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Online shopping sales tax bill to be proposed

New Yorkers shopping on Amazon.com's site already pay

New Yorkers shopping on Amazon.com's site already pay online shopping taxes because the company has offices in the state. Credit: AFP / Getty Images File, 2010

Get ready. You could have  to pony up just a bit more than  $1.29 to buy that hot new song on iTunes.

A U.S senator says he will introduce a bill that would impose taxes on all Internet-bought merchandise, according to a post by Declan McCullagh on Privacy Inc., a CNET News blog.

If it passes both houses of Congress and is signed into law, all online retailers like Amazon, eBay and iTunes would be forced to collect state taxes from every transaction.

McCullagh's post says Sen. Dick Durbin (D-Ill.)  is expected to introduce the bill April 19, the day after the deadline to file federal  income tax returns.

In February, Durbin hinted at the proposal, saying the current Internet shopping model hurts local economies, McCullagh reported.

McCullagh quotes a speech Durbin reportedly gave in Collinsville, Ill. "Why should out-of-state companies that sell their products online have an unfair advantage over Main Street bricks-and-mortar businesses?" Durbin said. "Out-of-state companies that aren't paying their fair share of taxes are sticking Illinois residents and businesses with the tab."

Some Republican House members led by Rep. Dan Lungren of California and Rep. Ron Paul of Texas have begun gearing up for a fight against  such tax, McCullagh said.

In general, consumers do not pay sales tax on products bought over the Internet thanks to two legal precedents set by the United States Supreme Cout. In 1967, in National Bellas Hess Inc. v. Department of Revenue of the State of Illinois and in 1992, Quill Corp. v. North Dakota, the Court concluded that the Commerce Clause and Due Process Clause of the U.S. Constitution requires that the state only has a right to collect taxes if the vendor has a physical presence in the state.

New Yorkers pay some online shopping taxes, like on Amazon.com or B&H photo, because both companies have offices in the state.

Arguments for and against a new tax plan basically boil down to this: On one side, you can buy the new "Tangled" Blu-ray movie from Walmart.com for $22.99 from the convenience of your home, tax free, and have it shipped for free. The other choice: go outside, buy that same movie from the local Walmart, pay taxes, but in turn, support the local workforce.

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