Daily Ticker

Internet Tax Bill Should Protect Small Businesses: eBay

Online shopping could potentially change forever if Congress decides to pass the Marketplace Fairness Act, a bill that would require all online retailers to collect sales tax on Internet purchases.

The Senate approved the bill earlier this week by a margin of 69 to 17 but its fate now depends on House lawmakers. House Speaker John Boehner told Bloomberg in an interview on Tuesday that the bill would be a “big burden on some very small businesses” and he would “probably not” support it.

Online sales totaled $231 billion in 2012 and could grow to $370 billion by 2017, according to Forrester Research. There are currently more than 400,000 eCommerce-related jobs in the U.S., Forrester says.

Taxing online goods has come into sharp focus in the past year because so few consumers actually pay sales tax on their Internet purchases. Retailers are required by law to only collect sales tax from consumers when they have a physical presence or warehouse in the state where the consumer lives. Economists estimate that states and localities lose at least $11 billion of tax revenue annually because of unreported online purchases.

The National Retail Federation has been lobbying lawmakers to enact the Marketplace Fairness Act to level the playing field for online retail giants and small mom-and-pop stores. (Amazon says it supports the bill)

One Internet juggernaut that has spoken out against the bill is eBay (EBAY). The company's CEO John Donahoe says the bill would impose an "unfair burden" on small businesses. He writes in The Wall Street Journal:

"The proposed bill would require them to collect sales taxes on behalf of every state where they make a sale. That would make it difficult, if not impossible, for them to succeed...This isn't a debate pitting the Internet against Main Street. This is about big retailers, like Amazon, trying to undermine small online businesses."

EBay wants the Marketplace Fairness Act to exempt small businesses that make less than $10 million in annual out-of-state sales or have fewer than 50 employees. Brian Bieron, senior director of Global Public Policy at eBay, tells The Daily Ticker that small businesses could face significant costs by complying with the new law.

"Small businesses who use the Internet should be protected from any negative impacts," he says. "[Small businesses] should be encouraged to use the Internet and other technolgoies to grow. Asking small businesses to take on the same tax duties as giant retailers is very unfair."

Bieron expects the House to take up the bill in the next few weeks and says there will be more more committee hearings and debate before a vote is scheduled.

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