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Federal Taxes to be Imposed on Online Purchases

August 10th

A bill recently proposed in Congress would demand that federal taxes be imposed on all online purchases.

Currently, internet businesses are only required to follow state laws. Therefore, at the present moment, those businesses with a physical presence within the United States are forced to charge state taxes, while those with only an online presence are not. In those cases it is only the consumers themselves who are held responsible for reporting the sale to the authorities for tax purposes.

Though consumers are required to pay a “use tax”, it is rarely declared and can lead to IRS penalties. However, under the terms of the proposed “Main Street Fairness Act,” internet business would be required to collect federal taxes with each online purchase. This would end inequities between those businesses with a physical presence and those that exist only online.

The bill is being supported by such internet giants as Amazon and Sears, even though Amazon themselves currently profits from the lack of federal tax on online commerce.

What Will The Impact Be On Small Business?

Small businesses already bear a heavy weight when it comes to the responsibility to maintain payroll taxes for employees. While those opposed to the bill claim the additional taxation would place an undue burden on small business, many disagree. In fact, Senator Dick Durbin from Illinois actually suggested that small business would be exempt from the new proposed law entirely

It seems that those who have the strongest opposition to the bill are actually some of the larger businesses, such as Ebay and TechNet who, theoretically, would struggle the least under the new proposed bill.

Though the bill’s opponents claim the proposition is unfair, as it would force smaller retailers to shoulder the same tax collecting burdens of national retail giants, its supporters seem to be making a similar argument to the reverse. While main street stores have been forced to collect taxes on behalf of their consumers for years, online retailers have escaped the same burdens.


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