Amazon Has a Very Good Reason to Now Support an Internet Sales Tax

Now that the legislation favors Amazon, in a total turnaround from earlier this year, today Amazon came out and said it "strongly supports" the Internet sales tax.

Now that the legislation favors Amazon, in a total turnaround from earlier this year, today Amazon came out and said it "strongly supports" the Internet sales tax. A few months ago, Amazon was acting all baby, filing law-suits and refusing to collect the fees but today it has no problem with it at all. Yet, while Amazon lauds the legislation, eBay contines the fight, reports CNET's Declan McCullagh. What gives? Well, Amazon has had this epiphany that other Internet companies haven't because things are now working in its favor.

Amazon okayed the The Marketplace Fairness Act, which aims to close sales tax loopholes, because it had the "appropriate provisions," said Amazon Vice President Paul Misener at a Judiciary Committee meeting today. Those "appropriate provisions" include a very low exemption for small businesses at $500,000 a year in sales, meaning most Internet sellers would have to collect the fees. A giant company like Amazon can survive with these impositions, but for a small retailer, the taxes can put them out of business. At least that's what eBay is arguing. Stores like Amazon already dominate the web, eBay's debuty general council Tod Cohen explained to McCullagh. "To illustrate, big-box discount retailers accounted for 42 percent of total retail sales in 1987," he said. "As of July 2010, their market share had jumped to 87 percent." Without a higher exemption, big retailers will continue to push smaller vendors, who can't afford the taxes, out of business, argues eBay. Tomorrow, eBay will tell the Congressional panel that it opposes the legislation and would not support anything that didn't have higher exemptions. The House Bill has a higher cap than the Senate Bill at $1 million, but even that is too low, argues eBay.

Beyond the competitive advantage the legislation would afford Amazon, the company could make money off the deal, charging its vendors in exchange for sales tax chores, according to marketing trade-site Multi-Channel Merchant's Jim Tiemey. He suggests that Amazon will offer an optional service that would deal with the sales tax collection process and collect a 2.9 percent fee for the process. Abe Garver, a financial analyst at Focus Investment Banking, estimates Amazon has $116 million a year to gain from this set-up. Update: Amazon has informed us that its tax collection service is not profitable.