CBS News, The Consumerist and New York Post have all recently reported that tax free shipping online could soon be a luxury of the past. A bill was expected to be introduced to congress on Monday of this week that would force retailers to start collecting sales taxes, regardless of the state in which the consumer and the merchant reside. This is not the first time a bill of this nature has been presented to Congress. Some speculate that state and tax officials have been trying to get Congress to pass such laws for as many as ten years for both internet and mail order sales. While supporters have been unsuccessful in the past, they now believe that current economic conditions will force Congress to act in some way. According to the New York Post, a recent study provides evidence in support of the bill. “The study by the Rockefeller Institute, which is the public-policy research arm of the State University of New York, said that fourth-quarter 2008 sales taxes dropped by 6.1 percent, and that preliminary figures for the first three months of 2009 suggest even steeper declines.” Information like this, combined with the ongoing recession, which will potentially cut deeper into tax revenues, have the National Conference of State Legislatures believing that they will not be defeated this time around.
The complexities associated with collecting state and local taxes are the main reason that online retailers do not currently collect sales tax on out of state orders. Not only do the tax rules differ from area to area and state to state but they are updated on a regular basis and the definitions of taxable products are often completely ludicrous. Take for instance information that James Turner presented in 2003, “a proposed definition of candy would have taxed the Milky Way Midnight candy bar but not the original Milky Way bar”. There are talks of simplified tax rules and mandatory updates of tax changes by the states, but none of the proposals have shown enough simplicity to be supported by online retailers. The New York Post does mention that online consumers are supposed to save receipts from their online purchases and pay their state when they file income taxes, but even those that aren't trying to abuse the system don’t know this.
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