Amazon Admits it: Collecting Sales Taxes Not So Hard Anymore

11/30/11Follow @curtwoodward

In the long-running debate over online sales tax laws, one of the most laughable ideas has been that calculating sales tax rates all over the country is somehow a difficult job for big e-commerce companies like Amazon.com.

You know, the same company that adds enough servers every single weekday to run a circa-2000 version of itself. The same company that knows every item I’ve ever perused, and can tell me what fellow shoppers bundle and buy. The same company that gives away streaming movies and takes a loss on full-color touchscreen tablets just to get people in the buying mood.

But that’s been the basic argument against various cash-starved states’ attempts to pass “Amazon laws” deputizing online retailers as new tax collectors. A longstanding U.S. Supreme Court decision, enacted before the Web was a force in retail, held that figuring out sales tax rates for thousands of jurisdictions nationwide would put a burden on interstate commerce. And that is something only Congress is allowed to do.

That could be happening sometime soon. As we’ve discussed, Amazon is putting its weight pretty heavily behind a new online sales tax system being debated in Congress. The latest evidence of the Seattle company’s dedication was on display today, as VP Paul Misener testified at a U.S. House committee hearing on the issue.

In his prepared remarks, Misener acknowledges the obvious fact that software has solved the problems with national sales tax collection: “With today’s computing and communications technology, widespread collection no longer would be an unconstitutional burden on interstate commerce, and Congress feasibly can authorize the states to require all but the very smallest volume sellers to collect.”

He also shouts out Avalara, the Bainbridge Island, WA-based company that has been a leader in supplying online sales tax software to retailers, particularly small and medium-sized sellers. As CEO Scott McFarlane recently told me, all the talk of sales tax collection being some kind of unfathomable dark art is frustrating for the entrepreneurs trying to solve the problem.

“What chafes me is when people say that there’s not a solution out there, it’s too hard. The reality is, it isn’t. It’s a statutory requirement. We have the technology,” McFarlane said.

It’s encouraging to see so much progress being made on an issue that’s lingered, probably needlessly, for so long. Amazon’s sometime foe at the National Retail Federation, which represents a lot of the big brick-and-mortar retailers, also is behind the recent push to enact a national online sales tax system.

The fight for now seems to be over which businesses to exempt from such a system. The bill Amazon’s supporting gives a pass to sellers making less than $500,000 a year in revenue, and Misener’s testimony calls out $150,000 as an even better figure. eBay, in its own testimony today, wants a much bigger small business exemption—eBay’s Tod Cohen threw out several suggested thresholds, from $5 million up to $30 million.

There is the matter of a little election about a year from now, which could see big changes in who’s in charge over in the other Washington. It’s not clear whether this issue will be resolved before the political climate gets hot and heavy—if you were running for re-election, would you want some opponent running ads about how you voted for an Internet sales tax?

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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