Internet sales tax bill passes Senate, awaits House approval

The Marketplace Fairness Act, an internet sales tax measure that supporters say will help mom-and-pop retailers compete with online retailers, passed the U.S. Senate by a 69-27 margin on Monday and will soon go before the House.

The law calls for internet retailers with more than $1 million in annual revenue to collect sales taxes from out of state shoppers. State governments claim it will help them collect billions in unpaid revenue while brick-and-mortar retailers, who also support it, say it will level the playing field by forcing online competitors to collect tax.

Opponents of the law, which include libertarians and states like Oregon that have no sales tax, complain it will lead to regulatory burdens tied to collecting tax from numerous state and local governments. Supporters counter that the task will not be that onerous because the law would require states to provide merchants with free tax collection software.

For consumers, the law means paying more sales tax on online purchases. Right now, consumers typically pay only if the online merchant is located in their home state.

The bill will now go to the House where conservatives say they will oppose the bill; they may not succeed, however, as politicians from both parties have argued that the bill does not impose a new tax but instead helps collect taxes that are already owed. The Obama Administration supports the proposed law.

eBay(s ebay), one of the law’s prime opponents, said in a statement that it will keep pushing for merchants who collect less than $10 million to be exempt.

To understand more about the law, see GigaOM’s primer on who’s for it and who’s against.