Senate legislation would require online retailers such as Amazon to collect state use taxes, in lieu of sales taxes, when items are purchased by out-of-state consumers.
Opponents of online sales tax legislation are also trying to use the holiday season to win over lawmakers. Phil Bond, executive director of the We R Here Coalition, said many of its small-business members have turned to Internet retail as a way to compete with larger brick-and-mortar stores.
I believe that members of Congress want to be on the side of small businesses, Bond said.
Internet companies are divided on the issue. Giant e-retailer Amazon which recently began collecting taxes in some of its biggest markets, including Texas and California backs the legislation.
But eBay, which operates a marketplace for many mom-and-pop sellers, has objected, saying the small-business exemption is not high enough. Many technology industry groups including TechAmerica, the Computer and Communications Industry Association, the Information Technology Industry Council and CompTIA have sided with eBay.
The bill also faces opposition from anti-tax advocate Grover Norquist, who could sway congressional conservatives. If you have to change the law, and when you change the law you collect more taxes, its a tax increase, Norquist told CQ Roll Call in July.
Lawmakers representing states that do not have a sales tax, including Sens. Kelly Ayotte, R-N.H., and Ron Wyden, D-Ore., also balk. They say it would be unfair for businesses in their states to have to collect taxes.
They have introduced a resolution (S Res 309) to oppose new tax requirements on Internet companies. In the House, Democrat Zoe Lofgren and Republican Dan Lungren, both of California, have introduced a companion resolution (H Res 95).
This week, Rep. Darrell Issa, R-Calif., announced his intention to introduce a bill during the new Congress that would enact a two-year moratorium on bills that impose new regulations or burdens on the Internet. An Issa spokesman said the lawmaker was not targeting any specific bill, but opponents might be able to leverage such initiatives to stall the sales tax effort.