Will the Amazon-Backed Online Sales Tax Sway the House?

 
on April 29 2013 12:21 PM
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Amazon may be looking to expand into the smartphone market as the world’s largest online retailer has reportedly hired a former member of Microsoft’s Windows Phone unit. Wikipedia

The Marketplace Fairness Act, AKA the new legislation that will require states to collect sales tax from items purchased online, is likely to clear the Senate when the final vote is conducted next month.

It is not yet clear if it will do the same in the House, however, where many conservative lawmakers are expected to vote against the bill.

According to The Hill, "The issue has received such scant attention in the lower chamber that neither Speaker John Boehner (R-Ohio) nor Majority Leader Eric Cantor (R-Va.) has taken public positions on it."

The Hill speculated that the bill will face a "tough battle" in the House.

The New York Times concurred with that assessment, noting that online sales tax legislation has divided the GOP.

Like any tax-related bill in Congress, supporters are intrigued by the potential gains of taxing online businesses.

According to ABC News, Internet sales accounted for just 1.6 percent of total U.S. retail sales in 2003. By 2012 they accounted for 5.2 percent of all sales, amounting to more than $225 billion in revenue.

Traditionally, online businesses were only required to collect sales tax if they had physical locations in states where sales tax was already being collected. This is why Best Buy (NYSE: BBY [FREE Stock Trend Analysis]), Barnes & Noble (NYSE: BKS), GameStop (NYSE: GME) and other brick-and-mortar chains have stayed silent on the issue -- because they already collect and pay sales tax.

Amazon (NASDAQ: AMZN), on the other hand, does not yet have any physical locations outside of its distribution centers. This has prevented the online retailer from having to collect sales tax in most states.

After years of battling the potential legislation, however, Amazon finally caved and decided to support the bill.

Overstock.com (NASDAQ: OSTK) has not yet done the same, but its chief executive might get what he wants.

In January, Overstock.com CEO Patrick Byrne proposed a so-called "Equity in Sales Tax Collection Act Bill," asking for states to provide tax collection software and to cover any costs that may be associated with its use.

The former element -- free software -- is a key part of the Marketplace Fairness Act.

Freebies are not enough to satisfy eBay (NASDAQ: EBAY), however. John Donahoe, the company's CEO, recently sent out a mass e-mail on the matter, telling recipients why they should not support the bill.

"Whether you're a consumer who loves the incredible selection and value that small businesses provide online, or a small-business seller who relies on the Internet for your livelihood, this legislation potentially affects you,"

Donahoe wrote. "For consumers, it means more money out of your pocket when you shop online from your favorite seller or small business shop owner." Donahoe added that the tax bill would require businesses to collect sales taxes nationwide from more than 9,600 jurisdictions across the country, placing an "unnecessary burden" on merchants.

Etsy has also expressed concerns about the bill, which requires merchants who earn more than $1 million annually to collect and pay sales tax.

That site has built a growing marketplace, but its total merchandise sales ($895.1 million in 2012) pale in comparison to those who support the bill. In addition to Amazon, Wal-Mart (NYSE: WMT) has become a prominent supporter.

According to The Wall Street Journal, "The drivers of this rush to tax are Wal-Mart and other big retailers that can more easily absorb the costs of collection than can smaller competitors."

Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

 

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