Tax Wars: Online v. Brick-and-Mortar Retailers

July 18, 2011 -

A war is brewing in California (and beyond) between traditional retail and online retailers on sales tax. For years politicians said they would not tax the internet, but a recent change in laws has made it so that Amazon.com has to collect sales tax from any affiliate doing business in the state. While traditional brick-and-mortar retailers applauded this change (they see it as leveling an uneven playing field) online retailers are, to turn a phrase, pissed off. Among other efforts, Amazon.com is seeking to rally anti-tax Americans by proposing a voter referendum in California to overturn the new state law.

Retailers, using the power of lobbyists in D.C. are on the other side of the issue and include such heavyweights as Wal-Mart, Sears and national organizations such as the National Retail Federation. Because of their lobbying efforts and deep local, state, and federal connections with politicians, they have the support of states, which sees taxing online sales as a new ways to gain much-needed revenues.

"Congress has to take action," Neal Osten of the National Conference of State Legislatures, tells Politico. "..this is $23 billion that the federal government can give to the states."

Meanwhile, Sen. Dick Durbin (D-Ill.) is expected to introduce a bipartisan bill in the next few months called the "Mainstreet Fairness Act," that would allow states to require online retailers to collect sales tax if states agree to standardize those taxes.

Politico claims that Durbin has held off on introducing the bill because he wants to line up support for it. But Durbin will probably find himself caught in the crossfire of lobbying efforts from both sides of the issue.

Online resellers such as eBay and the Electronic Retailing Association are stepping up efforts by hiring lobbyists firm Mehlman Vogel Castagnetti, led by Bruce Mehlman - a former assistant commerce secretary for technology policy in the George W. Bush administration. The firm recently added Brian Wild, a former senior adviser to House Speaker John Boehner (R-Ohio), to lobby on this issue. It has also added ML Strategies. Amazon has hired Cauthen Forbes & Williams, the Bockorny Group, and TwinLogic Strategies.

"Congress is not anxious to run in and do this," points out Steve DelBianco, executive director at NetChoice, a group that represents numerous online retailers and resellers. "If Congress were to grant states this authority to force retailers to pay sales tax, consumers will feel it like a tax increase and Congress will be scratching its head saying, 'What do we get out of it?'"

On the other side of the issue is the Streamline Sales Tax Governing Board, a group that represents 23 states. They have hired Clark Lytle & Geduldig. Sears has hired OB-C Group. The International Council of Shopping Centers is also lobbying for Congress to step in.

"We’ve talked to lawmakers who want to support Sen. Durbin’s bill," David French, senior vice president of government relations at the National Retail Federation, tells Politico. "What has played out in the states has heightened interest in sales tax fairness."

While a showdown may be brewing in our nation's capitol on this issue, Amazon also want to put the issue in the hands of voters by proposing a referendum voters could have a say in. The company is also battling a similar law in New York in the courts. The company is doing what it can to combat new laws in Illinois and California, and in Texas it has proposed that it invests in warehouses and distribution centers in the state if it is allowed to operate for four more years without having to worry about collecting sales tax.

Obviously online sales tax collection is a murky issue and one that can be dangerous for politicians - particularly on the national stage - to get involved with. Opponents of state and federal proposals to collect sales tax online will no doubt say that what they are doing is tantamount to raising taxes on every day consumers..

Read the entire Politico report here.

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Comments

Re: Tax Wars: Online v. Brick-and-Mortar Retailers

I really don't see how it's an uneven playing field. At least not in terms of pricing. I mean sure, you don't have to pay tax online, but most of the time you pay shipping, which can oftentimes cost as much or even more than what you would pay in taxes.

I guess everyone needs something to bitch about.

 

 

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Re: Tax Wars: Online v. Brick-and-Mortar Retailers

I think this whole debate is showing that our tax structure needs some kind of rethinking.

 
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MechaTama31I buy stuff off the eshop because it gives me the convenience of a flashcart without the guilt.09/23/2014 - 5:03pm
Montewell thanks for the info Eisen; try that the next time i need something off the eshop09/23/2014 - 3:54pm
james_fudgere: MP, i've sent tech support a note - thank you :)09/23/2014 - 3:14pm
IanCNah that wasnt directed at you Andrew :)09/23/2014 - 3:00pm
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Andrew EisenOh hell no. No, it took Nintendo a dog's age just to get to the point its competitors have been at for a while! (And it's still not there yet, in a lot of respects.)09/23/2014 - 2:26pm
IanCSame as PSN handles it, fi you are trying to say only nintendo do that.09/23/2014 - 2:23pm
Andrew EisenYou have to try to purchase something first. Pick a game, hit purchase and if your wallet doesn't have enough to cover it, you'll be given an option to "add exact funds" or something like that.09/23/2014 - 2:05pm
MonteI have seen no option for that on my 3DS; anytime i want to add funds it only gives me the option to add in denominations of $10, 20, 50 or 10009/23/2014 - 2:03pm
IanCWhat Andrew Wilson said. PSN is the same when you make a purchase over a certain price (£5 in the UK)09/23/2014 - 2:02pm
Andrew EisenNeither eShop charges sales tax either. At least in California.09/23/2014 - 2:00pm
Andrew EisenBoth Wii U and 3DS eShops allow you to add funds in the exact amount of whatever's in your shopping cart. If your game is $39.99, you can add exactly $39.99.09/23/2014 - 1:57pm
Infophile@Matthew Wilson: As I understand it, any regulations to force tax online would also set up an easy database for these stores to use, minimizing overhead.09/23/2014 - 1:30pm
MonteReally, the eshop just does next to nothing to make buying digitally advantagous for the customer. Its nice to have the game on my 3DS, but i can get more for less buying a physical copy at retail. And that's not even counting buying used09/23/2014 - 1:18pm
MonteIanC, The Eshop wallet system only lets you add funds in set denominations and the tax makes sure you no longer have round numbers so you ALWAYS loose money. A $39.99 game for instance requires you to add $50 instead of just $4009/23/2014 - 1:13pm
Matthew Wilsonbut thats just it those sites, even the small ones, sell all over the country.09/23/2014 - 11:12am
 

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