California-Amazon deal gives hope to states and the Main Street Fairness Act

September 30, 2011
Stateline.org

Stateline.org: Amazon deal with California may set precedent for online tax collection

According to an article on Stateline.org, the deal between Amazon and California on online sales tax collection gives other states hope that they, too, may get online retailers to collect sales tax—though they do not have as strong a position for negotiating as California:

Now that the largest state in the country has seemingly pressured Amazon to change its policy, the result could be a flood of new online tax laws, as other states ask why Amazon can’t treat them the same as it treats California. Danny Diaz, spokesman for the Alliance for Main Street Fairness, a group trying to get the online retailers to collect taxes, says Amazon has undermined its own case by striking the California deal. “You begin your argument by saying you can’t do it, it’s too complicated, it’s unconstitutional and all of this,” Diaz says, “and you end your argument by saying you’ll do it in a year, it’s legal, you can do it. Clearly, clearly the ground has shifted underneath your feet.”

Other states, though, might not be in a position to get the same deal as California. For one thing, Amazon had more of a presence in that state than simply a bunch of affiliates. The company had several wholly-owned subsidiaries in California, which made it tougher for the company to claim that it lacked a physical presence.

The other difference is that California is simply bigger, which may have made Amazon leery of cutting its ties there. Last Friday, the company said it would add 10,000 jobs in the state in coming years. “When you’re California or New York across the table from an Amazon, it’s a pretty big slice of the market,” says Kevin Sullivan, commissioner of the Connecticut Department of Revenue Services. “We don’t have the leverage that a New York has or the leverage that a California has.”

But, the article continues, the Amazon-California deal inspires even more hope that federal legislation on online sales tax—which would make state-by-state laws unnecessary— will finally pass:

For now, Amazon isn’t indicating that it will offer other states the same deal it offered California. But the company is saying what it would like to have happen next: a federal solution. “We’re committed to working with Congress, retailers and the states to pass federal legislation as soon as possible,” Paul Misener, Amazon’s vice president of global public policy, said in a statement after Brown signed the law. That isn’t a new position. Amazon’s case has long been that it isn’t against collecting sales taxes, so long as a federal deal also makes collecting the taxes less burdensome.

That’s actually what most state officials want, too. Legislation in Congress known as the Main Street Fairness Act would require online retailers to collect sales taxes in the state where a purchase is made, but only if the state is among those that that have made their sales taxes more uniform through an interstate collaboration known as the Streamlined Sales and Use Tax Agreement.

When state legislators came to Washington last week to give their view on federal debt negotiations, one thing they asked Congress for was passage of the Main Street Fairness Act. With Amazon and big brick-and-mortar retailers like Wal-Mart and Target forming an unusual coalition in favor of a federal law, their hope is that their side has the clout to win passage. If the California deal adds urgency to the efforts, all the better. “We’re going to face hundreds of millions, billions of dollars in [aid] reductions,” says Neal Osten, director of the National Conference of State Legislatures’ Washington office. “This is something Congress can do for the states.”

With Amazon, Walmart, Target, and many more major retailers (not to mention the Retail Industry Leaders Association) all joining state legislators from both sides of the aisle in supporting the Main Street Fairness Act, surely the bill’s time has come.

“Still,” the article says, “there are reasons for skepticism.”

For one thing, some online retailers are still taking a hard line against collecting sales tax. Jonathan Johnson, president of O.co (formerly known as Overstock.com), points out that Amazon’s size and wealth positions it to cope with differing sales tax rates and definitions around the country. Smaller online companies might suffer more. “I think the Main Street Fairness Act is anything but main street and anything but fair,” Johnson said in an interview with Stateline. “Big retailers would like to create a barrier to entry for any new company.”

The other reason for doubt is that Congress has struggled to forge compromises on all big issues lately. A proposal that would result in more taxes being collected—even if the taxes are legally already owed—will be an especially hard sell, even if the failure to pass it will likely result in a new round of messy fights between states and online retailers.

If these are the only arguments standing in the way of the Main Street Fairness Act, then we take heart. There are reasonable answers to these objections.

First, the notion that “the Main Street Fairness Act is harmful for small online retailers”: It’s really not. Technology has reached the point that today, it’s no more difficult to collect sales tax online than to calculate shipping rates. Look at TaxCloud, a comprehensive sales tax management service that’s available at no cost for retailers. With services like TaxCloud available—again, at no cost—there’s no reason for any retailer, no matter how small, to find it difficult, costly, or burdensome to collect sales tax.

Second, there is this scare statement that “the Main Street Fairness Act is a hard sell in Congress”: We disagree. While it is easy to simply say things like “it will never happen” or “Congress is too divided,” nobody in Washington DC is saying that about this issue (except for the ATU and NTP). In fact, it’s one of those rare bills that has bipartisan support. It may have been introduced by a Democrat, but it has lots of Republican supporters, among them Senator Bob Corker (R-TN), Senator John Boozman (R-AR), and Tennessee Governor Bill Haslam (not to mention all the Republican supporter in state legislatures, such as Luke Kenley (IN) and Evelyn Lynn (FL), to name just two). We think that once hard facts overcome all the inflammatory rhetoric about the Main Street Fairness Act, voting for it should be a pretty easy decision.

The Stateline article is well worth reading in its entirety for its thorough summary of the arguments for and against online sales tax collection. Just keep in mind that the arguments against it aren’t the last word.


Senator Bob Corker (R-TN) voices support for online sales tax collection

August 26, 2011

According to an article in the Nashville Business Journal, Senator Bob Corker (R-TN) has voiced support for the online collection of sales tax:

U.S. Sen. Bob Corker signaled Wednesday that he’d support a federal policy to make online retailers collect sales taxes, calling it “patently unfair” that companies like Amazon.com don’t have to while brick-and-mortar businesses do. . . .

Corker on Wednesday stopped short of outright saying he was ready to support a proposal to force the collection of sales tax by online retailers nationally. He said he’s studying a legislative proposal by Sen. Dick Durbin, D-Ill., that is still changing, and Corker noted that consumers already are supposed to contribute sales taxes for online purchases but typically don’t.

In a recent blog post, we talked about the (false) perception that online sales tax collection is a partisan issue—in fact, we’re seeing more Republican politicians speak out in favor of online sales tax collection every day. Which isn’t surprising at all. The online collection of sales tax is a bipartisan issue of tax fairness; it doesn’t involve raising taxes or creating a new tax, and it does involve making sure our Main Street retailers are able to compete with online retailers on a level playing field.

We applaud Senator Corker for speaking out in favor of online sales tax collection, and we look forward to seeing more and more Republican lawmakers join him.


Editorial: Florida (and the country) needs online sales tax collection

August 26, 2011

We were thrilled to see this editorial from the Tallahassee Democrat (reprinted on the News-Press.com website), which makes one of the strongest, most cogent arguments for online sales tax collection that we’ve ever read. We urge you to read the entire editorial, but here’s part of it:

State Rep. Michelle Rehwinkel Vasilinda reminds – or attempts to remind – her tax-resistant colleagues in the Florida Legislature that collecting a sales tax on purchases made online is not the same as raising taxes.

Raising money, yes, but as Rehwinkel Vasilinda put it at the end of last session, “The concept of leaving tax revenue on the table, especially when we really need it, is really irksome.”

Taxes should be collected on purchases from online merchants, the same as purchases in brick-and-mortar shops, which suffer from this not-so-level playing field of commerce. Business groups such as Associated Industries of Florida and the Florida Retail Federation would like to see the disparity addressed.

It’s not just the tax avoidance that’s a problem for local merchants. In many cases local stores end up functioning as a showroom for online shoppers who like to look at the merchandise in person, but buy it online where there’s no sales tax.

But because online sales cross state boundaries and tax rates vary so much nationwide, a meaningful online sales tax would be most effectively and uniformly collected under federal legislation.

This clear-sighted editorial ends with an endorsement of both the Main Street Fairness Act and the Streamlined Sales and Use Tax Agreement (SSUTA). SSUTA was created by forty-four states and the business community to simplify sales tax collection and make it easier for businesses to collect sales tax. The Main Street Fairness Act would allow states that have adopted SSUTA’s guidelines to require all retailers, whether in-state or out-of-state, to collect sales tax on purchases made by state residents.

Last spring, Rehwinkel Vasilinda, D-Tallahassee, sponsored HB 455 to have Florida join the agreement, and Sen. Evelyn Lynn, R-Daytona Beach, sponsored the companion SB 1548. Neither moved forward, though perhaps now, with this umbrella effort in Congress gathering steam, Florida lawmakers will join the 23 states that have joined the coalition.

Roughly 1,400 retailers already collect sales tax in those “streamlined” states on a voluntary basis.

They’ve remitted more than $700 million to their respective states, yet estimates are that the actual amount lost could be as much as $23 billion by 2012.

This legislation is overdue in Congress, and the collection of this tax is critical to Florida, which needs to join the future and work to close this unfair tax loophole here.

To those who have said that online sales tax collection is not a bipartisan issue: Note that the measure to have Florida join SSUTA was introduced in the Florida Senate by a Republican and in the House by a Democrat.

In an article on another Florida website, Matthew Falconer, who is running for mayor of Orange County (FL), also points out that the Main Street Fairness Act is a bipartisan issue and offers a way to combat the false perception that it increases taxes:

Not surprisingly there is support for the bill on a state level by Republicans and Democrats alike. Even Jeb Bush supports some type of internet sales tax. There are complications to the collection procedures but the technology exists to address those problems. The obstacle to the internet sales tax collection problem is political. It is seen as a tax increase which is taboo for Republicans.

The easy solution to that problem, again supported by Jeb Bush, is to reduce taxes by the same amount of the increased revenue from internet sales tax collection. This does not create additional taxes but levels the playing field between brick and mortar stores, the ones that employee our neighbors, and on line retailers (many of which are based in other countries).

Other politicians have also suggested that if sales tax were collected online, other taxes could be eliminated. As we blogged about recently, Indiana State Senator Luke Kenley and West Virginia delegate John Doyle have said that if online retailers collected sales tax for their states, the inheritance tax or the groceries tax (respectively) could be eliminated.

We have long said that online sales tax collection is a bipartisan issue, one that should matter to anyone who cares about fairness and tax equality. We’re glad to see that politicians on both sides of the aisle agree.


More business groups supporting the Main Street Fairness Act

August 17, 2011
WFCA

WFCA supports Main Street Fairness

The American Booksellers Association (ABA) and the World Floor Covering Association (WFCA) have joined other business groups in publicly stating their support for the Main Street Fairness Act.

According to an article on the industry website Floor Covering News, the WCFA endorsed the Main Street Fairness Act after a unanimous vote of its executive committee:

“This legislation is long overdue and aptly named,” said Jim Walters, Chairman of the Board, WFCA and president of Macco’s Floor Covering, Green Bay, WI. “In some states Internet sellers enjoy as much as a 10% price advantage over local brick and mortar retailers who are mandated by law to collect and remit sales tax to local and state governments. This legislation would make the playing field a little more level,” he concluded.

The WFCA views the legislation as helping small business interests. “This bill is crafted in such a way that it is not anti-Internet based companies, but does seek to address the fundamental unfairness in the marketplace as Internet commerce takes an ever increasing slice of the retail pie,” said Chris Davis, president & CEO, WFCA. “This is not a Republican or Democrat issue. It impacts all Americans. And it’s not a new tax. It’s one every purchaser is supposed to pay, but isn’t. The WFCA is joining coalitions to support this legislation and we are going to encourage everyone we can to back these bills and write their representatives in Washington to urge them to support their passage.” (emphasis added)

ABA e-fairness campaign

ABA e-fairness campaign

The American Booksellers Association has long been a strong supporter of online sales tax collection. According to an article in Bookselling This Week on the ABA website, Oren Teicher, the ABA CEO, wrote to Senators Susan Collins and Olympia Snowe of Maine to ask them to support the Main Street Fairness Act:

In the letters to Collins and Snowe, Teicher wrote: “This bill if passed would go a long way toward leveling the playing field for bricks-and-mortar stores in those states. More importantly, since customers already owe use tax for any online purchases they make, this is not a new tax — it simply stipulates who is required to collect and remit the sales tax.

“Currently, our independent bookstore members, and Main Street retailers like them, are being forced to compete with remote, online retailers that have a significant, and unfair, advantage. . . .

Teicher also noted: “Importantly, sales tax fairness is an issue that is supported by Republicans and Democrats at both the state and federal level. Sen. Durbin’s bill is virtually identical to the bill introduced by [Republican] Senator Enzi last year, and, ultimately we expect full bipartisan support for the Main Street Fairness Act. We urge you to please support Sen. Durbin’s bill.” (emphasis added)

The ABA website provides an “e-fairness action kit” with templates for letters to lawmakers. Although it’s designed for independent booksellers, the kit is a great resource for anyone who wishes to contact their state or federal representatives.

We’re happy to see these groups join others in supporting the Main Street Fairness Act. It’s important to remember that for every Walmart or Best Buy that supports the bill, there are dozens of small businesses—such as an independent bookstore or rug seller—that also support it. They may be less visible, but there are many more small businesses than large ones that need this legislation in order to compete on a level playing field with online retailers.

If you agree and want to support small, independent businesses in your community, write to your representatives and let them know that you are in favor of the Main Street Fairness Act.


Sen. Boozman (R-AR) voices support for the Main Street Fairness Act

August 16, 2011
Senator Boozman (R-AR)

Talk Politics Segment: Senator Boozman supports online sales tax collection

Senator John Boozman (R-AR) gave an interview with Roby Brock on Talk Politics on Monday and said that he believed online retailers should collect sales tax, just as bricks-and-mortar retailers do. For Senator Boozman, it seems to be an issue of fairness and states’ rights:

[Where I live] sales tax is about 9 percent . . . and so when [bricks-and-mortar retailers] start out 9 percent behind [because they have to collect sales tax and online retailers don’t], then you’ve got problems. . . .

When you look at the trajectory, online sales are heading just upwards as quickly as they can do. If you’d asked me this question ten years ago I’d [have said] no, leave the internet alone, let them establish themselves. Right now they’re very much established, and so I don’t think it’s fair. . . .

I think it’s a states’ rights issue. I think the states ought to be able to allow [online sales tax collection], and I think . . . we need to make it such that the states can . . . enforce it, and then go from there. But I do think right now it’s not a level playing field, and you look at rural America, it’s very very difficult right now with the economy that we’ve got, but when you have this tremendous inequity it makes it that much harder.

We couldn’t agree more. States should be able to determine for themselves whether and how sales tax should be collected on online purchases, just like any other kind of purchase, and online and bricks-and-mortar retailers should all play by the same rules.

However, we are puzzled but encouraged by one statement Senator Boozman made: that he didn’t really like the Durbin bill (the Main Street Fairness Act) but would be working with Senator Durbin. We hope this signals a renewed sense of compromise to achieve a common good.

You can see the interview for yourself here; the comments on online sales tax collection begin at 19:12 and last just under two minutes. A summary of the interview is available here.

Bravo, Senator Boozman! Thank you for having the courage to speak out on this important issue and for committing to help protect states rights and local businesses.


Group calls for boycott of Amazon, but Main Street Fairness Act is real fix

August 15, 2011

In an announcement earlier today, California “State Senator Loni Hancock (D-Oakland), Assembly Majority Leader Charles Calderon (D-Montebello), and Assembly member Nancy Skinner (D-Berkeley) joined dozens of California seniors, low-income families, people with disabilities, and health care and human services advocates” to launch the ThinkBeforeYouClickCA.org website opposing Amazon’s ballot referendum against California’s online sales tax collection legislation. The website urges people to cancel their Amazon accounts in protest of Amazon’s actions:

Every Californian has been affected by the cuts to balance California’s budget, none more than low-income seniors, students and people with disabilities. Now, online retail giant Amazon.com wants to overturn the one small victory we won this year in our campaign to close corporate tax loopholes: the Sales Tax law that would require online vendors to collect sales tax just as California’s “bricks and mortar” vendors do. This law will provide California with $200 million in desperately needed revenues to prevent further cuts to vital public services, while helping local business by closing the loophole that lets online retailers like Amazon.com undercut them. 

Fight back by telling Amazon.com to play by the same rules all other California businesses do! If Amazon.com is unwilling to contribute to the well-being of our state, then we need to tell Amazon.com that we won’t contribute to their profits!

According to a related Associated Press article, Amazon has spent $3 million to support its ballot referendum against California’s legislation.

While we understand why groups oppose the ballot referendum, there is a much better solution for everyone. The Main Street Fairness Act, now pending before Congress (S.1452 / H.R. 2701), would authorize states to require all retailers to collect sales tax—which would both level the playing field for bricks-and-mortar retailers and ensure that states receive the sales tax revenue that is already due and is needed to fund vital community services. What’s more, it will make collecting sales tax easier for all businesses.

Best of all, this is something that Amazon and California legislators can agree on—both support the Main Street Fairness Act. Whether you support or oppose California’s sales tax legislation, the Main Street Fairness Act makes more sense. It makes everyone play by the same rules, prevents further budget cuts, makes sale tax collection easier for businesses, and helps keep people employed (both by letting retailers keep their affiliates and by helping local retailers stay in business).

California’s Board of Equalization estimates that the state lost $1.145 billion in 2010 because most online retailers didn’t collect sales tax. As the Supreme Court ruled in 1967 (Bellas Hess) and 1992 (Quill), the only road toward recovering that lost revenue goes through Washington, D.C., via the Main Street Fairness Act—as we have said before.

Amazon has publicly stated that it supports the Main Street Fairness Act. Amazon’s Vice President for Global Public Policy, Paul Misener, even sent a letter thanking Senator Dick Durbin for introducing the bill:

Amazon.com has long supported a simple, nationwide system of state and local sales tax collection, evenhandedly applied to all sellers, no matter their business model, location, or level of remote sales.  To this end, I am writing to thank you for your bill that would allow states that sufficiently simplify their rules to require collection of sales tax by out-of-state sellers.

If you’re thinking about boycotting Amazon, consider putting your energy into supporting the Main Street Fairness Act instead. Contact your representative in Congress and let them know that the Main Street Fairness Act is the best solution for everyone. (Plus, it lets you keep your Amazon account.)


Internet Tax Freedom Act does NOT ban sales tax

August 10, 2011
Internet Tax Freedom Act Amendments Act of 2007

Internet Tax Freedom Act Amendments Act of 2007 (110th congress - H.R. 3678)

Although we see less of this now than we used to, there is still some confusion over the Internet Tax Freedom Act and how it affects sales tax on online purchases.

The truth is, it doesn’t. The Internet Tax Freedom Act (ITFA) was passed in 1998 and renewed/extended in 2007 (it’s now good through 2014) to ban taxes on internet access and internet-only goods or services, such as email and bandwidth. But ITFA expressly did not ban sales tax on online purchases (though it did say that sales tax on online goods must have the same rate as the same goods purchased offline).

As the Main Street Fairness Act has been getting a lot of press attention lately, we’ve seen a few articles, such as this one, that have mistakenly attributed the current rules on online sales tax (including the role of nexus) to the Internet Tax Freedom Act. So consider this an addition to our earlier list of mischaracterizations about online sales tax: The Internet Tax Freedom Act does not ban sales tax on online purchases.


New York Post: Web tax on tap

April 17, 2011
FOX News: Internet Sales Tax to be Introduced in US Senate

FOX News: Internet Sales Tax to be Introduced in US Senate

New York Post: Web tax on tap

New York Post: Web tax on tap

There is a brief article today in the New York Post which is worth reading – and has been syndicated now into a slightly varied version on FOX news.

The most interesting tidbit was a stunning admission by economics professor William Fox of the University of Tennessee. You see, he co-authored an important study several years ago which many states have been relying upon to gauge the amount of missing revenue from uncollected sales tax on online purchases. The figures in his report suggest that New York State alone missed out on $865 million in 2010, but apparently his 2009 report was based upon a conservative 9.9% annual growth rate from 2006 to the present. Now he admits the actual annual growth rate appears to be about 14% – which should have a significant amplification effect if one were to recalculate the conclusions from his previous studies. Up until this admission, the annual missing revenue due to uncollected sales tax (from all remote commerce including, online, mail-order, and telesales) was calculated at $23 billion– now we should expect that number to be even larger.

Wow.