Congress Considers Online Sales Tax Bill That Opponents Say Is Unfair To Small Business

WASHINGTON, D.C. – The next time you buy something on eBay, you could be charged for sales tax and the online marketplace isn’t happy about it.

The U.S. Senate is expected to approve the “Marketplace Fairness Act” next month, which would require many online retailers to collect sales tax in all states, not just states where they have a physical presence. The bill would apply to businesses that make at least $1 million in annual online sales.

While online buyers are technically supposed to be paying any sales tax that would apply to their purchase, few do, and states are eager to recapture those dollars as they struggle to balance their budgets.

The bill is supported by the National Retail Federation, which argues that it levels the playing field between traditional stores and online retailers. However, traditional stores don’t have to worry about regulations and rates in 9,600 tax jurisdictions across the U.S. – just the one in which they are located.

“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,” wrote eBay President and CEO John Donahoe in an email message to account holders this week.

“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,” he continued, urging people to use a form his company set up to contact their Congressional representatives to oppose the current bill.

While the proposed legislation appears to have more than enough support to pass in the Senate, its fate in the House of Representatives is less clear. Some Republicans view it as a tax increase. Should the bill pass in Congress, it is likely that President Barack Obama would sign it into law – he has already indicated his support.


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