Washington often talks about small businesses being the “foundation of our economy.” While this may make for great stump speeches, it’s also absolutely true. Small businesses are an integral part of the US and global economy and that is the primary reason eBay devotes so much of our time and resources to the many small businesses that call our platform home. We fight for policies that reduce barriers impacting small businesses so that they can succeed, create jobs, and compete in the global marketplace.
Fighting for the success of these small businesses is what I love most about my job at eBay. Small business owners like Danna Golden and Chris Bright, two successful online businesses that have used eBay to significantly expand their footprints, are perfect examples. Danna is the owner of Saddle Up, a western saddle and tack shop located in Longmont, CO. In 2013, during a twelve-week business course, Danna got a recommendation to sell her products on eBay’s marketplace. Taking the advice, Danna began listing saddles online, and has been successfully selling online ever since - nearly doubling sales as a result.
Both of these businesses sit right at the heart of what eBay stands for: people that are passionate enough about something to turn that passion into a successful, global enterprise. They’re success is our success and they motivate us to work as hard as we do every day.
But their success is not a given: the hurdles and headwinds they fight to overcome are significant. There are factors that we at eBay can help control, and help to alleviate those headwinds. But the thing that worries me the most are the factors that we can’t control – including the sales tax legislation that stands to put so many of these businesses at risk.
This week in Washington, I will be joined by small businesses and entrepreneurs from around the country, including Chris and Danna, for meetings with policymakers to advocate for a fair and equitable solution to the internet sales tax issue. The online sales tax issue has been hotly debated in Washington for well over a decade, and its supporters still characterize the debate as one that pits online retailers against offline storefronts. As this may have once been true, it is grossly inaccurate today. As a former executive from a big box retailer, I can tell you that physical retail stores are greatly incentivized - and face virtually no barriers - to establish websites that leverage scale, massive store and warehouse networks, and tax breaks across the country to attract more buyers. As a result, small online retailers face their biggest competition from mega-large retailers that strategically blend their online and offline stores.
While the online/offline dynamic of this debate has changed over the years, one thing has stayed the same: small businesses are still small. The Marketplace Fairness Act and Remote Transactions Parity Act would immediately expose very small businesses with online sales operations to collection and remittance requirements covering 9,600 tax jurisdictions in the United States as well as audits from tax collectors across the country. Larger retailers that employ more support staff can manage the audit exposure these bills create. But for many small businesses, these new tax enforcement burdens would harm their ability to continue selling beyond their own state, and many would be forced to scale back their online selling.
Here’s some good news to contrast these online sales tax bills – Congress has passed trade policies that will remove barriers to small businesses. The Trade Facilitation and Trade Enforcement Act, which recently became law, will update U.S. customs processes to reflect the modern retail economy. This new law makes small businesses more competitive by doing away with rules that previously required American retailers to pay double duty on items returned by overseas customers. Congress will again have the chance to remove barriers to small businesses when it takes up the Trans-Pacific Partnership (TPP). TPP takes important steps to further support small business exporters and modernize trade policies to account for the internet age.
The internet has revolutionized trade for small businesses. Today, 97% of American businesses that utilize eBay trade across borders, and on average they reach 18 different markets. Comparatively, just 1% of traditional offline businesses export and they reach between one and four overseas markets. Empowering our businesses to use the internet and serve customers across the globe only makes them stronger here at home. Policymakers should continue to work toward this goal as they look at TPP and all future trade legislation.
Startups and small businesses face significant challenges when facing off with giant competitors. The best and most balanced growth policy, as a country, would reduce barriers, open markets and provide small businesses the tools and incentives to encourage new economic opportunities.
The United States doesn’t impose these kinds of burdens on our small businesses with trade policies. We shouldn't with domestic tax liabilities either.
Lawton is SVP and Head of eBay’s North America Business.