Thursday October 30, 2014

Senate Passes Online Sales Tax 69-27; Measure Could Shape Amazon-eBay Battle

The U.S. Senate passed legislation requiring Web-based retailers with sales of at least $1 million to collect state sales taxes; the bill now moves to the House.

Forbes is reporting that the U.S. Senate on Monday passed the Marketplace Fairness Act by a 69-27 vote. The bill must now pass the GOP-controlled House of Representatives and receive the signature of President Obama, a supporter, to become law. The legislation would require Web-based retailers with sales of at least $1 million to collect sales taxes for the states where they ship goods and merchandise. Billions of dollars are at stake as online sales tallied approximately $225.5 billion in 2012, reports the U.S. Department of Commerce. Forbes columnist Robert W. Wood calls a House vote “iffy.” He writes: “Perhaps there will be a compromise, such as raising the controversial $1 million exemption. Small online sellers, after all, are getting the worst of this law.”

At the same time, USA Today states that the legislation could tilt the playing field between Amazon.com and eBay. The newspaper is reporting that “Amazon, which until recently was dead-set against a national online sales tax, now embraces it as it looks to expand its physical operations across the USA. eBay, Amazon’s rival, argues the tax would hinder its sellers who do more than $1 million in out-of-state sales annually.” In a recent letter to eBay sellers, Chief Executive John Donahoe pushed the suggestion that the law should exempt any firms that have fewer than 50 employees or make less than $10 million annually on out-of-state sales. Supporters counter that a national sales tax makes it easier for online businesses to manage taxes. Perhaps the biggest concern is that Amazon might use regulation as “a form of suppressing competition” remarks Eric Goldman, an Internet law professor at Santa Clara University. He states, “Amazon’s view is, ‘We can afford it, and others can’t.’”

The Green Bay Press-Gazette states that major retailers and Main Street stores are poised to emerge as the big winners if the House passes the bill. “National and regional chains are tired of being showrooms for shoppers who then search their smartphones for lower prices and buy online,” the newspaper notes. “The chains say they are at a 5 percent to 10 percent price disadvantage by having to charge sales tax.” Currently, Web-based retailers are only required to charge sales tax to consumers in states where they have a physical presence. Finally, states would get new revenue. According to a recent University of Tennessee study, states missed out on over $11 billion in uncollected taxes in 2012 from online purchases.

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