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The Associated Press November 10, 2011, 10:18AM ET

US senators introduce online sales tax bill

A proposal from a bipartisan group of 10 U.S. senators to allow state governments to collect sales taxes from out-of-state online retailers is drawing a mixed reaction from some major Internet businesses.

The group is led by Sens. Mike Enzi, R-Wyo., Dick Durbin, D-Ill., and Lamar Alexander, R-Tenn. They announced Wednesday that they're introducing a bill to allow states that adopt the same administrative procedures to require online sellers to collect taxes.

Under the bill dubbed the "Marketplace Fairness Act," state governments that don't accept the national standard could still collect sales taxes only if they agree to some minimum streamlining of their tax system. Sellers will less than a half-million dollars in annual sales would be exempt.

Internet retailers are currently required to collect sales tax for a state only when they have a physical presence such as a store or office there. When consumers order from out-of-state retailers, they may technically be required to pay the tax to their home state but don't always do so. Inc., a leading Internet retailer, announced Wednesday that it strongly supports the bill. The company has fought some taxation efforts from several states and said it would prefer a federal solution.

Amazon Vice President Paul Misener said the company plans to work with Congress, retailers and states to get the bill passed. "It's a win-win resolution," he said.

Amazon said that the bill would allow states to get additional revenue without new taxes or federal spending and it would make it easier for consumers and small retailers to comply with state sales tax laws.

But online auction company eBay Inc. said it is opposed.

Brian Bieron, senior director of government relations for eBay in Washington, said Wednesday it would place an unfair burden on small retailers to be forced to collect and remit sales taxes for states around the country.

Because small businesses generally only have a single location, Bieron said the current law requires them to collect and remit sales taxes only from customers at that one point of sale.

"They don't have to do that for the whole country," Bieron said. "This bill is going to raise that cost for the small business when they sell across the country, but it isn't going to address any of the other costs that are already higher for the small guy."

The National Taxpayers Union said Wednesday that it's concerned the bill wouldn't provide adequate protections to small firms against tax-collection liabilities on remote sales. The group warned that the bill threatens to harm the economy and suppress valuable tax competition among the states.

Enzi said in a prepared statement that Congress has been debating for more than a decade how to allow states to collect sales taxes from online retailers "in a way that puts Main Street businesses on a level playing field with online retailers."

"This bill empowers states to make the decision themselves," Enzi stated. "If they choose to collect already existing sales taxes on all purchases, regardless of whether the sale was online or in a story, they can. If they want to keep things the way they are, it's a state's choice."

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