Obama Backs Online Sales Tax, Will Congress?
Battle lines have been drawn between brick-and-mortar retailers and their online competitors.
On Monday, 74 senators voted to limit debate on a measure that would allow U.S. states to require out-of-state retailers to collect online sales tax, and could hold a vote as early as Wednesday. Significantly, the White House publicly backed the measure. Obama may be interested in supporting the measure because it broadens the tax base at a time when many states are strapped for cash.
Support or resistance to the measure falls split fairly predictably between companies like Best Buy (NYSE:BBY) and eBay (NASDAQ:EBAY), while Amazon (NASDAQ:AMZN) seems keen on assuming a third-party position of “bring it on.”
For some context on that last point, Amazon has already navigated these waters in miniature in California, which began charging Amazon online sales tax in September. Speaking in response to new bill at the time, spokesman Scott Stanzel said: “We offer customers the best prices with or without sales tax. We collect sales tax, or its equivalent, in more than half of the areas where we do business, and we’re pleased to say we’re thriving in those geographies”…
Currently, the law states that states can only force online retailers to collect sales tax if they have physical stores or affiliates within state borders. Amazon was brought into the tax fold in California because of its distribution hubs there.
Brick-and-mortar retailers have made an effective argument out of the idea that online retailers like Amazon or eBay are not operating on a level playing field. Customers who choose to shop online from states that do not collect online sales tax effectively receive a discount equal to the unenforced tax. This, of course, is a competitive pressure in and of itself.
Best Buy memorably instituted an online price-match guarantee over the holidays that has played a pretty significant role in helping the company regain its competitive footing. The move is credited with curbing consumer showrooming.