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Amazon favors online sales tax--if smaller rivals also have to pay

The retail giant favors collecting sales tax from online vendors, but only if the rules apply to virtually all businesses.

Amazon said it supports a federal law that would let states collect sales tax from online retailers, but only if smaller businesses are not exempt.

Paul Misener, Amazon's vice president for global public policy, yesterday expressed support for an "even-handed" method of collecting state sales taxes from Internet vendors in congressional testimony (PDF).

"Congress should authorize the states to require collection, with the great objects of protecting states' rights, addressing the states' needs, and leveling the playing field for all sellers," Misener said, according to a transcript of his testimony.

But the Amazon executive argued that Congress should devise a collection plan that would include smaller online businesses as well as their larger counterparts. He emphasized that any "small seller exception" must be limited, however--hardly a position that will endear Amazon to its smaller rivals.

"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," Misener testified. "Congress should rectify the current imbalance and avoid a future imbalance."

Misener said that a large amount of taxable revenue is actually generated by smaller sellers, claiming that 30 percent of uncollected tax revenue comes from businesses with annual sales below $150,000 and only 1 percent from businesses with higher sales.

Amazon has argued in the past that Congress should pass national legislation regarding online sales-tax collection rather than leaving it up to the discretion of individual states. The company has already cut deals to avoid paying taxes in certain states, such as California, hoping that a national law will win approval.

A bill introduced in Congress last month would require U.S. consumers to pay sales taxes at online vendors above a certain sales threshold. The bill (PDF) proposes that only online businesses with "gross annual receipts in total remote sales" exceeding $500,000 be required to collect tax.

Known as the Enzi-Alexander-Durbin bill, or the Marketplace Fairness Act, the bill has already won Amazon's support. But other retailers are less comfortable with the proposed bill.

Also testifying yesterday was Tod Cohen, vice president and deputy general counsel for eBay. In his testimony (PDF), Cohen called the proposal "anti-business," arguing that applying similar tax collection standards across the board would hurt small online retailers and consumers alike.

"The Internet sales tax bills that have been introduced in this Congress would change the playing field in a way that would apply sales taxes to small business retailers in the same manner as giant retailers," said Cohen. "This change in law would mean that consumers would face a new tax cost on goods purchased from small remote retailers, but the consumer would not gain benefits tied to presence. This means that the shopper will be less likely to buy from small retailers on the Internet."