EcommerceBytes-NewsFlash, Number 2855 - July 25, 2012     2 of 3

eBay Renews Protests as Lawmakers Weigh Online Sales Tax Bill

By Kenneth Corbin

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eBay and other ecommerce stakeholders are again warning against measures to impose new online sales-tax requirements as House lawmakers on Tuesday began consideration of a bill that would give states new taxing authorities over out-of-state sellers.

On the occasion of a House Judiciary Committee hearing on the Marketplace Equity Act, eBay delivered a letter to the panel's leadership arguing that small sellers will be the primary victims if such a bill is signed into law, framing the push for universal sales tax requirements as a play by big retailers to crowd out smaller competitors.

"The very idea that this debate is about "Online Retail" v. "Offline Retail" is a false paradigm," wrote Tod Cohen, eBay's vice president and deputy general counsel for government relations. "The largest in-store retailers in America are all major Internet retailers as well, and the largest Internet retailer (Amazon) has significant physical presence around the country. The sales tax debate has really come down to "Big Retail" v. "Small Retail" and whether or not it is smart public policy to treat a small business retailer the same as a multi-billion dollar retailer."

That view has put eBay in the opposing camp from Amazon, which has been lobbying for a federal law to normalize online sales-tax obligations as it has been fighting an array of state measures. According to Rep. Jackie Speier (D-Calif.), one of the sponsors of the Marketplace Equity Act, at least 30 states have pursued various policies in an effort to recapture tax revenue from online sales that has gone uncollected.

That revenue shortfall, estimated at $20 billion annually, has weighed on states' budgets, contributing to swelling deficits and service cutbacks, state officials have said.

Supporters of a federal law are quick to point out that in states that have sales-tax laws, consumers are required to remit what is known as a use tax for purchases they make online or through a catalog from a seller that doesn't collect the tax at the time of purchase. But many shoppers either do not know about that rule or they ignore it, leaving the burden of collection to the states. As a matter of enforcement, dramatically increasing audits to catch individual consumers is not a practical or appealing policy option.

"It is a tax that is currently due and not collected, so we have a situation where we're enabling a lot of people out there to break the law," said Tennessee Gov. Bill Haslam, a Republican. "It is basically an issue of fairness. Some people pay it, some people don't."

The Marketplace Equity Act, backed by Speier and Steve Womack (R-Ark.), would only permit states to compel out-of-state sellers to remit sales taxes after they had taken steps to significantly simplify their tax codes. For instance, it would require states to administer remote sellers through a single tax authority and a consolidated sales and use tax return.

Additionally, the bill would exempt sellers with overall annual revenues of less than $1 million or in-state revenues of $100,000.

That carve-out is more generous than a similar bill pending in the Senate, which would limit the exemption to retailers with revenues of $500,000 of less. But for eBay, which frames its advocacy on the issue around the small sellers that fill out the ranks of its marketplace, even the $1 million exception is too restrictive.

"Small business retailers using the Internet are entrepreneurs who are creating jobs, serving consumers and creating competition for established retail giants," Brian Bieron, eBay's senior director of federal government relations, said in a statement. "They should be protected from any new Internet sales tax regime so that they continue to advance and grow, and regrettably the Speier-Womack Internet sales tax legislation falls far short of an acceptable small business retailer exemption."

While eBay has emerged as a leading opponent of federal online sales-tax legislation, the firm was not on hand to testify at Tuesday's hearing. Instead, Steve DelBianco, executive director of the advocacy coalition NetChoice, which counts eBay as a member, took up the ecommerce giant's part.

"That's not nearly high enough," DelBianco said of the small-seller exception, also arguing that the bill's provisions to streamline the patchwork of state and local tax codes do not go far enough. "They need radical simplification and they need reduced administrative burdens."

Supporters of the bill countered that at least eight companies have developed commercially viable software that can help sellers of all sizes navigate various states' tax codes. With the simplification provisions included in the bill, coupled with language stipulating that participating states supply the software applications to sellers, implementing the taxation framework would not be nearly as onerous as critics have characterized it, according to Womack.

"It's not complicated," he said. "There is existing off-the-shelf software to make the necessary reports. And our bill requires the states to provide that software."

Additionally, some representatives suggested that the burden on small businesses under the Marketplace Equity Act could be reduced if states offered sellers compensation to cover the administrative costs collecting the sales taxes.

That would be a "fair addition to this bill," said Wayne Harper, a Utah state representative (R) who testified on behalf of the Streamlined Sales Tax Governing Board, an interstate consortium working to simplify the tangle of state and local tax codes. "Vendor compensation as agreed to between the business community and the states would be good."

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About the Author
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects for more than four years, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here .


About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.


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