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Online Sales Tax Bill Running into Trouble in House of Representatives

An online sales tax bill that easily passed the Senate in May has hit many roadblocks in the House. At issue is not just the idea of online sales taxes, but where to draw the line between small and big businesses.

Currently, most states cannot tax purchases made online because the online retailer does not have a physical presence in the state. The controversial bill would grant states the authority to tax online sales despite the absence of a physical presence. However, far from being a blanket bill on all online purchases, the Senate version exempts businesses with $1 million or less in sales. Many in the House want to see that limit raised. In fact, it has even divided the Republican Party on the issue.

One of the most notable examples of a company that had long skirted around charging sales tax on purchases is Amazon. In the last few years however, nine states have negotiated agreements with the company that require the company to charge sales taxes on purchases made by residents of that state. This bill would open the floodgates on allowing all states to force Amazon and other companies to charge sales tax.

With the Department of Commerce predicting that virtually all shopping will be done online by 2023, it is little wonder why this is becoming a big deal. States are estimated to be losing over $20 billion annually, and given the difficulty most states are facing with balancing their budgets, that is not a small chunk of change to let slip by. Whether this specific bill will pass remains to be seen given the strong opposition to it in the House, but it may be inevitable that all our purchases online will soon have that extra sales tax tacked on to it. 

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