WASHINGTON — Congress entered the protracted fray over imposing taxes on e-tailing once again on Friday and this time a main opponent — Amazon.com — appears to be on its side.
This story first appeared in the August 1, 2011 issue of WWD. Subscribe Today.
Sen. Dick Durbin (D., Ill.) introduced long-anticipated legislation Friday that would authorize 24 states to require all Internet retailers to collect tax on online sales.
The debate over taxing Web sales has taken place in Washington for more than a decade without any resolution, but brick-and-mortar retailers are hoping this is the year Congress will act.
In a stunning twist, Amazon.com, which has battled states against a sales tax requirement and threatened to sever business partnerships, said in a letter to Durbin that it supports his legislation and has always supported a “simple, nationwide system of state and local sales tax collection, evenhandedly applied to all sellers, no matter their business model, location or level of remote sales.”
Paul Misener, Amazon’s vice president of global public policy, in the letter, a copy of which was provided by Durbin’s office, said, “Introduction of your bill returns the discussion of interstate collection of sale tax to Congress, which the Supreme Court says is the appropriate forum to resolve the issue.”
Sears Holdings Corp. also supports Durbin’s bill.
A movement by several states in recent months backing legislation requiring online sellers to collect sales taxes could also provide the impetus needed on Capitol Hill. Most recently, California Gov. Jerry Brown signed legislation in late June that requires out-of-state Internet companies to collect sales taxes and remit them to the state.
The U.S. Supreme Court ruled in a 1992 case, Quill Corp. v. North Dakota, that retailers are required to collect sales tax from out-of-state customers only if they have a “physical presence” in the customer’s state.
Durbin’s bill, dubbed the Main Street Fairness Act, would authorize states that have adopted the Streamlined Sales & Use Tax Agreement of 1999 — developed to simplify sales tax laws in response to the Supreme Court decision — to require out-of-state sellers to collect sales tax regardless of whether they have a physical presence or not. The bill would cover Internet-only sellers as well as “remote sellers,” such as catalogue companies.
Durbin’s office said 24 states have changed their laws to comply with the Streamlined Sales & Use Tax Agreement, but the Quill decision directed Congress to sanction the agreement.
Traditional retailers are backing federal legislation and a national standard requiring e-tailers to collect sales taxes, arguing they are put at a competitive disadvantage alongside small retailers when consumers choose Internet-only Web sites over stores because of the added cost of sales tax.
“We believe there should be a level playing field where all retailers follow the same rules regardless of whether they sell their merchandise in a brick-and-mortar store, through the mail or online,” said David French, senior vice president of government relations at the National Retail Federation. “This bill would end a situation where Internet sellers have had an unfair price advantage over local stores for far too long. Tax policy should be channel neutral and not favor one segment of an industry over another.”
Durbin’s bill exempts small businesses, as defined by the governing board of the Streamlined Sales & Use Tax Agreement, and compensates retailers for any startup administrative costs associated with collecting sales taxes.