US Senate passes internet sales tax bill

A proposed new law that would compel internet retailers to collect state sales taxes has passed in the United States Senate, receiving support from both Democrats and Republicans.

Called The Marketplace Fairness Act, the federal law would require internet-based businesses with over US$1 million in turnover to collect federal sales taxes in the same way that retailers with a physical presence are now are forced to do.

Sales taxes collected would go to the state where the purchaser lives, according to the bill.

Currently, internet sales from retailers such as Amazon are mostly tax free, something that the bill's proponents say give them unfair advantage over "bricks and mortar" companies.

The tax free status comes from an older Supreme Court ruling that found keeping track of thousands of different tax rates and collecting the money would place an unreasonable burden on retailers.

Ebay, which is home to many small internet retailers, is fighting the bill, which it says will harm its businesses and not bring in as much revenue as the states believe. The internet marketplace operator wants the turnover limit before the sales tax collection requirement kicks in to be raised to at least US$10 million, and not affect businesses with staff of fifity or fewer.

Smaller business operators have also rallied against the proposed new law, with the We R Here lobby organisation claiming it would kill the growth and job creation potential of minor online retailers.

The bill will now go to US House of Representatives, where the chair of the powerful Judiciary Committee, Bob Goodlatte, has already criticised the proposed new law for being too complicated and needing more consideration.