Amazon.com, the 800-pound gorilla of online retailing, has thrown its support for federal legislation to allow states to mandate online vendors collect state sales taxes.
The current law calls for sales tax to be collected only from retailers that have a physical presence in a state. So, for example, Washington state residents must pay a sales tax on Amazon's goods because the company is headquartered in Seattle while those who buy from Amazon in other states are making tax-free purchases. The system is unfair to consumers and old-fashioned retail merchants who sell their goods out of stores. The current law puts brick-and-mortar merchants at a competitive disadvantage.
Amazon, to this point, had been resistant to collecting sales taxes in states where it does not have a physical presence because not having to collect sales taxes has boosted sales.
But momentum is shifting toward closing the loophole and Amazon officials have concluded the proposal now in the U.S. Senate might be the best deal they will get.
The proposal, dubbed the Marketplace Fairness Act, is sponsored by Sen. Dick Durbin, D-Ill., and has strong bipartisan support. Approval would enable states to capture an estimated $23 billion a year in uncollected taxes. For Washington state it would mean $483 million in new -- and much needed -- revenue during the 2013-2015 budget cycle, according to the state Department of Revenue.
Ebay, another of the 800-pound online gorillas, continues to fight the Marketplace Fairness Act because it fears some of the smaller vendors it does business with will lose the competitive advantage the sales-tax exemption gives them.
Hmmmmm, then they will know how brick-and-mortar merchants feel.
We have for years strongly urged Congress to establish national policy that brings equity for merchants in cyberspace and those on Main Street in Walla Walla and every town in America.
Durbin's proposal seems fair. The Marketplace Fairness Act would apply to all 45 states with sales taxes, not just the two dozen or so states that were aggressively seeking a change in the law. In addition, Durbin's plan exempts smaller businesses -- those with sales of less than $500,000 -- from having to collect and distribute sales taxes.
That seems reasonable. This will still allow smaller retailers who dabble in online sales to continue without having to hassle with tax collections.
This proposal is equitable to all online retailers while leveling the playing field for traditional Main Street merchants. Let's hope the the fact Amazon.com isn't standing in the way will be enough to turn this legislation into law.