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Senate passes bill letting states tax online sales

  • FILE - In a June 16, 2011 file photo former Rep. Anthony Weiner, D-N.Y., speaks during a news conference in New York, to say he's weighing a run for New York City mayor. Wiener and former South Carolina Gov. Mark Sanford are running on redemption. Based on the comebacks attempted by plenty of other politicians, athletes and celebrities felled by scandal, the strategy just may work. To a certain degree, it already has: Both men are back in the national political spotlight just a few short years after their dalliances led many observers to declare their careers over. (AP Photo/Seth Wenig, File)

    FILE - In a June 16, 2011 file photo former Rep. Anthony Weiner, D-N.Y., speaks during a news conference in New York, to say he's weighing a run for New York City mayor. Wiener and former South Carolina Gov. Mark Sanford are running on redemption. Based on the comebacks attempted by plenty of other politicians, athletes and celebrities felled by scandal, the strategy just may work. To a certain degree, it already has: Both men are back in the national political spotlight just a few short years after their dalliances led many observers to declare their careers over. (AP Photo/Seth Wenig, File)

  • FILE - In a June 16, 2011 file photo former Rep. Anthony Weiner, D-N.Y., speaks during a news conference in New York, to say he's weighing a run for New York City mayor. Wiener and former South Carolina Gov. Mark Sanford are running on redemption. Based on the comebacks attempted by plenty of other politicians, athletes and celebrities felled by scandal, the strategy just may work. To a certain degree, it already has: Both men are back in the national political spotlight just a few short years after their dalliances led many observers to declare their careers over. (AP Photo/Seth Wenig, File)

    FILE - In a June 16, 2011 file photo former Rep. Anthony Weiner, D-N.Y., speaks during a news conference in New York, to say he's weighing a run for New York City mayor. Wiener and former South Carolina Gov. Mark Sanford are running on redemption. Based on the comebacks attempted by plenty of other politicians, athletes and celebrities felled by scandal, the strategy just may work. To a certain degree, it already has: Both men are back in the national political spotlight just a few short years after their dalliances led many observers to declare their careers over. (AP Photo/Seth Wenig, File)

  • IIn this photo taken April 29, 2013, former South Carolina Gov. Mark Sanford talks during the 1st Congressional District debate in Charleston, S.C. Sanford and former Rep. Anthony Weiner, D-N.Y., are running on redemption. Based on the comebacks attempted by plenty of other politicians, athletes and celebrities felled by scandal, the strategy just may work. To a certain degree, it already has: Both men are back in the national political spotlight just a few short years after their dalliances led many observers to declare their careers over. (AP Photo/Rainier Ehrhardt)

    IIn this photo taken April 29, 2013, former South Carolina Gov. Mark Sanford talks during the 1st Congressional District debate in Charleston, S.C. Sanford and former Rep. Anthony Weiner, D-N.Y., are running on redemption. Based on the comebacks attempted by plenty of other politicians, athletes and celebrities felled by scandal, the strategy just may work. To a certain degree, it already has: Both men are back in the national political spotlight just a few short years after their dalliances led many observers to declare their careers over. (AP Photo/Rainier Ehrhardt)

  • IIn this photo taken April 29, 2013, former South Carolina Gov. Mark Sanford talks during the 1st Congressional District debate in Charleston, S.C. Sanford and former Rep. Anthony Weiner, D-N.Y., are running on redemption. Based on the comebacks attempted by plenty of other politicians, athletes and celebrities felled by scandal, the strategy just may work. To a certain degree, it already has: Both men are back in the national political spotlight just a few short years after their dalliances led many observers to declare their careers over. (AP Photo/Rainier Ehrhardt)

    IIn this photo taken April 29, 2013, former South Carolina Gov. Mark Sanford talks during the 1st Congressional District debate in Charleston, S.C. Sanford and former Rep. Anthony Weiner, D-N.Y., are running on redemption. Based on the comebacks attempted by plenty of other politicians, athletes and celebrities felled by scandal, the strategy just may work. To a certain degree, it already has: Both men are back in the national political spotlight just a few short years after their dalliances led many observers to declare their careers over. (AP Photo/Rainier Ehrhardt)

  • FILE - In a June 16, 2011 file photo former Rep. Anthony Weiner, D-N.Y., speaks during a news conference in New York, to say he's weighing a run for New York City mayor. Wiener and former South Carolina Gov. Mark Sanford are running on redemption. Based on the comebacks attempted by plenty of other politicians, athletes and celebrities felled by scandal, the strategy just may work. To a certain degree, it already has: Both men are back in the national political spotlight just a few short years after their dalliances led many observers to declare their careers over. (AP Photo/Seth Wenig, File)
  • FILE - In a June 16, 2011 file photo former Rep. Anthony Weiner, D-N.Y., speaks during a news conference in New York, to say he's weighing a run for New York City mayor. Wiener and former South Carolina Gov. Mark Sanford are running on redemption. Based on the comebacks attempted by plenty of other politicians, athletes and celebrities felled by scandal, the strategy just may work. To a certain degree, it already has: Both men are back in the national political spotlight just a few short years after their dalliances led many observers to declare their careers over. (AP Photo/Seth Wenig, File)
  • IIn this photo taken April 29, 2013, former South Carolina Gov. Mark Sanford talks during the 1st Congressional District debate in Charleston, S.C. Sanford and former Rep. Anthony Weiner, D-N.Y., are running on redemption. Based on the comebacks attempted by plenty of other politicians, athletes and celebrities felled by scandal, the strategy just may work. To a certain degree, it already has: Both men are back in the national political spotlight just a few short years after their dalliances led many observers to declare their careers over. (AP Photo/Rainier Ehrhardt)
  • IIn this photo taken April 29, 2013, former South Carolina Gov. Mark Sanford talks during the 1st Congressional District debate in Charleston, S.C. Sanford and former Rep. Anthony Weiner, D-N.Y., are running on redemption. Based on the comebacks attempted by plenty of other politicians, athletes and celebrities felled by scandal, the strategy just may work. To a certain degree, it already has: Both men are back in the national political spotlight just a few short years after their dalliances led many observers to declare their careers over. (AP Photo/Rainier Ehrhardt)

The Senate sided with traditional retailers and financially strapped state and local governments yesterday by passing a bill that would widely subject online shopping – for many a largely tax-free frontier – to state sales taxes.

The Senate passed the bill by a vote of 69-27, getting support from Republicans and Democrats alike. But opposition from some conservatives who view it as a tax increase will make it a tougher sell in the House. President Obama has conveyed his support for the measure.

Under current law, states can only require retailers to collect sales taxes if the store has a physical presence in the state. That means big retailers with stores all over the country like Walmart, Best Buy and Target collect sales taxes when they sell goods over the internet. But online retailers like eBay and Amazon don’t have to collect sales taxes, except in states where they have offices or distribution centers.

As a result, many online sales are tax-free, giving internet retailers an advantage over brick-and-mortar stores.

“We ought to have a structure in place in the states that treats all retail the same,” said Matthew Shay, president and CEO of the National Retail Federation. “Small retailers are collecting (sales tax) on the first dollar of any sale they make, and it’s only fair that other retailers who are selling to those same customers the same product have those same obligations.”

The bill would empower states to require businesses to collect taxes for products they sell on the internet, in catalogs and through radio and TV ads. Under the legislation, the sales taxes would be sent to the state where the shopper lives.

Supporters say the current tax disparity is turning some traditional stores into showrooms, where shoppers pick out items they like, then buy them on the internet to avoid sales taxes.

“It’s about the way commerce has changed in America,” said Sen. Dick Durbin, a Democrat from Illinois. “Bookstores, stores that sell running shoes, bicycles and appliances are at a distinct disadvantage. They’ve become showrooms.”

Many governors – Republicans and Democrats – have been lobbying the federal government for years for the authority to collect sales taxes from online sales.

The issue is getting bigger for states as more people make purchases online. Last year, internet sales in the U.S. totaled $226 billion, up nearly 16 percent from the previous year, according to estimates.

States lost a total of $23 billion last year because they couldn’t collect taxes on out-of-state sales, according to a study done for the National Conference of State Legislatures, which has lobbied for the bill. About half of that was lost from internet sales; half from purchases made through catalogs, mail orders and telephone orders, the study said.

In the Senate, lawmakers from three states without sales taxes are leading the opposition: Montana, New Hampshire and Oregon.

A strange twist to the law ""the sales taxes would be sent to the state where the shopper lives"". NH would get the money for purchases made by NH residents, will the state be returning those tax dollars to the individuals. If a state has no sales tax a person should be able to show a receipt and get the tax amount refunded. Another question could be, if I buy a product in a Mass. store paying a tax, why are those tax dollars not sent to NH as it would be in this law?

Jim - the article is written poorly and is confusing. As I understand the law, the merchant would collect the sales tax that the purchaser would have paid had the transaction taken place at the purchaser's place of residence. So, someone from MA who buys an item online would pay MA tax no matter where the merchant is located. The merchant would collect the tax and submit it to MA. A purchaser from NH who buys from the same merchant would pay no sales tax because NH has no sales tax. This is why online merchants are so opposed to this - they would have to keep track of their buyers' addresses and charge the sales tax from the buyers' homes.

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