Senate Approves Online Sales Tax Bill

By Scott Neuman

Published May 6, 2013 at 1:54 PM EDT

Supporters of the Marketplace Fairness Act say it will level the playing field between online retailers and traditional brick-and-mortar stores.

Update at 7:00 p.m.:

The Senate has passed the Marketplace Fairness Act by a vote of 69 to 27, The Associated Press reports.

Here's our original post:

The Senate is expected to approve a measure on Monday that would end tax-free shopping for online purchases, a move that concerns many e-retailers but has the support of the states that stand to collect billions in previously lost revenues.

As NPR's Dave Mattingly reports, the Marketplace Fairness Act would give states the power to require retailers to collect state and local sales taxes for the first time.

"The money would be sent back to the state where the shopper lives," he says. "Currently that requirement only applies to retailers with a physical presence in a state, giving Internet retailers a pricing edge over traditional stores."

The bill has drawn bipartisan support in the Senate, with conservatives such as Wyoming Sen. Mike Enzi and Tennessee Sen. Lamar Alexander among its supporters. It is expected to pass in the Senate but faces a tougher battle in the House, "where some Republicans regard it as a tax increase," The Associated Press reports.

According to the AP:

"As Internet sales have grown, 'It's putting pressure on the brick-and-mortar competitors and it's putting pressure on state and local sales tax revenues,' said David French, senior vice president of government relations for the National Retail Federation. 'It's time for Congress to create a level playing field so that all retailers are treated fairly.'

"On the other side, eBay says the bill doesn't do enough to protect small businesses. Businesses with less than $1 million in online sales would be exempt. EBay wants to exempt businesses with up to $10 million in sales or fewer than 50 employees."

A broad coalition of mostly brick-and-mortar retailers is lobbying in favor of it. While the largest online retailer, Amazon, has voiced support for the bill, many others oppose it.

EBay CEO John Donahoe told NPR's Morning Edition on Monday that the law will squeeze out the smaller sellers on EBay.

"So, I'm a small business in Pennsylvania and I now have the tax authorities from five, 10, 15 states auditing me or sending me letters that I didn't do the calculation correctly," Donahoe argues. "I may have to go fight for myself on behalf of that. That burden is the concern that we have that will impede their ability to thrive and ultimately to succeed and grow jobs."