Amazon lobbies heavily for Internet sales tax

Retail giant's might dwarfs that of small business owners

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WASHINGTON — When Peter Ollodart realized earlier this year a bill in Congress to require sales taxes on all Internet purchases could wipe out his company's slim profits, the owner of Puget Sound Instrument flew to Washington, D.C., to persuade lawmakers to oppose it.

The three-day trip cost Ollodart more than $2,000, no small share of the $50,000 salary he draws as the firm's president.

What Ollodart didn't know is his annual pay equals what Amazon spends per month for one powerhouse lobbying firm to get that same legislation enacted.

Seattle-based Amazon late last year hired Patton Boggs, a marquee Washington, D.C., lobbying group, to join two other firms on retainer, as well as Amazon's in-house lobbyists, in hopes of getting the Marketplace Fairness Act passed.

The bill cleared the Senate in May, 69-27. But the measure has stalled in the House Judiciary Committee, whose chairman, Rep. Bob Goodlatte, R-Va., has expressed "serious concerns" about the Senate version.

Still, the end of tax-free shopping on the Internet may be near. That prospect has spawned a fierce duel of special interests.

Amazon, Wal-Mart, Best Buy and some brick-and-mortar retailers are whipping for votes in favor. Other types of small businesses, the conservative Heritage Foundation and eBay are leading the opposition.

The battle involves more than just campaign cash and a bevy of lobbyists. Both camps have made aggressive use of op-ed pages, social media, briefings for lawmakers and staff, and competing studies purporting to debunk the other side's "facts."

A coalition formed in February by Amazon, Sears and more than 200 other companies, for instance, produced a video testimonial by Goodlatte's clothier in Roanoke, Va., that the bill would help the family business by ending online sellers' sales-tax advantage.

The same group, Marketplace Fairness Coalition, supplied supportive lawmakers leaving town on August break with recess kits containing "top-line message points" to talk up how the bill would promote free markets, create jobs and reduce the need to raise taxes.

Though Amazon is a big beneficiary of tax-free shopping, the Seattle company for more than a decade has insisted it supports uniform federal rules that would apply to all but the smallest retailers. Achieving that could free Amazon from litigious confrontations with the growing number of states coming after it for uncollected taxes.

The Marketplace Fairness Act would override a pair of early Internet-era rulings by the U.S. Supreme Court that have kept states from compelling online and catalog retailers to collect sales taxes on orders from states where they do not have stores or another physical presence.

One sign of the bill's priority for Amazon in this Congress is the company's visibly stepped-up presence on Capitol Hill. The company has spent $1.7 million on lobbying so far this year, according to the Center for Responsive Politics, a nonprofit watchdog group in Washington, D.C.

San Jose, Calif.-based eBay, the bill's biggest foe, in comparison has spent $1.2 million. It wants small businesses with less than $10 million in sales to be exempt.

Amazon is on pace to surpass the record $2.5 million it spent in 2012. Before 2006, its lobbying expenses never topped $1 million.

In the nine months ending in June, Amazon has paid Patton Boggs $500,000 for the services of nine lobbyists, according to federal lobbying reports. Among them are former Senate Majority Leader Trent Lott, R-Miss., and former Sen. John Breaux, D-La.

All but two Patton Boggs lobbyists on the Amazon account are former federal employees.

Amazon has lobbyists at two other firms working wholly or in part on the sales tax bill. One, Elizabeth Frazee of TwinLogic Strategies, is Goodlatte's former legislative director.

In all, Amazon has 25 lobbyists handling the issue on its payroll.

High stakes

For Ollodart, 48, the stakes are nothing less than the survival of his company.

He bought Puget Sound Instrument in 2011 after a 14-year career as a manager at Microsoft. The Tacoma firm last year sold $3.5 million worth of walkie talkies, marine radars and other electronics.

More than a quarter of the orders went to buyers in Florida and other states, putting Ollodart close to tripping the $1 million exemption on remote sales that would require him to collect local sales taxes.

Ollodart expects it would cost him thousands of dollars a year to file monthly returns to 44 states outside of Washington that levy sales taxes.

The legislation requires states to provide retailers with free software. But Ollodart and other small business owners say that wouldn't cover the cost of integration or needed systems upgrades.

Ollodart said his 2012 tax return shows a net profit of $350 — the sum left after paying for his salary, employee raises, computers and tools, better medical benefits and other investments as a new owner.

If Congress were to pass the sales tax bill, Ollodart said, "it would put us out of business. It's a pretty simple message."

In May, Ollodart joined a grass-roots group called eMainStreet Alliance, which claims 700 small, independent member businesses who oppose the bill. Ollodart said his venture into political activism has been largely dispiriting.

Of the five members of Congress from Washington Ollodart contacted, only his congressman, Dave Reichert, met with him. Reichert appeared sympathetic, he said, though on the fence.

Reichert's spokeswoman said the Auburn Republican has not decided his vote, but will weigh it carefully because " we don't want to place any undue burdens on small businesses."

Ollodart says he received only form replies from Washington Sens. Maria Cantwell and Patty Murray, Democrats who voted for the bill. Same with Democratic Rep. Suzan DelBene of Medina, a House Judiciary Committee member and a co-sponsor of the bill; and Rep. Denny Heck of Olympia, whose district includes Ollodart's business and who also supports universal sales taxes.

Ollodart said he philosophically objects to turning out-of-town retailers into tax collectors on behalf of states where they get little, if any, public benefit. That's a point Amazon itself once argued while fighting back against individual states.