Report: Congress Set to End Tax-Free Online Shopping

The free ride may soon be over.

For the past decade and a half, most Internet shoppers haven't been forced to pay sales tax while buying goods online.

But now, according to CNet News, an alliance of "brick-and-mortar" retailers and state governments has teamed up to end that — and they've crafted federal legislation that may be introduced in Congress as early as next week.

Previous attempts in past years to do so have flopped.

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The sheer complexity of sales-tax-collection in the U.S. — it's estimated there are about 7,000 different states, counties, municipalities and other governmental agencies that collect it — has made it nearly impossible to collect taxes from online retailers.

In theory, customers are supposed to calculate how much they owe and to whom they owe it, and then pay it separately, but few if any people do.

The only exceptions until recently have been in cases where large online retailers have physical offices in certain states.

For example, Washington state residents pay sales tax on orders from Seattle-based Amazon, as do residents of Kansas, Kentucky and North Dakota, where the company has facilities.

States and municipalities hate the current system, but few have done anything about it — except New York state, which has very aggressively fought to get back its money.

As of June 1, 2008, all online retailers have been obliged to charges local sales taxes on items shipped to anywhere in New York — and also charge tax on the shipping and handling.

Now the impetus is on to have it happen nationwide — and Congress is getting involved in what could be seen as a purely local issue.

"We will have the bill ready for introduction by next Monday," a spokesman for the National Conference of State Legislatures told CNet News in a story posted Wednesday. "We finalized the language and now we're working out the remaining issues and adding some new provisions at the request of various stakeholders."

It's not clear what exactly the bill would do, but it's expected to be introduced in the House by Rep. Bill Delahunt, D-Mass., and in the Senate by Sen. Mike Enzi, R-Wyo.

The real thinking behind it comes from the Streamlined Sales Tax Project (SSTP), a slow-but-steady effort to get states and municipalities to simplify and unify their sales-tax regimes so that online sales tax can reasonably be collected.

Nineteen states, most smaller ones from the Midwest and upper South, are full members, meaning they've already achieved that goal as defined by the SSTP. Three more are "associate members" who will comply by July 1 of this year.

Notably missing are the four monster-population states of California, Florida, Illinois and New York, or any of the five Deep South states. Of other states with large high-technology sectors, Utah and Washington are represented; Texas and Massachusetts are absent.

Nonetheless, SSTP head Scott Peterson is hopeful about the bill's chances.

"One of the big things the states have learned in the recession is they have declining revenues," Peterson told CNet News. "We're very optimistic about Congress this year."

• Click here to read more on this at CNet News.

• Click here for the Streamlined Sales Tax Project Web site.