Republican, Democrat lawmakers reintroduce online sales tax legislation in Congress

Last week, Democrat and Republican lawmakers revived legislation called “The Marketplace Fairness Act” that could force online retailers, such as Amazon and eBay, to collect sales taxes. Federal and state officials argue that this bill could abolish a “handicap” on the traditional bricks-and-mortar establishments.

The bill would permit states to gather sales taxes from online businesses for transactions within the state. It does offer an exemption for retailers that generate less than $1 million in domestic sales, up from $500,000. According to the National Conference of State Legislatures, states could collect more than $23 billion in tax revenue.

National and local bricks-and-mortar stores already amass sales taxes from online revenues because of their physical locations. These establishments as well state governors have made the case for quite some time now that there needs to be laws that level the playing field between physical and online merchants.

“While store owners collect and remit state and local sales taxes, their digital competitors are off the hook — and benefiting because of it,” said David French, the National Retail Federation’s senior vice president for government relations, in a statement.

Illinois Democratic Senator Richard Durbin, Wyoming Republican Senator Mike Enzi and Tennessee Republican Senator Lamar Alexander were the individuals to reintroduce the measure Thursday. The bill is similar to previous versions introduced in the House of Representatives.

The online and auction juggernaut eBay has come out against the act because it could impose serious harm against some of its largest marketplace sellers.

“No small business should face new taxes,” said Brian Bieron, eBay’s senior director of global public policy, in an interview with AllThingsD. “There’s no benefit compared to the harm that would be done.”

The Heritage Foundation is another organization that is against the proposal. Meanwhile, ADP, the National Federation of Independent Business, Council on State Taxation (COST) and Verizon are neutral on the issue.  AT&T and the National Cable and Telecommunications Association are currently undecided on the measure.

“In the long run, the national economy as a whole benefits from allowing consumers to choose freely what they wish to buy, of whatever quality they wish, at whatever prices they choose to pay, and from whatever seller they wish, whether in the same state as the consumer or not,” wrote David S. Addington, Heritage’s Vice President for Domestic and Economic Policy, in an April research report.

“Intervention by the federal government and the states in the consumers’ choices by enactment and implementation of S. 1832 would increase the revenues of states, but hobbling out-of-state businesses that sell through the Internet or mail order catalogs does not help the national economy.”

There are dozens of companies that support the latest tax scheme, including Amazon, Barnes and Noble, Best Buy, PetSmart, Wal-Mart and many more. Dozens more of national, state and local trade associations are also in support of the legislation, according to the act’s website.

Although there is broad support, Internet giants, such as Amazon, prefer the matter be resolved at the federal level. They are also concerned that the taxes could drive up the cost of doing business, while they may have to also install new systems and software to collect the surcharges.

New Hampshire Republican Senator Kelly Ayotte has vowed in a press release to fight against the federal legislation. Ayotte announced that she is working across party lines, including with Oregon Democratic Senator Ron Wyden, to reintroduce a resolution that no federal law should give the states the power to apply new taxes on Internet businesses and entrepreneurs.

“Although we stopped this bill last year, its proponents are back at it,” stated Senator Ayotte. “We need to remain vigilant in the fight to protect New Hampshire’s online retailers, and I continue to work across party lines to ensure that our Internet vendors don’t become sales tax collectors for other states.

This article was updated Feb. 21, 2013 at 7:45 p.m. to reflect that COST is neutral on the legislation. COST representatives confirmed this and the original source has updated its list of supporters, opposition and neutral.

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