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Tuesday, July 24, 2012 - Page updated at 05:30 p.m.

Wal-Mart lobbies hard to end online retailers' tax advantage

By David Welch
Bloomberg News

In its struggle against surging online retailers such as, Wal-Mart Stores has unleashed a weapon long shunned by founder Sam Walton: lobbying.

On Tuesday, the House Judiciary Committee will hold a hearing on a bill that would let states collect sales tax from out-of-state merchants who sell to their residents.

Passage would mean that online retailers, which mostly don't collect sales tax, will lose a price advantage that has helped them take business from brick-and-mortar stores.

Wal-Mart, which has been boosting political contributions and staffing up its Washington, D.C., office, is one of the prime movers behind the bill, said Rep. Steve Womack, R-Ark., who authored the legislation.

"This is Wal-Mart's top issue, if not one of their top issues," Womack said. "Wal-Mart is important to me because they are headquartered in my district."

It's easy to see why Wal-Mart is determined to force online merchants to charge sales tax.

Last year, Seattle-based Amazon's sales grew 41 percent to $48.1 billion. Bentonville, Ark.- based Wal-Mart increased U.S. sales at its namesake stores 1.5 percent to $264.2 billion.

Five years ago, only about a quarter of Wal-Mart customers shopped at Amazon, according to Kantar Retail, a London-based research firm. Now half say they do, Kantar says.

To improve its Web sales, Wal-Mart has been acquiring social-media companies and technology firms in Silicon Valley. Wal-Mart generates less than 2 percent of its revenue online, according to a Kantar estimate.

In the meantime, Wal-Mart has been stepping up its activities in the nation's capital.

The chain spent $7.8 million on lobbying efforts in 2011, the most in its history, says, a website founded by the Center for Responsive Politics, a watchdog group.

Before the mid-2000s, Wal-Mart had a limited presence in Washington. The office now has 15 people because the company "wants to be involved in issues that are important to our customers and our associates," said Brooke Buchanan, a spokeswoman.

Sam Walton preferred to steer clear of politics and focus on opening stores, according to Rogan Kersh, a political-science professor at Wake Forest University in Winston-Salem, N.C., who studies corporate lobbying. As recently as 2005, Wal-Mart spent less than $2 million on lobbying, according to OpenSecrets.

"Wal-Mart had this attitude that they didn't need to worry about Washington and politics," Kersh said. "They started lobbying on tax issues some years ago. Once you start down the path, it's not something you retrench on. It just keeps expanding."

Womack said he talks regularly with Wal-Mart Chief Executive Mike Duke, Chief Finance Officer Charles Holley and members of the Walton family.

Sam Walton's son, Rob Walton, is chairman of the board.

In 2011 and 2012, Womack was Wal-Mart's largest recipient of political contributions, receiving $30,950.

The retailer gave presumed Republican presidential candidate Mitt Romney $21,500; President Obama got $20,119, according to OpenSecrets.

Rep. Jackie Speier, a California Democrat who signed onto the original bill, received $7,500 over the past two years from Wal-Mart, according to OpenSecrets.

Womack makes no apologies for sponsoring a bill that would help Wal-Mart. "If something affects Wal-Mart, it affects me and it affects jobs in my district," he said.

The online tax bill took shape after a conversation with top Wal-Mart executives in January 2011, Womack said. He asked what issues were important to them.

The response: sealing up the loophole that allows online retailers to sell goods without a sales tax.

Beyond Wal-Mart, Womack said he also wants to provide succor to small, independent retailers.

One jewelry shop in Fayetteville, Ark., complained that with the state's 9 percent sales tax, a buyer can visit a site like Seattle-based and buy a $10,000 piece of jewelry tax free and save nearly $1,000.

"Right now, an online seller has an unfair advantage," Womack said.

"How many small-business obituaries do we have to read before we do something?"

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