Advertisement
Smart Buying

Senate Approves Internet Sales Tax Bill

The Marketplace Fairness Act moves a step closer to becoming law and closing a loophole that allowed most online purchases to escape sales taxes.

Consumers might not be able to escape paying sales taxes on the things they buy on the Web much longer. That's because the Senate voted May 6 in favor of legislation that gives states the authority to collect sales tax on most online purchases.

Under a 1992 Supreme Court ruling, online retailers are not required to collect sales tax from customers in states where they don’t have a physical presence such as a store or warehouse. Technically, consumers who escape the sales tax online are supposed to pay a “use tax” for those purchases on their state income-tax return if they live in one of the 45 states with a sales tax. Few actually do, and as a result states are losing out on an estimated $24 billion in sales-tax revenue, according to the National Retail Federation.

Advertisement - Article continues below

The Marketplace Fairness Act, which the Senate voted 69-27 to approve, would close that loophole. The bill won't affect all online purchases, though. Retailers with less than $1 million in annual sales in states where they don't have physical operations will be exempt.

Brick-and-mortar retailers and trade groups such as the National Retail Federation have been pushing for this legislation for years because they claim that the current system unfairly favors online retailers. (Kiplinger Editor-in-Chief Knight Kiplinger agrees that online retailers should collect sales tax. See his Money & Ethics column on the topic.)

Advertisement
Advertisement - Article continues below

Consumers don't need to worry about paying more for online purchases quite yet, though. The issue now goes to the House of Representatives for consideration. However, President Obama does support this legislation, so it likely will become law if the House approves it.

Follow me on Twitter

Advertisement

Most Popular

What Are the Income Tax Brackets for 2020 vs. 2019?
tax brackets

What Are the Income Tax Brackets for 2020 vs. 2019?

The IRS unveiled the 2020 tax brackets, and it's never too early to start planning to minimize your future tax bill.
June 20, 2020
65 Best Dividend Stocks You Can Count On
stocks

65 Best Dividend Stocks You Can Count On

These 65 Dividend Aristocrats are an elite group of dividend stocks that have reliably increased their annual payouts every year for at least a quarte…
July 8, 2020
Find a Great Place to Retire
happy retirement

Find a Great Place to Retire

Our cities provide plenty of space to spread out without skimping on health care or other amenities.
July 2, 2020

Recommended

Sales Tax Holidays in 2020
state tax

Sales Tax Holidays in 2020

Sixteen states are having sales tax holidays this year. If you plan your shopping around these tax-free periods, you can save big on back-to-school cl…
July 1, 2020
13 Luxury Goods That Are Cheaper at Costco
spending

13 Luxury Goods That Are Cheaper at Costco

You could be missing out on huge savings: Costco sells a limited selection of luxury goods at discounted prices, both in-store and online.
June 27, 2020
COVID-19: A Once-in-a-Lifetime Chance to Change Our Spending Habits
spending

COVID-19: A Once-in-a-Lifetime Chance to Change Our Spending Habits

The coronavirus pandemic has changed everything, including how we spend money. Are you spending less right now? Many people are. Here’s how to make th…
June 17, 2020
24 Best Travel Websites to Save You Money
Travel

24 Best Travel Websites to Save You Money

Traveling is fun and you can do it without breaking the bank — you just have to know where to go online first.
June 12, 2020