Online sales tax bill moves to the Senate; what this means for online pet business retailers

Yesterday, the Senate voted 75-22 to advance the online sales tax bill, also called the The Marketplace Fairness Act, SB. 743.

With this latest vote it is suggested that supporters of the bill are likely to see it win approval in the Senate later this week.

It's path through the House, is not as clear.

The bill would require online retailers to collect state and local sales taxes for purchases made over the Internet. The sales taxes would be then be sent to the states where a shopper lives.

The bill would exempt small businesses that earn less than $1 million (calculated from the preceding calendar year) annually from out-of-state sales (and requires states to provide retailers with software to calculate sales taxes based on a buyer’s zip code.)

Under current law, states can only require stores to collect sales taxes if the store has a physical presence in the state, such as a headquarters, distribution center, affiliate business and more.

Proponents indicate that many online sales are essentially tax-free, giving Internet retailers a big advantage over brick-and-mortar stores. Opponents say it would require complicated regulations for retailers and doesn't have enough protections for small businesses.

According to CBS, 'Last year, Internet sales in the U.S. totaled $226 billion, up nearly 16 percent from the previous year, according to Commerce Department estimates.'

So what does this mean for your pet business?

If you are a small online pet business with under $1M in out-of-state sales, you would be exempt from this proposed law. If you are a larger pet business with sales over $1M in out-of-state sales, the bill would require you to calculate (with potentially supplied software from your state) sales tax based on the purchaser's zip code and then pay local and state sales tax on those purchases to each state based on these calculations.

UPDATE: May 6, 2013 - Today the Senate voted 69-27 to pass the The Marketplace Fairness Act, also known as the "Internet Sales Tax." The bill is expected to face more opposition in the U.S. House.

Photo courtesy of DerekGavey.