Open Letter to eBay CEO John Donahoe

Does eBay Really Need a Special Exception to online tax collection? I received an email from eBay’s CEO, stating

…we believe small businesses with less than 50 employees or less than $10 million in annual out-of-state sales should be exempt from the burden of collecting sales taxes nationwide.

At first blush, the exception seems reasonable. But considering eBay’s business model, it’s completely self-serving. I replied to the address from which he sent the email. Since it might bounce, I share my response publicly.

Mr. Donahoe:

I agree that processing state & local taxes could be a burden on small businesses, especially the sort of special-focus, long tail small businesses that reach customers far and wide through eBay. eBay’s opportunity is to alleviate this burden. How? Provide new services & API’s in your platform to make tax collection a dead-simple process. Wouldn’t this render eBay an even more strategic platform for the small businesses that integrate with your platform? Coming from eBay–a company among the first to demonstrate how a web platform could simplify doing business online for micro-businesses–the “burden of collecting sales taxes nationwide” argument is rather specious. I notice that eBay does not advocate that all businesses of the scale you state–online or not–should get that exception.

Online businesses have had a remarkable opportunity to germinate and prosper for nearly two decades free of sales taxes. As online sales have grown, state and local governments’ revenues have declined. That affects our schools, highways, municipal services and other infrastructure. Furthermore, since the demographics show that online shoppers are generally wealthier than those who don’t shop online, isn’t your exception for online micro-businesses a special accommodation for higher-income households?

Perhaps eBay needs to re-think this issue in broader terms than asking for a special exception for eBay’s sweet spot in the market.

Thanks for your email and consideration of my response,

Ted Haeger

Donohoe’s complete letter follows.

Dear Ted,

Congress is considering online sales tax legislation that is wrongheaded and unfair, and I am writing to ask for your help in telling Congress “No!” to new sales taxes and burdens for small businesses.

Whether you’re a consumer who loves the incredible selection and value that small businesses provide online, or a small-business seller who relies on the Internet for your livelihood, this legislation potentially affects you. For consumers, it means more money out of your pocket when you shop online from your favorite seller or small business shop owner. For small business sellers, it means you would be required to collect sales taxes nationwide from the more than 9,600 tax jurisdictions across the U.S. You also would face the prospect of being audited by out-of-state tax collectors. That’s just wrong, and an unnecessary burden on you.

Big national retailers are aggressively lobbying Congress to pass online sales tax legislation to “level the playing field” with Amazon. And, as they compete with big retail, Amazon is advocating for this legislation too, while at the same time they are seeking local tax exemptions across the country to build warehouses. This is a “big retail battle” in which small businesses and consumers have a lot to lose. But eBay is fighting, as we have for more than 15 years, to protect small online businesses and sellers and ensure healthy competition, value, and selection that benefit consumers online.

The solution is simple: if Congress passes online sales tax legislation, we believe small businesses with less than 50 employees or less than $10 million in annual out-of-state sales should be exempt from the burden of collecting sales taxes nationwide. To put that in perspective, Amazon does more than $10 million in sales every 90 minutes. So we believe this is a reasonable exemption to protect small online businesses. That’s what we’re fighting for, and what big companies such as Amazon are fighting against.

I hope you agree that imposing unnecessary tax burdens on small online businesses is a bad idea. Join us in letting your Members of Congress know they should protect small online businesses, not potentially put them out of business. Click here [link removed] to make your voice heard. Together, I believe our voices can make a difference.

Sincerely,

John Donahoe
President and CEO
eBay Inc.