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Could the End of Tax-Free Online Shopping Be Near?

July 11, 2012 by John Suder

Load up your carts, because tax-free online shopping could become a thing of the past.

According to a report from ABC News, there’s a bill circulating that could force online retailers to start collecting taxes for purchases. With an esitmated $23 billion in uncollected taxes per year, this could represent a huge windfall for struggling states.

So, why have online retailers been able to skirt the tax issue until now? The answer is that in 1992 the Supreme Court held that stores without physical locations in the state where the customer lives do not have to include sales tax. Unfortunately, small brick-and-mortar establishments suffer the most, due to lower pricing online and the trend of “showrooming” – using the physical locations to compare prices and features, then making the purchase from online competitors.

Ecommerce giants like eBay, Overstock and Facebook have formed a group to protest the proposed bill. Traditional retailers with brick and mortar locations such as Wal-Mart, Target and Barnes and Noble have stepped up in support of the legislation, as well as groups such as the National Retail Federation and the Retail Industry Leaders Association.