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eBay Attacks SBA Study on Sales Tax Legislation

After eBay warned sellers last month about how Congress might try to pass the Marketplace Fairness Act, it came out swinging again on Cyber Monday over the online sales tax issue. This time, eBay criticized the SBA(Small Business Administration).

eBay said an SBA study failed to provide new research about the Marketplace Fairness Act’s impact on small businesses and said the author of the study was biased, having a long history of support for the MFA, also known as the Internet Sales Tax bill.

The Marketplace Fairness Act would give states the authority, under certain conditions, to compel out-of-state retailers to collect and remit the tax on the purchases that their residents make. Those conditions include taking steps to simplify state and local tax codes and to provide retailers with free software to help with the accounting burden. The bill that passed the Senate would exempt sellers with less than $1 million in annual remote sales.

The debate over the issue over online sales tax has been heated. eBay said it could support the bill if the exemption for small sellers were raised to $10 million and expanded to include companies with fewer than 50 employees. In its email to sellers last month, eBay warned that merchants could be subject to audits by tax collectors from other states. The marketplace asked sellers to contact their members of Congress, and stated, “If the Marketplace Fairness Act is allowed to become law, it could require online sellers like you to collect sales taxes nationwide from the more than 9,600 tax jurisdictions.”

In a blog post on its government relations website on Monday, eBay said “many observers” have pointed out concerns about the study’s methodology and findings, including the following:

Analysis Based on Unreliable Data – Rather than conducting new research that contributes to the online sales tax debate, the authors depend heavily on data from the Internet Retailer 500, which is a voluntary survey used for marketing purposes. Many small business owners do not participate in the survey because it opens them up to harassment from patent trolls or other competitors. Such a heavy reliance on a single, wholly inappropriate source results in misleading findings.

Out-of-Date Worldview – Another key weakness in the report is the authors’ belief that the modern retail landscape is strictly split between online and offline retailers. Today, there is a blending of online and offline commerce as brick and mortar stores are increasingly embracing technology and going online to reach new customers and markets around the world, becoming what is referred to as “omnichannel.” eBay remains committed to helping these businesses grow and create new opportunities.

Ignores Audits, Compliance Costs, and Due Process Issues – The thought of being dragged to another state where the business does not have physical presence for a costly audit worries many business owners who use the Internet. In their 41-page study, the authors make only two fleeting references to audits. Also, the study ignores the software integration costs that many small businesses will incur. While the states will have to provide free tax software to businesses if the Marketplace Fairness Act became law, they are not required to cover the integration costs, such as updating shopping cart software or paying licensing fees to third parties to manage these updates.

Finally, eBay said more research was needed to help policymakers understand the dramatic impact the Marketplace Fairness Act would have on small businesses.

“eBay Inc. believes that any workable remote sales tax policy must provide true fairness for Internet-enabled businesses so they are empowered to use the Internet to succeed. True state sales tax simplification or an increase in the MFA’s small business exemption are two options that policymakers should consider as they continue to work towards a solution.”

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.