Big Government has previously discussed the Texas legislature’s surprising move of passing legislation aimed at forcing out-of-state, online only retailers to collect and remit to the state sales/use tax.

Such legislation is constitutionally dubious, and sources say, may well be vetoed by Gov. Rick Perry for multiple reasons.  First, opponents say the bill would increase taxes to the tune of $60-plus million a year.  Second, it appears unlikely to pass constitutional muster.

But third, other red states like South Carolina and Tennessee that are keen to attract and retain business appear to be rejecting similar moves, thus potentially marginalizing the Lone Star state should H.B. 2403– the bill in question– be allowed to become law.

From CNBC:

The House voted 97-20 to give Amazon a five-year exemption from collecting sales taxes from online shoppers in South Carolina.

From the Houston Chronicle:

Tennessee lawmakers on Wednesday backed off trying to force Amazon.com to collect sales taxes on transactions in the state, at least for this year.

Texas is widely regarded as one of the most business-friendly states in the country, and it has a relatively low unemployment rate of 7.7% to prove it.

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Big Government has previously covered efforts led by California liberals, including Assemblywoman Nancy Skinner, to force out-of-state, online-only retailers with no physical presence in California to collect and remit California sales tax where they sell into the state, based purely on them advertising with or enabling their store to be accessed via an independent website based in California.  Such efforts are likely unconstitutional.  The most prominent example of such a website would be eBay, the Internet auction giant.

Unsurprisingly, eBay has not been enamored with such efforts which would hit eBay sellers, and has been seeking to work into legislation a threshold designed to ensure that at least some of its out-of-state sellers will not be subject to California sales/use tax collection and remittance obligations where they sell to customers in the Golden State (California-based sellers who sell to Californians are already on the hook).

A possible threshold of $10,000 a year or less in sales to Californians has been reported, but sources say that eBay and/or some of its sellers want that limit raised higher– potentially up to $2 million per year.

EBay has its California sellers engaged in a grassroots lobbying effort aimed at forcing amendments to the legislation, which would defang it.  No doubt eBay sellers located outside of California, who are currently not obliged to collect and remit sales tax on purchases made by Californians, are ecstatic about this. California-based sellers would not benefit from building in a sales threshold, though, especially a high one that could tilt the eBay marketplace distinctly to the advantage of out-of-state sellers. However, their legislators are being urged to make amendments that, if put through, could seriously reduce the already rather pitiful revenues that backers of the legislation claim they would obtain by ramming it through.

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As California Democrats continue to press for an unconstitutional new tax scheme targeting out-of-state, online retailers, it has emerged that an additional two retailers alleged to be backing the effort themselves decline to collect and remit tax on Internet sales made to customers resident in states in which those retailers maintain no physical presence.

Recently, Capitol Confidential reported on what was described by critics as hypocritical behavior on the part of retail powerhouses Target and Bloomingdale’s.  Now, research indicates that Macy’s and Saks Fifth Avenue—both alleged to be lower-profile backers of the so-called “Amazon tax” proposal and both competitors of Overtsock.com, itself a major target of the legislation—engage in the same behavior.

The below screenshot shows an online purchase initiated at Macy’s website by a customer in Nebraska, a state in which Macy’s maintains no physical presence.  The relevant webpage indicates that Macy’s intends to collect and remit no Nebraska sales tax on the transaction.

Meanwhile, this Saks purchase initiated using a zip-code for Arkansas—a state in which Saks has no stores—likewise indicates that Saks intends to collect and remit no Arkansas sales tax on the transaction.

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Last week, California Democratic Assemblywoman Nancy Skinner announced the introduction of fresh legislation to force out-of-state, online retailers to collect California sales tax– legislation that critics charge amounts to an effort to introduce a new tax in what is arguably already the most heavily-taxed state in the nation.

The move replicates others pursued in years past by Democratic colleagues of Skinner– but notably avoided by Gov. Jerry Brown in his recently announced budget– and by all accounts seems to ignore the overwhelming likelihood that such a scheme would prove unconstitutional if challenged in court (by virtue of the the Quill v. North Dakota decision).

However, Skinner’s legislation is also being challenged on the basis that it would not, contrary to backers’ assertions, help put a substantial dent in the state budget deficit or eliminate or minimize the need for deep budget cuts in order to close it.  In fact, using Skinner’s own numbers, it appears that the institution of a so-called “Amazon tax” would strip away a mere 1.1 percent of California’s budget deficit:

(image via Americans for Tax Reform)

Critics say even the minuscule prospective “help” that might be afforded by the institution of Skinner’s new tax with regard to closing the Golden State’s budget gap may represent a “best-case” scenario: Were the new tax instituted, online retailers could well end their affiliate programs, thereby denying affiliates a revenue stream that enabled them to contribute over $100 million to California’s coffers in 2009.

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Last week, Capitol Confidential reported on a new scheme being pursued by California Democrats to force out-of-state, online retailers to collect and remit California sales taxes.

But in a new development, it is now being reported that the proposal has attracted support from Republican State Sen. Roy Ashburn, making it technically bipartisan.

In addition, while proponents have been arguing that if pursued, this tax maneuver will not hurt smaller, online retailers, Capitol Confidential has learned that the preferred language of some movers and shakers in fact fails to exempt smaller retailers and would draw a surprising category of those selling to consumers online into the California sales tax net: Out-of-state small and medium-sized businesses that market through eBay.

Those familiar with one proposal floated this week say it would exempt from the requirement to collect and pay out California sales tax retailers who advertise with or market through California-based websites and who have not sold $10,000 or more worth of goods in aggregate to Californians during the prior 12 months.

However, even in a rough economy, experts say many small businesses who sell through California-based eBay could exceed that threshold.

If that is correct, such individuals speculate that it could hurt eBay, a big employer in the state, in addition to about 25,000 small online advertising businesses who carry ads by the likes of Amazon.com and Overstock.com.

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