Obviously, all that has changed. More and more business is transacted online every day, creating an artificial advantage for online sellers over their brick and mortar counterparts.
Yet, even though online commerce is a firmly established force in the retail world, online-only companies still receive an unfair advantage over brick-and-mortar businesses when it comes to sales tax. The tax is still due; online-only retailers just don’t have to collect it because there is no structure in place to make them do so. They start out with an automatic pricing advantage over their traditional competitors, while communities lose much-needed revenue – over $11 billion in 2012 alone.
If online companies with up to $30 million in sales are exempted from the Marketplace Fairness Act, it would unfairly punish small local retailers. To justify their argument, eBay bases this figure in part on the Small Business Administration’s definition of small business. But that delineation was set with traditional, brick-and-mortar companies in mind. As former administrator of the SBA, I am confident that no one ever intended that figure be used to exempt online businesses from collecting and remitting legally owed taxes. eBay should not be allowed to preserve special treatment in the tax code for a handful of giant multi-million dollar online sellers at the expense of the hundreds of thousands of small businesses on Main Street.
Main Street retailers pay rent, salaries, advertising expenses and local taxes that do not apply to Internet sellers, and never will, even after the Marketplace Fairness Act becomes law. Online companies also frequently incur less expense related to equipment purchase and maintenance, and inventory acquisition and storage. That’s fine. It’s great actually, for the owners of online companies, and one of the reasons their business model is so attractive and successful.
But special treatment in the tax code should not give online sellers a leg up over their brick and mortar counterparts. That’s not a business model decision, its government interference in the free market.
The Marketplace Fairness Act recognizes the need to protect small and start-up Internet businesses, exempting companies with up to $1 million in annual sales. This is a reasonable limit, giving start-ups a chance to grow and small companies room to find their place in the market.
But $30 million in sales is simply too high a ceiling.
Online companies doing over $1 million in sales have ample resources to invest in simple technology that will make it easy to collect sales taxes from multiple jurisdictions. In fact, eBay offers software to its sellers for as little as $15 per month. Considering their brick-and-mortar competitors have to start collecting sales tax on the first dollar they make, this is hardly a burden. And remember, there is no sales tax exemption for small Main Street retailers, even though they are the companies that often contribute the most to our communities.
As the name implies, the Marketplace Fairness Act is about just that – fairness. There is nothing fair about giving a $30 million Internet company a pass on sales tax, while their Main Street competitors collect and remit every penny owed. For that reason alone, eBay’s position is off base and should be rejected.
Barreto was the administrator of the U. S. Small Business Administration under President George W. Bush.