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Support grows for online sales tax

Giant e-commerce retailer Amazon now backs Congressional legislation to tax online transactions.

Kai Ryssdal: If you're in California and you buy, say, a tent online from an out-of-state e-retailer, you don't pay sales tax. Handy for the consumers among us.

States, though, say they're losing $23 billion a year in unpaid taxes on transactions like that. Government deficits being what they are, it's no surprise there's bi-partisan support in Congress to make online retailers collect state and local sales taxes. The kicker here is that Amazon's one of the companies in favor.

Marketplace's Queena Kim has more on what could be a new chapter in e-commerce.


Queena Kim: Once upon a time in e-commerce -- like a decade ago -- online retailers like Amazon said collecting state and local sales taxes could kill their young industry. It was one of their only competitive advantages over brick-and-mortar stores.

Well fast-forward to 2012 and that argument -- it’s over.

Steve DelBianco: I’m sorry I don’t buy it at all!

That’s Steve DelBianco, executive director of NetChoice, a trade group that represents e-commerce companies like Ebay and Overstock.com.

DelBianco: There’s no evidence that consumers actively use e-commerce because they want to avoid sales tax.

Many big e-retailers are already collecting taxes and that hasn’t hurt sales. Turns out online shoppers are more affluent.

Gene Alvarez: In order to be an Amazon customer, it’s starts with having Internet connection, having a machine.

That’s Gene Alvarez, an analyst at Gartner. By “machine” he means a computer and he also says you generally need a credit card, an office or somewhere where it’s safe to leave packages. So e-commerce shoppers don’t mind spending a few extra bucks on sales tax. What they do mind? Waiting.

Alvarez: The competition is shifting from 'you won’t pay tax' to 'how quickly we can get a product into a consumer’s hands?'

To do that, big e-retailers need to be closer to customers. Amazon has a distribution center in more than a dozen states. And in each of those states, it’ll eventually have to start collecting sales tax. So now, their competitive edge depends on making sure all the other e-retailers collect taxes too.

In San Francisco, I’m Queena Kim for Marketplace.


Ryssdal: Retail sales, of course, are down, and we've been asking you on Twitter: What you're spending money on if you're not shopping? Shawn Connell tweeted us: "Using it to offset the rise in grocery prices, mostly."

Tweet us at @MarketplaceAPM.

About the author

Queena Kim covers technology for Marketplace. She lives in the Bay Area.

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