Chances are American online shops will become subject to VAT

“Marketplace Fairness Act”

At the moment American states can only impose VAT on shops with a physical location on their territory, such as a shop, an
office or a warehouse. Each state can decide on its own how high
the VAT is: some charge none, while in other states it can be as high as eight
percent. Nonetheless, pure online shops without a physical location have always
escaped VAT.

Not only big retail chains have been fighting
against what they call “distortion of competition”, but also a pure player as
Amazon, with distribution centres in many states and subject to a
different VAT in almost every one of them, is asking for more uniformity.

Notorious opponents are among others eBay and
Overstock.com, internet companies who barely have to pay any VAT. Other
opponents are smaller companies, who fear they will drown in the administration that
comes with all this.

New legislation earns governments billions

The new legislation, which was approved by a
majority in the Senate earlier this week, gives each state the possibility to
go directly to online shops – even those without a physical location on their territory
– to charge VAT for every order they deliver in the state.

Some
retailers with less than one million dollar in sales from distance sales could
be exempt from the tax. Based on online sales of 2012, the new law would get the
states about eleven billion dollar of new earnings.

Tackle VAT inequality

The National Retail Federation, America’s
biggest retail federation, is very pleased and thanks the senators “for
standing with local retailers and America’s small business owners. Today’s
action in the Senate is a significant step for sales tax fairness”, said the
NRF president Matthew Shay.

“Retailers compete for customers on many
different levels, distribution channels and fronts, including service and
selection, but they cannot compete on sales tax. Congress needs to address this
sales tax disparity and allow retailers to compete freely and fairly. Retailers
of all shapes, sizes and channels deserve a level playing field”, said Chairman
of NRF Stephen Sadove.