Amazon, eBay Wrestling Over Newest Online Sales Tax Plan

This looks like the beginning of the end for tax-free online shopping.

Federal lawmakers from both parties today are unveiling their plan to close a loophole in federal tax law that has let retailers like Amazon and eBay avoid charging sales tax to shoppers in many states.

Amazon has long said it would support a change in national sales tax policy—but true to the company’s style, it was an all-or-nothing bargain.

Until the feds got things sorted out, and states made their sales tax laws more uniform, the mega retailer was perfectly happy to take drastic measures like closing down affiliate networks and warehouses when state officials demanded their cut of the action.

But Amazon apparently started to see the benefit of dealmaking, and the dominoes have been falling for the past couple of years toward a national online sales-tax policy.

Amazon once only collected sales taxes on purchases in a handful of states (including its home of Washington), but the company has worked out agreements to start sending sales tax collections to several new states, including California, Texas, Pennsylvania, and Massachusetts. This is tied to the company’s need for more shipping centers to speed its deliveries, and branch offices to accomodate its appetite for tech workers.

At the same time, the company has pushed harder to get a federal system in place. In some cases, state officials (like Massachusetts Gov. Deval Patrick) have made it pretty clear that they would be pushing for a federal online sales tax law once Amazon started playing nice in their states.

Today, Amazon chief lobbyist Paul Misener,  thanked sponsors of the new online sales-tax plan and pledged to work with them to get it passed.

eBay, however, is not so gung-ho. The other online retail pioneer has remained opposed to online sales tax efforts, even maintaining its own webpage full of pugnacious quotes and informational materials about the campaign. eBay reiterated its opposition today.

The fight here is probably going to center around who doesn’t have to collect sales taxes under any new system. The current idea is to make the “small business” exemption start at $1 million in yearly sales outside of a home state. eBay presumably has enough people topping that mark to make it seem like a real problem.

Meanwhile, tech companies who provide tax software are likely cheering the idea. That includes Avalara, a Seattle-area company that could see its client list jump if a lot more “remote sellers,” as they’re called, have to start collecting and sending in sales tax revenues.

Further adding to the tech-industry connections, you’ll note that one of the online sales tax bill’s co-sponsors is freshman Washington state Congresswoman Suzan DelBene, a former Washington state tax official and ex-Microsoftie who represents the Redmond area.

These things take time to get done, but the overall vibe is clear: This train is leaving the station. So if tax-free online shopping was second nature to you, get ready to start doing some double-takes when you check out.

Here’s the letter that Amazon’s Misener sent to Senate sponsors of the new online sales tax bill. An identical copy went to members of the House.

Amazon Letter to Senate

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