The Big Story Blog

Online stores vs tax collectors -- when the stores won

Posted at 11:05 AM on November 17, 2011 by Paul Tosto
Filed under: Economy, Taxes

The battle between giant online retailers and state tax collectors was settled by the U.S. Supreme Court in 1992. The retailers won.

Quill Corp vs North Dakota ruled that Amazon and other online stores couldn't be compelled to collect state sales taxes unless they had operations in that state.

Justices sided with the basic argument that with thousands of state and local taxing authorities, online stores would face too great a burden on commerce to try and collect for all of them.

Nearly 20 years later, the tax system may finally be catching up.

A push in Washington to let states collect sales taxes through a uniform system is gaining support.

There's already a voluntary simplified system in place -- a cooperative effort of 44 states and 1,400 retailers to collect sales taxes.

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"Now that these states have made tax collection simple and easy for retailers," the group argues, "Congress can adopt legislation that applies to the products and services sold by remote sellers."

That's where the next fight is coming.

A bill introduced last week in the U.S. Senate by Republicans and Democrats would give states that are part of the streamlined sales tax agreement the power to collect sales taxes from online retailers.

Some of the biggest fish in online retailing are fighting it, calling it a potential jobs and business killer.

"New and misguided remote tax schemes will devastate electronic retailers working to survive in these harsh economic times," the Electronic Retailing Industry says. "Massive cost increases and new regulatory burdens will significantly damage consumers and the marketplace on which they rely."

One of the biggest fish, though, Amazon.com, is taking a different tack. Amazon has come out in support of the bill while Ebay and others remain opposed.

Why the division?

One analyst thinks Amazon perceives it has an edge over its competitors.

The Seattle-based giant is "probably the online retailer that has the greatest ability to deal with and absorb the costs of that increased complexity and red tape, highlighting the fact that Amazon's fight against affiliate taxes was driven far more by its interest in protecting its position than in protecting online retail," Patricio Robles with the group Econsultancy wrote recently.

So in the end it could be a system that works wonders for Amazon and for local tax collectors and could cause problems and higher costs for everyone else.


About Paul Tosto

Paul Tosto

Paul Tosto writes the Big Story Blog for MPR News. He joined the newsroom in 2008 after more than 20 years reporting on education, politics and the economy for news wires and newspapers across the country.