A representative of Amazon.com Inc. today urged Congress to enact the Marketplace Fairness Act of 2011 in testimony during a hearing before the U.S. Senate Committee on Commerce, Science and Transportation. The Marketplace Fairness Act of 2011, also known as S. 1832, would require online retailers who exceed a revenue threshold to collect and remit state sales tax on online purchases in all states. Current law requires online retailers only to collect and remit state sales tax in states where they have physical operations.
“Congress should enact S. 1832 to protect the states’ rights, address the states’ fiscal needs and level the playing field for all sellers,” said Paul Misener, vice president for global public policy for Amazon.com. Amazon is No. 1 in Internet Retailer’s Top 500 Guide. Misener also reiterated Amazon’s view that the exemption threshold for sellers should be kept low. Amazon has previously said it would like that threshold to be $150,000 in annual sales, whereas S. 1832, as it stands today, has the threshold at $500,000.
Misener cited Amazon research that found that a $500,000 threshold would exempt “well over 99% of online sellers.” He did not elaborate on how Amazon conducted the research.
Testimony from Steve DelBianco, executive director of NetChoice, a group that lobbies federal officials on behalf of Internet retailers and that opposes overturning the existing sales tax rules, stated that the $500,000 exemption is too low, and that collecting and remitting sales tax in other states would be burdensome. “Make no mistake about it—$500,000 in retail sales is still just a sole proprietor operation,” he said. DelBianco urged Congress to move slowly on any changes. “Congress can afford to take the time to design legislation that requires real simplification and makes states accountable to these requirements,” he said.
DelBianco cited research, based on Internet Retailer Top 500 Guide data, that estimated that the top 500 retailers were responsible for 93% of the uncollected sales tax on U.S. e-commerce in 2011. The smallest e-retailer by sales in the Top 500 Guide generated approximately $15 million in sales in 2011. DelBianco proposed that Congress exempt sellers below the Top 500-cutoff. “Under this method, the small seller exception for 2012 would have been $15 million in annual sales. That would leave exempted retailers with a more reasonable gross margin to cover expenses, while allowing states to recover over 90% of the uncollected sales tax on e-retail.”
David French, senior vice president of government relations for the National Retail Federation, said in written testimony submitted to the committee that the organization believes a modest small-seller exemption for remote sales is appropriate, but that “raising the level too high will only exacerbate the potential for inequity between a small remote retailer that does not have to collect any taxes and a local small retail competitor who must collect sales tax.”
Alternate, but similar, legislation pending in the U.S. House sets the exemption threshold at $1 million in total remote sales or at $100,000 in remote sales to a particular state. French did not say what threshold the NRF, a trade group for bricks-and-mortar and web-only retailers, supports for small sellers, but did say the organization is encouraged by the attention and momentum the online sales tax issue is getting. “NRF supports Congress granting states remote collection authority with simplifications that ensure retailers are not unduly burdened by collecting and remitting sales taxes. Congress needs to pass S. 1832 this year,” French said.
For more on the online state sales tax issue, see the article “When, not if” in the August issue of Internet Retailer.
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