Illinois Senator's Business Tax Bill Gains Supporters, Amazon is Onboard

The new bill would apply to online retailers like Amazon. 

Amazon has agreed to cooperate.

Amazon has been battling state after state in an effort to avoid sales tax collection, but a recent bill by Senator Dick Durbin (D-Ill.) is changing Amazon's mind as the federal action gains increased support.

Amazon, the largest online retailer with over 90 million registered buyers, has been pressured to collect sales taxes by U.S. states in the recent past due to large state budget deficits, and brick-and-mortar stores complaining about unfair competition. According to University of Tennessee studies, states are expected to lose $10 billion in uncollected online sales taxes this year, and another $11.4 billion next year. With states already dealing with weak economies, this additional loss in taxes hurts, and the potential gain could lift them out of the red.

The online retail market was worth $165 billion last year, and some U.S. states did all they could to get a piece of that. For instance, Texas State Comptroller Susan Combs charged Amazon $269 million in unpaid sales taxes, and California state Governor Jerry Brown recently signed a bill to enforce online sales tax. Both instances caused Amazon to cut ties with in-state affiliates and split, noting that a 1992 Supreme Court ruling excuses the online retailer from collecting taxes in states that do not have company employees or warehouses operating within its borders.

Amazon has said that it would change its tune if the problem was "fixed properly" with federal legislation. Durbin answered this call a couple of months ago when he introduced the Main Street Fairness Act, which requires all businesses (online and brick-and-mortar alike) to collect sale tax "in the state where the consumer resides." His aim is to give states the authority to require retailers to collect sales taxes already owed, and will not impose new taxes.

The bill is now gaining momentum as it attracts more supporters. Last Friday, the National Governors Association and the National Retail Federation gave the bill their support.

As promised, Amazon has cooperated with the new measure. All the company has asked for is a "national framework" for remote sales taxes, and Paul Misener, Amazon's vice president for global public policy, has written a letter to Durbin pledging to cooperate.

Analysts at William Blair & Co. have said that Amazon's prices are an average of 11 percent below store prices of half of over 2,000 items for sale at 24 retailers. If Amazon were to begin collecting sales taxes, this 11 percent would drop to the single-digits.