Internet Sales Tax, Amazon rode into the ranks of the world’s biggest retailers on the back of its low, low prices. But it’s more likely than ever that those prices will rise for most Americans as the Senate prepares to vote on a nationwide internet sales tax bill.
Senators voted 74-20 late yesterday to let debate proceed on the so-called Marketplace Fairness Act, a measure that would require all online retailers with $1 million or more in annual out-of-state sales to collect sales taxes on behalf of every state where they sell. A final vote is expected shortly...REPORTED...wired.
Currently only states in which online retailers have a physical presence can force those companies to collect sales tax. Otherwise, the burden falls to the customer to pay the required state sales tax on their online purchases, typically when they file their state income tax returns. Hardly anyone does, which has allowed Amazon, among others, to enjoy a huge price advantage over brick-and-mortar competitors.
Some states have pushed back against Amazon in particular, claiming that its vast network of affiliate sellers qualifies as having a physical presence. Large states such as California and New York have used that ambiguity as leverage to force Amazon to start collecting sales tax. Amazon today collects sales tax in nine states that together represent a little more than one-third of the U.S. population.
This means that nearly 200 million Americans still don’t pay the same price on Amazon that they would at the store. Yet while the initial pressure to pass nationwide online sales tax legislation may have come from disgruntled brick-and-mortar chains, Amazon has backed the current bill following a massive expansion of its physical footprint with the erection of distribution warehouses across the country.
The Marketplace Fairness Act has zipped through the legislative process with speed seldom seen anymore in the U.S. Senate. In March, Senate lawmakers passed a non-binding resolution in support of the bill 74-25 in an exceedingly rare display of genuine bipartisan support, especially for tax legislation.
Opposition to the bill doesn’t divide along traditional party lines, either. The leading Senate voices against the bill, such as New Hampshire Republican Sen. Kelly Ayotte and Oregon Democratic Sen. Ron Wyden, come from states that don’t have sales tax. They say the legislation puts an unfair burden on small and medium-sized online businesses in their states.
“It really should be renamed the Internet Tax Collection Act because it’s going to make internet businesses the tax collectors for the nation,” Ayotte said during debate on the Senate floor yesterday.
Leading the opposition among businesses is eBay, which says the bill would hurt both sellers and shoppers on the site.
“For consumers, it means more money out of your pocket when you shop online from your favorite seller or small business shop owner,” CEO John Donahoe wrote in an email sent to eBay users starting over the weekend. “For small business sellers, it means you would be required to collect sales taxes nationwide from the more than 9,600 tax jurisdictions across the U.S.”
Donahoe also used the letter to take an extended swipe at Amazon and its support for the bill, portraying its rival as a retail giant out to stomp smaller online competitors. He proposed that any businesses with fewer than 50 employees or $10 million in yearly out-of-state sales should be exempt from collecting sales tax. “To put that in perspective, Amazon does more than $10 million in sales every 90 minutes,” Donahoe wrote.
Amazon didn’t immediately respond to a request for comment. But the Marketplace Fairness Coalition, which consists of Amazon and many of its brick-and-mortar rivals in support of the bill, issued a statement calling Donahoe’s letter “disingenuous” and arguing that the bill’s $1 million sales threshold already provides exemptions for most small businesses.
“EBay’s opposition to the Marketplace Fairness Act is a transparent attempt to maintain an unlevel playing field and benefit a very small number of their largest sellers,” the statement said.
While eBay’s objections don’t seem likely to sway the Senate, the bill’s passage in the Republican-controlled House seems less certain, given the vehemence of the many Tea Party-backed anti-tax crusaders on that side of the Capitol. If the House does approve the measure, Amazon shoppers coast to coast can look forward to paying more: Obama spokesman Jay Carney said yesterday that President Obama would sign the bill.
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