New Version of Internet Tax Proposed

If passed, all online retailers will have to collect sales tax

Amy King
MoneyTips Contributor

Sales Taxes Taxes Tax Laws

New Version of Internet Tax Proposed
September 9, 2016

Senate Judiciary Committee Chair Bob Goodlatte has introduced a new draft of the Online Sales Simplification Act (OSSA) that, if passed, would create an online sales tax that is much less complicated than the current method for online retailers to collect taxes.

The way internet sales taxes are currently collected depends on whether the retailer has a brick-and-mortar presence or other physical location, such as a trade show booth, in the state in which the consumer resides. If this is the case, the retailer is required to charge the consumer sales tax. Otherwise, the consumer may be required to pay a use tax. This use tax, which is imposed by a number of states, is a tax consumers are required to report on their income taxes at the end of the year. However, because there are additional tax forms that must be filed and a general lack of education regarding use tax, few consumers actually take this step.

This version of the OSSA is the latest in a number of proposals aimed at creating an easier form of sales tax for online purchases. The proposal lays down clearer guidelines on when sales tax is to be collected and how the tax is to be calculated. Much of this new plan depends on the state tax clearinghouse, an organization that was created to collect and distribute the sales tax gathered from internet sales.

This new proposal will be debated during the next session of Congress.

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