California-Amazon Sales Tax Fight Moves to Capitol Hill

Washington – A California fight over online sales taxes could now escalate nationally on Capitol Hill, pitting Amazon and other big retailers against skittish lawmakers accustomed to stoking anti-tax sentiments.

Under the emerging deal concocted in Sacramento, Amazon would join with brick-and-mortar competitors to lobby Congress for a national online sales tax law. In exchange, California would suspend enforcement of a new Internet sales tax until September 2012.

Amazon and the other companies are motivated and politically muscular, accustomed to deploying lobbyists, campaign contributions and all the tools of wielding influence. Still, their road ahead will be rough.

“The odds of getting a tax increase of any sort through this Congress, at the moment, are zero,” University of California at Berkeley political scientist Bruce Cain said Thursday.

Action this year is unlikely, because of the unfinished legislative business already confronting Congress. Next year will be tricky, because of the presidential and congressional elections.

If formally approved by California state legislators, the handshake deal struck Wednesday does not actually require imposition of a federal online sales tax. Instead, the Capitol Hill lobbying focus likely would be legislation authorizing states to require that all retailers collect sales taxes.

Currently, only sellers with a physical presence in a state, such as a store, office or warehouse, are required to collect that state's sales tax. But when the Supreme Court laid down that interpretation of the law in 1992, in a case arising out of North Dakota, justices also made clear that Congress could change the rules of the game.

“Congress is … free to decide whether, when, and to what extent the states may burden interstate mail-order concerns with a duty to collect use taxes,” Justice John Paul Stevens noted in the court's majority opinion.

A Senate bill to do just that, dubbed the Main Street Fairness Act, is currently backed by four senators, while a House of Representatives version is backed by six members.

“Legislation has been introduced in the past several years to do this, and it hasn't gone anywhere,” noted Jason Brewer, vice president of the Retail Industry Leaders Association, “but things may look different now. With so many states taking action, that's gotten Congress's attention.”

Besides California, Texas and at least seven other states this year have pushed bills to include online sales tax collections. Underscoring the political difficulties, the initial Texas online sales tax bill was vetoed in May by Gov. Rick Perry, now a declared Republican presidential candidate.

At the time, Perry declared that he wanted “a thorough policy discussion with … other states and even the federal government about interstate commerce and the structure of state sales taxes in the 21st century.”

Earlier this year, Amazon joined the National Retail Federation and others in publicly supporting the Main Street Fairness Act. The company's vice president, Paul Misener, wrote then that Amazon “has long supported a simple, nationwide system of state and local sales tax collection.”

Company officials did not respond to requests for further explanation Thursday. On Capitol Hill and in state capitals, though, the company is well known for its powers of political persuasion.

Amazon already spends more than $2.4 million annually on federal lobbying, records show. The company's lobbyists include both its own in-house force as well as several contract firms, whose lobbyists are well connected to congressional leaders past and present.

The company reported spending $5.25 million gathering signatures in California for a June 2012 ballot-measure challenge to the state's online sales tax.

Amazon's referendum effort, called “More Jobs, Not Taxes,” will be suspended under the deal.

Through its political action committee, Amazon contributed $189,000 to federal candidates during the 2010 election cycle, records show. This was twice as much as the Amazon PAC contributed during the 2006 election.

© 2011 McClatchy-Tribune Information Services

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