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TECHNOLOGY

Amazon Backs Internet Sales Tax Bill

After years of fighting states on the issue, Amazon endorsed a bipartisan bill introduced on Wednesday that would authorize states to require online retailers to collect sales taxes from out-of-state customers.

The legislation, introduced by Sens. Michael Enzi, R-Wyo., Dick Durbin, D-Ill., and Lamar Alexander, R-Tenn., would close a loophole left by a 1992 Supreme Court decision that found retailers do not have to collect sales taxes from customers in states where those firms do not have a physical presence such as a store or distribution facility.

 

“Amazon strongly supports enactment of your bill and will work with you, your colleagues in Congress, retailers, and the states to get his bipartisan legislation passed,” Amazon Vice President for Global Public Policy Paul Misener wrote the senators on Wednesday. The company didn’t explain its change of heart.

If Congress passes the legislation, consumers could be paying more for the books, clothing, or other products they buy online from some Internet retailers like Amazon or Overstock, which do not have retail stores or other facilities in most states and therefore don’t currently collect sales taxes from most customers. 

The issue has vexed big “brick-and-click” retailers such as Walmart and Best Buy, which are required in most cases to collect sales taxes on their online transactions because these companies have stores or other facilities in most states where their online customers live. Durbin said small brick-and-mortar businesses are also at a disadvantage because they are increasingly losing sales to the Internet. 

 

Enzi said states lose $23 billion a year in lost sales tax revenues because of the loophole. States in recent years have tried to address the issue on their own given that efforts in past years to find a national solution haven’t made much headway in Congress. Amazon has resisted state efforts but ceded ground on the issue earlier this year when it agreed to begin collecting sales taxes next year from customers in California. 

“To have the support of a major online retailer like Amazon is an indication that we, I think, have finally come up with the right answer,” Durbin said at a news conference.

In addition to Alexander, Durbin, and Enzi, the bill is cosponsored by four more Democrats and three Republicans, which the bill’s authors say bodes well for its prospects in the Senate. Durbin, the Senate’s majority whip, also noted that Senate Majority Leader Harry Reid, D-Nev., has indicated his support for the measure. 

The bill would require states that want online retailers to collect taxes on out-of-state sales to either participate in the state-designed Streamlined Sales Tax project or meet minimum standards set by the bill to make it easier for online retailers to comply.

 

These standards include designating one agency to be in charge of compiling the sales taxes collected by online retailers and establishing a uniform sales and use tax base within the state. “The bill empowers states to make the decision themselves,” Enzi said.

A similar bill was introduced last month in the House, and industry sources said the House Judiciary Committee may hold a hearing on that measure at the end of this month or in early December.

Despite Amazon’s support, both bills are still opposed by some tech groups and online companies such as eBay, which says the exemption for small businesses in the legislation is not big enough. Enzi said he would be open to increasing the threshold in the Senate bill.

“Imposing tax collection burdens on small Internet businesses, which are some of the most promising candidates for future economic growth, would be unjustified, unfair, and unwise,” Computer and Communications Industry Association President Ed Black said in a statement.

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