Marketplace Fairness Act: Everyone Loves It But Ebay

The Senate passed the Marketplace Fairness Act this week, and everyone seems to be on board with the bill: Republicans, Democrats, the states, even large retailer Amazon, who would be directly inconvenienced, is on board. Everyone, that is, but online retailer Ebay, who is supposedly concerned about the bill's impact on small businesses. Ebay's concerns, and the relative enthusiasm with which the bill passed the Senate, demonstrates a divide in the business world that goes beyond market size to market scope.

So what does the bill do, and whom does it help? States are probably the most excited about the bill, allowing them to get in on charging sales tax for online retail. For years, the lack of tax has made online shopping quite cheap, but no more. Everyone from Tea Party conservatives to left-wing liberals are supporting the bill in Congress, providing that they are from a state that has a sales tax. As a senior fellow at The Institute on Taxation and Economic Policy quoted by the American Prospect notes, "the revenue from the internet sales tax would pay for things “like schools and road repairs and traffic lights."

Others argue that the bill will help low income families, who do not have access to the internet (around 20-30% of all Americans) by discouraging inequity: rather than those who have enough money to afford a computer saving money, everyone would be subject to the same sales tax.

This, of course, would hurt online retailers, who make significant profit by saving on location rent, only ordering items as requests come in, and of course, through their exemption from the sales tax. Yet according to Forbes, retailers like Amazon are on board with the act, either because it increases fairness, or more cynically, because it drives out the smaller retailers who cannot afford to compete with added sales tax. 

Ebay is particularly concerned with the plight of small businesses. Though the bill would make an exception for small businesses with revenues under $1 million, the online auction site doesn’t think that's enough. According to an interview with Ebay's CEO done by NPR, millions of small businesses on Ebay would be harmed economically if the bill was passed. But of course, small businesses are the ones that would be helped significantly if the bill were to be passed ... the brick and mortar ones, that is.

This bill demonstrates a great divide: not between large businesses and small businesses, but between those integrated into the digital age and those still working solely in their local communities. Those who are selling their products online on retailers like Ebay are a new type of business that didn't exist ten or 20 years ago, and they are increasingly replacing the mom and pop shop that representatives and senators are invoking in defense of the Marketplace Fairness Act.  Those stores, sales tax or no sales tax, are in jeopardy: their optimism, not to mention their sales, have been dropping for quite some time. It's clear that we are living in a new economy, where commerce is digital. While the law might try to keep up, it might always be a step behind when it comes to this new economic landscape.