President Donald Trump might move forward with a national Internet sales tax, his Treasury Secretary has signaled. And it could have a big impact on the way you shop and how much you pay.Credit: Alex Wong/Getty
Speaking before the Senate Banking Committee this week, U.S. Treasury Secretary Steve Mnuchin said that there are parts of a proposed national Internet sales tax that President Trump "likes a lot." He added, according to the Washington Times, that the president wants to see a formal proposal and then will work with lawmakers on a bill.
“I think the president fundamentally supports the idea of some type of sales tax across the board, and we look forward to working with you and others on that,” Mnuchin said, according to Washington Times.
A national Internet sales tax has been a hot-button topic for years, with some saying it's a must-have and others saying it's an unfair concept. Those in favor of the tax say that current law provides an advantage for retailers that chiefly sell products online, since they only need to collect sales tax in states where they have a major physical presence.
"Just about everyone except self-interested and cost-sensitive consumers and pure-play online retailers see the merits of an online sales tax so long as it’s easily administered—calculated and collected," said Greg Girard, a retail analyst at IDC.
Lawmakers on both sides of the aisle have at one point or another floated the idea of an online sales tax in a bid to improve "fairness" between online and brick-and-mortar retailers. So far, however, some states have successfully enacted online sales tax, but no national bill has passed.
"A uniform national online sales tax system, regardless of nexus,would simplify administration and do a lot to level the playing field," said Girard.
A nexus refers to whether the retailer has a physical presence, stores or distribution centers in the state or not. Girard noted that Amazon sales are already subject to tax in many if not most states, given its national network of distribution centers, Whole Foods Market stores and lockers.
According to the Washington Times, which cited a Government Accountability Office estimate, the taxes could be major: state and local governments could raise between $8 billion and $13 billion each year.
Currently, you're able to save cash on many online purchases by not paying sales tax. By being forced to pay online sales tax, retailers would likely pass on that cost to consumers. The cost to buy products online, then, could go up significantly.
So, assuming a national online sales tax becomes a reality, what would it mean for online shoppers? Would they wind up paying more?
"Those are not easy questions to address," said Girard. "It all depends on what the market will bear, how the tax is constructed, its rate, and how much cost bears on a shopper’s decision.
Still, there's no telling if and when this bill would pass. Lawmakers would still need to draft a bill, fight about it in Congress, and hope to get the President's buy-in. It would be easy, then, to see this through.