Supporters of a national Internet sales tax proposal are negotiating with Amazon.com in a bid to win an endorsement from the largest online retailer for legislation introduced today in Congress.

The legislation would put the federal government's stamp of approval on a state-led effort to require online retailers to apply sales taxes to nearly all of their transactions. In return, states would simplify their complex tax laws to make collecting taxes easier for Internet businesses.

Backers of the legislation say the plan would ensure that online sellers are required to collect the same taxes as their bricks-and-mortar competitors and would provide much-needed cash for financially ailing states. Amazon's support would be the most substantial yet from the online community.

Amazon and the loose-knit coalition of state policymakers, retailers and congressional staff negotiated all day Wednesday over the scope of the legislation. According to several sources involved in the talks, Amazon wanted to ensure that most Internet retailers are subject to collecting sales taxes, not just companies that sell more than $5 million per year, as called for under earlier drafts of the bill.

The last-minute negotiations derailed plans for the Internet sales tax proposal to be introduced today in the Senate, according to Kim Sears, a spokeswoman for Sen. Mike Enzi (R-Wyo.), a chief supporter of the online sales tax effort. Sears said Sen. Byron Dorgan (D-N.D.) and Enzi want time to review Amazon's proposal.

The House sponsors -- Reps. Ernest Istook (R-Okla.) and William Delahunt (D-Mass.) -- rejected the Amazon proposal for now, introducing their bill this morning.

The changes that Amazon wants could doom the states' efforts, said an official with eBay who is familiar with the negotiations. Ebay supports the $5 million threshold now in the bill, a figure that would exempt a large portion of its independent sellers from collecting sales taxes.

"The fundamental problem with Amazon's proposal is that it treats someone who sells through one channel online differently than a person who sells through another," said the official, speaking on condition of anonymity. "To discriminate against online aggregators is a guaranteed way to stop any distance sales tax plan for at least 10 years, and we'll go to the mat on that one."

Amazon wants online merchants who have annual sales of $25,000 or more to be required to collect taxes for the 45 states that have sales tax laws on the books, according to several sources involved in the talks.

Amazon officials did not return repeated telephone calls seeking comment on the negotiations.

Internet Sales Tax Effort Builds Momentum

Thus far, Congress has been unwilling to give the states authority to tax all online sales, citing a 1992 Supreme Court decision that severely limited states' ability to tax catalog sales. In 1998 and again last year, Congress rejected efforts to give the states taxing authority if they came up with a sufficiently simple tax plan.

To answer that challenge, a group of state tax officials started the Streamlined Sales Tax Project, which has spent the past three years drumming up support for its plan to revamp archaic state tax laws to be more compatible with the Internet economy.

The negotiations with Amazon reflect the coalition's efforts to win support from the business community.

"Part of what retailers and states have been doing in an effort to be successful in their legislative strategy is reaching out to groups that have been critical of this plan and asking what needs to happen to make this bill acceptable to them," said Steve Kranz, tax counsel for the Council on State Taxation.

"On a fairness and level playing field basis, if it buys us the support of Amazon we're willing to include their suggestions," said Maureen Riehl, vice president of state and industry relations for the National Retail Federation and a participant in the negotiations.

The sales tax project has drawn bipartisan support among lawmakers as well, even from traditionally anti-taxation Republican lawmakers who say it's not fair that main street stores are required to charge sales taxes while their online competitors are not.

So far, 17 states have enacted legislation to bring their tax codes in line with the agreement. Three states -- Minnesota, Texas and Washington -- have implemented much of the agreement, but have balked at changing the way taxes are collected and distributed.

The legislation requires participating states to charge sales taxes based upon where the buyer lives. Some states, including Illinois, Kansas, Texas and Washington, prefer to base it on where the transaction takes place.

For Texas, it could have a big impact on localities that depend heavily on local sales taxes. Nowhere is that more true than in Round Rock, home to Dell Computer Corp., the world's largest PC maker. Since its arrival in Round Rock in 1993, Dell has brought with it nearly 10,000 jobs, and computer sales there account for nearly half of all sales tax revenues for the city. That revenue would disappear under the state plan.