Senate bill forces online retailers to collect sales tax

By Matt Porter

May 7, 2013 Updated May 8, 2013 at 1:15 AM EDT

Binghamton, NY (WBNG Binghamton) The online retail industry has turned into a billion dollar "tax-free" industry, which has 45 states and the District of Columbia fighting to force retailers to pay up.

The Senate passed the Marketplace Fairness Act of 2013 which implores online retailers who sell more than $1 million in products annually to collect sales tax.

Right now, online retailers only collect taxes if they have a physical presence in their respective state.

Tom Kelleher runs a specialty gift store in Binghamton. He said it's about time online retailers follow the same rules.

"While nobody likes paying taxes, nothing is for free," Kellher said. "Those things that municipalities do for us, cost money."

Kelleher said online stores have an advantage off the top in New York because they don't collect taxes.

"For years now, online realtors have not had to collect sales tax, so brick-and-mortar stores cost them 8 percent more," Kelleher said.

Opponents of the bill include the online giant Ebay, which said the bill will hamper smaller online retailers.

They've proposed exempting retailers that sell less than $10 million in goods or have fewer than 50 employees.

Locally, Broome County Executive Debbie Preston doesn't think the tax adjustment will bring in much more revenue despite the billions of dollars sold annually online.

She said it may also end up making it harder for small, local businesses that will have to sort out the tax codes of each state.

"It's going to make it more difficult for all other businesses to adapt to that," Preston said, "But that's what government does it makes things more difficult for the businesses."

The bill would require states to provide free computer software to help states calculate sales taxes based on where shoppers live.

States must also develop a system that doesn't require retailers to deal with individual counties or towns.

The bill is seen as a tax hike by some Republicans, which could make passage in the Republican-controlled House difficult.

However, Americans have always been required to pay sales tax on items they buy online or out of state.

But until now, it's been up to individuals to report those expenses on their tax return, which has been difficult for the IRS to enforce.