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White House backs US web sales tax - eBay hits panic alarm

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The White House has backed a bill that would give US states the ability to demand sales tax from online retailers, while the Senate clears the law for formal voting.

The senators voted 74 to 20, with six abstaining, to limit debate on the Marketplace Fairness Act and get on with final vote on the legislation.

The MFA, proposed by Senators Michael Enzi (R, Wy) and Richard Durbin (D, Il), among others, would give businesses 90 days to set up tax payments on internet shopping in accordance with state, region and city law.

"As a former small business owner, I believe it is important to level the playing field for all retailers – in-store, catalog, and online – so an outdated rule for sales tax collection does not adversely impact small businesses and Main Street retailers," Enzi said last month.

"Thousands of local businesses are forced to do business at a competitive disadvantage because they have to collect sales and use taxes and remote sellers do not, which in some states can mean a five to 10 per cent price advantage.

"We should not be subsidising some taxpayers at the expense of others."

The Act has a fair amount of support in the Senate and is backed by President Barack Obama as well, but the fate of the legislation in the House of Representatives is somewhat more uncertain, since some Republicans see it as a tax increase.

White House spokesman Jay Carney made Obama's support clear for the first time yesterday, telling reporters that the MFA would "level the playing field for local small business retailers who are undercut every day by out-of-state online companies".

"While local small business retailers follow the law and collect sales taxes from customers who make purchases in their stores, many big business online and catalogue retailers do not collect the same taxes," he said.

"And because these out-of-state companies are able to cut corners and play by a different set of rules, cities and states lose out on funding for K-12 education, police and fire protection, access to affordable health care and funding for roads and bridges."

The final Senate vote on the bill is likely to come tomorrow. In the meantime, eBay's head honcho has started major lobbying this week to stop the Act, emailing the online bazaar's millions of users to ask them to oppose the legislation. eBay has asked Congress to give small biz owners a break by cutting taxes for firms with fewer than 50 employees or less than $10m in annual out-of-state sales. The web bazaar, natch, wants to hang on to its own state-sales-tax-free status. ®

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