Major Retailers Want Internet Tax Law to Level Playing Field

Credit: Cnet Credit: Cnet[/caption]

On Monday, the Senate, in a vote of 75 to 24, endorsed imposing an Internet sales tax on all online orders in America.

This tax bill was proposed by two senators, Mike Enzi (R-WY) and Dick Durbin (D-IL). According to Enzi, states collectively lose $23 billion a year by not taxing online purchases.

Last week, lobbyists from the National Retail Federation and Retail Industry Leaders Association, representing major businesses such as Best Buy, Target, and Wal-Mart, made the case that brick-and-mortar stores were at a disadvantage to online stores.

An online sales tax, they said, would level the playing field for big box stores while also allowing state governments to capitalize on the ever-growing trend of online shopping.

eBay, another giant in online retailing, is against this bill because it feels it punishes smaller businesses.

“Small business retailers using the Internet are innovators using technology to grow a business, create jobs in local communities, and serve consumers with competitive alternatives,” an eBay spokesman said in a statement. “Congress should reject any Internet sales tax legislation that throws a new tax barrier in front of small businesses. A meaningful small business exemption that protects all small business retailers is a must.”

A House bill currently in place allows individual states to levy their own taxes provided they meet a set of criteria. If passed, this Internet tax bill would force online buyers to pay state sales tax on all orders from major retailers, even if the customer lives out-of-state.

There is another concept that would be replaced if the bill passes, called “nexus.” Under nexus, a business can be forced to collect taxes if the business has enough of a financial presence. Amazon.com is an example of a company operating under this rule.

The proposed tax, naturally, has many opponents. One of the most vocal is the National Taxpayers Union, who have created a petition to oppose what it calls “tax schemes.” The NTU believes this tax bill is irresponsible and wasteful.

“Governments have a spending problem, not a revenue problem,” the NTU said in its petition. “Making the decisions to pare back wasteful, unnecessary programs and there’s plenty of room to do so will help put us on the path to long-term prosperity.”

This new law comes with a few caveats, however. Most importantly, it is non-binding, so many states could choose to simply not enact it if they deemed it unworthy.

There are many who believe this seemingly lax tax bill is simply a ruse to get support for another bill that senators Enzi and Durbin sponsored: the “Marketplace Fairness Act of 2013.”

This bill would be largely similar to the previous one, but with a few crucial differences, most of which would make passing it difficult. Most notably, it would require states to clarify their convoluted tax laws.

EBay’s senior director, Brian Bieron, said that the strategy is to offer this general amendment that just about everyone would want to support, then claim that, by supporting that bill, senators want to support the more ambitious and risky bill. Doing this, he said, would allow them to jump the Finance Committee and go right to the floor.