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Senate passes Marketplace Fairness Act by wide margin

Internet taxes for all ... maybe

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The Marketplace Fairness Act (MFA), which will allow states to levy local sales taxes on internet purchases, was passed by the US Senate on Monday night by a vote of 69 to 27, in an unusual display of bipartisan support.

"For more than a decade I have been working on a solution to put Main Street retailers and online and out-of-state companies on a level playing field," said the MFA's sponsor Mike Enzi (R-WY) in a statement. "Not because it's popular, but because it's fair and it's the right thing to do."

It's a states' rights issue, Enzi said, not a matter for the federal government to get involved with.

"This doesn’t cause the federal government to do anything," he said. "What it allows is for the states to do what they have already passed laws on."

States don’t have to enact sales taxes on internet sales, but they should have the right to do so without worrying about federal oversight, he said.

The MFA was expected to pass after it was ushered through through earlier Senate votes, and it has the support of the White House. Big-box vendors both online and off also added their support, and many states that haven't already set up internet tax systems are keen to harvest some of the estimated $23 billion in uncollected sales tax revenue from internet sales (as calculated by the National Conference of State Legislators).

One of the few opponents of the MFA is eBay, which fears that its customers are going to get hit hard by the new tax system. While businesses that sell less than a million dollars of merchandise online are excluded from the legislation, larger concerns are likely to have a lot of increased costs.

This doesn’t worry companies like Amazon, which already pays taxes in a number of states where it has a physical presence. But smaller internet retailers would have to find a way to collect taxes for all US states, and the MFA says that it's up to states to provide a service for this, free of charge.

Before you start panic-buying to beat the tax raises, however, this isn't a done deal as yet – the bill must still pass through the House of Representatives. There it will face a much tougher ride – Republicans are in the majority, and almost all have signed up to Grover Norquist's pledge never to raise taxes under any circumstances.

Technically this legislation simply reapplies taxes that were rescinded by Bill Clinton in the 1998 Internet Tax Freedom Act. But given even the elimination of a tax loophole is seen as a rise by some members of the House, it could be some time yet before you need to start budgeting for the addition of state taxes for online sales. ®

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