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Originally published November 9, 2011 at 6:11 PM | Page modified November 10, 2011 at 1:28 PM

Amazon supports Senate's online sales-tax plan

Amazon.com has endorsed federal legislation that would allow states to compel online retailers to collect sales taxes — a stark contrast to its sometimes-combative opposition to attempts by individual states to require the same thing.

Seattle Times Washington bureau

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WASHINGTON — Bye-bye tax-free shopping on Amazon.com?

Amazon itself blessed that notion Wednesday by throwing "strong support" to a new Senate bill that would allow states to compel online vendors to collect sales taxes.

It was the Seattle-based Internet retailer's clearest endorsement of the federal legislation, and a stark contrast to its sometimes-combative opposition to attempts by individual states to require the same thing.

But the bill, introduced by Senate Majority Whip Dick Durbin, D-Illinois, drew an equally forceful rebuff from eBay, the huge online auction site. EBay fears many of its small member vendors would lose a crucial edge in price over big retailers.

Retailers with less than $500,000 in annual sales would be exempt.

With five Democratic and five Republican co-sponsors, Durbin's Marketplace Fairness Act may finally succeed in overcoming a decades-old ban on forcing retailers to collect sales taxes in any state where they don't operate stores or otherwise have a physical presence.

Passage would enable states to capture an estimated $23 billion a year in uncollected taxes. For Washington, the windfall could total $483 million during the 2013-2015 budget cycle, according to the state Department of Revenue.

In July, Durbin introduced a similar bill co-sponsored by five Democrats; that and a companion Democratic bill in the House never got out of committee.

Unlike those bills, the Marketplace Fairness Act would apply to all states with sales taxes, not just to two dozen that are officially part of an effort called the Streamlined Sales and Use Tax Agreement. It also clarifies the exemption for small businesses by including the $500,000 sales limit.

"Senator Durbin is very optimistic about the prospects for this legislation mostly due to the bipartisan support," said his spokeswoman, Christina Mulka.

Among the Republican co-sponsors are Sens. Lamar Alexander of Tennessee and Mike Enzi of Wyoming.

The bill would give the 45 states with sales taxes the power to require all remote sellers to collect state and local taxes under simplified rules.

So not only would Blue Nile have to add taxes to its online diamond sales, but Nordstrom would have to start collecting taxes on online or catalog orders shipped to states where it doesn't have stores.

The tax decision would be left to each state. But cash-strapped legislatures aren't likely to forgo the extra money.

Durbin's bill is backed by the National Governors Association, National Conference of Mayors and a host of municipal groups.

Legally, customers who aren't charged sales taxes are supposed to pay the equivalent amount in use taxes. But virtually no one does.

Amazon collects taxes in five states, including Washington. But it has pushed back vigorously in New York, Colorado and elsewhere against piecemeal efforts to force it to collect the taxes.

Amazon has argued that uniform, national standards are needed to ensure fairness. But not until Wednesday did it issue such an explicit endorsement for the effort.

"Amazon strongly supports enactment of the Enzi-Durbin-Alexander bill and will work with Congress, retailers, and the states to get this bipartisan legislation passed," said Paul Misener, Amazon vice president of global public policy, in a statement. "It's a win-win resolution — and as analysts have noted, Amazon offers customers the best prices with or without sales tax."

Amazon's seeming turnabout was greeted with some skepticism by its opponents.

Danny Diaz, a spokesman for Alliance for Main Street Fairness, a Virginia-based group lobbying for tax collection, said words aren't enough to prove that Amazon is ready to forfeit its tax advantage.

In some states, Amazon has severed ties with thousands of affiliates — shopping sites that direct visitors to Amazon — rather than risk states declaring them a physical presence that would obligate the company to collect sales taxes.

"They fought tooth and nail against every initiative" at state levels, Diaz said. "They need to get beyond their rhetoric."

Ty Rogers, an Amazon spokesman, declined to elaborate on the company's statement. Amazon has never specified how the legislation might affect its bottom line.

EBay, meanwhile, blasted Durbin's bill as stripping away one of the only advantages that small vendors have over mega-retailers.

"If you make this change, it's going the tip the balance" in favor of big competitors, said Brian Bieron, eBay's senior director of federal government relations.

Bieron said that not having to add sales taxes on an order is no more an unfair advantage than "when big guys get charged less by suppliers."

Bieron said the $500,000 sales cutoff doesn't go far enough to protect many eBay sellers. He refused to say where that line should be drawn but noted that the Small Business Administration defines small enterprises as those with less than $30 million in sales.

As for the divergent positions taken by eBay and Amazon, Bieron said it "clarifies the issue" as less pitting online vendors against brick and mortar stores, but big retailers squaring off against little ones.

Kyung Song: 202-662-7455 or ksong@seattletimes.com.

Seattle Times business reporter Amy Martinez contributed to this report.

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