Does New Federal Legislation Mean the End of Tax-Free Internet Shopping?

InternetTaxesUntil now, online shoppers generally enjoyed buying items from Internet retailers without the state sales tax charge.  That’s because online retailers are not required to collect sales tax when shipping goods to their out-of-state customers.  The customers are required to pay sales tax to their home state but this rarely happens.  Last week the U.S. Senate passed the Marketplace Fairness Act (MFA) which would require retailers to collect sales tax from their out-of-state customers and file sales tax reports in the states where their customers are located.  Enactment of this new law by the House of Representatives is not certain but it appears more likely than in the past.

If this federal law is passed, sales tax compliance will become incredibly complex.  As technology has advanced, state sales tax guidance has failed to keep pace.  Businesses are left guessing at the proper tax treatment of their sales and hoping their interpretation of tax rules is the correct one.  Under the MFA, retailers will be forced to collect sales tax from all of their customers and will face an army of compliance auditors from 45 states looking for mistakes.

The State and Local Tax (SALT) Group at KatzAbosch will be tracking this new legislation and is prepared with solutions to help businesses efficiently comply with these new requirements if enacted.  Please contact the KatzAbosch SALT Group if you have any questions regarding any SALT issues at 410-828-CPAS or email abareham@katzabosch.com

Prepared by Andy Bareham, Chair of the KatzAbosch SALT Group.

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