Thursday, April 25, 2013

Marketplace Fairness Act: Two eCommerce Giants with Opposing Views

Recently, the senate proposed the Marketplace Fairness Act, a bill that would impose a national sales tax on Internet retail transactions. While the bill has gained support from retailers such as Amazon, WalMart and Best Buy, similar online retail giants such as eBay and Etsy, strongly oppose this idea.

Currently, internet retailers are not required to charge local sales tax to a customer as long as the company does not have a physical presence in that state (ex: a warehouse). Buyers are supposed to pay the taxes from anything bought online directly to the state each year (which rarely happens).

The new bill would require internet retailers with sales over $1 million annually to collect sales taxes and send the revenue to the appropriate place.

This seems like a hassel, right? Well, according to The Washington Post, the law wouldn't be put into effect until states provide the appropriate software to retailers to make collection easier. States would also have to simplify their tax systems with a single tax agency, a single tax return and a single audit.

So why do the two internet retail giants (eBay and Amazon) have opposing views?

Why is Amazon in favor of it?

Having to collect sales taxes from different states is a daunting task for smaller retailers, specifically Amazon's competitors who may not be able to afford the expenses associated with it. Amazon, being a large corporation bringing in sales well over $1 million annually, has no problem hiring individuals to help.

Amazon recently changed its strategy by agreeing to pay sales tax in more states (which meant more warehouses in metropolitan areas) in order to provide same-day shipping to millions of customers. The fact that the company has already begun paying taxes should not make a significant impact on its financials.

Why is eBay against this bill?

According to The Wall Street Journal, eBay argues that the bill's sales threshold for triggering the tax is too low, treating small and large, multi-billion dollar online retailers - such as Amazon - exactly the same.  eBay also argues that the bill would not include reasonable protection for small businesses, imposing unfair tax burdens on them.

eBay also stated that it could not estimate how many of its merchants meet the $1 million threshold because many also generate sales outside of eBay.

As internet retailers, where do you stand? What are your arguments for or against this bill?

by Samantha Warner
Marketing Extraordinaire