US Senate OKs online sales tax bill

WASHINGTON - US Senate on Monday approved the online sales tax bill, which would widely subject online shopping to state sales taxes.

The Market Fairness Act, which passed the Senate in a 69-27 vote, would empower US state governments to require online retailers to collect taxes on purchases made by their residents.

Under current law, internet retailers in the United States don't have to charge local sales taxes to a customer so long as they don't have a "physical presence" in the customer's state.

The passage of the bill is seen as a major victory for traditional retailers which have complained for a long time that the out-of-state online businesses have an unfair advantage since they are not required to collect sales tax on the goods they sell.

It would also help ease the fiscal pressure on the financially strapped state governments by closing the long-standing tax loophole and returning billions of US dollars of tax revenue.

In 2012 alone, states lost a total of $23 billion in revenue because they couldn't collect taxes on out-of-state sales, according to an estimate of the National Conference of State Legislatures, a bipartisan organization that lobbied for the bill.

Backers of the bill said it would help level the playing field for brick-and-mortar retailers and enable states to collect sales taxes that already are owed.

Conservative groups opposed the bill, portraying it as a tax increase and arguing it would burden small online businesses with complex tax-collecting compliance task.

Businesses with less than $1 million in online sales would be exempted from the long-debated measure.

In a recent article carried on the Wall Street Journal, John Donahoe, the CEO of online retailer eBay, said a small business with a dozen employees simply can't be lumped in with national behemoths such as Amazon and retail chains that have warehouses and stores around the country.

He said that small businesses with fewer than 50 employees or with less than $10 million in annual out-of-state sales should be exempted from collecting sales taxes nationwide.

Last year, internet sales in the United States totaled $226 billion, up nearly 16 percent from the previous year, according to government figures.

The bill's fate in the Republican-controlled House remains uncertain as the GOP leaders in the House have not yet taken public position on it.