ebay On the Wrong (and self serving side) of the Sales Tax Issue

I received this email from ebay this morning. I think that ebay is on the wrong side of this issue.

I was in retail for many years and struggled with sales tax issues at every turn. “Struggle” is putting it mildly as at one point the NY State government came after me with guns a blaring. I have no love lost on sales tax but not because of those struggles but because it is an intrinsically regressive tax that hits poor people more than it hits the wealthy AND it puts the small business in the middle of tax collection and compliance. That being said it is a reality of the current day tax structure.

If you assume that it is reality and it is going to be then the question should be how to make it as fair, easy and equitable as possible for ALL businesses. As it currently stands it is none of those things. And it is an issue that affects all bricks and mortar retail businesses big and small. There should not be artificial product pricing variations in the market created by sales tax policy.

ebay should either be promoting alternative, more progressive taxation or promoting making this tax fair and simple. Advocating exemptions for certain businesses or sales volumes,as ebay does, only makes the sales tax more complicated, not less. At its best it then appears to be position that seems to be very self serving and not in the interest of all small businesses.

eBay
Dear Mike,Congress is considering online sales tax legislation that is wrongheaded and unfair, and I am writing to ask for your help in telling Congress “No!” to new sales taxes and burdens for small businesses.Whether you’re a consumer who loves the incredible selection and value that small businesses provide online, or a small-business seller who relies on the Internet for your livelihood, this legislation potentially affects you. For consumers, it means more money out of your pocket when you shop online from your favorite seller or small business shop owner. For small business sellers, it means you would be required to collect sales taxes nationwide from the more than 9,600 tax jurisdictions across the U.S. You also would face the prospect of being audited by out-of-state tax collectors. That’s just wrong, and an unnecessary burden on you.Big national retailers are aggressively lobbying Congress to pass online sales tax legislation to “level the playing field” with Amazon. And, as they compete with big retail, Amazon is advocating for this legislation too, while at the same time they are seeking local tax exemptions across the country to build warehouses. This is a “big retail battle” in which small businesses and consumers have a lot to lose. But eBay is fighting, as we have for more than 15 years, to protect small online businesses and sellers and ensure healthy competition, value, and selection that benefit consumers online.

The solution is simple: if Congress passes online sales tax legislation, we believe small businesses with less than 50 employees or less than $10 million in annual out-of-state sales should be exempt from the burden of collecting sales taxes nationwide. To put that in perspective, Amazon does more than $10 million in sales every 90 minutes. So we believe this is a reasonable exemption to protect small online businesses. That’s what we’re fighting for, and what big companies such as Amazon are fighting against.

I hope you agree that imposing unnecessary tax burdens on small online businesses is a bad idea. Join us in letting your Members of Congress know they should protect small online businesses, not potentially put them out of business. Click here to make your voice heard. Together, I believe our voices can make a difference.

Sincerely,


John Donahoe
President and CEO
eBay Inc.

 

 

 

 

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ebay On the Wrong (and self serving side) of the Sales Tax Issue by

12 thoughts on “ebay On the Wrong (and self serving side) of the Sales Tax Issue”

  1. eBay has just become too big and clunky. The interface is ridiculously complicated. The only good aspect of it is that there is so much exposure but even that is complicated by the fact that there are too many people selling too much on there

  2. I use ebay everyday to buy computer parts. I rely on it. This seems too complicated to put into place. How does it work from country to country and state to state?

  3. While I get your point eBay is just being realistic and I believe correct. If they simply let the law pass as is then the myriad of local and regional tax laws would fall on their and their vendors shoulders. In a previous life I worked for a major mortgage servicing company; we had to manage a database of over 15,000 different taxing entities across the United States whose rules changed constantly.

    If the law passes as is the online retail model will be severely damaged simply because bureaucracies and the taxing requirements will become too cumbersome to interact with. The smaller sellers will back away from selling online simply because the additional sales will not justify the significant filing and taxing requirements.

    If you honestly believe that a national sales tax consensus can be made then you are delusional. There is way too much division, cronyism, and corruption within our governmental structure.

  4. There is off the shelf software that calculates tax and pulls the exact amount out of your bank account to distribute it. I technologically advanced company like Ebay can build it right into their system. I used to be against an internet tax, since I have been employed in ecommerce or internet marketing for the last 15 years. The party is over. Web businesses don’t need any help anymore, they are doing just fine. If you can’t handle collecting taxes or if you feel like taxes ruin your business – you don’t know how to run a business…online or bricks and mortar.

  5. I couldn’t agree more! It’s hard enough for the local businesses to compete with the likes of Amazon etc. Let’s take away that automatic 8% advantage.

    The problem of course lies with the logistics of maintaining and managing sales tax accounts in all states. Something that will only be solved through technology and collaboration.

    Great article

  6. Brian

    Of all the ecommerce platforms that should be able to solve the issue of multi state taxation issues, i would think that eBay should be able to. Their resistance is disingenuous.

  7. I run a small business that has both a local and online presence. I agree that eBay should have no problems complying with these new laws.

    But what about small businesses like mine? Compliance is probably going to be complicated and in the end, like doing my payroll, I’m probably going to have to pay for some service or software to make it all work.

    And I’m tired of the argument that no sales tax gives online retailers a huge advantage. Let’s say you need soap. Where are you going to get it? Order it online and wait a week just because there’s no sales tax? No. You’re going to walk to the local store and buy it so you can wash your hands tonight.

    Local stores have a huge advantage in being local and highly visible to consumers.

    The local businesses that are crying foul are also being incredibly self-serving. They don’t want to level the playing field – they want to take away an advantage that online retailer have so they can keep those customer coming to their brick-and-mortar stores.

    The government is happy to help these local businesses because it’s more tax revenue for them. So the government is also being self-serving here.

    If the federal government really wants to impose an online sales tax (which I’m not 100% opposed to), they should simply set a flat sales tax rate so that all online merchants – including the small players like me – have an easy time with compliance. Then put the task of distributing that money to the states on a government agency.

    Otherwise, the government is just going to be throwing up another barrier for small companies to get started selling online.

  8. Matt

    As I pointed out in the article, I do not think that Sales tax is an effective or fair tax. We do need to collect taxes to pay for things like water, sewer, schools, roads, security & safety. I would not use a fragmented, regressive tax with a gadzillion officiating bodies to do so. SMBs should not have to collect ANY tax and more importantly should not have to enforce the rules.

    But I am not in charge and we don’t have a fair taxation system. We have what we have. And given that it needs to be as simple and as fair as possible to both the purchasers and the sellers. What we have is neither.

    I have no idea what size your company is so it is hard to say how it affects you. This bill only affects companies with (online?) sales greater than $1 million so it may not affect you at all. Also this bill has just passed the Senate and still needs to pass the House so it might never pass.

    As to complexity, only states that comply with simplification requirements are allowed to collect taxes and there will be free software that calculates the actual taxes. So while sales tax is complicated it is not as complicated as it used to be. Good enough? Probably not but SMBs have been dealing with this complexity for some time. Vendors like EBay are ideally suited to implement tracking and payment technology that should make this a no brainer for any given Ebay reseller.

    As to your argument that it doesn’t matter if you need soap you will buy soap, I would have to disagree. Soap isn’t usually taxed and it doesn’t make up a big % of sales tax anyways. That being said, I now purchase my dishwasher soap at Amazon so even that behavior is changing.

    But lets take a $1000 item for example; sold by CDW, Amazon, Apple, Walmart and Olympic Sports.
    -Lets assume that CDW does not need to collect the 8% tax ($80) because they have no “nexus” with any of the states except where they have headquarters and their own warehousing. If they outsource their warehousing, even if its in another state, they have no obligation to pay that states sales tax.
    -Amazon collects taxes in states where it has a warehouse or office.
    -Apple on the other hand collects tax in every state because they have a retail presence.
    -Dell with a retail presence in only some states collects only in those states.
    -Walmart collects in every state.
    -Olympic Sports sets up a different company for online sales that is totally independent of their retail stores to avoid any tax obligation.

    Thus you have an $80 difference top to bottom and patchy collection at best. That is simple? That is fair? No way.Not fair to the retailers and not fair to the buying public.

  9. Mike, thanks for the response. I really appreciate your taking the time and you make great points.

    But I don’t think I was completely clear in my last post. Basically, what I wanted to say was this: This law is not being passed to make the retail world more fair. It’s already hugely unfair in favor of the local merchants. It may be for the tax revenue but that’s secondary. What it’s really about is protecting brick-and-mortar stores that are seeing some of their sales disappear to the online world.

    I used the example of soap not as a literal example but an example of the benefits that offline retailers already have – they are close the consumer and deliver immediate gratification. They have a massive advantage over online already.

    To see this, check out the ec_current.pdf document on the census.gov site. It shows that in the 4th quarter of 2012 (a major shopping season), online retails sales represented about 6% of all retail sales. That’s up 600% over 10 years but still a very small number.

    Yet brick-and-mortar shops want to halt that growth and no doubt an online sales tax will help with that. That’s why so many chamber of commerces are pushing hard for this bill.

    Consider your example of the $1,000 item. If the only thing a local store can compete on is price, then, sure, a consumer will go with the cheapest option. No doubt there is a class of customer that falls into this category.

    But what about customers that care about immediate gratification? Face-to-face interaction? Local support? Ease of returns? Actually trying the product first?

    In everyone of these cases offline retailers win and win big. That’s why 94% of all retail sales still happen in-store.

    Again, I understand that this bill is only intended to hit the giant online retailers ($1M+ in sales). But once it’s in place, that bar will come down over time. If you doubt that, take a look at our income tax system. It was initially a tax only instituted on the wealthy because, well, who can’t get behind that. But over 50-60 years it became a tax on almost everyone.

    Once the infrastructure is in place to institute this, it will be coming to the mass of small businesses in the future. That’s why I oppose it.

  10. Not at all.

    I agree with you that the sales tax is regressive and should just go away and be replaced by something better. That’s one problem with this law.

    Secondly, Internet retail sales are up 600% over 10 years. I’d say that’s something the market embraces. It’s also something that terrifies traditional retailers and they are attempting to stop that rapid growth by eliminating one of the the three major advantages online retailers have (the others being low startup cost and a world-wide audience through the web).

    I’m saying that instead of the government trying to slow or reverse online retail growth while it’s still in its infancy (15 years vs 1000’s of years for the local retail model), they should say no to the Chamber and then embrace a different, non-regressive tax strategy to solve their local budget problems.

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