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The consequences of an online sales tax

eBay's new Feed experience, which allows users to personalize their eBay homepage with their own favorite things, was unveiled on interactive touch screens at an event on October 10, 2012 in New York City.

The days of tax-free online shopping could be coming to an end. The Senate is debating a bill that would give states the authority to collect taxes on all Internet sales. The bill pits two web titans against each other: Amazon supports it; eBay does not.

eBay has taken the lead against the Internet sales tax legislation. Over the weekend, it sent an email out to its merchants.  Trying to rally them against the bill. Right now, the Senate bill exempts online businesses with less than $1 million a year in sales outside of their home states. eBay wants to expand the exemption to $10 million. eBay vice president Tod Cohen has spearheaded the online tax fight.

He says, “We are committed to working for small businesses and not just have the giant retailers like Amazon use their size advantage against small guys."

Small guys like Chris Chapman. He owns snowsportdeals.com, an online business that sells used skis and snowboards on eBay and Amazon. Cohen has just over $1 million in sales every year. He says if he had to charge taxes for all 50 states, he’d have to hire someone just to handle taxes. In his dozen years in business, he says the tax debate is one of his biggest challenges.

“Of all the things for 12 years, this one scares me more than anything," he explains. "Because this could be crushing.”

Chapman says, by supporting the online taxation bill, Amazon is trying to crush him. Amazon wouldn’t talk to me for this story, but I did talk with Sucharita Mulpuru of Forrester Research. She says Amazon is supporting the Senate bill because it’s going to be hit with sales taxes anyway. Online retailers have to pay the taxes if they have a physical presence in a state. And Mulpuru says, Amazon is thinking about a major warehouse expansion, as part of a same day delivery plan.

She says, “How do you get to same-day delivery? Well you get to same-day delivery when you have a whole bunch of warehouses all over the U.S.”

Mulpuru says Amazon may also be planning to build actual stores someday -- which would definitely be collecting sales tax.

About the author

Nancy Marshall-Genzer is a senior reporter for Marketplace based in Washington, D.C. covering daily news.

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