eBay Launches Massive Push Against Bipartisan Online Sales Tax Legislation

The Senate moved a step closer to giving states the authority to collect sales taxes on online purchases Monday, voting 74-20 to begin debate on the Marketplace Fairness Act. The bill, which would close the so-called “Amazon Loophole” that allows online retailers to avoid collecting sales taxes from purchasers in states where they do not have a physical presence, has broad bipartisan support among both conservatives and liberals, and the voting margin nearly mirrored a symbolic resolution on the measure earlier this year.

But even though Amazon, long the beneficiary of the loophole, now supports the legislation for its own reasons, other online retailers are mobilizing against it. eBay, the online auction and retail site, sent emails to 40 million of its users over the weekend, urging them to voice opposition to the bill, as Reuters reports:

The e-commerce giant plans to send emails from Donahoe to at least 40 million eBay users, including most sellers on the marketplace. The first messages were sent out Sunday morning.

In the emails, [eBay CEO John] Donahoe said the legislation, known as the Marketplace Fairness Act, unfairly burdens small online merchants and asked eBay users to send an email message to members of Congress asking for changes.

The current legislation, introduced by Wyoming Sen. Mike Enzi (R), exempts companies with less than $1 million in annual out-of-state sales, a threshold eBay says would hit many of its online merchants. It wants to expand the exemption to companies with less than $10 million in out-of-state sales.

Raising the exemption would largely defeat the purpose of the legislation, though. Because they don’t have to collect sales taxes in most states, online retailers have a built-in advantage over brick-and-mortar retailers that have no choice — and that advantage exists for no particular reason. And businesses that would be exceed the $1 million sales exemption, meanwhile, are hardly small-time retailers. Raising the exemption would also put a dent in the revenue generated by closing the loophole, estimated at as much as $11 billion for states that have faced crunched budgets in the aftermath of the Great Recession and have been forced to cut spending as a result. And while sales taxes are inherently regressive, the Marketplace Fairness Act would make the tax code slightly more progressive, since many low-income families don’t have the option to shop at online retailers that don’t currently levy sales taxes.