House Panel Weighs Small Business Protections in Internet Sales Tax Bill

July 24, 2012

This morning, the House Judiciary Committee convened a hearing to discuss whether states have the authority to impose new sales tax collection burdens on Internet-enabled retailers.  The Committee is considering a bill, H.R. 3179, which would require online retailers to collect and remit sales taxes in up to 9600 taxing jurisdictions nationwide.  While the bill contains a “small seller exception”, the exception is extremely inadequate and would capture numerous small businesses that are struggling to remain competitive in today’s retail environment.

eBay strongly opposes any legislation that does not include a robust small business exemption and gives a small business the same tax burden as their larger competitor.  eBay believes that treating a small business the same as a mega-billion retailer will only hinder small business growth and development and impede job creation.  We want to ensure that the Internet marketplace remains open to both small and large businesses alike and we are calling on Congress to make sure that any Internet sales tax bill includes REAL small business protections.

eBay submitted a written statement to the House Judiciary Committee expressing our small business concerns with H.R. 3179.  Please click here to view our statement to the Committee and our press release.

In addition to our statements of opposition, here are a few statements from others who are in opposition to H.R. 3179:

“Although the majority of online sales taxes are already collected, state tax collectors and big box retailers are teaming up to levy new tax burdens on businesses with no local presence…TruST will counter the big-box retailers‟ campaign to saddle online competitors with a new and burdensome tax system that weighs most heavily on the smallest of sellers.”
Steve DelBianco, NetChoice

“New and misguided remote tax schemes will devastate electronic retailers working to survive in these harsh economic times. Massive cost increases and new regulatory burdens will significantly damage consumers and the marketplace on which they rely.”
Bill McClellan, Electronic Retailer Association

“Online retailers – large and small alike – cannot afford the economic hit that would come from a new sales tax from the Congress. The Marketplace Equity Act would impose a costly mandate on small businesses by requiring them to collect and remit sales taxes in thousands of tax jurisdictions across the country where they have no physical presence. Furthermore, the bill‟s small business exemption is too low and unworkable. Trying to force through a complex, confusing tax hike on these businesses would hurt their efforts to create new jobs and expand commerce across the country. Simply put, the Marketplace Equity Act takes us in the wrong direction at a time when our economy is still recovering and trying to create new jobs. We urge the Congress to reject this new tax and, instead, focus on ways to give businesses and entrepreneurs greater resources to expand their operations and put more Americans to work.”
Andy Halataei, Information Technology Industry Coalition

“We are disappointed that the continued effort to increase the burdens on online retailers is being is once again rearing its ugly head. Instead, Members of Congress need to focus on passing bills that will encourage growth and job creation like the Startup Act 2.0. Unfortunately, an Internet sales tax, which is what this bill would do, is a step backwards that would only hinder our economic recovery.”
Shawn Osbourne, TechAmerica

“Those calling for the collection of online sales taxes talk of 'fairness' and 'leveling the playing field.' However, the assumption that having online retailers collect sales taxes would result in a fair balance is mistaken. The compliance burden of managing a complex system of multiple tax jurisdictions is not comparable to collecting at a physical store for just that one jurisdiction. If the burdens are different, it would only result in a new imbalance. Ecommerce has enabled businesses to broaden the scope of their activities beyond traditional geographic limitations. It is neither fair nor equitable to negate their achievements and place a compliance burden on online retailers for daring to utilize a new legitimate business model that does not fit well with a sales tax system based on physical location. Drafting online companies into tax collection duties may be a convenient way for state governments to get at revenue, but penalizing businesses for utilizing technology and innovation would be a shortsighted targeting of new revenue models, while protecting existing business models at the expense of consumers and growth. We need policies that recognize the value of innovation and new business models like ecommerce, rather than penalizing and taking advantage of their creativity in the name of 'fairness' or 'equity'.”
Ed Black, Computer & Communications Industry Association

“Applying a tax regime designed in the 1930s to 21st century e-commerce will not work.  It is time for states to simplify their sales tax regimes.  This is not the time for ecommerce to be bogged down with unfunded tax-collecting burdens that will harm economic growth and job creation.”
Jerry Cerasale, Direct Marketing Association

“The Marketplace Fairness Act is an attempt to do an end-run around the Supreme Court’s physical presence rulings and would place unfair compliance burdens on small businesses around the country.”
Bartlett Cleland, Institute for Policy Innovation

Read the full statements from these organizations below: