What? Amazon Favors an Internet Sales Tax?

The (largely ceremonial) budget passed by the U.S. Senate Saturday included an amendment giving states more authority to collect sales taxes on Internet purchases.

The sales tax amendment, according to Hispanic Business, was really designed to test support for the "Marketplace Fairness Act," a bipartisan measure that has come to be known as the “Amazon tax.” The budget amendment passed by a vote of 75-24, signaling possible strong support should the act come up for a vote as a standalone law.

The Senate budget – including the sales tax amendment - has virtually no chance of adoption – thanks to the continuing showdown between the Democratic majority in the Senate and the Republican-controlled House. None-the-less, many experts and analysts, including Forbes’ Robert Wood, believe we are moving closer to a day when sales tax will be collected on all online purchases – not just those in states where the seller has a physical presence.

One of the more curious developments in this ongoing debate is the fact that Amazon AMZN, the world’s largest online retailer, supports the notion that Internet sellers should be required to collect sales taxes – even in states where they don’t have a physical presence.

Curious that is, until one digs a little deeper. As Bloomberg notes, Amazon is expanding its physical presence into more states and would be required to collect taxes in those jurisdictions anyway. This gives the company plenty of incentive to lobby for a law that would force competitors with smaller geographic footprints to play by the same rules.

All this leaves a dizzying “odd couple” juxtaposition of proponents and opponents of the law. Supporters include bricks-and-mortar retailers like Wal-Mart WMT, Best Buy BBY, Target TGT, and Dollar General DG, along with online retailer, Amazon. Opponents include eBay EBAY, Facebook FB, Oracle ORCL, and anti-tax groups including Americans for Tax Reform and Campaign for Liberty.

Organizations like Americans for Tax Reform and Campaign for Liberty maintain that passage of such legislation would constitute a new type of taxation and allow states to reach across their borders to force retailers to comply with complicated and expensive tax laws.

Not surprisingly, proponents of the “Marketplace Fairness Act” believe it levels the playing field, forcing all retailers to play by the same rules. The measure, as currently written, includes an exception for smaller online companies with gross annual sales of less than $1 million.

The National Retail Federation, another supporter of the law, estimates that state and local governments lose as much as $24 billion a year in taxes from non-taxed Internet purchases.