We All Have to Pay Online Sales Taxes (& What Ebay Thinks About That)

Remember the good ol' days when you could buy something from Amazon and have it shipped to you faster than you'd have time to make it to a store to purchase it yourself and with no sales tax (AKA the "Amazon loophole)? Well, you can still have it shipped to you faster than you'd have time to make it to a store but now you'll just have to pay sales tax. Those days are a distant memory for Amazon as they now have agreed to charge sales tax and soon many online retailers will be forced to do the same.  



For years online retailers were able to take advantage of the tax loophole that allowed them to not collect sales tax to consumers in another state if that the retailer had no presence in that state.  However, consumers themselves were supposed to voluntarily report and pay the sales tax when filing their annual tax returns.  Of course, that just meant no one ever did because it was impossible to track and get caught.



Companies that had no retail presence and mainly operating an online business boomed as shoppers flocked online for the convenience of shopping at home/work/on the go and as a way to buy things cheaper by avoid sales tax, almost 9% here in New York.

The U.S. Census Bureau estimates that retail e-commerce totaled $225 billion, an increase of almost 16 percent from 2011 and online purchases now account for 5.2 percent of total retail sales.  This meant states were foregoing hundreds of millions if not billions of dollars in revenue every year it could not impose sales taxes.

With the support of the Obama Administration, the Senate voted 74-20 to advance the bill and is expected to pass it on Wednesday.  Lobbyist on both sides are mobilizing for the debate

Now remember that Amazon loophole that everyone is now calling the eBay loophole? This is because under the proposed bill, the Marketplace Fairness Act, there would be an exemption for internet retailers making less than $1 million in out-of-state revenue.  You'd think that would cover most eBay sellers as the impression has always been eBay was the place for the small-time sellers looking to turn something in their closet into cash.  However, that is apparently not the case as eBay CEO, John Donahoe sent out emails to tens of millions of eBay merchants pleading them to write to their congressional representatives blocking the legislation.  Ebay said the threshold should be raised to $10 million and those with more than 50 employees but would not quantify the number of eBay sellers that it would impact.  

CEO Donahoe even wrote a WSJ op-ed piece entitled, "The Mom & Pop Internet Sales Tax" which is quite an exaggeration.  If you're doing $10 million in revenue then I don't think you need to be considered "Mom & Pop".  Sure you're still a small business compared to say...Amazon but you're taking in substantial revenue and mostly sellers will easily fall under the $1 million threshold.  However, I guess now we know where eBay really makes its money, which is with larger businesses.

Read More:
NYTimes: Internet Sales Tax Bill Gains Ground in Senate
NYTimes: In Tax Fight, Amazon Hands Baton to eBay
Bloomberg: Virtual Stores Should Pay Real Taxes
WSJ: Internet-Sales Bill Proceeds in Senate
WSJ: Attention Online Shoppers: Senate Weighs Sales-Tax Bill