Government looks to tax online shopping

WASHINGTON (NBC) - One market research firm estimated online holiday spending could jump 11 percent this year to $32.4 billion. The government isn't smiling, though, as the vast majority of online sales come without sales tax attached.

A 1992 U.S. Supreme Court ruling shielded online retailers from collecting the tax unless they have a physical presence in the customer's state.  That's a legal loophole the National Retail Federation is now trying to close.

"The money at stake is upwards of $23 billion or more," said Maureen Riehl. "And some estimates are as high as $40 billion."

Many cash-strapped states are anxious for what they see as their share of potential tax dollars each year. North Carolina and Texas are among the states that have gone to court over the matter.

"Right now, states are looking under the couch cushions for every cent they can find," said the Tax Foundation's Joe Henchman. "The importance is that we not let states harm the national economy as they do this."

The nonpartisan Tax Foundation contended that the myriad of state and local tax codes makes collecting internet sales taxes problematic.

"We're dealing with thousands - at last count - something like 8,000 different sales taxes and different states will exempt different things," Henchman explained.

24 states have streamlined their sales tax codes since 2005, and current legislation in the U.S. House of Representatives would allow those states to require online retailers to collect sales tax on their behalf.

"It makes no sense to us in retail that we shouldn't find a way to help states collect a tax that's already owed to them," Riehl argued.

Online shopping accounts for about 7 percent of the total holiday shopping pie, which is estimated to be about $447.1 billion this year.

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