The Senate is moving forward on a bill that would end the tax-free ride for internet shoppers, and it's setting off a big debate among retailers.
Under the "Marketplace Fairness Act," all online companies would be required to collect state sales tax. The measure has broad support from both parties as well as President Obama and even Internet giant Amazon.com, which was originally against the measure.
Currently, sales tax is required to be collected from internet shoppers who live in a state where the merchant has a physical presence. Technically, all shoppers are supposed to pay the sales tax to their state, even if the "e-tailer" doesn't collect it. But only a small few actually do that.
msnbc's JJ Ramberg, host of Your Business, told Jansing & Co. Wednesday that small businesses are divided. "If you're a small business and you're doing a lot of your sales on the internet and people don't have to pay sales tax, that's an advantage to you."
But on the other hand, Ramberg says small merchants who do most of their business in their home state are at a disadvantage because they're required to collect sales tax, while an out-of-state merchant does not have to collect the tax.
Some small online businesses are sounding the alarm about the new internet sales tax bill, claiming it would be a red tape nightmare. They say they'll now have to calculate the tax for some 9,600 state and local taxing authorities.
Ramberg said lawmakers are trying to address that concern. "As part of the bill, they are saying that they will make this easy for small business. The states are going to have to give them some software so that this is easily calculated."
Companies with less than $1 million in sales would be exempt from the new law. The Senate's bill could be approved as early as this week.