No surprise, Congress recently started the next round of bills to have sales tax applied to online purchases.  This has been going on for years, and it’s a complex issue. States want it because they want the sales tax money they lose out on due to online sales. Some local businesses want it because they feel that online competitors have too much of an advantage when they don’t have to charge sales tax. Even Amazon.com supports the idea. But it’s really not that simple.

Is it time for an online sales tax?Sales tax collection on purchases made out of state has been an issue for a long time. Before the internet, it was catalog sales, and purchases made when people travel out of state. Strictly speaking, these could be subject to a “use tax” that replaces the sales tax. But most people don’t pay it.

That’s why I expect something along these lines to pass eventually. States, counties and cities don’t like missing out on those revenues.

Collecting sales tax for online purchases isn’t a simple thing. There are thousands of different tax zones in the United States, and what is taxed in one place isn’t taxed in another. Keeping up with what gets taxed how much and who gets the money when is going to be complicated.

One thing I have to emphasize is that this isn’t money going to the Federal government. It’s going to the states. I keep seeing people complaining as though they think the Federal government is getting this money, and they aren’t. It’s also bipartisan, so the people blaming whichever party they dislike aren’t paying close enough attention.

What About Small Online Businesses?

The one piece of good news for small online businesses is that this may not affect you if you’re small enough. You have to do at least $1 million in out of state sales to have to deal with sales taxes in other states. Some say that’s not a high enough minimum, but it’s better than the $500,000 minimum previously proposed.

So it will affect some home based businesses. Certainly not all, as many of us are quite small, but not all. Many online businesses are just as much a small business as the small local businesses proponents say this bill is going to help, but considering how complex collecting and remitting sales taxes for so many tax zones will be, it’s won’t be a help for those online businesses just big enough to have to collect.

Will This Really Help Small Local Businesses?

Local businesses often support online sales taxes because they believe it will help them. After all, it’s a nice savings when you don’t have to pay sales tax. But I don’t know how well it will really serve them. I can get a lot of things cheaper online even before sales tax is considered. Online businesses, especially ones like Amazon, have the advantage of size and location. They’re big, so they can get better prices for their merchandise. They can locate their facilities where it’s cheap, not where they can get the most customers in the door.

There’s also the convenience factor. Online shopping is easy! Do it where and when you want, so long as you have a computer and an internet connection. Many people find this simpler than going to the store to see if they have the right item. Online stores usually have a much better selection than brick & mortar. Then again, you have to wait for shipping when you buy online, so online doesn’t always win out for sheer convenience.

Then there’s Amazon looking at ways to offer same day delivery. This may be a part of why they don’t mind online sales tax proposals – they may have to pay them anyhow if they open enough facilities to swing same day deliveries on any significant scale. There’s no telling if that’s really going to happen as of yet.

Good News For Affiliates?

The plus side of this for affiliates is that it could mean no more worries about nexus laws messing up your relationship with retailers. I was affected by the California affiliate nexus law, and it was a bit of a scramble figuring out what to do about it. I found alternatives, and now California and Amazon have an agreement so I don’t have any problems in that relationship anymore. It would be nice for that to not be a problem in general.

And the Opposition?

There are plenty who oppose any sort of online sales tax plan being put into place by the Federal government. Many say it’s the states’ job to handle it. Others cite privacy concerns.

Constitutionality may also come into play, and I don’t doubt that this law could be challenged on this basis. The Supreme Court in the past has said that out of state retailers don’t have to charge sales taxes due to the difficulty, but the 1992 Quill decision said that Congress should decide if states can require sales tax collection on out of state sales.  Many believe that the Constitution forbids this, as it’s interstate commerce, but only time will tell how that decision goes.

Disclosure: I often review or mention products for which I may receive compensation in the form of affiliate commissions. All opinions are my own.