The U.S. Senate is expected to open debate this week on the Marketplace Fairness Act: a bill that would dramatically alter how online businesses are taxed and how the states in which they operate can collect said taxes.
The bill, which passed a nonbinding vote of 75 Senators in March 2013, will enable businesses collect sales tax on online purchases and send that tax to the state in which the buyer resides. The battle over the bill has split party lines and retail groups alike.
Those in favor of the bill claim it will help physical retailers prevent showrooming, as consumers will no longer be able to buy the same taxed items they see in brick-and-mortar outlets without tax from online venues. As The Huffington Post notes, many states support the measure as well, as the National Conference of State Legislatures estimates that states lost a collective $23.3 billion in sales tax revenue to online sales in 2012 alone.
The Marketplace Fairness Act also includes an out clause for businesses that rake in less than $1 million in annual U.S. revenue: another bonus in the eyes of the bill’s supporters, which include powerful industry groups such as the Retail Industry Leaders Association (RILA). Senators Mike Enzi (R-WY), Dick Durbin (D-IL), Lamar Alexander (R-TN), and Heidi Heitkamp (D-ND) introduced the bill last month, giving it prominent supporters in the government as well.
But that same $1 million exemption lauded by many of the bill’s supporters is also decried by the Marketplace Fairness Act’s detractors. Opponents of the bill claim that it turns online retailers into defacto tax collectors, and site the additional software that such businesses must purchase as well. As The Huffington Post points out, this stance was highlighted by Sen. Kelly Ayotte (R-N.H.) and Senate Finance Committee Chairman Max Baucus (D-Mont.) during the vote in March.
And perhaps the most vocal and well-known opponent of the bill, eBay, went to new lengths to try and ensure its defeat this weekend. The online commerce giant emailed tens of millions of its users on Sunday, urging them to combat the bill attacking many of its tenants, reports The Wall Street Journal.
One of eBay’s central arguments is that the $1 million threshold does not encompass enough small businesses, many of which will still feel negative effects from the bill.
“The legislation treats you and big multi-billion dollar online retailers — such as Amazon — exactly the same,” eBay CEO John Donahoe wrote in the emailed statement.
Interestingly, as the Washington Post reported, online giant Amazon actually supports the bill, and for two likely reasons: it’s big enough to absorb the cost of collecting taxes, while many of its competitors are not. And Amazon is already building out its same-day shipping venues, meaning it has a presence in most states either way.
Given the bill’s previous 75-24 nonbinding vote in May, the Wall Street Journal handicaps the odds of it passing through the Senate as “decent.”
To read more on the Marketplace Fairness Act, read The Huffington Post article here and The Wall Street Journal here.
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