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Thu Nov 10 2011 14:54:03

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

By: Ina Steiner

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Three U.S. senators introduced the Marketplace Fairness Act on Wednesday, a bill that would allow states to require out-of-state sellers to collect sales tax for purchases made by in-state residents. eBay continues to oppose such legislation and came out sharply against it. But Amazon, who had been a vocal opponent of state efforts to impose collection requirements, is now backing the new bill.

What is it that makes eBay vehemently oppose the new bill and Amazon support it?

Years ago, a Supreme Court ruling held that a retailer must have a "physical presence" in a state to constitute a tax nexus. The Marketplace Fairness Act would change that. (Read about the new bill in today's EcommerceBytes Newsflash.)

Unlike eBay, Amazon is a retailer itself and has a physical presence in many more states than eBay. For several years, Amazon has been dealing with state governments pressuring it to comply with their tax laws. Realizing it is unable to fend off states indefinitely, Amazon has begun negotiating with some states to get exemptions from collecting sales tax in exchange for creating a minimum number of jobs in the state.

Econsultancy believes that Amazon feels if it can't have its way, other online retailers shouldn't be able to either.

Econsultancy, a market research and consulting firm for the ecommerce industry, also notes that Amazon is probably the online retailer that has the greatest ability to deal with and absorb the costs of increased complexity and red tape that federal legislation would create.

In fact, Amazon is charging its third-party merchants a 2.9% fee for using its newly released sales-tax collection feature. (Previously sellers had been forced to pay sales tax out of their own pockets if they wanted to comply with their states' requirements to collect in-state sales tax. )

Amazon declined to respond to our recent questions about the legality of charging to collect a mandated tax and asking if it had built in a profit component to the fee it charged sellers for using the service.

eBay lets sellers use sales-tax tables, but if legislation was passed, it would likely find itself answering more questions from its millions of buyers and sellers about sales tax - eBay is a more complex system, and  is only now rolling out a multi-item, multi-seller shopping cart that it's been working on for years and which still has limitations.

eBay faces consequences if it can't make it easy for sellers to collect sales tax. And how federal legislation would impact small marketplace sites such as Etsy, Bonanza, Ecrater, etc., depends on their checkout systems and how easy it is for them to add sales-tax collection functionality.

Small-Business Exemption
The proposed legislation states, "A State shall be authorized to require a remote seller to collect sales or use tax if the remote seller has gross annual receipts in total remote sales in the United States for the preceding calendar year of more than $500,000."

However, we've seen first-hand how small-business exemptions don't always work as intended. Companies like PayPal and Amazon are collecting social security numbers from sole proprietors who are exempt from the new "1099K" law because these payment processors are over-cautious about their own compliance. That's despite the fact that the law is very clear that small businesses are exempt from the reporting requirement.

Could some small businesses who are exempt under this new law end up being affected anyway thanks to marketplaces who are overzealous about compliance, or due to other unintended consequences?

What Do Online Sellers Think?
States are currently unable or unwilling to enforce existing laws that require residents to pay sales tax on out-of-state purchases - so how would they enforce this new bill? There appears to be nothing in the bill about how a state would force an out-of-state business to collect its sales tax or what the consequences would be to non-compliant sellers.

Let us know what you think of this bill and if it would affect your selling activity if passed.




Comments (28) | Permalink

Readers Comments

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: Charlie W. This user has validated their user name.
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Thu Nov 10 17:04:36 2011

It would be a headache and a great big hassle. Especially when it came time to submit taxes for states from which I seldom have customers.

I can't imagine that anyone would think it was worth my time (and theirs) if I had to submit $0.95 in sales tax to the State of Alaska. (I had one sale to Alaska this year and zero last year.)

Would there be a threshold that a merchant would have to reach before payment would be worthwhile?

Would the low-volume sellers be required to make minuscule monthly or quarterly payments? Or could it be held until the end of the year?

Would there be a minimum tax that merchants would have to pay (regardless of the amount of actual tax collected)?

It's a bookkeeping nightmare for small mom-and-pop family-owned ecommerce sites! It's always tedious and a few hours work to make certain that our own state taxes are paid in a timely and accurate manner. I can't imagine what it would be like if the work load was multiplied times FIFTY!

I have no doubts that there will be a parade of services who will consolidate and make all the submissions on behalf of small Internet merchants, but at a price, obviously. Ugh! Yet another fee that will come out of our pockets (and ultimately passed along to our customers.)

All of the above assumes that there is a sure-fire way to enforce the laws in the first place. What a nightmare that would be!

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

This user has validated their user name. by: Philip Cohen
Web Site

Thu Nov 10 17:19:03 2011

Surely, no none can seriously believe that eBay is concerned about the protection of “small” business? eBay is certainly not interested in the protection of very small business. Obviously, eBay is only interested in the protection of eBay. Notwithstanding that, eBay’s greatest problem is getting itself protection from its own executive management who are clearly a bunch of arrogant, ignorant, unscrupulous, narcissistic, sociopathic, probably congenital, imbeciles.

“PayPal and Amazon are collecting social security numbers from sole proprietors who are exempt from the new "1099K" law because these payment processors are over-cautious about their own compliance.”

Far be it for me to ever be uncritical of PreyPal but surely “small” sellers have to establish that they are and will remain under the limit and in the meantime those responsible for reporting the tax have to be ready to comply if a seller goes over the limit.

Of course, the simple answer to this problem would be for the feds to instead collect a GST/VAT on all commercial goods and services sales (including on imports), in place of the mish mash of varying state sales/buy taxes, and return that income, in a weighted, manner to the states. But I guess that would be too hard for the US, even though most other civilized countries now have such a federal tax. The Greeks don’t like paying tax either and look were it’s gotten them ...

Enron / eBay / PayPal / Donahoe: Dead Men Walking.

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

This user has validated their user name. by: Philip Cohen
Web Site

Thu Nov 10 17:49:20 2011

Taxes, taxes! Who wants to pay taxes? Particularly easily avoided income taxes? Nobody. But, don’t worry, when the US is finally declared insolvent, like Greece/Italy/…, that one percent (mostly those patriotic exporters of jobs and importers of cheaper goods/services) who will by then have garnered most of the wealth of the country will come to the aid of the other ninety-nine percent: this new “aristocracy” will employ some of you as vassals, just like it used to be a couple of hundred of years ago in Great Britain. The rest of you? Well, you will slowly starve to death because you won’t even have a big enough plot of land to subsistence farm on.

Enron / eBay / PayPal / Donahoe: Dead Men Walking.

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: Just Wondering

Thu Nov 10 20:43:07 2011

How are these companies going to treat foreign/overseas sellers?  For instance, eBay has many Chinese sellers selling in the US.  I can't imagine foreign sellers collecting taxes for US states, especially if goods are subject to customs tariffs on the way into the country.  Would this mean that the global community would then expect American exporters to submit taxes to their jurisdictions? Would foreign sellers be exempted?  Just wondering how this would work.

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: me

Thu Nov 10 21:31:54 2011

Tax all these chinese sellers. There are milions to make for the us.
Get them to pay back our debt

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: massachusetts howler

Thu Nov 10 23:56:51 2011

Ah Ha! Now Diamond sellers who have been taking us OUT have to pay taxes- POOR Diamonds!
I CANNOT TELL YOU how GREAT this is for us SMALL SELLERS!~ JD had BETTER REALIZE that this will kill off MANY BIGGER SELLERS and it WILL NOT DO A GD THING to us. Small sellers who made this venue!
Now all the big players will have this REQUIREMENT and WE are EXEMPT (what a BEAUTIFUL WORD). If you do not see WHY Ebay is fighting this and Amazon isn't you need to read these boards- they have sold us small sellers OUT and NOW S-O-M-E of the big sellers who have taken over have to pay taxes and WE WILL BE EXEMPT!
We small sellers have been STARVING for 3 years- I now do under 65K a year and ALL OF THAT (%95)is DEDUCTIBLE (mort. interest, fees and expenses) so we small sellers who have mortgages really don't have ANY TAX LIABILITY and you big sellers are SCREWED. For your renters out there pay your rent in 2 checks to your landlord- 1 @ 50% for apt. rent and on the other %50 OFFICE RENT- (I want to help EVERY small seller).
Hope you Diamonds have good accountants as ebay is probably going to include their FEES and s/h to your totals- NOW TAKE THAT DIAMONDS (at least you are on DSR OVERIDE- LOL :-) )
Hey Phil and Ming, have a beer- You all are lifetime BUDS! We are getting there guys (TENACITY)!
(It is RUSTING Phil).
friend 2 ALL- EXCEPT JD!!
(Hey JD- You ain't seen nuthin' yet- NOISE- your stock is DOWN GENIUS! Can I hear 20's??????
Going to drink 33 beers now- SO PLEASED- PEACE & OCCUPY.
Hail Ina!

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: massachusetts howler

Fri Nov 11 00:06:14 2011

I wrote the other day that PHIL and MING are our Patriots on JDbay. Ina tries to stay NUETRAL and we all understand that (we see that it has become hard for her but she is a PRO).
As much as Ina and David like to stay nuetral- THEY are our PATRIOTS too.
Phil for Ebay CEO!
:-)THE HOWLER (OCCUPY)

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: pete

Fri Nov 11 01:22:58 2011

Is this any surprise eBay paid less corporate tax than Donuthole paid on his blood money salery last year

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: Don'tBelieveThem

Fri Nov 11 08:03:59 2011

If the tax bill passes ebay has to provide an accurate accounting of where their revenue comes from now don't they? If sales are taxable ebay sell through rates and actual amount of sales cannot be hidden. No more BS vague misleading quarterly reports and stealing peoples money and implying it came from sales.

Maybe that's why ebay is so vehemently opposed to the tax.

I am against the tax but I would be willing to pay it to see ebay exposed.

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: GoldenOpportunity

Fri Nov 11 08:14:27 2011

Why would a greedy company like ebay pass up the golden opportunity to increase profits 2.9% collecting taxes for their sellers? Millions upon millions upon millions to be made and ebay is against it? Why?

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: Brian

Fri Nov 11 08:16:40 2011

Read thee fine print folks - you'd have to have 500,000 dollars in sales before you'd have to start collecting sales tax.  This is something a small dealer like me CAN support.  Mom and Pop shops - don't worry - this simply puts the megastores in the sales tax collection business.  Under a half-mil?  No worries.

Brian

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: Rich

Fri Nov 11 08:46:50 2011

Raising taxes stunts growth.  Adding sales tax to every order means the buyers pay more and don't get as good of a deal so they buy less.  There should not be sales tax on used items since used items already had sales tax when they were originally sold

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: Julie

Fri Nov 11 10:44:13 2011

I guess what aggravates me is not the collection of sales tax... but Amazon charging a fee to collect it. No wonder they are now supporting this Bill. Charge the seller 15% on every order total plus $39.99 a month, and hey, let's add another 2.9% fee on top of that. Somehow it does not feel right, as I can't imagine it creates any more expense that the current fees do not already cover. Really Amazon??

Funny how other marketplaces do not charge anything to add Sales Tax to an item...

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: Keith Yockey
Web Site

Fri Nov 11 10:55:57 2011

Amazon is using a 3p tax software company (Vertex.com) and is passing along those costs (+profit)  Nothing new, as they charge for printing shipping labels as well.
S.1832 is now available for online viewing http://thomas.loc.gov/home/thomas.php
I am opposed to this legislation.  It does nothing, if little to reduce the adm. burden online would now face.  A B&M has one store w one location and one tax rate. Online would need to file 45 tax returns.  While the bill requires States to provide software, just how will 45 software programs integrate w your website shopping cart?
Here in South Carolina, if you are over 85 you get a 1% discount on Sales Tax. That tax notice must be displayed behind the cash register.  I can just see a CA seller complying w that law :-)
My solution is simple.  Have the CC Processors collect and remit tax directly (States pay related fees) ~ States get instant funds ~ No privacy issues ~ No exemptions needed. ~ System works for B&Ms as well as online.
This is a golden opportunity of PayPal to get into the tax software business, as well as a new revenue stream that would not affect online sellers.  Sadly, my emails to Tod Cohen have gone unanswered.

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: Budguy1 This user has validated their user name.

Fri Nov 11 11:33:35 2011

Quote from Ebay's statement: "unreasonable burden for smaller sellers".
So what do they call all the "Unreasonable Burdens" they have been putting on us the past few years?

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

This user has validated their user name. by: Ric

Fri Nov 11 11:34:25 2011

Government has never seen a tax they did not like. They also make the tax laws as ambiguous and difficult as possible so that taxpayers will have to hire someone to translate and explain the law, then handle the details of compliance and filing.

When a national sales tax law is enacted, the law should require that the venue NOT the seller be responsible for collecting and remitting tax revenue under the new law.

States want the additional revenue, but they have not thought the process through.

Do they really want to be inundated with tens of thousands of remittance forms and payment checks? If each individual seller is to be responsible for collecting and remitting sales tax revenues, how many additional employees will states have to add in order to process the volume of paperwork associated with hundreds of thousands or even millions of small transactions filed every quarter. The cost of added personnel for each state could well exceed the revenue collected, putting states into deficit mode.

In the event compliance audits are necessary, how much will the state of California have to spend to audit my books here in New Jersey? The reality is that if there is little or no chance of enforcement through compliance audits, then many small sellers are likely to collect tax revenue as required and simply not remit payments to the various jurisdictions.

Making venues such as eBay or Amazon responsible for collecting and remitting tax payments on behalf of the hundreds of thousands of individual sellers is the way to go if Government wants to actually increase revenue instead of increasing deficits by collecting and enforcing the new tax law with each individual seller.

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: comet This user has validated their user name.

Fri Nov 11 12:07:30 2011

In NY there is a space on your State Income Tax form for a ridiculous "reporting" of sales tax that you DID NOT PAY to OUT OF STATE entities.  Really?  Something we were NOT charged for we have to PAY???  Hmmm...

And there seems to be no way to check this.  Or enforce it!  Now I guess if you paid by CC there could be some sort of reckoning at some point on out-of-state residents purchasing things.  But ya know---this seems like a lot of work.  And wouldn't really work well on oh lets say---cash sales.

We shop almost daily in the neighboring state of Vermont.  And their tax rate IS lower but that is not really the REASON we go there---it is CLOSER than NY stores for us.  I have read about Western states that will give bordering residents EXEMPTION CARDS so they do not HAVE to pay the State tax--since they in theory get NO BENEFIT from them!  

And a few minutes drive across the skinny end of Vermont is New Hampshire.  With NO SALES TAX.  And I will admit if we are going to make a MAJOR purchase we will drive on over.  Chances are we will shop for the big ticket item---lawn mowers,  large TV's etc---and also buy other things we need and meals etc.  So we are benefitting the BOTTOM LINE.  Does any one ASK to see our IN STATE proof of residency?  No.  Does NY have a revenue agent posted in EVERY store to make sure they get---"their share" of NEW HAMPSHIRES revenues?  This all wanders of to Bizarro World rather quickly.

And if you THINK NY can enforce this law---well--the FIRST year they had a space on the Tax form for you to in-put the amount you had NOT PAID to out of state or Internet sellers.  The FOLLOWING YEAR you were FORCED TO ENTER SOMETHING---there was NO OPTION for some one who had NOT in actual fact bought ANYTHING out of state!  So many people protested about this that now it isagain back to a "Voluntary" fill in.  Which I would venture to say almost NO ONE admits to actually in fact DOING.  So if NY (and by extension) all other states interested in this---is going to demand payment they are going to have to PROVE YOU OWE IT.  

And these people can't agree on how to tie their own shoe laces and whether--WHETHER!!!!!---or not we NEED a comprehensive Health Care System in this country---I just cannot see this actually being a functional IRS sorta thing in maybe the NEXT 50 years.  

But the very IDEA that ebay is now beating their breasts and gnashing their teeth and wailing that THIS WILL HURT THE SMALL SELLER---now THAT is rich.



Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: John in LV

Fri Nov 11 14:41:28 2011

Like usual, the Senators are approaching this from a rather foolish & unworkable approach.

First, I am willing to concede athe need for an online retailer to charge sales tax. It isn't realistic to expect eCommerce to be permanently exempt.
   However, the relevant tax collected by the retailer should be the rate charged by every other retail store in the city or municipality where the retailer is located. Said sales tax to be remitted to the State Dept of Revenue or equivalent entity in charge of administering for that jurisdiction. Said tax to be distributed to merchants's state, local city, etc.
   This leaves the merchant with ONE tax to collect and also provides merchants home town with some ecenomic benefit... just as would normally be the case for any other new retailer who begins to business in a town.
    The idea of asking a family run retailer with 4 employees to first know, then collect, then remit monthly sales tax payments to literally thousands of tax entities nationwide is simply ludicrous and will most certainly result in incomplete and erroneous compliance by the majority of small retailers who simply can't navigate the complexity.
    Like usual, Washington is getting this Bass-Ackward and creating problems rather than solving them.
    For what it's worth, we're a mid-sized family eCommerce retailer in business primarily on the web since 1997.

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

This user has validated their user name. by: Bijoux Dragon
Web Site

Sat Nov 12 13:48:55 2011

Simple - under $500,000, no collection worries and OVER $500,000 in sales you collect the taxes.  

As somebody very, VERY comfortably below the threshold, I can say that if my sales suddenly reached that level, I would be delighted to comply.  Now --- how do I get to that level in my lifetime????

Why eBay Opposes and Amazon Favors Sales Tax Collection Bill   Why eBay Opposes and Amazon Favors Sales Tax Collection Bill

by: small businessperson
Web Site

Sat Nov 12 14:50:03 2011

Given this do-nothing Congress is blocked by a political party resolutely determined to block any legislation involving the intstitution or increase in any tax whatsoever, the whole thing is nothing more than a tempest in a teapot. Like Prohibition, it will be unenforcable, and the fact is that I continue to pay the sales tax owed to my state for customer orders without having to collect. I call it a cost of doing business and leave it at that. Even if the current tax law goes into effect without any more challenges, it only affect the first dollar after $500,000 so I don't have anything to worry about, do I? I certainly don't make enough money to even qualify for the requirement.

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