Sep 6

Amazon Supports Federal Internet Sales Tax Bill

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internet sales tax supports a federal internet sales tax

Why have lawmakers proposed to initiate a new internet sales tax?

Responding to pressure from states and from organizations, members of the United States Congress are considering passing a federal internet sales tax bill which would force internet companies to pay a sales tax.

Traditional ‘brick and mortar’ retail stores specifically feel that they are at a disadvantage when competing against internet retailers who are not bound by the same tax laws as the ‘brick and mortar’ stores. Though some states have worked on bills which tax online retailers, most states do not as of yet tax purchases made over the internet. Responding from pressures by ‘brick and mortar’ stores, and from individual states who feel that an internet tax would raise state revenues in this difficult economic time, those in Congress have considered passing an internet tax law.

Why does Amazon support the federal internet sales tax bill?

Surprising to many observers has been that, one of the world’s largest online retailers, supports some federal effort to subject internet retailers to taxation. This comes as a particular shock considering Amazon’s opposition to internet sales tax proposals that have arisen in different individual states, including Illinois and Connecticut. Amazon has even stopped conducting business with land based ‘affiliates’ in states mandating an internet sales tax, so as to avoid being subject to those state taxes.

Despite these efforts and the fact that the company could potentially lose business as a result of a tax on online goods, Amazon has consistently supported a federal effort to subject online retailers to an internet sales tax. Representatives of the company claim that Amazon already is subjected to a sales tax in around 50 percent of its total sales across the world, and that sales tax has not adversely affected business. The company also claims that a single internet sales tax policy in the United States would enable Amazon to more effectively sell products in accordance with the law, since the company would not have to deal with the tax policies of each individual state.

What problems could occur if the new internet sales tax proposal became law?

Critics, however, fear that a federal internet sales tax would serve as an undue burden on internet companies. Some argue that small online businesses would be subjected to heavy taxation which could, in turn, stifle the innovation the internet has come to represent. Those opposed to the new tax further contend that the tax subjects these small internet retailers to the same massive tax obligations that large retailers, such as Amazon, are more capable of enduring.

Small companies feel that Amazon’s support of the tax might stem from the belief that Amazon’s small competitors might be forced out of business if a tax was implemented. Companies such as eBay, free-market enthusiasts, and many concerned about the future of the internet have all voiced their concern about what they perceive as a biased and counterproductive internet sales tax.

  1. Blaine Moore 6 Sep 2011 |

    I wouldn’t mind a US sales tax law [i]as long as[/i] it replaced the need to collect taxes on a state by state basis – this could potentially simplify matters rather than make it more confusing for those that do business in more than one state.

    • Internet Lawyer 6 Sep 2011 |

      If the government wasn’t run by a bunch of scoundrels, I’d see the merits of a federal internet sales tax for simplification purposes. However, once such a tax is enacted, no matter how small, it will skyrocket over the years. For example, the U.S. federal income tax rate was 1% for most taxpayers when it was enacted. Can you imagine that rate today? Instead, politicians grow government and raise taxes to spend other people’s money.
      Any state that supports a federal internet sales income tax is going to be short-sighted. Here’s why. The federal government will enact the tax to replace state e-commerce taxes. But the money will fund D.C. with little or none being sent back to the states where it is collected. It will go to pay for more federal workers to collect and enforce the tax, plus bail out Uncle Sam’s existing broke progams, such as health care, Social Security, etc. You can be sure the rates will jump because these types of taxes are easy ways to loot taxpayers. Kind of like the “hidden” gasoline taxes that makes each gallon of gas 10 times more profitable for the government than the big oil companies that made the gas possible in the first place. The consumer doesn’t realize how bad they’re being taken to the cleaners.
      Best wishes,

      • Blaine Moore 6 Sep 2011 |

        Very good points, Mike.

        Let me rephrase my stance…

        I wouldn’t mind a US sales tax law as long as it replaced the need to collect taxes on a state by state basis and that tax money was then redistributed to the states – I wouldn’t mind tracking which state purchases were made in and reporting that along with my taxes collected when making a payment.

        It would be more work (especially for small businesses like myself who only operate out of one state) but it would still be easier than trying to track sales tax or track affiliate sales for individual states and having to report to each state (or county or city) which has its own laws and rules.

  2. Stuart Halpryn 4 Oct 2011 |

    regardless of the arguments for or against a tax, of which entity (state or federal) implements it, or even of how the taxes are spent, everyone that markets on the internet is facing the inevitability that one day, apparently sooner than later, taxation of internet sales, in some form, will be put into place.

    so what is the average internet marketer doing to prepare for this eventuality?

    ~ is your shopping cart capable of charging tax?
    ~ do you have an accounting method in place to track sales as well as any taxes that might become due?
    ~ is there a plan in place as to whether you’ll prepare the taxes yourself or have you looked into finding someone who can file everything for you?
    ~ what will the effect be on your state and federal income taxes?
    ~ have you looked into whether your local municipality, city, township requires that you have a permit in place to run your type of business within their borders?
    ~ have you determined whether or not there are any legalities that you have to adhere to or if there are any documents that you have to put in place, or any liabilities that you might incur?

    there’s more involved in running a business (and it soon may become a bit more complicated) online than just slapping up a web page. and as quite a few internet marketers have already found out, being unprepared could leave you ‘up the creek without a paddle’ and facing consequences that you may have never imagined.

    just a few of my thoughts on the matter…..