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Making Online Sales Tax Work for Small Sellers

May 8, 2013

by Althea Erickson

Etsy.com handmade and vintage goods

Update: On May 6, the US Senate voted to pass the Marketplace Fairness Act, which would require online sellers who earn over $1M in annual revenues to collect and remit sales tax for every state, not just the one where you live. 

The good news is, the bill won’t become law unless it moves through the House of Representatives. We encourage you to call your legislator (find their number here) and let them know where you stand. You can also join the conversation with other sellers in this forum thread. Below is the original blog post that was published on April 22, 2013.

This week, the US Senate will vote on the Marketplace Fairness Act, a bill that requires online sellers to collect and remit sales tax for every state, regardless of where you live. Right now sellers are only required to collect sales tax in the states where they have a physical presence. (Online buyers are responsible for paying their home state’s sales taxes, but most don’t.)

We at Etsy support the intent of the legislation, to help states reap the tax they are owed, but feel it will unnecessarily burden small businesses. Most Etsy sellers work from home and don’t have the administrative resources to comply with the law. That’s why the “small seller exception” included in the bill is so important. We believe in pushing that exception as high as possible, not only to protect sellers now, but to give their businesses room to grow down the line.

Currently, the bill exempts businesses who earn under $1 million annually, though the level of exception is hotly debated, and some companies have even argued to eliminate it altogether. If you’re thinking, “$1 million, phew, that excludes me,” that’s understandable. $1 million in sales, however, is well below other federal definitions of small business. And the top 500 largest internet retailers make up 93% of lost state revenues. A lower exception hurts small businesses more than it helps states.

With the vote happening this week, we encourage you to call your Senators (you can find their numbers here) and tell them you support increasing the level of the small seller exception in the Marketplace Fairness Act. Hearing directly from constituents makes a lot more impact than just hearing from Etsy staff.

The Etsy community actually put this issue on our radar for the first time last year, when several sellers commented about it on a blog post about Chad’s trip to the US Senate. Since that time, we’ve been meeting with legislators and connecting Etsy sellers directly with D.C. officials to advocate.

This is part of our emerging focus on policy issues that affect our community. Since I arrived at Etsy, I’ve found that politicians often don’t understand the needs or challenges of our community. A seller making jewelry or decor from home is very different than a dentist, gas station owner or a tech start-up. Officials don’t realize how hard it will be for you to comply with a new regulation, or that many existing public programs to support small business don’t help you. We want to change that. So let me know in this forum thread what other governmental policy issues you’re worried about. I’d love to work with you to help solve them.

 

Althea Erickson is Etsy’s director of public policy, and the seller behind Brooklyn Assembly. Before she joined Etsy, she led the advocacy and policy work at Freelancers Union.