Bloomberg News

Amazon Executive Asks Congress to Address Online Taxes

December 05, 2011

(Updates with additional comments by Otto starting in eighth paragraph.)

Nov. 30 (Bloomberg) -- Paul Misener, Amazon.com’s vice president for global public policy, urged Congress to set standards for collecting state sales taxes from online commerce. Any exceptions to the tax should be kept “very low” for fairness reasons, Misener said.

Misener spoke today at a House Judiciary Committee hearing. Seattle-based Amazon, the largest online retailer, has long battled attempts by states to levy sales taxes on Internet transactions. Now it’s backing efforts to create a federal standard for states to collect sales tax on online purchases.

A 1992 U.S. Supreme Court decision exempted businesses from collecting sales taxes in states in which they don’t have a physical presence, or “nexus,” such as a store or warehouse.

That ruling has given Internet-based sellers an edge in the marketplace over brick-and-mortar retailers, said Representative John Conyers of Michigan, the top Democrat on the Judiciary Committee.

“Online retailers have, let’s face it, an unfair advantage,” said Conyers, a co-sponsor of one of three pending bills that would give states the ability to collect taxes on sales by out-of-state vendors.

Ground Rules

John Otto, an accountant and state representative from Texas, urged lawmakers to set ground rules for requiring the collection of online sales taxes.

If the 1992 Supreme Court decision “is allowed to remain the law of the land, are we not picking winners and losers within the retail sector?” Otto said. “The marketplace has changed in 19 years and we have not.”

Questions from several Republican panel members reflected concern that a law facilitating the collection of the sales tax would be perceived as a tax increase. Otto and other supporters of federal legislation said states are only seeking what they’re already due.

“This is not a new tax we’re collecting,” Otto said. “It’s a tax we’ve been unable to collect.”

In 2012 states will forgo an estimated $23 billion in uncollected taxes from out-of-state catalog and online sales, according to the National Conference of State Legislatures.

The issue has divided online retailers. Executives from San Jose-based EBay Inc. and Overstock.com of Salt Lake City cautioned lawmakers against passing a measure that would harm small businesses or saddle online retailers with added expenses.

‘True’ Protections

“Unfortunately, the authors of recent remote sales tax bills have walked away from true small business protections,” Todd Cohen, EBay vice president and deputy general counsel for government relations, said in his prepared remarks. “They want businesses everywhere to be collecting online everywhere. Obviously we disagree.”

Overstock chairman and CEO Patrick Byrne said requiring companies like his to collect sales tax “would be very burdensome.”

Byrne said efforts to pass sales tax legislation are an attempt by Amazon and other big retailers to hurt smaller rivals.

Amazon’s Misener said technology has advanced enough so that all but the smallest sellers can manage sales tax collections.

“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,” Misener said.

Misener said almost 30 percent of uncollected sales tax revenue can be attributed to sellers with annual online sales of less than $150,000. Only 1 percent of online sellers have annual sales of more than that amount.

--Editors: Jodi Schneider, Laurie Asseo

To contact the reporter on this story: Andrew Zajac in Washington at azajac@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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