Monday, April 22, 2013

eBay lobbies its sellers to lobby Congress over Internet sales tax bill

Wikimedia Commons photo eBay.jpg
The Senate appears on the cusp of passing national online sales legislation this week. While appears to have back down in at least a few states, agreeing to collect sales tax in states such as California, its rival eBay, which is really a collective of mostly small-to-medium-sized sellers, is asking its user base to lobby Congress for the company.

The emails purportedly come from eBay CEO John Donahoe, the company says that the Marketplace Fairness Act, as the bill is known, unfairly burdens small online merchants. The emails, which began hitting inboxes on Sunday, asks eBay sellers to send an email message or other communication to members of Congress asking for changes to the legislation.

The legislation will give states the power to compel retailers which do not have a physical presence inside their borders to collect sales tax. The 1992 Quill vs. North Dakota Supreme Court decision, which said that a retailer would not be required to collect sales tax in a state unless it had a "physical presence" in that state, is why many Internet retailers have been exempt from sales tax collection.

To be clear, Quill vs. North Dakota didn't mean that sales tax did not need to be collected. Instead, it meant that because of the complexity of state and local sales taxes, the retailers were not required to collect them. Instead, the buyers were required to pay them on their state income tax return, as "use tax."

Of course, human nature being what it is, the number of people actually paying this sort of tax has been reported to be around 1 percent.

To get around this, many states, including California, began rewriting their laws so that a "physical presence" did not necessarily require a brick-and-mortar location in the state. Instead, laws were rewritten such that having an advertising nexus, such as websites based in the state advertising the site (for example, Amazon Associates), was said to constitute that "physical presence," and thus require sales tax collection.

Due to state and local sales tax laws, it is extremely complex to collect sales tax, and smaller businesses might have more of an issue than large ones. However, The legislation includes an exemption for merchants that generate less than $1 million in annual out-of-state revenue.

In eBay's emails, Donahoe argued in the emails that the exemption should be expanded such that merchants less than 50 emplwith less than $10 million in annual out-of-state revenue , or fewer than 50 employees, should be exempt., which as noted above has caved to pressure in many states, supports the legislation. Donahoe singled out its huge rival in his emails:
This legislation treats you and big multi-billion dollar online retailers -- such as Amazon -- exactly the same. Those fighting for this change refuse to acknowledge that the burden on businesses like yours is far greater than for a big national retailer.
However, emails from note an interesting fact: While the emails say that the legislation will require small businesses to contend complex and difficult sales tax payments, eBay's own seller website advertises software that makes such payments "easy," the company said:
Avalara’s AvaTax delivers small and mid-sized businesses a fast, easy, accurate and affordable solution for achieving sales and use tax compliance.
Senate Majority Leader Harry Reid (D-Nev.) filed a motion on Thursday supporting the proposal. With Reid's motion, the Senate is now expected to vote as early as Monday on the motion, but a vote could come later in the week.

No comments: