U.S. Sen. Dick Durbin (D-Ill.) is pushing a federal law to govern the collection of sales tax by online retailers. Under current law, online retailers don’t have to collect sales tax, unless they also have a physical presence in the state.“Right now, the obligation is on the buyer when they make an internet purchase,” Durbin says. “My accountant this year reminded me, and I calculated things up and paid the extra amount in sales tax as I was supposed to. Most people don’t.”
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The shoppers treat the situation as a discount, even though the law requires them to pay sales tax or an equivalent use tax. This gives online-only retailers a price advantage vs. in-person retailers, if the buyers are willing to be scofflaws. It also deprives the state of money. Durbin says a conservative estimate is thatIllinoisloses $153 million a year to internet sales on which sales tax isn’t paid. The Durbin bill would require online retailers to collect tax and remit it to the appropriate state, just the way in-person retailers have to collect the tax. The bill gives the retailers a small fee for collecting the tax. The measure does not impose any new taxes.