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Internet Sales Tax & Revenue Building

April 25, 2013

States are always looking to maximize the revenue it collects from its residents. The introduction of more taxes or an increase in taxes is a common way states gather additional revenue.

The internet sales tax bill could lead to $11 billion in funds annually, according to a University of Tennessee research study. Along with more taxes, states must also look at the large amount of taxes it loses to tax fraud each year. For example, in South Florida, a single tax scam recovered $160 million in false tax refunds. The money lost in revenue because of tax scams is enormous.

The internet sales tax bill, the newest revenue building effort, if it becomes law would require internet and remote retailers to collect state sales taxes during a financial transaction, irrespective of where the retailers are located. It will empower U.S. states to charge taxes from all online retailers.

Those in favor of the bill claim that the new tax will level the playing field for brick and mortar retailers, as online retailers are allowed to be state tax free. Those in opposition claim that the tax will be unfair to smaller online retailers because big firms like Amazon and WalMart are better equipped to absorb the new sales tax. Another argument against the internet sales tax is that retailers in a state which has no sales tax will have to collect sales tax on purchases made in states that collect sales taxes.

White House spokesman Jay Carney said, “Today, while local small-business retailers follow the law and collect sales taxes from customers who make purchases in their stores, many big businesses online and catalogue retailers do not collect the same taxes.”

The internet sales tax is expected to provide funds to cash-strapped states. The bill will allow states to tax online sales outside their physical borders. Many changes have been made to existing tax laws to help the recovering economy. Apart from the expiration of the many tax cuts, including the payroll tax cut, new taxes have also come into effect.

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