By Lisa Sylvester
Washington D.C. (CNN) - Tax-free online shopping may soon be a thing of the past.
You may have to start shelling out more money if a proposed bill becomes law.
If you buy anything from a restaurant in Washington D.C. the sales tax is 10 percent.
Buy clothing, books, or other goods in the district, and the sales tax is six percent.
But if you bought something online from a business that doesn't have a physical presence in D.C., the retailer wouldn't ask you to pay a sales tax at all.
Neal Osten is with the National Conference of State Legislatures, and he says that's costing states $23 billion this year.
"Look at California, California has a great deal of problems. This would mean $4.1 billion in revenue for California that they don't have right now. That could mean more teachers, police, more firemen," said Osten.
He says more and more states are passing laws that would require consumers to pay sales tax on all internet purchases. But, so far online sales companies have been able to get around that because of a 1992 Supreme Court ruling on mail order purchases. That decision said if a retailer doesn't have an actual physical location in the state, the retailer doesn't have to collect sales tax.
Legislation in Congress would change that.
Say you are in Washington D.C. and you buy a $20 shirt online from an out-of-state company who happens to be in California. As of now you pay zero in taxes, but if this federal bill became a law, you would have to pay D.C.'s six percent sales tax and that shirt would cost you $21.20. Taxes go to the state the item is being delivered, not where it's sold.
Bricks and mortar retailers say the new federal proposal is only fair.
"All we're asking is for government to close this loophole, level the playing field and let everybody compete on price in a free market," said Jason Brewer with the Retail Industry Leaders Association.
But a coalition of internet companies, including eBay and Overstock, are lobbying against the proposed federal legislation, saying this is going to hit mom and pop operations.
"Nothing could be less fair to America's small businesses than forcing them to collect and remit sales taxes for nearly 10,000 different jurisdictions across the country," said Steve DelBianco with NetChoice.
A clause in the current Senate bill exempts relatively small retailers with less than $500,000 in annual sales.
Consumer Ian Cairns says he buys everything from clothing to dish soap online.
"As a consumer I wouldn't be super excited, but I also wouldn't be shocked if that happens," said Cairns.
For Americans used to tax-free online shopping, paying sales tax online might feel like a tax increase.
State governments argue it's a tax that should have been paid all along.
CNN