In its struggle against surging online retailers such asAmazon.com Inc., Wal-Mart Stores Inc. has unleashed a weapon longshunned by Sam Walton: lobbying.

On July 24, the U.S. House of Representatives JudiciaryCommittee will hold a hearing on a bill to let states collect salestax from out-of-state merchants that sell to their residents. If itis passed, online retailers, which now mostly don't collect salestax, will lose a price advantage that has helped them take businessfrom brick-and-mortar stores.

Wal-Mart, which has been boosting political contributions andstaffing up its Washington office, is one of the prime moversbehind the bill, said Congressman Steve Womack, an ArkansasRepublican who authored the proposed legislation.

“This is Wal-Mart's top issue, if not one of their top issues,”Womack said in a phone interview. “Wal-Mart is important to mebecause they are headquartered in my district.”

It's easy to see why Wal-Mart is determined to force onlinemerchants to charge sales tax. Last year, Seattle-based Amazon'ssales grew 41 percent to $48.1 billion. Bentonville, Arkansas-basedWal-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-Martcustomers shopped at Amazon, according to Kantar Retail, aLondon-based research firm. Now half say they do, Kantar says.

To improve its Web sales operations, Wal-Mart has been acquiringsocial-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 Washingtonactivities. The chain spent $7.8 million on lobbying efforts in2011, the most in its history, according to OpenSecrets.org, awebsite founded by the Center for Responsive Politics, a watchdoggroup in Washington.

Before the mid-2000s, Wal-Mart had a limited presence in thenation's capital. The Washington office now has 15 people becausethe company “wants to be involved in issues that are important toour customers and our associates,” Brooke Buchanan, a spokeswoman,said in a telephone interview.

Founder Walton preferred to steer clear of politics and focus onopening stores, according to Rogan Kersh, a political scienceprofessor at Wake Forest University in Winston-Salem, NorthCarolina, who studies corporate lobbying. As recently as 2005,Wal-Mart spent less than $2 million on lobbying efforts, accordingto OpenSecrets.

Keeps Expanding

“Wal-Mart had this attitude that they didn't need to worry aboutWashington and politics,” Kersh said in a phone interview. “Theystarted lobbying on tax issues some years ago. Once you start downthe path, it's not something you retrench on. It just keepsexpanding.”

Womack, whose district includes Bentonville, said he talksregularly with Wal-Mart Chief Executive Officer Mike Duke, ChiefFinance 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 ofpolitical contributions, receiving $30,950. The retailer gavepresumed Republican presidential candidate Mitt Romney $21,500;President Barack Obama got $20,119, according to OpenSecrets.Representative Jackie Speier, a California Democrat who signed ontothe original bill, received $7,500 over the past two years fromWal-Mart, according to OpenSecrets.

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

The online tax bill took shape after a conversation with topWal-Mart executives in January of 2011, Womack said. He asked whatissues were important to them. The response: sealing up theloophole that allows online retailers to sell goods without a salestax.

Beyond Wal-Mart, Womack said he also wants to provide succor tosmall, independent retailers in northwest Arkansas. One jewelryshop in Fayetteville, Arkansas, complained to him that with thestate's 9 percent sales tax, a buyer can visit a site likebluenile.com and buy a $10,000 piece of jewelry tax-free and savenearly $1,000.

“Right now, an online seller has an unfair advantage,” Womacksaid. “How many small-business obituaries do we have to read beforewe do something.”

Complicated Process

In fact, online sales are supposed to be taxed — it's overlycomplicated for all but the most conscientious shoppers to pay up.When someone buys from Amazon or another website, they are quotedthe sales tax. Consumers are then supposed to contact theirindividual state and pay it. Womack said he bought coffee fromAmazon for $72. To pay the $6.54 in sales tax, he had to download aform, fill it out and write a check to the Arkansas Department ofFinance and Administration.

If the bill is passed, every state will have to provide onlineretailers with software that calculates and helps collect the salestax from buyers. With 47 members of Congress signed on and manystates clamoring for a crack at the estimated $23 billion in taxrevenue that is missing on tax-free online sales, the momentum ison Wal-Mart's side.

A similar bill in the Senate has strong Democratic support andis starting to get some traction among Republicans. SeveralRepublican leaders, including New Jersey Governor Chris Christie,Indiana Governor Mitch Daniels, and Texas Governor Rick Perry havesigned on to the concept, according to a report from Bloomberg BNA,a division of Bloomberg that tracks tax developments. In the samereport, Senator Lamar Alexander, a Tennessee Republican, said hehopes the House measure passes this year and said the Senate billis moving through the legislative process.

Wal-Mart management sees Womack's tax bill as being aboutfairness, Daniel Morales, a company spokesman, said in a phoneinterview. Womack said Amazon supports his bill because it may helpset up one standardized way to collect and pay sales tax.

Paul Misener, Amazon's vice president of global public policy,told the House Judiciary Committee at a hearing in November thatthe company supports the sales tax if it is approved by the federalgovernment.

While online retailers will probably lose some hard-core bargainhunters if the bill passes, their sales will keep growing, saidBryan Gildenberg, a Kantar analyst.

“Any retailers will tell you that that buyer is their leastprofitable,” he said.

Bloomberg News

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