Online purchases could soon be taxed if one U.S. representative has his way.
Earlier this month, Rep. Bill Delahunt (D-Mass.) introduced a bill called the Main Street Fairness Act that would require online retailers to charge sales tax on all of their sales regardless of where in the U.S. a customer lives.
States are losing billions of dollars in sales tax revenue when online shoppers aren’t charged sales tax, and about $18.6 billion will go uncollected as a result, according to Delahunt’s website.
Currently, many online retailers are required to charge sales tax to customers within their state. And while they’re not required to charge out-of-state customers sales tax, those customers are supposed to pay sales taxes to their state themselves, though they often don’t, according to AllBusiness.com. But New York, Rhode Island and North Carolina have enacted laws requiring all online retailers to collect taxes on purchases made from those states.
And not charging taxes on purchases made online is unfair to brick and mortar stores that have to charge sales tax, Delahunt says.
When consumers shop online in order to avoid paying sales tax, mom and pop shops supposedly lose business, which is why the bill aims to restore “fairness and competition to the marketplace,” Delahunt says on his website.
“These revenues go uncollected because of the complex array of sales tax rules across the country. These outdated systems allow many online retailers to avoid collecting sales taxes from out-of-state consumers, and place retailers on local Main Streets at a competitive disadvantage simply because they collect and remit sales tax revenue. This is wrong,” Delahunt argues.
But while small retail stores have lost business to large online retailers, other local shops have actually increased revenue by selling their wares online and those companies could take a hit from the bill as well.
What’s more, while local stores might get more foot traffic and rack up more sales as online shopping becomes a little less appealing, Main Street consumers would take a hit in the wallet with this measure.