- The Washington Times - Tuesday, April 23, 2013

Brace for it, online shoppers: Consumers likely will pay more to shop on the Web as lawmakers look to impose new sales taxes.

The movement to hit consumers with an Internet sales tax is gaining momentum in Washington as the Senate considers the Marketplace Fairness Act, which would place online retailers in charge of collecting the fees.

Consumers would be stuck footing the bill for a tax they technically already owe, but which hasn’t always been collected. In 2012, $23 billion in sales taxes, mostly from online purchases, went uncollected across the country, according to the National Conference of State Legislatures, including about $72.5 million in the District, $376 million in Maryland and $423 million in Virginia — money that the Senate bill could help capture in the future.

On Monday, the Senate voted 74-20 to send the act to the floor for final passage. The House, where there is also bipartisan support for the bill, would then vote on it. President Obama has already said he will sign it if it gets to the White House.

Passage wouldn’t necessarily result in immediate price hikes, but odds are retailers will look for ways to recoup the millions suddenly redirected to tax bills.

Most states charge a sales tax of about 8 percent on average, according to Brian Bieron, senior director of global public policy at eBay, the online marketplace that has been a staunch opponent of the Marketplace Fairness Act.

“There’s no question that consumers are going to be paying sales taxes more often when they shop online,” Mr. Bieron said. “It will simply be more expensive for consumers.”

Many Internet retailers also oppose the tax because they know it will eliminate an advantage they have long enjoyed over their brick-and-mortar peers.

“This is another attempt by senators to sneak through a [tax] increase,” said Phil Bond, executive director of We R Here Coalition, a group of small Web retailers opposed to the bill. “There are good reasons this policy hasn’t been considered in the U.S. Senate [before]: Taxpayers don’t like it.”

But many analysts think online shoppers will just absorb the higher costs.

“I don’t think it will affect online shopping,” said Kay Bell, tax specialist at Bankrate.com. “A lot of people shop online for convenience or because they can’t find the product locally. They will probably grumble about paying more, but their shopping habits shouldn’t change too much.”

The Marketplace Fairness Act could also help local retailers compete more effectively with online stores such as Amazon and iTunes.

Many states raise sales tax rates to adjust for the money lost in online taxes that currently go uncollected. That puts an unfair burden on consumers who prefer to go into the store, Ms. Bell said.

Phineas Baxandall, senior analyst for tax and budget policy at U.S. PIRG, a consumers’ rights organization, agreed.

“The next time they consider raising the sales tax, maybe they won’t have to,” he said. “They could cut sales taxes, or they could decide just not to increase the sales tax in the future.”

Ms. Bell said the bill would help the poor because they tend to shop online less than high-income consumers.

“Those people who tended to be patrons of brick-and-mortar stores will now feel like they’re being more fairly treated in the tax world,” she said.

The bill would make it easier for shoppers who follow the rules to pay their taxes, according to Stephen P. Kranz, a D.C.-based tax partner at the international law firm McDermott Will & Emery. He compared the Internet tax to a company taking income tax out of its employees’ paychecks.

“Consumers would no longer have that administrative burden of keeping track of their online purchases and which ones have been taxed and which ones haven’t,” he said.

• Tim Devaney can be reached at tdevaney@washingtontimes.com.

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