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Internet Sales Taxes Could Go Gangnam Style In 2013

 December 06, 2012 01:28 PM

(By Rich Bieglmeier) Forget ?????, Gangnam Style in English, higher taxes or the focus group approved "new revenues" are the hottest craze as 2012 comes to a close. Eh~ taxing lady - Op op op op oppan Taxman (pronounced like a Jamaican) Style.

Whether it is President Obama, Treasury Secretary Tim Geithner on the left, or Speaker of the House John Boehner, Weekly Standard Editor Bill Kristol on the right, or voters in California, it's Eh~ taxing lady - Op op op op oppan Taxman Style.

The internet could join the craze. Illinois Democratic Senator, Richard Durbin and Wyoming Senator, Mike Enzi offered the Marketplace Fairness Act as an amendment to the National Defense Authorization Act.

iStock just loves how our elected representatives name their proposed legislation. What sort of crazy person would be against "Marketplace Fairness?" According to Durbin, Enzi and other proponents of fairness define the ambiguous word as taxing your online purchases.

[Related -Level Watching and Swing Trade Planning for Amazon (AMZN)]

If the Marketplace Fairness Act amendment is added to the National Defense Authorization Act, it means you will pay a sales tax for all of your online purchases. So, if you purchase a product from a California based website, you'll have to pay your state's sales tax rate. A 1992 ruling by the U.S. Supreme Court said that a "state could only force a seller to collect sales taxes if the seller had a physical presence in that state—such as a warehouse, office, or employees."

The question investors have to ask themselves is how would a sales tax on goods and services online impact companies like Amazon (AMZN), Netflix, Inc. (NFLX), Staples, Inc. (SPLS), Dell Inc. (DELL), Best Buy Co., Inc. (BBY), Apple Inc. (AAPL) and others.

[Related -Fusion-IO, Inc. (FIO): Can Fusion-IO Q2 Results Cheer Street?]

According to a study done by the Kellogg School of Management at Northwestern University, a new, online sales-tax could have a profound, specific impact. The research showed that online sales fell 16% - ouch! However, there is a big however, the study revealed that almost all of the decline came from full-priced items. Online shoppers still sought "deals," but headed for the bricks and mortars for non-sale items.

What are some of unintended consequences of passing the Marketplace Fairness Act? iStock can see a number of the larger online retailers domiciling outside of the U.S., especially if the need for a physical presence in the US is limited. It's not such a far-fetched idea as you might believe, The Kellogg study concluded with, "If the U.S. collects sales tax, then consumers might look to buy from Canada, or Bermuda—someplace that doesn't collect the tax."

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