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Carney: Amazon joins Walmart in push for online sales tax

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Photo - An Amazon.comfulfillment center in Phoenix. (Getty Images)
An Amazon.comfulfillment center in Phoenix. (Getty Images)
Politics,Timothy P. Carney,Campaign 2012

Congressmen in both parties want you to pay more taxes on your online purchases, and once again, big business is lobbying for bigger government, which would hurt Mom and Pop.

Online sales taxes have been a battlefield for lobbying titans for years, pitting Walmart and the rest of the brick-and-mortar retail lobby against Amazon and other online retailers. But now Amazon has changed its business model and also its lobbying position, joining the rest of the retail giants in calling on Congress to aid states in collecting sales tax from online sales.

Here's the background:

There is no federal sales tax. Almost all states charge sales taxes, and many counties, cities and towns do, too. The U.S. Supreme Court ruled in Quill v. North Dakota in 1992 that states could not collect sales taxes from a business that had no physical presence in the state.

So if a Virginian orders a book online from a bookseller in Ohio, neither state can collect a sales tax. Virginia can't force an Ohio business to calculate, collect and pay sales taxes for every state, county and town where it may have customers. Ohio, in turn, cannot collect sales taxes on a sale to Virginia.

Technically, the Virginia buyer in this case is supposed to pay "use tax" to the Virginia government. But almost no taxpayers even know about the "use tax," and state governments haven't really tried to collect it. As a result, online sales are basically tax-free as long as the seller and the buyer are in different states.

That's one reason Amazon set up shop in Washington State, as opposed to California -- that allows Amazon to sell its goods tax-free to the 98 percent of the U.S. population that lives outside the Evergreen State.

As Amazon grew from an Internet bookstore to a dominant online shopping mall, its brick and mortar competitors found this tax advantage intolerable. For years, lobbyists from Walmart and the rest of the industry have been pushing Congress to pass a bill effectively overturning Quill's requirement that a state can collect sales taxes only from in-state business.

Walmart, for instance, has employed Republican operative Charlie Black as a lobbyist on the issue, according to disclosure forms filed by Black's lobbying firm, Prime Policy Group. Black was an aide to presidents Ronald Reagan and George H. W. Bush plus a campaign adviser to George W. Bush and John McCain.

Jonathan Mantz was a top Democratic fundraiser for years, and he served as deputy executive director of the Democratic Senatorial Campaign Committee. Today he is a lobbyist at BGR Group, where he lobbies the senators for whom he raised money. This year, Mantz has lobbied on online sales-tax legislation for the Retail Industry Leaders Association, according to RILA's lobbying forms. RILA's members include Kmart, Costco, Home Depot, Sam's Club, Target and Ikea.

The bipartisan lobbying effort has yielded fruit this year in the "Marketplace Fairness Act." Under this bill, if you buy something online, you pay a sales tax. Retailers, meanwhile, will have to collect sales taxes for every state where they have customers, even if the retailer has no physical presence there.

This is often how tax legislation gets passed: powerful interests hire revolving-door lobbyists to push for taxes on their clients' competitors. For over a decade, such online sales-tax bills have faltered in Congress, largely because they had a powerful opponent in Amazon.

But this year, Amazon switched teams, joining Walmart on the pro-tax side -- not out of some newfound concern for "marketplace fairness," but because Amazon's business model is changing in such a way that now Amazon stands to benefit from this tax.

In order to provide faster shipping, Amazon is building warehouses throughout the country. These warehouses constitute a "physical presence," which requires them to collect sales taxes, in any event. So, if Amazon is going to have to collect sales taxes under the existing "physical presence" doctrine, it may as well try to expand online sales taxes to whack its smaller competitors who don't have a 50-state network of giant warehouses.

The rest of the online retail industry remains on the anti-tax side. NetChoice, a coalition including other online retailers like eBay and Overstock.com, is fighting the "Marketplace Fairness" bill.

These are the typical battle lines in Washington: big business for big government, and smaller business for smaller government. And the bigs typically win.

Timothy P.Carney, The Examiner's senior political columnist, can be contacted at tcarney@washingtonexaminer.com. His column appears Monday and Thursday, and his stories and blog posts appear on washingtonexaminer.com.

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