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.

Thoughts from eBay Dev Con

Over the past few years, demand for APIs into web-hosted services has increased enormously. Fewer and fewer big, web-based companies can resist the market imperative to provide API access into the services they offer. The number of APIs tracked by Programmable Web—from companies large and small—continues to grow.

Here are some stats to chew on, direct from the eBay Dev Con keynotes on Monday:

• Total active users on eBay: 84,000,000
• Developers in eBay Developer Network: 70,000
• Developers employed by eBay: ~2,000
• Number of applications using eBay platform: 12,000
• Frequency of listing updates on eBay: 500 per second
• Transaction volume on eBay: $2,000 per second
• Number of people who make some or all of their income through eBay: 1.3 million
• Amount earned by eBay’s top 10 affiliates through listings last year: $20,000,000 (yes, that’s averaging $2 million each)

What I found particularly interesting is the marketplace for developers. If you’re a developer looking to make money by developing to the eBay platform, the primary target market is not getting items to buyers. Rather, it’s providing the right tools to sellers. Independent developers and smaller development firms have provided everything from tools to get listings up faster, to tools to analyze data and optimize selling techniques.

In general, for the Amazon.coms and eBays of the world, providing web APIs supplements revenue—often from channels previously inaccessible via their main web storefronts. By opening APIs, these companies found that independent developers would willingly augment their platforms in numerous, innovative ways in order to exploit opportunities either too small for the companies to pursue themselves. Consequently, the APIs of these companies have created new opportunities for small shops and independent developers, benefitting both themselves and the API providers. By opening up APIs into their platform, eBay has increased its own success.

What I’m saying in general is: expect this trend of increasing data access through web APsI to continue. The model works.