Online giant eBay is leading the charge against legislation that would require sales tax to be collected on Internet sales. The mandate would be an unfair burden on small businesses, eBay says. And yet who are among the bill’s strongest supporters? Yep, small businesses.
For years, online sellers have benefitted from what brick-and-mortar retailers call the “internet sales tax loophole.” For the most part, e-retailers are only required to charge customers sales tax if the vendor has a physical presence in the state where the purchase is being made. Consumers are supposed to pay the appropriate sales tax when they file their annual federal and state income taxes, but almost no one does. The situation gives e-commerce businesses an obvious pricing advantage over brick-and-mortar stores and online retailers with a physical presence in the state, which must always tack on sales tax.
The Marketplace Fairness Act, which passed in the U.S. Senate and is now being considered in the House, would close this loophole. The legislation would allow states to require out-of-state vendors to collect sales taxes just like the physical stores at the customer’s location.
Amazon, the world’s largest e-retailer, has voiced support for online sales tax collection initiatives in recent years. The only big company that’s actively fighting the legislation today is eBay. Company CEO John Donahoe was quoted on NPR this week arguing that the law would hurt small businesses:
If it’s allowed to play out things will still sell in eBay marketplace, but it will be larger and larger sellers that are doing the selling and the small guy will, over time, slowly be squeezed out.
Currently, the Marketplace Fairness Act would exempt retailers with less than $1 million in annual revenues. Instead, eBay wants the exemption pushed to the $10 million revenue mark, which Donahoe pointed to as one of the criteria used in Obamacare to define a small business. “All we’re saying is an exemption at $10 million – small business or less – that’s the balance we think this bill should have,” said Donahoe.
What’s more, eBay has played up the idea that the legislation represents a new tax, when supporters of the bill say it’s actually just an effort to enforce existing taxes. “No small business should face new taxes,” said Brian Bieron, eBay’s senior director of global public policy, told AllThingsD. “There’s no benefit compared to the harm that would be done.”
Overall, eBay claims it is simply fighting for the little guy. But a coalition called the Alliance for Main Street Fairness says that just the opposite is true. “Hundreds of thousands of small businesses are rooting for this legislation to level the playing field” the group states in a newly released video that rips apart eBay’s arguments point by point: