ROBERT SIEGEL, HOST:
Moving on now to legislation that has nothing to do with violent attacks or hacking. This week, a bill is making its way through the Senate that would require more online retailers to collect sales tax. The measure appears to have strong bipartisan support, and President Obama has said that he'll sign it. As NPR's Scott Horsley reports, the political battle pits online retailers against brick-and-mortar stores.
SCOTT HORSLEY, BYLINE: Nancy Mashragi backed in to online retailing. The social worker and her architect husband both lost their jobs in 2008. So to make ends meet, they began selling electronic equipment on eBay.
NANCY MASHRAGI: It just kind of grew into a business from just the two of us on our dining room table and now we employ eight people, plus myself and my husband.
HORSLEY: This year, the Clearwater, Florida, couple expects to ring up sales of up to $4 million. That's an attractive target for tax collectors in other states. Under the Marketplace Fairness Act, now before the Senate, online companies like the Mashragis would have to collect sales taxes from customers in any city or state that requires them.
MASHRAGI: We're happy to pay taxes. We currently collect taxes for the state of Florida. But I just feel that it's not possible or practical for us to be collecting taxes for this many jurisdictions. We're just too small for that.
HORSLEY: Long before the Internet, there was a history of tax authorities in one state going after businesses in another. But Joseph Henchman of the Tax Foundation says a series of Supreme Court cases - some involving catalog retailers - limited the cross-border taxing authority.
JOSEPH HENCHMAN: The main thing that came out of those court decisions is the idea of physical presence, that if your company has people or property within the state, then the state can impose tax obligations on you. And if you don't have that within the state, then they can't.
HORSLEY: But the high court left the door open for Congress to change the rules. And Colorado Senator Mark Udall says given the way the Internet has reshaped retailing, it's time for lawmakers to do so.
SENATOR MARK UDALL: Back when trading posts and local markets were the most prevalent places for consumer goods, you didn't have to worry about out-of-state sellers. Today, though, nearly one in 10 sales occur online.
HORSLEY: The Obama administration says requiring online sellers to collect sales tax would help to create a level playing field for Main Street stores and plug a hole in state and local coffers which have lost billions in uncollected taxes.
Until now, the main argument against such a move was that it's just too complicated. The Tax Foundation's Henchman notes there are thousands of different taxing jurisdictions, each with its own peculiar rules.
HENCHMAN: A few years ago, we got involved in Iowa where the revenue department had issued a circular about pumpkins reminding retailers that if - this is around Halloween - that if people are buying their pumpkins for decorative purposes, that's taxable. But if it's for consumption purposes, it's nontaxable.
HORSLEY: The Senate bill does require states to simplify their sales tax rules and provide software to calculate the taxes owed. Amazon, the nation's biggest online retailer, used to resist collecting taxes but it's endorsed this bill. Henchman says Amazon is already facing a big tax collection requirement
HENCHMAN: Amazon used to have a physical presence in only a handful of states. Now, their business model is moving more towards next-day delivery and even in some cases same-day delivery. And that means having a lot more warehouses, a lot more distribution centers. And so they're actually creating physical presence in a lot more jurisdictions.
HORSLEY: That's left eBay as the loudest voice against the Senate bill. While the measure would exempt sellers with less than a million dollars in sales, eBay's Brian Bieron argues the threshold should be at least 10 million.
BRIAN BIERON: People on the street might say, oh, a million dollars? Well, that's a lot of money. But in the world of retail, a million dollars of sales is a very small amount.
HORSLEY: The sales tax act is expected to pass the Senate as early as this week. After that, it faces a more uncertain future in the Republican-controlled House. Scott Horsley, NPR News, Washington.
(SOUNDBITE OF MUSIC)
AUDIE CORNISH, HOST:
You're listening to ALL THINGS CONSIDERED from NPR News.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.