EcommerceBytes-NewsFlash, Number 2720 - January 18, 2012     2 of 3

eBay and Amazon Spar again Over Online Sales Taxes

By Kenneth Corbin

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WASHINGTON - Consensus was in short supply here at the annual State of the Net conference, where representatives from eBay and Amazon squared off in a panel discussion concerning the contentious issue of online sales taxes.

For eBay, the fight to defeat legislation that would empower states to require out-of-state Internet companies to collect sales taxes has vaulted to the top of the company's policy agenda, according to Becky Relic, head of North American government relations for all of eBay's properties, including PayPal.

"We are here to protect small businesses. We need to see all of them grow, all of them thrive," Relic said, arguing that the tax collection requirement would disproportionately hurt the small sellers with shops on its marketplace.

Paul Misener, Amazon's vice president of global public policy, was on hand to counterpunch, arguing that the 1992 U.S. Supreme Court decision that barred states from requiring out-of-state companies to collect sales taxes dates to a pre-Internet era when the tangle of state and local tax codes could not be simply negotiated with a software program.

"We believe the time is now for Congress to act," Misener said. "Our view is that Congress may, should and feasibly can allow the state to require out-of-state sellers to collect."

Amazon has endorsed bills that have dropped in the House and Senate that would authorize states to impose the collection requirement on out-of-state retailers provided that they signed onto an interstate framework to harmonize their tax codes with other states, or demonstrate that they have taken other steps to simplify their tax framework.

Meanwhile, eBay has maintained staunch opposition to the measures, putting the two ecommerce heavyweights in opposing camps on the policy debate. For its part, eBay has been framing its advocacy around the small business community, arguing that the sales tax collection requirement would impose an unreasonable burden not just on strictly Web-based sellers, but also on small brick-and-mortar retailers who turn to the Internet to open a new sales channel.

"When, you know, I think about an eBay seller who is a small shoe salesperson ... who had a small storefront in rural America and was desperate to try to keep it," Relic said, "she turns to online business to try to make a go of it, to try to keep that business there."

Misener and other backers of sales tax reform are quick to point out that the legislation would set minimum annual revenue thresholds that sellers would have to meet before the states could require them to collect the taxes. The Marketplace Fairness Act pending in the Senate, for instance, would exempt sellers with annual remote sales of less than $500,000, meaning that more than 99 percent of online sellers would not have to collect the tax, according to Misener.

Amazon has been in ongoing negotiations with legislators in several states that have floated proposals to close what they see as a tax loophole: consumers who make purchases from out-of-state companies that don't collect the tax at the time of purchase are still responsible for remitting the payments, but most are either unaware of the requirement or ignore it. As a result, the states have been experiencing significant revenue losses, a shortfall that has spurred many lawmakers into action as state budgets have become awash in red ink.

"It isn't a tax increase. It's an issue of whether or not states are going to collect taxes that are already owed," said Bill Hughes, senior vice president of government relations with the Retail Industry Leaders Association, a proponent of the collection legislation.

But Hughes acknowledged that the pending legislation has no clear path forward in a gridlocked Congress working under an election-shortened legislative season.

And even if the requirement to collect sales taxes would not in fact amount to a new tax, but rather a shift in the collection burden from the states to businesses, some opponents continue to characterize it as a tax hike on small businesses in an attempt to make the measure politically untenable, particularly in the GOP-controlled lower chamber.

"In the House there's a strong sentiment against new taxes," said Steve DelBianco, executive director of Net Choice, an ecommerce advocacy group that opposes any expanded collection requirement and counts eBay as a member.


About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.


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