Tax-free shopping doomed?
By KYUNG M. SONG November 13, 2011 12:32AM
In this Nov. 11, 2010 photo, Leacroft Green places a package to the correct shipping area at an Amazon.com fulfillment center, in Goodyear, Ariz. Amazon.com, the source of many presents good, bad or ugly, has patented a system that would let people exchange unwanted gifts for those they want before anything is actually shipped. For now, though, it's just a patent, so until Amazon figures out how to implement it, you may be stuck with that itchy sweater from grandma. (AP Photo/Ross D. Franklin)
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Updated: December 14, 2011 8:17AM
WASHINGTON — Bye-bye, tax-free shopping on Amazon.com?
Amazon blessed that notion last week by throwing “strong support” to a new U.S. Senate bill that would allow states to compel online vendors to collect sales taxes.
It was the Internet retailer’s clearest endorsement of the federal legislation — a stark contrast to its sometimes-combative opposition to attempts by individual states to require the same thing.
But the bill, introduced by Sen. Dick Durbin (D-Ill.) drew an equally forceful rebuff from eBay, the huge online auction site. EBay fears many of its small member vendors would lose a crucial edge in price over big retailers.
With five Democratic and five Republican co-sponsors, Durbin’s Marketplace Fairness Act may finally succeed in overcoming a decades-old ban on forcing retailers to collect sales taxes in any state where they don’t operate stores or otherwise have a physical presence.
Passage would enable states to capture an estimated $23 billion a year in uncollected taxes. From 2005 to 2010, Illinois lost an estimate $183 million each year, Durbin said.
Customers who aren’t charged sales taxes are supposed to pay the equivalent amount in use taxes. But virtually no one does. And that gives online retailers an advantage.
Last March, Gov. Pat Quinn signed a measure aimed at forcing Amazon and other online retailers with any kind of physical presence in the state to collect sales taxes on purchases made by Illinoisans. But the company got around that law by cutting ties with its Illinois-based affiliates, stymying the state from deriving any sales-tax revenues from the company.
“Most small businesses in Illinois don’t want a government handout. They don’t want special treatment. They just want to be able to compete fairly,” Durbin said in a statement.
“The Main Street Fairness Act doesn’t ask anyone to pay a single penny more in taxes. Instead, it would help governors and mayors collect taxes that are already owed.”
But Steve DelBianco, executive director of NetChoice, a lobbying group that represents Internet companies, said dealing with each state would be unfairly complicated. “Small online retailers are right to fear the costs and compliance burdens of this proposal,” he said.
In July, Durbin introduced a similar bill co-sponsored by five Democrats; that and a companion Democratic bill in the House never got out of committee.
Unlike those bills, the Marketplace Fairness Act would apply to all states with sales taxes, not just to two dozen that are officially part of an effort called the Streamlined Sales and Use Tax Agreement. Retailers with less than $500,000 in annual sales would be exempt.
Among the Republican co-sponsors are Senators Lamar Alexander of Tennessee and Mike Enzi of Wyoming.
The bill would give the 45 states with sales taxes the power to require all remote sellers to collect state and local taxes under simplified rules.
The tax decision would be left to each state. But cash-strapped legislatures aren’t likely to forgo the extra money.
Amazon has argued that uniform, national standards are needed to ensure fairness. But not until Wednesday did it issue such an explicit endorsement for the effort.
“Amazon strongly supports enactment of the Enzi-Durbin-Alexander bill and will work with Congress, retailers and the states to get this bipartisan legislation passed,” Paul Misener, Amazon vice president of global public policy, said in a statement.
Scripps Howard News Service
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