A measure to extend state sales tax to all online purchases is getting the attention of some major lobbyists.  With a Senate vote on the Marketplace Fairness Act (MFA) expected as early as tomorrow, stakeholders are making their voices heard.

In one corner, there’s the forces of major retail like Best Buy, Wal-Mart, and the online giant – Amazon.com. They’re joined by the bipartisan National Governors Association and smaller retail owners in the years-long fight to require state sales tax be applied to all internet purchases.

Logo of the Securities Industry and Financial ...

The MFA has its big-gun supporters, but they’ve got powerful competition from the likes of eBay, Overstock.com and most recently, Wall Street; the Securities Industries and Financial Markets Association (SIFMA), which represents hundreds of companies including Goldman, Sachs Co., Morgan Stanley, and E*TRADE Financial Corp, recently came out in opposition to the bill in fear of it leading to a financial transactions tax on bonds, stocks and derivatives.

In a statement released yesterday, SIFMA CEO Kenneth E. Bentsen said:

“We believe the impact of this legislation on trade in services has not been adequately explored by Congress.  The bill could lead to unexpected costs being passed on to consumers of financial services, including sales taxes on services or state-level stock transaction taxes.”

Reuters reports that 11 EU countries currently impose such a federal tax, but the Obama administration, which supports the MFA, remains opposed to extending it to financial transactions.  ”It’s hard for a state to even broaden their sales tax to include hairdressers,” Verenda Smith, deputy director of the Federation of Tax Administrators, said. “I don’t want to think how hard it would be to broaden to financial transactions.”

SIFMA has worked on a similiar issue already this year, providing testimony against a set of Minnesota measures that imposed a sales tax on financial services.  In their statement, they argued the proposals would decrease employment in Minnesota, make the state less competitive and increase the cost of doing business there.

NA-BW038_SALEST_G_20130421183010While SIFMA has reason to be concerned of a financial transactions tax, the MFA is designed to assist brick-and-mortar retailers, whose competitiveness is compromised by online retailer’s ability to avoid charging sales tax.  By leveling the playing field, local retailers might see better sales and state governments would benefit from new revenue; estimated sales taxes lost from online transactions is over $20 billion/year.

An official from a partnership of e-commerce companies called NetChoice disagrees, “The bill has never been about helping Main Street but about helping Big Box stores.”  NetChoice serves to “break down barriers to e-commerce,” and argues  the MFA would be a financial and time-constraining burden to small businesses, particularly sellers who use services like eBay for their businesses.

In the video below, a representative from the National Governors Association and NetChoice debate the MFA on NBC Nightly:

If there’s one thing to like about the MFA, it’s that it’s blurring the partisan lines on tax policy.  Although it could be seen as a “pro-tax” bill, there were 4 Republican sponsors of the MFA and many more Republican governors on board with it.  A handful Democrats oppose the legislation, to boot.

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