PhillyDeals: Internet tax wars: Big vs small; Amazon vs eBay

Posted: August 17, 2012

The biggest Internet retailer,, has switched sides in the 20-year fight over whether and how online consumers ought to pay state sales taxes.

Once carefully sales-tax-averse as a mostly online enterprise, Amazon has built a network of 76 giant warehouses, including sites in Pennsylvania, New Jersey and Delaware, and has been adding secure boxes and other local facilities to handle returns, software and customer service.

(It's as if Amazon expects that the U.S. Postal Service really will die of congressional neglect, and wants to make sure its freight still gets through.)

Accordingly, Amazon has made tax deals with California, Texas, New Jersey and other states, promising it will finally start collecting state sales taxes, sometimes in exchange for states' agreement not to demand back taxes for previous years.

While Amazon is becoming more of a conventional land-based retailer, Walmart and other big chain stores have gotten the hang of Internet sales and have collected taxes on those, too, just as they do in stores.

Now that Big Retail is all on the same side, it's pushing to make sure small business gets squeezed, as well.

The National Retail Foundation and both sent lobbyists to an Aug. 1 U.S. Senate hearing to cheer on bipartisan tax legislation that would make it easier to collect taxes from out-of-state retailers that sell into another state. Lead sponsors are Sens. Mike Enzi (R. Wyo.) and Jay Rockefeller (D., W.Va.).

Who's resisting? Tea-party allies like Sen. Jim DeMint (R., S.C.), who want to starve government. Plus a surprising corporate coalition, including Facebook and Rupert Murdoch's News Corp. (they own Fox News and the Wall Street Journal), and led by eBay, the online-auction site that counts small businesses as its biggest users.

"This is not about the Internet versus brick-and-mortar retailers. That view is completely out of date," said Brian Bieron, senior director of eBay's Washington lobbying office.

It's now a fight between giant retailers and the little guys, says eBay, which also owns GSI Commerce and the former, based in Philadelphia's western suburbs.

"Small retailers should be exempt from the new tax burdens" because they already have higher per-unit shipping and administrative costs than big businesses, argues Bieron, a St. Joseph's University grad.

But what's a small business? Let the feds decide that, says Bieron: "They already have hundreds of small-business definitions."

While the fight moves toward the next Congress, states say many online small-business sales taxes are still going unpaid. Pennsylvania last winter promised to start collecting taxes on Internet sales by companies that have operations in the state by Sept. 1. The state projects these Internet collections will bring in around $43 million in the current fiscal year and $67 million next year, says Revenue Department spokeswoman Maya Warren.

Let the states decide whether and how to go after Internet sales, and keep the feds out, says eBay. "The Internet doesn't mean you don't have to collect state sales tax," Bieron concluded. "But we don't think states, deep down, really think they need" to clamp down on out-of-state small retailers. After all, both parties claim to be pro-small-business.

Cranes in W. Phila.

The University City Science Center, a union of Penn, Drexel and other institutions, plans to spend more than $15 million, starting in September and finishing in mid-2014, on a new 11-story tower at 3737 Market St. It is a joint venture with developer James R. Berens' Baltimore-based firm Wexford Science & Technology.

The 273,000-square-foot building's major tenant will be nearby Penn Presbyterian Medical Center. UCSC chief executive Stephen Tang says he expects there will also be room for some of the 30 small firms that now share UCSC "incubator" space, if they flourish and grow. Tang notes neighboring 3711 Market, finished two years ago, has filled with growing companies, including Integral Molecular Inc. and Eli Lilly & Co.'s Avid Radiopharmaceuticals unit.

UCSC had proposed a higher-rising "gateway" project for the neighborhood before the 2008 economic slowdown. The lot south of Market and west of 38th Street remains available. It is "the jewel in the crown" and would support a higher tower, Tang says. "This is one of the few intersections in University City - or Center City - that has two lanes of traffic going in both directions. It is a very desirable location."

Architect is Zimmer Gunsul Frasca of Washington, with UJMN Architects + Designers of Philadelphia. Cushman and Wakefield is the leasing agent. Contractors have been invited to apply.

Contact Joseph N. DiStefano at 215-854-5194, or @PhillyJoeD.

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