Renamed the “Marketplace Fairness Act”, a group of bipartisan senators is expected to introduce an alternate version of the “Main Street Fairness Act” in order to appease Web companies like eBay. Rather than taxing all transactions on the Internet, the new bill focuses on large retailers and allows smaller transactions to remain free of taxes. The bill is designed to give states the option of collecting the new tax. Some states may abstain from the tax since Web companies like Amazon bring distribution warehouses into the state along with thousands of jobs. However, all states won’t be allowed to impose the tax on the smallest online retailers.
The bill closes a loophole that was created after a 1992 Supreme Court decision decided that sales taxes shouldn’t be collected from customers when the store has no physical presence in the state. Sponsors of the bill include Senator Lamar Alexander of Tennessee, Senator Dick Durbin of Illinois and Senator Mike Enzi of Wyoming. Senators are currently debating what threshold constitutes a small business. One group of senators is seeking the tax for businesses over $1 million in national sales or $100,000 in sales within any given state. Another group is arguing for $500,000 in total national sales.
Amazon kicked off the the debate on federal involvement with collection of the sales tax after the company battled with Jerry Brown and the state of California over a new state law that required the collection of the new tax. Amazon was able to obtain a one-year delay in the collection of the sales tax after cutting off over 25,000 California affiliates from collecting revenue from sales made through affiliate sites. Amazon and other Web companies are seeking federal involvement to set a standard for all states. In addition, big-box retailers like Walmart and Target are also pushing for the sales tax to level the playing field when competing with online sales.
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