A bill that would allow states to collect sales tax from Internet companies like Amazon and eBay passed the Senate on Monday by a wide margin of 69-27, in a largely bipartisan push to help level the playing field for brick and mortar stores vis-a-vis their online competitors.
The Marketplace Fairness Act, sponsored by Democratic Senator Richard Durbin of Illinois and Republican Senator Mike Enzi of Wyoming, would, for the first time, force Internet retailers to collect state and local sales tax. (Many states already force some retailers to collect sales taxes, though their rules don’t apply equally to all online merchants.) It would also create a streamlined way for those companies to collect sales tax across 9,600 state and local jurisdictions.
Companies like eBay and anti-tax activists like Grover Norquist of Americans for Tax Reform complain that the bill is just too complicated, although both have other reasons for opposing the measure — chief among them being the way it would formally end the Internet’s (admittedly somewhat frayed) status as a tax haven.
The bill’s detractors claim it will create massive confusion. The bill exempts online retailers who earn less than $1 million in annual out-of-state sales, although retailers like eBay are pushing to raise that cap to $10 million. EBay also complains that the bill’s collection mechanism — which would require states to provide companies with software to help them calculate taxes in various jurisdictions — will significantly injure its many retailers and, by extension, eBay itself.
Amazon, by contrast, has thrown its support behind the bill. Since it already collects sales tax in many of the states where it maintains warehouses, the e-commerce giant would benefit if its competitors had to do likewise. The measure would also reduce any competitive disadvantage Amazon might face as it builds out its distribution network in pursuit of same-day delivery to major urban centers.
The bill now moves to the Republican-dominated House for an inevitable battle. But as the New York Times‘ Jonathan Weisman notes, “…the bill would now go to the House Judiciary Committee, not the tax-writing House Ways and Means Committee. That itself could ease the bill’s passage.”
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