eBay And Amazon Take Different Sides In Online State Sales Tax Debate

Two of the biggest e-commerce companies Amazon (NASDAQ:AMZN) and eBay (NASDAQ:EBAY) have opposing views on whether online retailers should collect sales taxes or not. Amazon.com, switched sides in the 20-year old fight and now collects sales tax in Kansas, Kentucky, North Dakota, New York, Texas and Washington. It plans to cover several more states over the next year. Meanwhile, eBay Inc., has stood by its position that the proposed sales tax would negatively impact small businesses which form a major chunk of its client base. It has instead proposed that retailers who have a business that earn less than $5 million per year be exempted in order for them to be competitive. ^[1]

With presence in several states Amazon is already collecting sales taxes

Amazon Inc. has a physical presence in several states where it has warehouses and fulfillment centers. As the law requires an online retailer to charge and pay sales taxes if they have a physical presence in the state, the company is already collecting taxes from users of those states. The company does not expect significant impact on its sales as a result of the nationwide application of the tax. It contends that it still has the price advantage and the customers will stay with it on account of the ease of shopping online coupled with quick delivery. We expect revenues to be marginally impacted by the increased taxes as some of the users may move over to the brick and mortar stores on account of nearly equal prices. We currently have a $222 estimate for the company.

eBay bats for small businesses with an agenda of its own

eBay Inc. contends that the new levy would negatively impact small businesses, a significant chunk of its user-base, as they would have to bear additional costs by acting as tax collecting agents for states when they are already burdened with higher costs due to the relatively smaller size of their operations. Besides, the new levy would require the company as well as it users to keep track of more than 9,600 tax jurisdictions, significantly burdening their operations. ^[2] The new tax would result in buyers having to pay more while sellers will have to deal with lots of paperwork to track the various taxes associated. We expect the added difficulty in the whole process to have a small impact the volume of transactions over eBay Marketplace, marginally driving down revenues. We currently have a $50 estimate for the company.

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