A bill has been approved by the United States House of Representatives that will permanently prevent states from collecting tax dollars on sales that are made over the internet. The bill, which is called HR 644, is a trade policy that has been amended to feature a permanent renewal of the Internet Tax Freedom Act.
The bill is part of the Trade Facilitation and Enforcement Act of 2015, and it was approved by the House with a vote of 256 to 158. By passing the bill, the House has also granted the renewal of the act that forbids both state and local governments from taxing the access to the internet. The Internet Tax Freedom Act was originally put into place in 1998, and it has been renewed several times since then.
The act includes some controversial elements, most notably the limit on the collection of sales tax, which forbids states from collecting tax dollars on online transactions that are made outside of the state where the website operates. The law has largely been credited at helping massive online retailers such as Amazon become extremely successful.
However, this law has also been criticized by state governments who lose out on tax dollars, as well as brick-and-mortar retailers who have complained that they are at an unfair advantage since they are still required to collect taxes.
For now, the bill will be reviewed by the Senate for additional consideration. Assuming that it passes the Senate, the bill would then go to President Obama for approval. The bill has been largely supported by Oregon Democrat Senator Ron Wyden, who has pressured his fellow members of Congress to keep the Internet Tax Freedom Act permanent.
Wyden said, “The ban on internet access taxes expires in just a few days, and there's a good chance this fight over sales taxes could sink the law that has helped the internet grow and thrive. I'm telling my colleagues to keep these issues separate. Now's not the time to risk steep new taxes on the growing digital economy."
With how much online retailers in the United States depend on the Internet Tax Freedom Act, expect Congress to move full steam ahead with this policy. It should be fully expected that online retailers will continue to enjoy the tax exemptions that allow these businesses to thrive.