Two separate bills working their way through Congress could theoretically close the loophole that allows consumers to skip out on paying sales tax on purchases from e-retailers located in different states. Even so, in all likelihood online shoppers won’t be forced into paying sales tax anytime soon.
Over the years, e-retailers and the consumers who shop online to avoid sales taxes have been accused of having a “free ride.” For the most part, the laws stipulate that online sellers must charge sales tax only when the merchant has a physical presence in the state where the purchase is taking place. The net result is that a consumer in state X might not have to automatically pay sales tax when he makes a purchase from an e-retailer based in state Y.
The scenario gives an unfair advantage to the e-retailer over local brick-and-mortar retailers, which obviously have to collect local sales tax. Consumers are supposed to keep track of their online purchases and pay the appropriate sales tax when filing their income taxes, but the number of individuals who do so is approximately … zero. (Well, it’s close to zero anyway.)
Amazon, all-powerful online entity that it is, has come under fire in particular for not universally collecting sales tax on purchases, and it has made agreements with states on a case-by-case basis to charge the appropriate taxes.
Even as the vast majority of Americans now pay sales tax on Amazon purchases regardless of where they live, there are still many e-retailers that aren’t required to collect sales tax on out-of-state purchases. If either the Remote Transaction Parity Act or the Marketplace Fairness Act of 2015 become law, this loophole would be closed and states could start requiring nearly all sellers to collect sales tax.
Yet, as InternetRetailer.com reported, it’s not looking likely that either of the bills will pass in the near future. What’s more, if and when either does manage to become law, in order to allow time for e-retailers to tweak their operations to be in line with new regulations, there will be a delay of at least 12 months before sellers will have to collect sales tax. E-retailers will also be given a reprieve from charging sales tax during the peak winter holiday shopping season in the first year after either bill becomes law.
The upshot for consumers is that even if one of these bills suddenly catches fire in Congress and surprisingly passes soon, “2017 would be the first holiday season it could take effect,” InternetRetailer.com states. Remember, that’s only if one of these bills passes. If neither does, then many online shoppers can continue enjoying their free ride indefinitely.