Online sales tax battle pits Amazon against Norquist and Sen. DeMint

Proponents of an online sales tax aren’t letting up in their push to move legislation through Congress this year, despite the opposition of conservative heavyweights.

Retailers have been lobbying aggressively for legislation that would help states collect sales taxes from online purchases. Joining in the effort are state and local governments and some unions, which see an opportunity to raise more revenue.

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Internet retail giant Amazon has been a vocal supporter of the tax effort, whose backing has been trumpeted by lawmakers and lobbyists alike. 

David French, senior vice president of government relations for the National Retail Federation (NRF), said Amazon’s support serves notice to lawmakers that serious proposals are on the table. 

“Amazon is a strong consumer brand and having them engaged in support of the legislation sends a strong signal to Capitol Hill. It shows that Internet retailers and brick-and-mortar retailers are serious about getting something done,” French said.

Still, there are long odds for an online sales tax to be passed this year. Campaign season is expected to slow down work in Congress, and opponents argue the tax proposals put forward in the House and Senate would be harmful to small business.

A number of conservative heavyweights — from Grover Norquist’s Americans for Tax Reform (ATR) to Sen. Jim DeMint (R-S.C.) — have come out against the plans.

A spokesman for ATR said the group has not yet determined whether the proposals violate the group’s Taxpayer Protection Pledge. But ATR and other conservatives are concerned that the measures would constitute little more than a tax hike.

“The Supreme Court has correctly ruled against forcing businesses to collect taxes for states they don’t reside in,” DeMint told The Hill in a statement. “States should focus on lowering taxes and competing for new businesses, not increasing taxes on businesses and Americans in other states.”

With prominent Democrats and Republicans having backed legislation for the tax, lobbyists hope that it could enter the debate during a December lame-duck session. Barring that, they are laying groundwork for action in 2013.

“There aren’t a lot of opportunities to get this done before the end of this year. I wouldn’t rule it out, but there’s ton of work that needs to be done to get it there,” French said. “We are turning over every stone to make sure that every message that can be delivered is delivered.”

Under a two-decade-old Supreme Court decision, state governments cannot force companies to collect a tax on online purchases unless the business is physically located there.

The bipartisan bills in the House and the Senate would allow states to collect sales taxes from out-of-state online retailers, with supporters arguing that the current setup gives Internet outfits a leg up on brick-and-mortar stores.

Republican sponsors have sought to cast the bills as a states’-rights issue, saying the measures only allow the collection of taxes that are already owed.

“This bill empowers states to make the decision themselves,” Sen. Mike EnziMike EnziJudd Gregg: The silver lining Judd Gregg: A little change Lobbying World MORE (R-Wyo.), a lead sponsor and member of the Senate Finance Committee, said when the measure was introduced in November. “If they choose to collect already existing sales taxes on all purchases, regardless of whether the sale was online or in store, they can.”

But while Amazon might be on board, online retailers like eBay Inc. and Overstock.com are not.

“Small businesses already face many higher costs than their bigger competitors,” said Brian Bieron, senior director of U.S. government relations for eBay Inc. “To add a sales tax burden that’s not there today would hurt small business.”

Bieron said eBay is looking for a small-business exemption from collecting an online sales tax. Both bills do contain an exemption for small sellers — the Senate bill exempts businesses that have less than $500,000 in annual sales, while it’s $1 million in the House version. But eBay says those exemptions need to be larger.

“The ones proposed here are well below a reasonable definition of what a small business is,” Bieron said, noting the Small Business Administration defines a small-business electronic retailer as having $30 million in annual receipts.

Amazon disagrees. In a one-page handout shared with reporters, the company said the $500,000 small seller exemption would exempt well over 

99 percent of all online retailers from collection requirements.

Amazon already collects sales tax in five different states. That will spread even without a federal bill, as other states such as California and Pennsylvania are set to start taxing online sales this year.

Some argue Amazon has been more vocal in its support as more states have taken action.

“I think the activity in a lot of states, especially red states, compelled them to speak out in favor of a federal solution,” said Jason Brewer, a spokesman for the Retail Industry Leaders Association (RILA), about Amazon.

Scott Stanzel, a spokesman for Amazon, said the company has supported a federal solution for the online sales tax issue for more than a decade.

“We have long held the position that the right place for this to be considered is Congress,” Stanzel said.

Retailers are not alone in lobbying for the proposal. Last month, both the National Association of Counties and the National League of Cities were in town for fly-in visits with lawmakers where they pushed for passage of an online sales tax.

At stake is $23 billion in local and state sales taxes that are not collected by online retailers, state and local officials argue.

Unions have joined in, too. The International Association of Fire Fighters and the International Council of Shopping Centers have run joint ads in Washington publications urging Congress to support an online sales tax.

“Like mom-and-pop retailers, fire departments are part of the fabric of our local communities. Both are endangered because of an antiquated tax policy that is costing states and localities millions of dollars in revenue each year,” said the ad. 

Last month, the council had some members visit lawmakers, while the Alliance for Main Street Fairness, a business group, had more than 60 small-business owners from 15 different states lobbying in Washington. Both NRF and RILA are contacting their state affiliates to have them lobby their lawmakers.

Republican senators are also seeking to rally support for their proposal. A Senate GOP aide told The Hill that Majority Leader Harry ReidHarry ReidThe Hill's 12:30 Report Senate Dems: No August break without Zika deal Top Senate Dems defend Lynch-Clinton meeting MORE (D-Nev.) had pledged he would bring it to the floor if it had 15 Republican supporters.

The measure currently has five GOP sponsors in the Senate and roughly 15 overall, with Sen. Lamar AlexanderLamar AlexanderSenators press Obama education chief on reforms Senate honors Tennessee coach Pat Summitt Bipartisan gun measure survives test vote MORE (R-Tenn.) and Majority Whip Dick DurbinDick DurbinClinton ally stands between Sanders and chairmanship dream Reid backs House Puerto Rico bill McConnell pledges redo vote on Zika after break MORE (D-Ill.) among the key supporters.

A Senate Finance hearing later this month on state and local tax issues is also expected to touch on online sales tax.

An aide to a sponsor of the House bill, which was introduced by Reps. Steve WomackSteve WomackA fix for the well-intended ethanol flop House Dems interrupt votes with push for gun bill GOP lawmakers blast Obama for 'unprecedented' overreach MORE (R-Ark.) and Jackie Speier (D-Calif.), said it would be difficult to predict how far the measure would progress this year.

The aide didn’t believe there was a deal to bring the proposal to the House floor like there was in the Senate.