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Online sales tax bill provides shelter to big businesses, more cash for governments

By   /   May 9, 2013  /   News  /   7 Comments

By Eric Boehm | Watchdog.org

HARRISBURG, Pa. — A push for online sales tax “fairness” is more about protectionism than equal protection.

Some have drawn that conclusion from after the U.S. Senate OK’d of the Marketplace Fairness Act earlier this week.  The bill — if it becomes law — would allow states to collect sales taxes from online transactions, even if the companies conducting the transaction are located outside the borders of the state.

ALL SMILES: Amazon.com might be smiling about the new online sales tax passed by the U.S. Senate, but it's bad news for taxpayers.

ALL SMILES: Amazon.com might be smiling about the new online sales tax passed by the U.S. Senate, but it’s bad news for taxpayers.

“States and local governments want more money, and with this bill they’d get it. Huge online and traditional retailers like Amazon and Walmart want even more advantages over smaller competitors. With this bill, they’d get those additional advantages,” said Steve Stanek, a research fellow for the Heartland Institute, a free-market think tank based in Chicago.

In order to comply with the new rules, online retailers will have to collect and send taxes to more than 9,000 different taxing jurisdictions, according to the NetChoice Coalition, an advocacy group for small online sellers that opposed the bill.

All businesses will have a new burden of complying with the online sales tax rules. But larger online retailers — like Amazon.com, for example, which supported the bill in the U.S. Senate — will be able to absorb the cost of compliance while their smaller competitors might not.

That could explain why E-Bay — which organizes thousands of individual sellers into a single marketplace, and used that organizational power to form a coalition of groups opposed to the Marketplace Fairness Act — opposed the legislation.

And brick-and-mortar stores like the idea because their competitors, who often can sell items more cheaply because they don’t charge sales tax, will have to collect the tax as well.

Matthew Shay, president and CEO of the National Retail Federation, said the Senate vote was a significant step for “tax fairness.”

“This bill and its companion in the House will level the playing field for all retailers — both online and off — while safeguarding states’ rights,” Shay said in a statement.

There was plenty of big money behind the bill’s passage.

Advocates for the bill outspent opponents of the new online sales tax measure by a margin of 13-to-1, according to an analysis by MapLight, a nonpartisan research organization that tracks lobbying spending.

MapLight’s analysis shows that more than $57 million was spent lobbying Congress on the bill, with $53 million coming from companies and groups supporting it.

Amazon alone spent more than $208,000 lobbying senators to pass the bill, and senators who supported the bill got, on average, 29 percent more campaign cash from all sources than those who voted against it, according to MapLight.

The bill faces an uncertain future in the U.S. House of Representatives, where the Republican majority seems unwilling to support legislation that could be seen as a tax increase on American businesses and people making purchases online.

Eric Boehm is a reporter for Watchdog.org and bureau chief for PA Independent. Contact him at [email protected]

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Eric Boehm is the national regulatory reporter for Watchdog.org. He lives in St. Paul, Minnesota. His work has appeared in Reason Magazine, National Review Online, The Freeman Magazine, The Philadelphia Inquirer, The Washington Examiner and Fox News. He was once featured in a BuzzFeed listicle. Follow him on Twitter @EricBoehm87 and reach him at [email protected]

  • Richard Bunce

    Either all businesses need to ask all customers where they live and collect the correct sales tax OR they all need to collect the sales tax for where the business is located. This is nonsense that the sales tax I pay for a purchase at a business in the next town over is based on whether I use my computer to buy it or drive over there. Actually having private business acting as tax collector for State and local governments needs to end. States not being able to enforce their use tax Statutes is the root of this alleged problem.

  • charmainej27

    private business has always collected taxes for state and feds . however if ordering on line you have to put the state and city & zip so why the bitch they have the info already on the order form, if taxes are imposed the people ordering know what the tax should be they can include if paying by cash – states can post the sales tax on line for retailers they have avail for themselves , i might be missing something but the only problem being if the cities that have their sales tax might not get there share.

  • bitters

    What some seem to be missing is that this puts a huge paperwork burden on small companies.. And I’m surprised that the potential for collecting taxes on financial transactions and 401 K’s was left out..

  • A lot of the photo equipment I purchase on line isn’t available in my city. When it is a choice of using local seller or EBay, the shipping cost usually is equal to what local sales tax would be so I pay the same either way. The local taxing entity provides no service or infrastructure that aids my online transaction – no free internet connection or service after the sale for example – so they would be taxing me for an activity just because they have that legal authority. Several of the businesses I frequent – local book store for example – already give me the option of buying their goods on line or in their local brick and mortar facility. THIS IS NOTHING MORE THAN AN ATTEMPT TO COLLECT NEW TAX REVENUE AND I OPPOSE IT.

  • I’m an author and sell my books online. I’m practicing civil disobedience on this one as there is no friggin way I’m going collect taxes and send it to 47 different governments on a quarterly basis. Come and get me.

  • If they want to be fair, they should be asking all businesses to stop collecting taxes completely.

  • if you are an online retailer join the rest of us to organize a reply. Shop.org is AGAINST smaller retailers we can not count on them to tell our story. Join here:

    https://www.facebook.com/groups/fairsalestax/