This story has been updated with information about the tax exclusion limit set by Senate bill 1832.
NEW YORK (MainStreet) -- An Internet sales tax has long been a hot-button issue in Congress and industry. But as more businesses embrace e-commerce to sell their goods, states struggle to bring in revenue in a struggling economy and political candidates talk tax reform, it's a button that keeps getting pushed.
It's, at best, complicated. The Supreme Court ruled in 1992 that businesses that do not have a physical presence in the state they sell to do not have to charge sales tax. Yet the ruling, especially as more and more companies sell goods only through the Internet, means an advantage over bricks-and-mortar small businesses that some call unfair.
|If a business doesn't collect sales tax, it's the consumer's responsibility to report purchases on their state income tax and pay a "use tax." Proposed laws could change that.|
The issue gets even more complicated. If a business does not collect sales tax, it's the consumer's responsibility to report purchases on their state income tax and pay a "use tax," but very few people actually pay it. So the government is once again turning its eye to the issue, looking to make businesses, even those that sell through Amazon (AMZN), eBay (EBAY) and Etsy, among others, charge sales tax.For independent retailers, the issue is their very survival, says Jeff Milchen, co-founder of the American Independent Business Alliance. But whose survival? In a sense, the answer is both bricks-and-mortar and online-only retailers: On the one hand, bricks-and-mortar stores with a sales tax are at a disadvantage to online-only sellers; on the other hand, if sales tax reform takes place, figuring out multiple state and local sales tax percentages could be a nightmare for a smaller online business. Big businesses have the resources and capital to put toward figuring out state and local sales taxes; a midsize e-commerce site could go out of business if owners are forced to spend more time dealing with sales tax issues than selling, making or providing services.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV