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The federal government and almost all these United States are broke, and so they're considering something we've all at least thought about from time to time: making money off the Internet. There's a fight brewing in Washington, D.C. over an attempt to collect sales tax from online purchases... yet again.

The idea is pretty simple - states haven't been able to collect sales tax on most Internet purchases thanks to a 1992 Supreme Court Decision holding that retailers can only charge tax in states where they have a physical presence (yes, all the folks in Kentucky have been getting screwed on their Amazon orders for many years now), so now they're turning to Congress for help getting around the ruling. The result is H.R. 5660, the Main Street Fairness Act , introduced by Massachusetts Democrat William Delahunt, which would essentially do an end run around the status quo to give states the power to force Internet retailers to collect and remit sales from customers in those states, making it a whole lot easier to tax them.

Not surprisingly, everyone from Amazon to individual eBay powersellers seem to oppose the idea. The Computer and Communications Industry Association, which claims its members employ more than 600,000 workers and generate annual revenues in excess of $200 billion, had this to say:

CCIA has long opposed taxes on e-commerce, which would burden on-line vendors with the task of sorting through the policies of thousands of taxing authorities around the country, and forcing them to serve as revenue collection agencies for each of them. Small businesses from mom and pop operations to entrepreneurial companies may close if faced with such a legal and accounting nightmare.

This week, supporters of the bill tried to rally support on Capitol Hill, and they were met with a new resolution from New Hampshire Democrat Paul Hodes that seeks to stop any new Internet sales tax, not just the Delahunt bill, in its tracks. It calls the new accounting requirements that could be imposed on internet retailers "burdensome" and "unfair."

On the other side is the National Retail Federation, representing a number of brick-and-mortar retailers, who says the lack of an Internet sales tax is unfairto them. Touche.

And of course there is one other group that could be affected - actual taxpayers. Andrew Wylan of the National Taxpayers Union calls the attempts to tax internet sales a "money grab:"

Instead of seeking new avenues into taxpayers' wallets, legislators on the federal and state level should chart a path toward fiscal responsibility. Taxing Internet purchases beyond what's allowed already would be an unwise and unwarranted deviation from that path.

Lobbyists from both sides can be expected to work overtime on this issue, but our guess is the stalemate, and hence the status quo, will continue for quite a while. But with over $23 billion in potential revenue for state governments so cash-strapped they might as well add "hitchhiking" to their public transit master plans hanging in the balance, the issue isn't likely to completely go away anytime soon.

Photo by Don Hankins on Flickr. Used under Creative Commons License.

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^ Well, I agree that this is a bogus money grab, but they're not taxing the Internet but vendors who sell things online. Honestly it's not so crazy an idea to tax sales by a company made using the internet... ah well. I hope it doesn't happen, but if it does I'm not going to lose it.

if this thing is passed, what happens if a seller is in another country? what type tax to charge? for both country? or the seller's only? or the buyer's? its a nightmare.. for both seller n buyer.

Let the US Federal government impose the tax consistently throughout the USA and its posessions, then make quarterly payments to the individual states based upon their representation in the House of Representatives. That means all consumers will pay, for example, a 5% sales tax regardless where they live (USA or otherwise).

But guess what??? Such a plan will fail because consumers will buy from non-US sources who impose no such tax. It will also fail because it will make our eCommerce businesses less competative than foreign ones.

But guess what??? Such a plan will fail because consumers will buy from non-US sources who impose no such tax. It will also fail because it will make our eCommerce businesses less competative than foreign ones.

Which roughly translated means that your customs staff aren't doing their jobs.

Not that I'm happy about it but if I buy something from the U.S.A. online and have it shipped to my home (recently bought Rosetta Stone software for someone in my household to study French) the wonderful and helpful folks at Canada Customs and Revenue (or whatever the department's name is these days cus they change it every few years) are more than happy to send me a bill via the courier company that delivered the package to charge me for any taxes that are required on that purchase.

I don't see why the U.S. customs folks couldn't do the same in your scenario thus eliminating your concern about non-US purchasing.

I'll be pretty shocked if this passes - new taxes, especially on a means of acquiring goods that so many people are using to save money right now, just seems like political suicide, although I would sure love to see some of that tax revenue going to our crumbling schools and roads around here....