Ebay Urges Users to Oppose Federal Sales Tax Legislation

eBay’s chief executive officer (CEO) John Donahoe has e-mailed users of the online marketplace to urge their support in opposing Federal sales tax legislation pending in the Senate that could pave the way for the first national Internet sales tax in the US.

In his message Donahoe said the legislation, known as the Marketplace Fairness Act (MFA), would unfairly burden smaller online merchants and urged eBay users to lobby members of Congress via e-mail for changes.

The legislation is due to be voted on shortly by the Senate and proposes to give US states the power to compel retailers outside their borders to collect online sales tax. Currently, states can only require merchants with a physical presence within their borders to collect.

The proposed legislation includes an exemption for merchants that generate less than US$1m annual out-of-state revenue. However, Donohoe said that the threshold should be raised to exempt merchants with less than US$10m in annual out-of-state sales, or fewer than 50 employees.

He also pointed out that rival Amazon is a supporter of the MFA. “This legislation treats you and big multi-billion dollar online retailers – such as Amazon – exactly the same,” Donahoe wrote in the e-mail, which was first reported by Reuters. “Those fighting for this change refuse to acknowledge that the burden on businesses like yours is far greater than for a big national retailer.”

Supporters of the bill, which include national store chains such as Walmart, Macy’s, and Best Buy, retort that online retailers often do not collect sales taxes at checkout and thus enjoy an unfair competitive advantage over the stores. The Marketplace Fairness Coalition (MFC), a group of companies supporting the act, claim that it would “level the playing field.”

“Mr. Donahoe wants you to believe that the MFA would somehow penalise small online businesses,” the MFC said in a statement. “This is disingenuous because it overlooks the fact that this legislation exempts small sellers with less than US$1m in annual remote sales to address concerns about small business compliance. To put this in perspective: the MFA exempts 99% of all sellers and over 40% of all online commerce.”

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