Internet sales tax wars: Big vs small; Amazon vs eBay

UPDATE: Washington lobbyists add: 

EBay "highlights small business, but interestingly enough (doesn't) mention the fact that brick-and-mortar retailers must collect and remit sales on their very first sale," writes Stephen E. Schatz Sr., of the National Retail Federation, which, he points out, represents small as well as big stores.

Despits their inclusion in the NetChoice trade association which opposes the Enzi-Rockefeller state Internet tax law, "Facebook and Newscorp are not" themselves taking a public stand, says Jason Brewer, of the Retail Industry Leaders Association. So why are they listed in the group's anti-tax-bill statement? "I think the testimony was written in a way to deliberately mislead."

EARLIER: The biggest Internet retailer,, has switched sides, in 20-year fight over whether and how online consumers ought to pay state sales tax.

Once ferociously sales-tax-averse, Amazon has built or bought dozens of giant warehouses (plans call for 76 by year's end, including at least five in east and central Pennsylvania, two in Delaware, and three in New Jersey), and is adding networks to handle local distribution, returns, software and customer service.

(It's as if Amazon expects the Postal Service really will die of Congressional neglect, and wants to make sure its packages still get through. And maybe to replace your mailman, too.)

Accordingly, Amazon has made tax deals with California, Texas, New Jersey and other states, promising it will finally start collecting state taxes on its sales, in exchange for non-collection of back taxes for prior years. 

Even as Amazon has turned into a more conventional retailer that helps governments collect taxes instead of helping customers avoid taxes, Walmart and the big chain stores have integrated Internet sales into their businesses and are collecting taxes on those, too, just like they do in stores. They have converged.

Now that Big Retail is all on the same side, it's pushing to make sure small business gets squeezed, too. The National Retail Foundation and sent lobbyists to an Aug. 1 hearing to cheer on bipartisan Internet tax legislation sponsored by Senators like Mike Enzi, R-Wyo., and Jay Rockefeller, D-W.Va.

Who's resisting laws that would make it easier for states to tax Internet sales? Tea Party allies like Sen. Jim DeMint, R-S.Car., for one. Plus a surprising corporate coalition, including Facebook and Rupert Murdoch's News Corp.(they own Fox News and the Wall St. Journal), and led by eBay, the online sales site that counts small businesses as its biggest users.

"This is not about the Internet versus brick and mortar retailers. That view is completely out of date," Brian Bieron, senior director of eBay's Washington lobbying office, told me. 

It's now a fight between giant retailers and the little guys. EBay says it's backing the little guys, the small businesses Democrats and Republicans both claim to cherish. "Small retailers should be exempt from the new tax burdens," because they already have higher per-unit shipping and administrative costs than big businesses, argues Bieron, a St. Joseph's University grad. "EBay is unique in the Internet/retail space, where our business model is to empower small-business retailers" alongside midsize and big companies. 

So what's a small business? Let the feds decide that, says Bieron: "They already have hundreds of small-business definitions."

While the fight moves torward the next Congress, states say billions in small-business sales taxes, especially on sales to out-of-state buyers, keep going uncollected. Pennsylvania has issued strict guidelines that argue it already has the right to tax these transactions, but Internet retailers say the state hasn't moved to really enforce the rules, so far.

Let the states decide on whether and how to go after Internet sales, says eBay."The Internet doens't mean you don't have to collect state sales tax," Bieron concluded. "But we don't think states, deep down, really think they need" to clamp down on small cross-country sellers.