Big businesses and localities win online sales tax

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  • .@TPCarney: To lock up GOP votes, the support of big business always helps.

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  • For years, the battle over online sales taxes was a stalemate because Wal-Mart had a powerful opponent in Amazon.

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  • Republicans' aversions to taxes and regulations are often rooted in a desire to be "pro-business."

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When do 21 Republican senators vote for higher taxes? Answer: When the biggest businesses and local politicians hire top K Street lobbyists to push for the tax-hike legislation.

A bipartisan majority of senators on Monday passed the "Marketplace Fairness Act," which forces large and mid-sized online retailers to collect and remit sales taxes for every state, county, city, or town where a customer lives. (Currently, consumers don't pay taxes on most online sales, unless the buyer and seller are in the same state.)

Many Republican Senate staffers told me that revenue-hungry local politicians -- mayors, governors and state legislators -- successfully wooed some GOP senators and are making progress on House Republicans. One lobbyist who represented local governments said his firm sicced state lawmakers on congressmen and senators -- often their former colleagues -- to back this bill.

But to lock up GOP votes, the support of big business always helps.

The Retail Industry Leaders Association, representing giant chains like Wal-Mart, Best Buy and Target, was an early advocate of online sales tax legislation. Their Senate champions were Democrat Dick Durbin and Republican Mike Enzi -- both of whom carried the ball for retailers in the 2010 bill regulating how much banks could charge stores for processing debit-card transactions.

For years, the battle over online sales taxes was a stalemate because Wal-Mart had a powerful opponent in Amazon. Amazon fought in court against states that wanted Amazon to collect and remit sales taxes. The online retailer cited rulings no business could be forced to collect a sales tax in a state where it had no "physical presence."

But as Amazon has grown and tried to accelerate its shipping speeds, the company has begun erecting warehouses around the country. These warehouses meet the "physical presence" test, and in more and more states, Amazon had to agree to collect sales taxes.

So, if Amazon is already collecting and remitting sales taxes under the "physical presence" doctrine, why not force all retailers -- even those too small to have a national network of warehouses -- to collect and remit sales taxes? Amazon in 2011 or 2012 joined RILA in supporting the Marketplace Fairness Act.

Republicans' aversions to taxes and regulations are often rooted in a desire to be "pro-business." Once Wal-Mart and Amazon join hands, pro-business Republicans were happy to support legislation leading to higher taxes.

Look down the list of Republicans who voted for the bill, and you'll see three main types: Republicans at the left end of the party such as John McCain, Susan Collins, and Lindsey Graham; former statewide officials, such as ex-governors Lamar Alexander, John Hoeven, and Mike Johanns; and the K Street crowd, such as former lobbyist Dan Coats, or Roger Wicker, the understudy to Trent Lott, the former senator and now Republican superlobbyist.

Lott and his firm Patton Boggs play an interesting role in the lobbying push for the Marketplace Fairness bill.

Patton Boggs has long represented a handful of local governments. Last year, lobbying filings show, the firm represented these governments on this bill.

"Governors all over the country," Lott told USA Today, "have been active in saying this is a states' rights issue for them."

Patton Boggs had another client interested in the bill: Wal-Mart. Patton Boggs has represented Wal-Mart for more than a decade, and in early 2012, the firm started lobbying on "e-Fairness taxation issues," according to lobbying filings.

Then in November 2012, as the industry was trying to stick the legislation into a lame-duck defense bill, Patton Boggs picked up another client for the Marketplace Fairness Act: new convert Amazon. Lott is listed as a lobbyist on the account.

An Amazon spokesman wrote me to say the company "hasn't changed positions and has supported federal legislation on this issue for more than a decade." But Steve DelBianco, leading a lobbying coalition of the bill's opponents such as eBay, says that's not true. "I worked with Amazon for 10 years," he told me. DelBianco said Amazon used to support an effort more broadly embraced by the industry, called "streamlined sales tax," which would be a multistate agreement to set common definitions and boundaries for state sales taxes (while allowing different rates).

Other prominent Republican lobbyists who worked on the issue for the retailers included former Sen. Don Nickles of Oklahoma.

So there's the formula for winning Republicans over to a tax-hike bill: combine a states' rights argument with a K Street all-star team representing the biggest businesses in the industry.

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Timothy P.

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