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.