Sales Tax Meets the Internet

The following is a guest post by Mariana Ashley, a freelance writer who particularly enjoys writing about online colleges. She loves receiving reader feedback, which can be directed to mariana.ashley031

Over the past few months, several states have been pushing legislation designed to tax online businesses. While online companies already pay state sales taxes to the state of their headquarters, The Main Street Fairness Act, as named by Illinois Senator Dick Durbin (D), proposes to collect taxes on all purchases made in states that have company affiliates.

For example, companies like with affiliates in Illinois, which already has the Fairness Act in effect, will experience tax for all sales to Illinois residents. Amazon severed its ties with affiliates in Illinois immediately after the bill, to escape the effects of the law.

Many fear that the effects of this bill nationwide will cause some companies to leave the United States, thus removing jobs from the company. Others are worried that the tax will decrease spending and destroy online retailers.

Proponents of the tax argue that tax-free online sales give an unfair advantage to Internet retailers that don't maintain operations in every state. And with some retail businesses closing down their brick-and-mortar locations but continuing online sales, states are looking for ways like this to retain any revenue possible.

I'm by no means a member or supporter of the Tea Party Movement. In fact, I support taxes in most cases. But this bill poses some problems that are a bit more alarming than simply paying another sales tax.

Think about the pros and cons of shopping online versus in a store. In a store, you get to test and touch merchandise, you have the item in your possession as soon as you buy it, and you can easily return it by going back to the store. Online, you have many resources for research and comparison (although those with smartphones have these in stores as well), but you have to pay for shipping, wait for the product to ship, and deal with the hassle of return-shipping if something is broken.

Consider how the added sales tax will affect people's shopping habits. There would be no benefit to shopping online unless online vendors had extremely low prices. Otherwise, you're pretty much paying the same price or more to have something shipped to your home instead of having it immediately once you leave a store.

Online retailers would also have to use more resources to simply comply with the bill. Online companies would be flooded with significant paperwork and periodic audits regarding all the new taxes from each state; this might be enough to make online retail simply out of the question for small or up-and-coming businesses.

While this proposed bill is aimed at providing fairness for small local business, its biggest supporters and lobbyers are paid by huge brick-and-mortar retailers like Wal-Mart. This is yet another reason to question who this bill will really help and whether it's worth the amount of businesses it may significantly hurt.

The bill has some time before it's in any position to come into effect, but in the meantime, I suggest people get their online shopping out of the way.

Further Reading:


  1. Almost all states need money badly. Online Sales tax is one way they can get some.

  2. I think your first paragraph is misleading: States are NOT pushing for legislation to
    tax online businesses. What they’re trying to do is make sure existing sales tax – and
    yes, sales tax is already due on online purchases; consumers are supposed to send
    the tax due directly to the state – is sent to the state as required by law. No one is
    proposing a tax on online businesses or any kind of new tax.

    Also, the federal Main Street Act proposed by Durbin has absolutely nothing to do
    with affiliates. I think you’re confusing the federal Main Street Fairness Act with
    Illinois’ Main Street Fairness Act, which does require online retailers with Illinois
    affiliates to collect Illinois sales tax. But despite the shared name, the two have
    nothing to do with each other – the federal Main Street Fairness Act never even
    mentions affiliates. It would not change anything for affiliates or target online
    retailers that use them.

  3. What the federal Main Street Fairness Act would do is allow states that have
    simplified their sales tax laws to require online retailers to collect sales tax. So
    instead of consumers having to send in the tax due, it would be collected at the point
    of sale, just as it is when you shop at a local store.

    It’s frankly ludicrous to believe that collecting sales tax would hurt online retailers.
    They offer convenience, selection, and frequently lower prices, which more than
    make up for the ability to handle merchandise and not pay for shipping at a local

    It’s also not difficult for online retailers, even small ones, to collect sales tax. –
    technology has made it easy. There are sales tax management services available
    to handle every aspect of sales tax. In fact, I work for a company,, that
    offers one such service, TaxCloud (, that’s completely free to
    retailers. TaxCloud not only calculates the sales tax due, it also files tax returns,
    generates monthly reports, monitors changes to tax laws across the country, and
    handles exemptions and even audits. With services like TaxCloud available, it’s hard
    to understand how collecting sales tax could be difficult for online retailers.

  4. You mention that the “biggest supporters” of the Main Street Fairness Act are “huge
    brick-and-mortar retailers like Wal-Mart.” I think the key word in that sentence
    is “biggest” – for every huge Wal-Mart, there are thousands of small local retailers
    supporting the bill.

    And they’re the ones who are really being hurt by the current situation. I’ve heard
    over and over again, in testimonies before state committees, from local retailers
    who are seeing customers browse their shelves, ask clerks questions, and then
    say “Thanks, I’m going to order it online.”

    Sorry for the length of this comment, but I thought it was important to correct the
    errors in the post (no one is proposing a tax on online businesses or any kind of new
    tax; sales tax is already due on online purchases; the federal Main Street Fairness
    Act has nothing to do with affiliates and would not affect affiliates at all) and offer
    another take on the issue.

    R. David L. Campbell
    Chief Executive Officer
    The Federal Tax Authority (FedTax)


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