Internet Sales Tax Bill Passes U.S. Senate

May 7, 2013

Tennessee Senator Lamar Alexander

WASHINGTON (AP/WMOT) — The U.S. Senate has passed a bill that could end tax-free shopping on the Internet for many shoppers. Tennessee Senator Lamar Alexander is a prime sponsor of the measure.

The bill now goes to the House where it faces opposition from some lawmakers who regard it as a tax increase.

The bill would empower states to require businesses with more than $1 million in out-of-state sales to collect taxes for products they sell on the Internet, in catalogs and through radio and TV ads. Under the legislation, the sales taxes would be sent to the states where a shopper lives.

Speaking on the floor of the Senate yesterday, Alexander said he sees the issue as a question of states rights.

“It allows governors and legislators to decide for themselves whether they want to require out of state sellers to do the same thing in-state sellers already do, which is to collect the sales tax that’s already owed when something is sold.”

Under current law, states can only require retailers to collect sales taxes if the merchant has a physical presence in the state. As a result, many online sales are tax-free.