The US Senate has approved the online tax bill. This means that one day soon, your online shop could be taxed. The Marketplace Fairness Act was created to collect state taxes from online companies that sell in any particular state - even if the company does not have a physical shop in a state.
For example: a small online shop that sells to consumers in Vermont could be taxed by the state of Vermont. What if that shop also sells to consumers in New York? The shop would be taxed by both Vermont and New York. As the bill currently stands, online shops would be taxed by any state that choose to collect tax. But, there are a few terms included that might help protect small online retailers.
The Dirty Details
The US Government isn't really aiming for small online shops with the tax bill. Instead, the government is looking at companies like Amazon and Ebay that rake in piles of tax-free cash. Any shop that does not gross $1 million in sales, will not be taxed. So, you don't have to worry about a small Etsy (or other) shop.
In order for a state to collect taxes from an online retailer, the state must be part of the Streamlined Sales and Tax Use Agreement program. So far, only 22 states are part of this program, though that number is likely to grow.
As soon as this bill passed, some Republicans and Democrats rallied against it. Now, the Marketplace Fairness Act will go to the House. If it passes at the House, President Obama will sign the bill, and it will become a law.
Hindering Online Growth
There are a lot of reasons why many people and companies do not want this act to pass. One of those reasons is that a bill such as this one would hinder online entrepreneurial spirit. If companies seeking to setup shop online will be taxed by every state they sell to, founders and entrepreneurs might think twice about creating an online store.
Or, it could mean that retailers will move back to brick and mortar shops. If the online marketplace becomes too taxed, a brick and mortar shop might make the most sense. After all, shop owners will only be taxed by one state if they set up a physical location.
White House Supported
If you're thinking and hoping that the White House will veto the bill, think again.
Online companies tend to have a strong advantage over small brick and mortar companies that are struggling to survive. These online shops don't pay taxes while the average mom and pop shop has to pay taxes. This is the one reason why the White House strongly supports the bill. But, there has to be a line somewhere. Online shops can't be taxed from every angle. This doesn't seem fair in the least.
What are your thoughts? Do you oppose or support online taxes? Either way, it looks as though online shops will be taxed relatively soon. Talk back below.