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eBay Rallies in D.C. Against Web Tax Change

WASHINGTON -- Online auction giant eBay is aiming to garner support on Capitol Hill against an Internet taxation plan that's gaining momentum.

In a speech at the National Press Club on Thursday, eBay President and Chief Executive Meg Whitman blasted the proposed Streamlined Sales Tax Project, or SSTP, and its potential implications for small businesses.

"The resources needed to comply with SSTP could force thousands of businesses to shut their doors, and this is probably not what lawmakers want to see just as this economy is starting to recover, and jobs are being created," Whitman said.

Among other things, SSTP will require online businesses to collect sales taxes from purchases made by residents from other states. The plan seeks to ensure that national taxing jurisdictions (that is, cities, states, and counties) receive taxes when their citizens buy from remote businesses -- which are often missed, since current laws generally ask citizens to remit such expenses on their own, to their home jurisdictions (as what's known as "use tax.") On the flip side, the law presently requires businesses to collect taxes only in their home jurisdiction and in any jurisdiction where they have a physical presence (known in legislative parlance as a "nexus.")

However, critics of SSTP contend that it will force online businesses -- which might lack a nexus entirely -- to do what offline businesses aren't, and collect sales taxes from all jurisdictions, regardless of where they have a physical location.

"A small business operating on eBay is often a husband and wife team, maybe with an employee or two, operating out of their home," Whitman said. "To add responsibility for tracking and remitting sales tax across potentially 45 states and thousands of tax jurisdictions coult shut them down. It's simply too much to ask for our small entrepreneurs."

Making matters tougher for small businesses is the fact that under SSTP, the U.S. will have thousands of different tax jurisdictions -- potentially 7,900. Accordingly, businesses must correctly calculate and assess the appropriate amount of sales tax for each, and also remit the proper amount to the appropriate jurisdiction.

"Were SSTP adopted, it would double, or even triple, the nation's taxing jurisdictions," Whitman said. "SSTP would force businesses that operate over the Internet to collect and remit taxes in thousands of cities and counties across the country ... the red tape for small businesses would be enormous."

Whitman wasn't alone in criticizing the SSTP as placing an undue burden on its sellers. Yesterday, during an event it labeled "The United States of eBay," the auction site brought 51 of its users -- one from each state and the District of Columbia -- representing small businesses that buy and sell products and equipment on its site, and set up meetings with members of Congress.

Most of those meetings, naturally, focused on the Internet taxation issue, and gave several small business eBay sellers the opportunity to express their sharp disapproval of the SSTP.

"I think it's ridiculous," business-owner Paul Dell told eCommerce-Guide.com. Dell's New Hampshire-based click-and-mortar sporting goods store, SportStop, does more than 50 percent of its business on eBay.

"If they really want an even playing field, why single out Internet companies for having to collect taxes for people 1,000 miles away?" he said. "It's a burden that we shouldn't have to face. We shouldn't have to be singled out and come under someone else's rules, where we don't have any representation or way of changing those. If I don't like the fact that it's an 8 percent sales tax in California or whatever, I can't do anything about it."

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