Senator Durbin: online sales tax bill can pass

WASHINGTON Wed Nov 9, 2011 6:50pm EST

Richard Durbin, a U.S. democrat senator speaks at the closing ceremony of a summit of non-government organisations in Dhaka on February 19, 2004. REUTERS/Rafiqur Rahman

Richard Durbin, a U.S. democrat senator speaks at the closing ceremony of a summit of non-government organisations in Dhaka on February 19, 2004.

Credit: Reuters/Rafiqur Rahman

WASHINGTON (Reuters) - A bill creating the first national authorization for states to collect online sales tax will overcome political deadlock and become law next year, the No. 2 Democrat in the Senate predicted.

The bill "really does have an amazing array of support ... we may have finally come upon the right way to do this," Senator Richard Durbin told the Reuters Washington Summit on Wednesday.

Durbin, who is co-sponsoring the bill with nine other senators from both parties, said he wants to hold a Senate committee hearing, possibly before Christmas on the measure.

Asked if he believed his bill -- which has been stalled for many years on Capitol Hill in previous versions -- would pass Congress before the 2012 elections, Durbin said, "I do."

States are now limited in the online sales taxes they can collect from retailers that do not have a physical presence within the state. Some states have argued that a shipping facility is sufficient basis for taxation.

The bill has won endorsement from Amazon.com Inc (AMZN.O), the largest online retailer, which has been battling state efforts to levy online sales taxes.

Amazon said in a statement on Wednesday that it "strongly supports enactment" of the measure.

It had $34 billion in online sales last year and has previously threatened to pull jobs from any state that passes a sales tax collection requirement on Internet sellers.

But Amazon now backs federal legislation because the company no longer wants to fight states on a case-by-case basis, said lobbyists who asked not to be named.

OPPONENTS STILL FIGHTING

The bill's critics remain convinced the sales tax will hurt small businesses.

"My concern is not Amazon. I'm worried about the small sellers," said Carl Szabo, policy counsel for NetChoice, a lobbying coalition representing companies with Internet sales that is critical of the bill.

NetChoice members include online marketplace eBay Inc (EBAY.O), which, in a statement opposing the bill, framed it as large corporations versus small businesses and entrepreneurs.

The eBay criticism is "disappointing," said Republican Senator Lamar Alexander on a conference call on Wednesday.

Opponents of the legislation "enjoy being subsidized by other taxpayers," he said.

A key sticking point for opponents is the small business exemption -- set at $500,000 in annual online sales in the Senate bill. Senators said on Wednesday they were open to compromising on the exemption threshold.

"There isn't anything in this bill that is sacrosanct," Republican Senator Mike Enzi told reporters. "If $1 million seems to be what the consensus of the Senate thinks, we could make it $1 million."

Enzi, who has been a supporter of state online sales tax collection for years, introduced in May 2007 similar legislation with a $5 million small business exemption.

(Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Tim Dobbyn)