Retail Industry Members Debate E-commerce Sales Tax Bills

"It’s simple and easy for remote sellers to collect” state sales taxes, said Emmett O'Keefe, director of public policy at Amazon. In 2013, requiring online sellers to collect sales tax does not “create an undue burden on interstate commerce,” he said. “It’s not a new tax. It’s a tax that’s lawfully owed today” but states are currently unable to collect from online sellers, he said. “We believe the time is now to adopt the Marketplace Fairness Act."

The proposal’s small seller exemption -- currently set to encompass companies that do less than $1 million in online sales annually -- is too low, said eBay Senior Director-U.S. Government Relations and Global Policy Brian Bieron. Previous attempts to regulate interstate sales taxes have included higher small seller exemptions, and the level set by these bills would harm small online sellers, he continued. “These are the businesses that would theoretically grow into the large retailers of tomorrow. … I think there are some folks in this debate [who] would prefer that they don’t."

The bills amount to taxation without representation, because businesses will have to remit sales taxes to states other than the ones they vote in, Bieron said. “States today, absolutely, have the power to force any retailer with a presence in their state to collect sales taxes,” and this bill would expand states’ powers so that states could force companies located outside their boundaries to remit taxes, he said. States also “have the power to require every citizen in their state to pay their use taxes,” he continued, but “this is not a use tax collection bill."

A company that does $1 million in online sales may be only a one- or two-person operation, said Steve DelBianco, executive director of NetChoice, an online commerce association that includes eBay and Overstock.com as members. If retail companies have, on average, a gross margin of 25 percent, a small business under the bills’ definition has, at most, $250,000 to pay for all its expenses, including salaries, he said.

These bills are “not nearly simple enough to deserve congressional endorsement to blow away the physical presence standard,” DelBianco continued, referring to the current law’s structure, which requires online sellers to remit sales tax to states in which those sellers have a physical presence. Small sellers should not be expected to comply with the varied and complex sales tax systems, and the bills do not do enough to simplify the requirements of those systems, he said. Amazon is only now pushing the bills because it has distribution centers -- and therefore is responsible for collecting sales tax -- in so many states, he continued.

By opposing the bills, eBay is trying to protect a few of its big sellers “from operating on the same playing field as everyone else who are being good corporate citizens,” said Bill Hughes, senior vice president-government relations of the Retail Industry Leaders Association, which represents major retail companies, including Walmart and Best Buy. The bills are “set up to protect small businesses” with their small-seller exemption and requirement that states provide free tax calculation software to online retailers, Hughes continued. “States have to provide free software to any business that wants it, and if you use that software, you're not liable” for any tax calculation errors, he said.