Internet Sales Tax Plan Steamrolls into Congress

New legislation was discussed in Congress on Thursday that may represent the official start of open season on Internet Sales Tax legislation.

Bipartisan legislation will be introduced in both the House and the Senate that would authorize states to collect taxes on items purchased online.

The 20 states already in agreement on what they have dubbed the Streamlined Sales Tax Project support legislation that would allow them to collect sales tax on Internet purchases based on a simplified multi-state program that will avoid some of the confusion of paying tax to multiple entities. Seventeen of the 20 states have enacted legislation simplifying the collection and distribution of sales taxes. Only states that have enacted the streamlined sales tax plan would be able to require retailers to collect taxes online.

Those who support the legislation claim that states and localities lost more than $13 billion in 2001 on sales that would have generated sales tax but for the fact that the goods were purchased from online vendors.

Reports surfaced on Thursday indicating that negotiations are underway with Amazon.com, the largest online retailer, to endorse the online tax plan. United Press International reports that such an endorsement would be "the beginning of the end for tax-free Internet shopping."

Some retailers, including Wal-Mart, Target, and Lowes, have already begun collecting sales tax on online sales.

The bill being introduced in the House would exempt companies making less than $5 million annually from having to pay the taxes. Amazon.com, however, is reportedly withholding its support of the bill until that $5 million threshold is removed. Senate sponsors of the bill are waiting to review Amazon.com's proposal before introducing the bill.

The sales tax legislation may meet with obstacles along the way. Even if enacted this fall, it is expected that it would be at least a year before consumers start paying tax on online purchases.