Financing

As Online Sales Tax Passes Senate, What's the Word on Main Street?


Amazon's fulfillment center in Phoenix; the company is among those supporting the online sales tax measure

Photograph by Joshua Lott/Bloomberg

Amazon's fulfillment center in Phoenix; the company is among those supporting the online sales tax measure

Last night the U.S. Senate passed the Marketplace Fairness Act, which would require online sellers with more than $1 million in annual revenue to collect sales tax on transactions across state lines. Are Main Street shop owners hoping the essence of the bill makes it through the House of Representatives and is signed into law?

Depends on who you ask, though many businesses, large and small, and advocacy groups support it, as Karen E. Klein pointed out in January. Small Business Majority Chief Executive Officer John Arensmeyer says his group backs the bill: “We know from all the research we’ve done—not on this issue, but in general—that one of the fundamental things that small business owners believe in is a level playing field.” That sounds similar to the National Retail Federation, which has long championed the bill as a means to keeping brick-and-mortar businesses on level ground with online retailers.

Opposition to the bill has generally fallen along two lines. Anti-tax lobbyists, led by Grover Norquist’s Americans for Tax Reform, have criticized it as a new tax on consumers. E-commerce giant EBay (EBAY), meanwhile, has argued that the law would place undue compliance burdens on small Internet sellers and has proposed exempting businesses with less than $10 million in annual revenue from collecting sales tax from out-of-state customers.

Last month, National Federation of Independent Business spokeswoman Jean Card told me her lobbying group had a neutral position on the bill because its membership is divided.

It has been widely noted that the bill doesn’t introduce a new tax, but requires businesses to start collecting levies already on the books—with an estimate of $23 billion in annual revenue at stake. As I reported last month, the Senate bill would require states to provide businesses with free tax-compliance software to help manage the process of collecting out-of-state sales tax.

As for what happens next, the issue is headed for the House, where Richard Rubin reports it is unlikely to move fast. Still, he writes, House Republican leadership, including Speaker John Boehner (R-Ohio) and Majority Leader Eric Cantor (R-Va.), have deferred it to House Judiciary Committee Chairman Bob Goodlatte (R-Va.), who has not come out against the bill. “I am open to considering legislation concerning this topic,” Goodlatte said in a statement posted online last night, adding that he doesn’t believe the Senate’s bill is “sufficiently simplified yet.”

Clark is a reporter for Bloomberg Businessweek covering small business and entrepreneurship.

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