eBay CEO: Web Sales Tax Would Create 'Administrative Burden'

David Greene talks to eBay CEO John Donahoe about the political battle over online sales tax. On Monday, the Senate is expected to vote on a bill that would end the free ride that consumers have enjoyed when shopping online. The Marketplace Fairness Act would require online retailers to collect sales tax from customers, and pay them to states where customers live — just like brick and mortar stores.

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DAVID GREENE, HOST:

If you like to shop online, you might want to follow a boat that could be coming soon in the U.S. Senate. The proposed Marketplace Fairness Act would end the free ride many online consumers have enjoyed by requiring online retailers to collect sales tax - just like customers have to pay in most states, when they walk into brick-and-mortar stores.

Here's Virginia Senator Mark Warner, who supports the new bill.

SENATOR MARK WARNER: It's about fairness. It's about having a level playing field for all types of retail outlets.

GREENE: Now one of the biggest e-commerce outlets, Amazon, also supports the bill, but the CEO of another major online retailer does not. EBay's John Donahoe has been rallying sellers on his site to oppose the bill in its current form.

JOHN DONAHOE: If it's allowed to play out things will still sell in eBay marketplace, but it will be larger and larger sellers that are doing the selling in the small guy will, over time, slowly be squeezed out.

GREENE: Donahoe wants more companies to be exempt from the new rules. Right now the bill says online retailers making less than $1 million a year would not have to collect tax. Donahoe wants that exemption raised to 10 million a year or for companies with fewer than 50 employees. His biggest concern is that small businesses might not have the resources to deal with inquiries from tax authorities from dozens of different states.

DONAHOE: So I'm a small business in, you know, in Pennsylvania, and I now have tax authorities from five, 10, 15, 20 states audited we were sending me letters saying that you didn't do the calculations correctly. I may have to go fight for myself on behalf of that. That burden is the concern we have that will impede their ability to thrive and ultimately succeed and grow jobs.

GREENE: Even like an eight or nine million dollar business? I mean you worry about them? They seem pretty big and able to deal with this kind of stuff.

DONAHOE: Well, it depends. We would say use 50 employees or $10 million. The employees are sort of the easiest way to think about it. If you have less than 50 employees usually you don't really have a big tax department.

GREENE: How many small retailers who use eBay are we talking about here, thousands, hundreds of thousands, with this might help?

DONAHOE: Millions.

GREENE: Millions?

DONAHOE: eBay literally has millions of small businesses that sell on it. And our perspective is the definition of small business, we're just looking to what the Treasury Department says, which is 10 million or 50 employees is what the Affordable Health Care Act defined as a small business. All we're saying is an exemption a $10 million - small business or less - that's the balance we think this bill should have.

GREENE: To me ask you about a couple of the arguments on the other side. One is that states are cash-trapped right now. They need these millions and millions of dollars in uncollected tax revenue and that's actually what is more important for the economy right now.

DONAHOE: This is where I think this bill is penny wise and pound foolish, because the bill as it is today will collect an enormous amount of tax. The revenue generated by businesses that are $10 million or less is small...

GREENE: Small in comparison.

DONAHOE: ...and minute and yet the job creation from those businesses is high and good for the state.

GREENE: And what about the principle at stake here, the idea that OK, I'm in the state of Pennsylvania, I'm buying something online, I should, you know, be forced to pay state sales tax for what I'm purchasing?

DONAHOE: Well, here's the irony. Here's going to be the inconsistency the way this will now work -which is, if you buy it online and you're sitting in the state of Pennsylvania, you buy it from someone from Oklahoma online, you have to collect sales tax. If you call a small business in Oklahoma on the telephone and ask them to ship it to you, they won't have to collect sales tax. So again, all this exclusion is doing is providing the same protections of small businesses in the off-line world, online.

GREENE: That is eBay's CEO John Donahoe. Now we reached out to the National Conference of State Legislatures for reactions to Donahoe's comments. A spokesperson told NPR that eBay's support for the higher exemption defeats the purpose of the legislation. As the spokesperson put it, states should be able to collect the taxes they are owed, and every retailer online or in store should play by the same rules. Nothing more. Nothing less.

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