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Online Sales Tax Issue Back in Spotlight

Bipartisan Marketplace Fairness Act reintroduced in Congress.

The online sales tax issue took center stage again on Thursday as new legislation that would require online sellers and out-of-state merchants to collect sales tax from buyers was reintroduced in Congress.

The Marketplace Fairness Act, introduced by Sen. Mike Enzi (R-WY), would give states the authority to require online merchants and out-of-state retailers to collect sales and use tax when buyers make purchases from them. Currently, states cannot do this unless a seller has a physical presence in a state.

A similar bill failed to pass last year, according to Sen. Kelly Ayotte (R-NH), an opponent of the bill.

Supporters of this new bipartisan bill say it will level the playing field between brick-and-mortar stores that have to collect sales tax and online shops.

“This sales tax disparity hinders community-based retailers, hurts Main Street jobs, and has led to a $24 billion loss for state and local governments,” says David French, the senior vice president for Government Relations for the National Retail Federation, which supports the new legislation. “As ecommerce and [mobile] commerce continue to increase in market share, it’s time Congress allows all retailers to compete on the same playing field.”

He says the 2013 Marketplace Fairness Act would give states the ability to collect taxes “that are already owed.”

“The Marketplace Fairness Act reinforces free and fair competition in the marketplace, protects states’ rights and brings much-needed simplification to the nation’s complex sales tax system,” he continues.

eBay asks users to oppose bill

However, opponents, including eBay, say the new legislation will burden—and hurt—small sellers.

“Small business retailers using the Internet are innovators using technology to grow a business, create jobs in local communities and serve consumers with competitive alternatives,” notes Tod Cohen, eBay’s vice president and deputy general counsel of Global Government Relations. “Congress should reject any Internet sales legislation that throws a new barrier in front of small businesses. A meaningful small business exemption that protects all small-business retailers is a must.”

eBay asks users in its Action Center to email their representatives opposing the new bill.

“eBay believes that small businesses selling via the Internet should only be subject to the tax laws of the states in which they operate, and we are working very hard to stop Congress from changing the law in a way that hurts small online businesses,” the marketplace states.

Amazon supports the new legislation. What do you think of the new bill?

About the author

Olga Munoz
Olga Munoz is editor of TheOnlineSeller.com. In addition to writing news and feature articles about e-commerce, selling trends, online marketing and other topics of interest to online sellers, Olga manages the site's social media efforts. A journalism graduate of Chico State, Olga says her favorite part of being a journalist is learning interesting facts that help put stories into perspective, attending industry events and meeting interesting people "that leave you smiling, even in tough situations." Opinions expressed here may not be shared by The Online Seller and/or its principals.

  • I have already written my Senator asking him to oppose the bill. I recently quit my job of 20 years due to health issues and refused disability and/or any other assistance. Instead, I built a business on eBay to where I’m now making more income than my job. This bill would hurt small businesses and people like me who depend on online sales for income.

  • Trudy Phillips

    EBay is akin to having a garage sale for many. Others are akin to flea market sellers that in many jurisdictions have to pay a sales tax at the end off the day. And a huge majority of sellers are Thrift Stores and. large Vendor stores selling on EBay that would in a brick & mortar location have to collect, report and pay sales tax, This is also an Amazon.com situation. Same scenario exists. Maybe those that sell less than $500-$1000 a year should be exempt – a Garage sale entity. Those that sell more would pay tax. If a tax is imposed, yes- many would quit selling on Ebay. So Ebay will be opposed to a tax. They loose income. But the sellers in any category will be innovative and find other methods, avenues to sell goods, where sales taxes will not be noticed and no tax imposed.

    • You make it sound like eBay sellers don’t collect any sales tax, and that simply isn’t the case. Most eBay sellers collect sales tax for every state in which they have a presence. For example, I live and operate in Ohio and I charge Ohio sales tax, which is different for each of the state’s 88 counties. If I had a warehouse in Pittsburgh, I’d also have to collect sales tax for every district in Pennsylvania. Online sellers already are burdened with more tax accounting than brick & mortar stores, so where is the fairness?

  • John Kushmerick

    Amazon supports the new bill for sales tax because they already have a physical presence in all states and therefore have to charge sales tax anyway. They aren’t supporting it for any other reason than their self-serving reasons.

    • And Amazon knows such legislation will kill a lot of its eBay competitors, who still operate with relative independence in comparison.

  • The argument that online sellers have an advantage over brick & mortar stores is horribly flawed on the surface. First, a brick and mortar store in Franklin County, Ohio, has to charge, and pay, only Franklin County sales tax no matter where the buyer actually lives. However, an online seller in Franklin County has to know, charge and pay in every one of the state’s 88 separate taxing districts, depending on where the buyer lives! And that’s the way it is now. So where is the advantage?

    Brick & mortar stores don’t charge you sales tax according to where you live, they charge according to where they ARE. Online sellers don’t deserve to be treated any differently!!

    If this law takes affect, that brick & mortar store still will be paying in 1 taxing district, no matter where their buyers live. Online sellers will have to register in 50 states and will be liable for more than 9,000 separate taxing districts!! How on earth is that fair??? Every small seller who can’t afford a full-time accountant will be out of business immediately. That’s going to hurt the economy, not help it.

  • I’m glad you’re doing so well that you can afford a full-time accountant to deal with the 9,000 taxing districts for which you’ll be liable. Most of us small sellers can’t afford that.

    The playing field won’t be level until brick & mortar stores have to collect a different sales tax according to where each walk-in customer lives because that’s what they’re proposing for online sellers.

    • eric fox

      “The Marketplace Equity Act does provide a very specific small business
      exemption. It would exempt businesses with $1 million or less total
      remote sales”
      So….unless you are doing over a million a year in sales, the average eBay seller would NOT have to collect sales tax.

      • Art

        Like Eric Fox says above, the tax applies only if seller does $1 million a year in sales. That’s $2740 a day, 7 days a week! Seriously, how many of you do that kind of volume? I do quite well on eBay and I do about 10% of that. Everybody has their panties in a wad because places like eBay are telling them the sky is falling. If I were doing $1 million a year, I’d have no problem paying it. It will probably have a small benefit to most small sellers as they won’t be charging the tax.

        If you’re doing a million plus a year and find this tax to be overwhelmingly costly to you, maybe it’s time to figure out how to get your profit margin up. I would be willing to bet that this tax will touch less than 5 % of the sellers on eBay. That 5% is probably well over 50% of eBays sales volume. eBay wants you to squeal to protect the B&M’s that are ruining it for the rest of us. The small sellers doing less than a million a year.

  • We file our state tax reports as required every quarter, yet the State of Texas screws up our online filing more times than not. Although we have proven our innocence in every single case, they charge penalties and interest because THEY cause our payments to be withdrawn late. Multiply this times 50? … I’ll be looking at early retirement. How sad for my employees.



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