Online retailers battle over Marketplace Fairness Act

There’s a fight brewing over the subject of sales taxes, and it’s taking place not only in the halls of Congress, but between online retailers and traditional brick and mortar stores. A bi-partisan group of sponsors in the Senate introduced S.1832, The Marketplace Fairness Act, earlier this month. It seeks to make it easier for states to collect sales tax from online transactions, particularly in cases where the purchases are made across state lines. Such a move was bound to cause some controversy, but Governor Haley Barbour weighed in this week in support of the measure, explaining why he believes it’s time to end the current exemption for such sales.

“I am writing to congratulate you on the introduction of the Marketplace Fairness Act and offer my support for its timely passage,” Barbour wrote in a letter to Sens. Mike Enzi (R-Wyo.) and Lamar Alexander (R-Tenn.), two co-sponsors of the bill. Sen. Dick Durbin (D-Ill.) is also a leading supporter…

“Fifteen years ago, when e-commerce was still a nascent industry, it made sense to exempt startups like from collecting and remitting sales taxes in states where they had no facilities,” Barbour wrote. “But today, e-commerce has grown, and there is simply no longer a compelling reason for government to continue giving online retailers special treatment over small businesses.”

“Failure to level the playing field threatens to, and in fact has, run many of them out of business, taking with them jobs and the sizable contribution they make to not just our community culture, but to the organizations who have long benefited from their charitable involvement,” he wrote.

The debate is pitting some online retailers against others. Amazon has come out at least partially in favor of the measure, but they already collect sales taxes in a number of states, including New York, Illinois, Rhode Island, North Carolina, and Colorado. Other states have been moving in a similar direction. But another early giant in online sales, E-bay, is fighting against it.

“This is another Internet sales tax bill that fails to protect small business retailers using the Internet and will unbalance the playing field between giant retailers and small business competitors. It does not make sense to expand Internet sales tax burdens on small businesses at a time when we want entrepreneurs to create jobs and economic activity.” Tod Cohen, eBay’s Vice President for Government Relations and Deputy General Counsel.

I’m still not entirely sure where I stand on this one. Any time we begin a discussion with the phrase “more taxes,” my trigger finger gets itchy. But there are some compelling arguments in favor of this. In principle, I understand why there would have been a tax holiday in the nascent days of e-commerce just to help it get off the ground, and I’ve been the beneficiary of those types of deals for years. But by doing so, we also have the government engaging in a version of “picking winners and losers” as well as allowing Washington to interfere with the states’ ability to control their own tax policy.

And while I hate to invoke the word “fairness” in a discussion of the free market, it does stand to reason that each retailer in any given area should have the opportunity to compete on an even playing field with everyone else. Of course, if I were to question anything about the bill, it would be the timing. I know I do the majority of my Christmas shopping through Amazon and NewEgg, and it would have been nice to consider this after I’d already made all my purchases.

So have your say. Is this a good idea?