Brian Steinhoff has his agenda set for the upcoming legislative session.
As the president of the Minnesota Retailers Association (MRA), which represents 2,000 businesses ranging in size from major corporations to mom-and-pop shops across the state, he is making the issue of online sales taxes his main focus in 2012. Steinhoff is bringing together an alliance of state politicos and brick-and-mortar retailers like Best Buy and Target in an effort to close a loophole at the Legislature that exempts sales from online-only companies such as Amazon from state sales taxes. Retailers are legally bound to collect sales taxes on an online purchase if they have a store in the buyer’s home state.
“We feel pretty strongly that we have a good shot to get it done this year. It is our number one priority,” Steinhoff said. “We love Internet sales. All of our retailers are collecting Internet sales, but they have to pay sales taxes, and it’s really just a fairness issue.”
But the proposal’s appeal goes beyond fairness for some. Imposing what many refer to as the “Amazon tax” would have padded the state’s coffers by nearly $400 million last year alone, according to Minnesota Department of Revenue Commissioner Myron Frans, one of the bill’s supporters. (Some critics, however, have said that’s an unrealistic high-side estimate.) In a state still reeling from a $5 billion 2010 budget deficit and staring down another likely shortfall at the start of the next session, the prospect of extra cash could be appetizing to embattled legislators, sources say.
The issue is not a new one in Minnesota. The MRA pushed the legislation last year, which would require online businesses like Amazon.com and Overstock.com (which rely on other Minnesota affiliates with a physical presence to promote their websites and products) to collect sales taxes above a certain threshold. Gov. Mark Dayton included it in his budget proposal, and the bill’s chief author, Republican Sen. Julianne Ortman, chairs the Senate Taxes Committee. But while the bill had support in the Senate, the Amazon tax was not included in the final Republican budget.
“We were hopeful that it would get in the final package,” Frans said. “Everyone felt like it was something we needed to look at, but 2011 was not the right year to do it.”
Next year is looking sunnier, he said, particularly as momentum builds on the issue nationally. Four bills are now in the queue in the U.S. Senate and House that would give states the right to require online merchants to collect sales taxes above a certain threshold. One of the bills — the Marketplace Fairness Act — has the support of Amazon, despite the company’s years of opposing similar legislation.
Amazon is also cutting deals on a state-by-state basis. In October, Amazon agreed to begin collecting sales taxes from Tennessee residents in 2014. That move came shortly after Amazon took an even bigger leap by agreeing to begin collecting sales taxes in California, the nation’s most populous state and a key battleground on the issue over the years. Illinois, South Dakota, New York, Rhode Island, Oklahoma and North Carolina have also adopted some version of the “Amazon tax” on online purchases.
Groups like the National Conference of State Legislatures (NCSL) have been lobbying for just such a policy for several years, and the bill has lived in Congress in some form for about a decade. For that reason, Steinhoff isn’t counting on anything. “We are supportive of the national bills,” he said. “However, Congress has been looking at this issue for 10 or 11 years, so we are also taking an action at the state level.”
For Amazon’s part, it’s staying quiet about the Minnesota debate. Officials from the company say only that they are supporting legislation at the federal level. During the 2011 session, the company led the opposition to the bill in Minnesota.
Amazon’s two Minnesota lobbyists — Winthrop & Weinstine’s John Knapp and former Minnesota Management & Budget Commissioner Tom Hanson — lobbied hard against the move, which they said would hurt Minnesota small businesses. Amazon has said it would sever ties with its Minnesota affiliates if the law was passed.
At the federal level, eBay is pushing back against legislation, but the company has been quiet on the issue of the online sales tax in Minnesota. “Our principal focus last session was online ticket selling,” said longtime DFL lobbyist Ted Grindal, who is one of about a half dozen registered eBay lobbyists in Minnesota. While Grindal didn’t know the plan for 2012 lobbying on the issue, he said “groups sometimes take turns on leadership roles.” Some think eBay will take center stage in opposing the bill as Amazon’s role in the debate changes.
“EBay generally does not support policies or legislation which force small businesses to take on the same costs and tax burdens as national retail businesses, because it is unrealistic, unfair and will unbalance the playing field between giant retailers and small business retailers on the Internet,” wrote David London, senior director for government relations at eBay, in an emailed statement. Representatives from the company would not take a direct position on the Minnesota bill.
Despite bipartisan support from key figures in St. Paul, the bill’s path is not without its obstacles. Some anti-tax advocates will reject the new online sales tax bills on principle, one lobbyist said: “People are particularly sensitive about tax issues in this environment. But it’s not about increasing taxes, it’s about compliance.” Another lobbyist said consumers who are used to paying no sales tax online will view the change as a tax increase — and anything that could be spun as a tax increase will be a tough sell at the Republican-controlled Legislature, especially during an election year in which all 201 seats are up for grabs.
In Steinhoff’s view, it’s only a matter of time before the issue is addressed. “It’s really becoming a big deal with Internet sales growing the way they are,” he said. “It’s grown exponentially, and it’s becoming an issue that we can’t ignore.”