• Taxing Online Shopping

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    Mellody Hobson talks to listeners about the change in online shopping on this week’s “Money Mondays.”

    Mellody, you want to talk to us about online shopping today.

    That’s right, Tom. And I’m afraid I don’t have great news for most people. Last week, Congress cleared the way for a bill about online sales taxes known as the Marketplace Fairness Act, and it’s going to mean big changes for businesses and consumers. Right now, if an internet business has no physical presence in the buyer’s state, it doesn’t have to charge tax on the sale. The onus is left on the buyer to report the purchase—which can be done on your state income tax form. In reality, practically no one does this, so taxes go uncollected.

    Under the proposed law, sellers would have to pay the sales tax to whatever state they ship the purchase to. This levels the playing field in that pure online retailers, such as Amazon.com, would be subject to the same rules as Walmart.com. Because Wal-Mart has actual stores in every state, it is required to collect sales tax on every transaction. This is not small potatoes. U.S. shoppers spent $225 billion online last year, so we’re talking about up to $24 billion in sales tax that now goes uncollected.

    Okay, so who wins and who loses?

     The winners are local economies who will collect all that tax money and the losers are consumers—who will have to pay it. Also losing are online businesses, who will have to charge more for their products in order to collect the tax.

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