With talks of going over the fiscal cliff, eBay executives are hoping to stir grass roots discussions about another tax issue.
That issue is the potential for Congress to pass legislation that would allow states to require Internet-based businesses to collect and remit sales tax for purchases.
The Main Street Fairness Act would pose an undue burden on business owners, according to Brian Bieron, a director of U.S. governmental relations for eBay’s U.S. division.
Not surprisingly, the Kentucky Retail Federation takes quite the opposite position.
“We are certainly in favor of anything that levels the playing field between bricks and mortar stores and online sellers,” said Laura Leigh Goins, vice president of communications and member relations for the group.
While most of the proposals do allow an exemption for “small business,” eBay, which is a marketplace for sellers of all sizes, takes exception to what is being called a small business, according to Bieron.
Thresholds of $500,000 or $1 million in annual sales are being considered. Only those companies making more than either of those figures – depending on which legislation is approved – could be required to collect and remit sales taxes to states.
“Those numbers are far too small to protect businesses using the Internet,” Bieron said.
Bieron said those thresholds don’t follow what the federal Small Business Administration considers to be a small business.
Their definition of a small business is any company doing less than $30 million in business a year, he said.
By comparison, a single Walmart does about $90 million a year in business, he said.
Bieron speculates that as many as one-third of the retailers who would be required to collect sales tax would be what most people consider small business.
Goins said a recent survey of the group’s membership had 94 percent of them saying that they would lose in-store sales to online purchases because of the unfair advantage. Those brick and mortar stores pay taxes and otherwise invest in their local communities.
“So we absolutely support the federal fairness legislation,” Goins said.
To Bieron, Goins disputes what constitutes a small business. She said some people think even a $500,000 threshold is too high.
“We feel like any sale should be treated the same, whether it is made in a store or from a coach on a laptop,” Goins said.
Bieron said the potential layers of different local taxes that might need to be collected would be difficult and cumbersome for small businesses. But Goins said software already exists to manage such issues and would be provided for in the legislation.
In Kentucky, online sellers with a physical presence in the state already collect sales tax for sales made within the state, including from Amazon, which is embroiled in sales tax-related disputes in Western states.
“We have collected tax from Amazon for years, so we’ve proven that it can be done,” Goins said.
The retail federation estimates that Internet and catalog purchases that go untaxed cost the state more than $200 million for fiscal year 2012.
If federal legislation is approved, and that likely won’t happen during the lame duck session, it would be up to states to enact their own legislation requiring the collection. Bieron said they still want it to be on consumers’ minds.
Bryan Sunderland, vice president of public affairs for the Kentucky Chamber of Commerce, said the organization has polled its members from time to time on the subject.
“We have gotten a lot of mixed opinions,” he said. “I do know the U.S. Chamber of Commerce is considering a policy, and we will be looking at it in terms of what gets recommended by the governor’s Blue Ribbon Commission on Tax Reform.”
The commission’s next meeting is Thursday in Frankfort.