Supporters of the legislation, named the Marketplace Fairness Act in the Senate, say it is about tax fairness and that it isn’t a tax increase. Read Q&A with National Retail Federation tax expert.

“Some have said: ‘Well, it’s a new tax.’ Of course it’s not,” said Tennessee Republican Sen. Lamar Alexander. “This is a tax that everybody owes but only some people pay.”

Opponents claim it amounts to a national Internet sales tax and imposes burdensome compliance costs on small businesses.

“I fear that what we’re going to do is crush a lot of these start-ups,” said Sen. Ron Wyden, an Oregon Democrat.

The legislation has pitted retailers including Wal-Mart Stores Inc. WMT -0.53%  and Amazon.com Inc. AMZN -0.90% , a onetime opponent, against critics like eBay Inc. EBAY -0.22%   and anti-tax advocates.

The Senate bill would exempt businesses with less than $1 million in online sales, but eBay wants to raise that small-business exemption to firms with less than $10 million in sales.

“EBay will continue to focus on bringing greater balance to the legislation by protecting small businesses with less than $10 million in sales or fewer than 50 employees,” Brian Bieron, the company’s senior director of global public policy, said in a statement on Monday night.

States can now only require retailers to collect sales taxes if they have some physical presence in the state, like a store or a warehouse.

In arguing that it is not a tax increase, the bill’s supporters point out that online shoppers in many states are already required to pay such sales taxes when they file their state income-tax returns. Few do, however. Last year, states lost out on $23 billion by not collecting taxes on Internet sales, according to a University of Tennessee study.