Online Sales-Tax Battle Continues

NFL Hall of Famer Fran Tarkenton discusses the impact of a sales tax on purchases made over the internet.

Amazon, eBay at Odds Over Web Sales Tax

Features MarketWatch

Amazon.com Inc. and eBay Inc. staked out opposing positions Wednesday in testimonies before US lawmakers on the issue of collecting sales tax from online purchases.

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The two largest e-commerce firms differ primarily on whether small businesses should be exempt from pending legislation that would require online retailers to collect taxes in states were they have no physical presence.

Under current practices, online merchants may avoid collecting tax on such transactions, prompting traditional retailers to complain that this gives internet-based rivals an unfair advantage.

Over the summer, lawmakers proposed legislation seeking to simplify the process of allowing states to collect online sales taxes on purchases made by their residents, if the states choose to participate. Under the proposed Marketplace Fairness Act, retailers with annual sales below $500,000 would be exempt.

Amazon, which has actively opposed efforts by individual states to collect sales taxes in the past, supports the proposals, arguing that a federal measure would help in "leveling the playing field" for all retailers.

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"Fairness among sellers should be created and maintained," Paul Misener, Amazon's vice president for public policy, said, according to remarks prepared for delivery before the House Judiciary Committee. "Sellers should compete on a level playing field. Congress should not exempt too many sellers from collection, for these sellers will obtain a lasting un-level playing field versus Main Street and other retailers. Congress should rectify the current imbalance and avoid a future imbalance."

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By contrast, eBay says small retailers are already heavily disadvantaged in the marketplace against big-box players such as Walmart, Best Buy and Target. Those companies, eBay says, have a large base of physical stores as well as large online retail sites. And Amazon, eBay added, has a vast network of distribution centers across the globe.

"In short, while small business retailers are active online and are adopting technology, they are not winning the race under the status quo," said Tod Cohen, VP and deputy general counsel of eBay, who added that the "share of online sales being done by retailers with less than $20 million in sales is falling."

Cohen said smaller online retailers also face a disadvantage in tax breaks and favorable shipping rates that are enjoyed by larger retailers.  

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