For this month's Environmental Outlook: Ten years ago, Israel experienced a prolonged drought that forced the country to come up with a strategy to address water scarcity. What its experience could teach an increasingly water-starved planet.
The Senate is likely to move ahead this week on a bill that would allow states to tax Internet sales. All but four states require brick and mortar retailers to charge their customers sales tax. Online retailers have been exempt. Customers who buy on the internet are supposed to be keeping track of their on-line purchases and paying taxes due on their own, but this happens rarely. Opponents of the law argue it would be an administrative nightmare for small online sellers to comply with the all the different state sales tax rules and an added expense for consumers. Please join us to discuss the pros and cons of taxing internet sales.
- Jonathan Weisman congressional reporter, The New York Times.
- Rachelle Bernstein tax counsel, National Retail Federation.
- Brian Bieron senior director of federal government relations, Ebay.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The Senate may vote later this week on a bill that would end most tax-free shopping on the Internet. Many online retailers oppose the legislation in part because of the difficulty of complying with many thousands of state tax rules. Joining me in the studio to talk about taxing Internet sales: Brian Bieron of eBay, Rachelle Bernstein of the National Retail Federation and Jonathan Weisman of The New York Times. Do join us, 800-433-8850. Send us your email to firstname.lastname@example.org. Follow us on Facebook or send us a tweet. Good morning to all of you.
MR. BRIAN BIERONGood morning, Diane.
MS. RACHELLE BERNSTEINGood morning.
MR. JONATHAN WEISMANGood morning to you.
REHMGood to see you. Jonathan Weisman, give us some background and history on this so-called Marketplace Fairness Act.
WEISMANI'll give you a truncated version. You know, way back in 1992, the Supreme Court made a decision about catalog sales -- remember those -- that basically punted the question of collection of remote sales taxes, taxes for -- on people who were buying from out of state to Congress. Congress was supposed to come up with some kind of regime -- regimen. And, of course, it wasn't a big issue then. Catalog sales were not a huge part of the retail world. And Congress has not done anything.
WEISMANBut, you know, with this recession and with just the death of so many mom-and-pop retailers, it has become a very salient issue. State and local governments are desperate for revenues. And they can go to their lawmakers and say, we need you to respond. The Supreme Court wants you to. And you're not actually raising taxes. This is a way to help us out, help your mom-and-pop retailers out and, you know, you're not actually raising taxes. You're only facilitating the collection of taxes that are due anyway.
REHMJonathan Weisman of The New York Times. Rachelle Bernstein, tell me what the trends are in online sales versus brick-and-mortar.
BERNSTEINWell, I think it's obvious to everybody -- the trends are that we are having -- that online sales are increasing an awful lot. We expect that online sales will double over the next six years. And certainly, since the days that Jonathan's talking about with catalog sales, we've seen online sales so much larger than catalog sales ever were, which is probably why this issue is coming forth as it is now because it is so much of a bigger issue.
REHMSo how does the National Retail Federation feel about taxing online sales?
BERNSTEINWe feel that we have to have all retailers on a level playing field, and we have everyone in our membership. We have straight online companies. We have companies that are just small mom-and-pop, brick-and-mortar stores. And then we have larger companies that do both, that have both in brick-and-mortar presence as well as an online presence.
REHMSo you would be in favor of this online tax?
BERNSTEINWe -- yes. We are in favor of the tax, which is actually -- the tax is not an online tax. The tax is a sales tax that every state applies to goods that are sold in that state, whether you go into a store in that state to purchase it or you sit in your house and you purchase that good over your computer or with the telephone. So this tax still applies. We are in favor of applying the collection responsibilities equally to all sellers of the same good in that state.
REHMRachelle Bernstein, she's tax counsel for the National Retail Federation. Brian Bieron, as a government relations executive of eBay, how do you feel about this?
BIERONWell, our view on this is that it's really not a question of Internet versus store because the way retail works today is that all size retailers and all kinds of retailers are using the Internet. All the largest members, all the big store retailers, they're all online, too. We all know about Wal-Mart and Target and Best Buy. They're all big Internet retailers.
BIERONSo this obviously isn't a question of Internet versus store because the store businesses are all big Internet businesses, too. And the same is true for small businesses that small retailers, mom-and-pops who are on Main Street, they're also using the Internet too. At eBay, we're a marketplace. We're not a retailer. We provide online and mobile services to all kinds of retailers, big and small.
BIERONOur message to people on this bill is that if you change the law in a way that penalizes small businesses who use the Internet, you're actually going to make it harder for small businesses to grow because what this tax change right now would do is it would take the smallest retailer, who's only in one little store or one little warehouse, and would suddenly treat them with the same tax burden as a multi-billion dollar retailer with facilities all over the country and tens of thousands of employees.
REHMTell me how that would actually penalize the small retailers.
BIERONSure. The small retailer who uses the Internet to compete from far away with giant retailers who are everywhere, right now, that small retailer has a lot of costs related to being small. When you try to ship a product from 3,000 miles away, you know, there are real costs with that. It's harder to be small than to be big in retail, which is why giant retailers over these decades have grown even more dominant.
BIERONThis tax change would mean that not only would the sales tax be applied from far away, which just raises the price of their product, but the reality is that complying with taxes in 50 states and nearly 10,000 tax jurisdictions, that carries costs. And big retail businesses have literally teams of accountants and lawyers who handle their tax business. Those big businesses, they just don't take all those jobs and get rid of them with like a software program. It's a real job.
REHMBrian Bieron, senior director of federal government relations for eBay. I'm sure many of you have thoughts. Give us a call, 800-433-8850. Rachelle, I know you want to jump in.
BERNSTEINI did want to jump in because we're very concerned about this legislation, not just for large brick-and-mortar retailers but for our small brick-and-mortar retailers. And they have all of these costs as well, and they have to collect taxes from day one. And our -- and I hear what Brian is saying about the fact that everyone is starting to have an online presence, even the smallest retailers.
BERNSTEINAnd generally, we find that is true. But when I talk to our really small retailers that have one store or maybe two stores in a community, what they tell us is that their online sales are very small, and they don't anticipate them growing that quickly.
BERNSTEINBut the competition that they feel from Internet sales where the tax is currently not being charged is much greater than the advantage of potentially someday being in a situation where they might have to collect taxes on Internet sales because the other thing about the legislation that's currently being considered in the Senate is that it would exempt all businesses with less than $1 million of remote sales. And that takes care of 99 percent of Internet sellers today.
WEISMANI wanted to jump on that, too, because you have to -- that $1 million exemption is important. It's also important that eBay, which is kind of lonely in this fight, you know, once Amazon decided to join forces...
WEISMAN...you know, eBay was somewhat isolated. And now eBay is talking about a $10 million exemption. And once in -- on Capitol Hill, once you're dickering over price, you're almost there because now you're in negotiations. You're no longer just for or against. And I think that's a very big deal.
REHMWhat is this use tax that online buyers are supposed to pay, Jonathan?
WEISMANWell, you know, when you're filling out your taxes, there's a line that says, how much sales tax do you owe on goods and services that you bought online? Nobody does this. I mean, really, the only -- I think only the most fastidious politicians and accountants ever fill this thing out. Frankly, I just did my taxes, and I didn't even notice it. I'm only really becoming aware of it now. So it is true that we are supposed to pay these taxes. We just don't. And what the state and local governments are doing is saying we need help collecting this because we can't do it on our own.
BIERONWell -- but I think that Jonathan's right that at the end of the day, from eBay's perspective, this isn't a fight over yes or no. It's a fight over a bill that tries to say that $1 million retailer is a big business and just below a million is a small business when in the world of retail, $1 million is a tiny, little microbusiness, literally one- and two-person businesses. We are talking about a $10 million small business exemption, and we would turn to other sources.
BIERONThe Treasury Department Office of Tax Analysis, they say businesses above 10 million are big for tax -- analyzing tax bills and below 10 million is small. We talk about 50 employees because the Affordable Care Act, the Obama health care bill exempts businesses below 50 employees. The Family and Medical Leave bill which -- Medical Leave Act goes back a couple of decades. That set the small business exemption at 50 employees. We find this million dollar number to be, honestly, sort of picked out of the air and far too small to let these small businesses grow into big small businesses.
REHMAll right. So is everybody saying that this is a matter of debate as to whether it's 10 million or 1 million? Where are you on this Rachelle?
BERNSTEINWell, obviously, our small retailers would rather there be no small -- our small brick-and-mortar retailers would rather there be no small business exemption. It's a difficult issue. But I think when -- and I don't really want to go back into this -- the Supreme Court decision that Jonathan raised at the beginning, but the concern at the time and very rightly so was that we have too many jurisdictions and too much complication.
BERNSTEINNow with software, all of this can very easily be done, and so we can help those smallest businesses with the compliance without giving an unfair tax advantage to one over another.
REHMRachelle Bernstein. Short break. We'll be right back.
REHMAnd welcome back. We're talking about legislation or a bill currently moving through the Senate that would allow taxes on online purchases. Did you know that you're supposed to fill in on your tax form the taxes that maybe you haven't yet paid on online sales? The first I've heard of it, Jonathan Weisman of The New York Times. And you've been covering this for quite a while. How many people fill in that space?
WEISMANI mean, I think it is literally, you know, we're talking about .01 percent. But we are -- we're on -- almost nobody, really almost nobody and nobody has to tried to enforce it, really.
REHMOK. Here's an email from Rick, "While this program allows Wal-Mart and its other big-box allies to whine about how Internet sales taxes will level the playing field, please be sure to mention how Wal-Mart and other big boxers often receive multi-year sales and property tax breaks to locate into an area." Jonathan.
WEISMANThat's absolutely true. And we were talking about how Amazon had thrown its weight behind this Marketplace Fairness Act. Amazon also has huge, you know, brick-and-mortar presences. They have warehouses and distribution centers. And under the law, if you have a distribution center in a certain state, you have more obligation to collect the taxes. So for a huge Internet sales outfit like Amazon, they're already collecting taxes because they basically have to. And they, too, have these great tax incentives to locate their giant distribution centers.
REHMTo what extent, Rachelle, is this tax regressive for consumers? Does the current system place a burden on some people who are less able to buy online?
BERNSTEINWell, that's definitely the case and it's -- and -- that people who have less money have generally statistically have less access to computers and the ability to do that. You also need to be able to use a credit card, for the most part, when you purchase online. And again, that -- our poorest people may not be in that situation. But I do want to also respond to the comment about the fact whether there are various property tax and other incentives that maybe offered to big-box stores, you know, so they don't have maybe a sales tax advantage.
BERNSTEINI still want to speak to, for example, one of our small businesses in Baltimore. The fellow runs a running -- sells running shoes. He's got one store in Baltimore. People come into his store because he's got a great selection. And they try everything on, they figure out exactly what size they need, they do all of that, and sometimes they are as bold as to then, you know, take out their telephone, look up and order something place else to save the sales tax. That fellow, believe me, has no tax incentive that he is being offered to run that store out of that place.
REHMWhat about that, Brian?
BIERONOh, no. That's the idea that the competition in retail is pitting small businesses who use the Internet against small businesses on Main Street. Honestly, it's like an imaginary conflict. Big retail dominates retail. They are literally 85, 90 percent of all retail. And so what we're saying is that every kind of retailer is using the Internet to some degree. I was literally on the cab right over here, we had NPR on, and I heard Yuki Noguchi's story where she was talking about a pet store owner who had seven shops and was on Internet.
BIERONAnd so -- I mean, that's a really big business. That's seven stores. We're talking about a business of two or $3 million who might have one warehouse, eight employees -- I'm looking at something called Concept Electronics in Florida here 'cause I brought some examples too -- eight people, two or $3 million. That isn't the business that's going to like drive the small business out. All we're saying is let's keep the Internet open for the very small retailer. A $10 million retailer is like one store. It's one drugstore except it's 10 million.
REHMAll right. So, Brian, let me be clear. If this bill were written with a $10 million exemption for small business, would eBay be in favor?
BIERONOh, yes. Our CEO sent an email to a lot of people this past weekend saying that exactly.
WEISMANThat's why I think this bill is going to pass.
REHMGo ahead, Jonathan.
WEISMANI mean, this is a fascinating case of politics where kind of the anti-tax activists, the Grover Norquists of the world, Heritage Foundation, a lot of the more ideological people in Washington are against this bill very much on just pure ideological grounds. They just say this is just a way to facilitate the collection of taxes. We don't like taxes to be collected, therefore we're opposed to it. But in this case, many very conservative Republicans are coming around because this is -- because they're hearing from their mom-and-pop retailers.
WEISMANThey're going to their districts and seeing shuttered storefronts and, you know, one retailer after another closing down. And, you know, when you hear from those people on Main Street, your constituents, and then you hear in the other area Grover Norquist, for the first time, Grover Norquist's voice is being drowned out. And it's one of the first times I've ever seen it, frankly.
REHMIt's interesting. Here, we've gotten a tweet, "Internet sales tax headed for Senate vote with strong support from anti-tax Republicans."
WEISMANThat's right. I mean -- and has even split the anti-tax activists because the American Conservative Union has come out in favor of this. This bill has gotten 70 -- consistently has gotten 75 votes in the Senate, including -- I mean, Ron Johnson, a Tea Party senator from Wisconsin, is firmly behind this bill. Roy Blunt, Republican from Missouri, firmly behind this bill. It's really changing the equation.
REHMNow, you've got four states that have no sales tax, so I presume they're going to be totally exempt from this.
WEISMANWell, this is -- ironically, because you would think, OK, the sales tax would apply, you know, if you're living in Montana, which has no sales tax and you buy from an eBay seller, you still don't pay sales tax because the sales tax is the state and local tax where you live, but the senators from Montana, from Oregon, from Delaware and -- actually the Delaware senator...
WEISMANAnd New Hampshire. They are virulently opposed to this, not because they're defending the citizens that would pay a sales tax. They won't. They're defending their online retailers who have never had to deal with sales taxes because there are no sales taxes in their state and would have to kind of create a sales tax regimen for themselves out of whole cloth that their state and local governments don't have.
BIERONWell, I think that the key thing to understand about the other opposition to this bill is that it's not so much, I think, about taxes as it's about the fact that the bill is about the power of government to enforce these tax laws. That -- and this is -- goes to the small business issue that eBay care so much about. The biggest change is that today every small business who's a retailer, whether they're on Main Street, on the Internet or both, they all have to answer to just the one tax authority where they live, their government.
BIERONThat's the thing that government has cared about for so many decades. Like we said, this goes back to way before the Internet. This is about states wanting to enforce their tax laws on far away businesses, who are a very attractive group of businesses to actually want to impose tax burdens on 'cause they don't get to vote for you. And so what we're saying at eBay is that the most important reason why we need to exempt small businesses who are truly small, these little businesses are just in one place.
REHMTen million and below.
BIERONOh, $10 million in retail, to give you some perspective, Amazon sells $10 million every 90 minutes.
BIERONWal-Mart sells $100 million per store, and they have 4,000 stores. Ten million dollars is a very small retail.
BERNSTEINWell, $10 million is relatively small if we talk about Amazon. It's not small when I talk about Falls Road Running Store in Baltimore, Md. or Polka Dot Press in Tallahassee, Fla. Those people have less than $1 million in sales. And so I still get back to you need a level playing field in you application of taxes, and you can't apply a higher tax based on -- you can't apply a difference -- give a loophole, if you will, or an exemption to some that you don't give to other taxpayers in similar situations.
REHMJonathan, I'd like to understand why Amazon flipped. They were previously against this. How come they came out for it?
WEISMANWell, I -- in part, it's competition with eBay, and they like to be on opposite sides. In part, it is because, under current law, if you have a presence in a state, you have to levy a tax on that -- in that state. Then you are like an in-state retailer. And Amazon has gotten so big that it has physical presences in so many states that has already adopted…
WEISMAN...you know, the sales tax collection because of those laws. So, for it, it's -- you know, making this adjustment is just not much. And I think that there is -- you have to know that, you know, in this day and age, with technology, the idea -- it's -- people say, well, there are these 7,000 -- more than 7,000 different sales tax regimens in state and local governments. How baffling would that be to apply? But frankly, technology today, you put an -- you put your ZIP code in. Your software can find it.
REHMAnd that's it. That's it.
WEISMANIt's not that hard.
BIERONNo, Diane, that's really not it, and I think of that as like as if there's the technology tooth fairy out there who's going to solve everything. And eBay, great technology company, we help businesses deal with this issue. But I would ask Rachelle about the fact that big retailers who have this obligation, they have large teams of attorneys and large teams of accountants today. Software doesn't do it. Software's part of the answer.
BIERONBut the thing that's different between the $3 million retailer who's selling online, and let's say you find a $3 million retailer who really doesn't use online at all, right now, both of them can only be sued by their state tax authority. They can only get a demand letter. They can only get audited. They can only be taken into court by that one state where they live. The big change here is that if this bill passes the way it is today, very, very small retailers will be able to face an audit, will be able to face a demand letter, will be able to face litigation from any state that goes after them...
BIERON...and there's no app for that.
REHMI think you're putting in a lot of interesting clauses. Would you agree with them, Rachelle?
BERNSTEINI would agree in part. What -- first of all, I do want to point to the software and the fact that eBay does provide software. But this -- but the legislation, importantly, says that the obligation for providing software is supposed to be on the states that are going to be collecting more revenue and that they have to pay for it.
BERNSTEINThey have to certify software providers that can provide software that works in all of the 45 states that are going to be -- that have sales taxes now. And so -- and that, if you rely on the software that is certified by these states, then they can -- then they cannot find you liable for reliance on that software.
REHMAnd you're listening to "The Diane Rehm Show." We're going to open the phones now, 800-433-8850, first to Houston, Texas. Good morning, Barbara. Thanks for joining us.
BARBARAGood morning, Diane, and thank you for taking my call.
BARBARAI'm a longtime shopper online. I love to buy things online, and I don't shop online to avoid tax. I shop it because it's convenient. Sometimes when people -- you know, sometimes the tax or the shipping doesn't make a lot of difference. It's really the price that drives it. When the lady talks about the gentleman selling the shoes, tax isn't that much to drive you away from it.
BARBARAIt's the overall cost of the product. So whether or not -- and I oftentimes buy things from retailers, and I do pay tax because they have a business in the state. So I have to do that. But the tax isn't going to make any difference whether or not I shop online.
REHMDo you agree, Brian?
BIERONI think the tax might make a difference of where they shop. As the caller said, shoppers online think of all different costs, including shipping, including taxes, including the price of the product. This...
REHMMany of these companies are now using free shipping. They are absorbing those costs.
BIERONEspecially the big companies. That's a big deal, is that, like, a big giant retailer absolutely can get the best shipping deal. A small business, these little businesses, they don't have those advantages, just like the little businesses don't get the special tax breaks, just like the little businesses face higher costs for the product. So what we're saying is it's not that it's going to kill online shopping, but it's going to disadvantage the smallest online retailers, and we want to protect them.
WEISMANI mean, the -- I thought it was interesting that Brian the other day -- I mean, a few minutes ago said three million. I mean, I think that we are getting to a point where there's getting -- we're negotiating right now, and we're getting down to where this bill passes without a whole lot of...
REHMAll right. To John in Alexandria, Va. Good morning.
JOHNGood morning, Diane. I enjoy your show this morning, and a lot of this is kind of near and dear to my heart, small business. And it's interesting because in plain sight of every politician in America, this has been going on for, like, 10 years. And, you know, whether you do $32 or 32 million, sales tax laws have been in -- you know, they've been on the books.
JOHNAnd they should be enforced. And so I have a couple of comments, and I'll take my, you know, answers off the air. But for the eBay lobbyists, I would say they have no trouble collecting fees from eBay users whether they said they'll -- $10 worth of things or 10 billion. All they have to do is give them the tax off the top and send it in for everybody that could charge another percent and help take money to the bottom line if they want to do that.
JOHNBut -- so eBay has all the software they need to collect the tax, send it in, be done with it. It just seems ridiculous to see small businesses closing up everywhere, even large businesses closing up. You know, it won't be long before Best Buy can't compete with Amazon selling stuff tax-free.
REHMAll right. Thanks for calling. Brian.
BIERONWell, I -- the -- it's clear that eBay has made a conscious decision to say the answer is not to figure out a way to make more money off small business. The answer is to make sure that there is a truly level playing field, which includes, at the very small businesses, making sure that they have the access to the Internet that they have today.
BIERONThis will disadvantage small businesses not because it's about figuring out the right rate. It's about all the other parts that go to complying with taxes, which you just have to look to big retailers to see. There's no technology that replaces the lawyers and accountants that it takes to deal with an entire country full of sales taxes.
BERNSTEINWell, I guess what I would say is that it's disappointing that eBay hasn't come to the table with more than just a large small business exemption that would put it at an advantage over the small brick-and-mortar stores, because if they've come to the table on more -- on where you could see more specific compliance problems in the scope of the legislation, I think that there would have been an open door to listen to some of those additional concerns if they were there.
REHMRachelle Bernstein, she's tax counsel for the National Retail Federation. Brian Bieron is the director of federal government relations at eBay. Jonathan Weisman is congressional reporter for The New York Times. Short break here. We'll be right back.
REHMAnd we're back talking about online sales tax which is a proposal working its way through the Senate. You have many anti-tax Republicans who are saying they are very much in favor of this. You've got Amazon saying it's in favor of it. Here in the studio we have a representative of eBay who is very definitely against it. Jonathan Weisman, when you first wrote about this story, you said it was on page B-2 of the of the business section. Now, where is it?
WEISMANYou know, I -- this is an issue that really touches the core because a lot, you know, everybody shops online now. They understand this issue. They also see the death of retail around them. They see what's happening. It's, you know, you go down to -- downtown Washington to watch the store fronts, to watch the death of book sellers, it is one after another. This is just an issue that's just right in front of people's faces, so they really understand what we're talking about.
REHMWhat about the issue of states? States are saying we need this revenue, Rachelle.
BERNSTEINThat's right. Obviously, with the growth of retail that we -- of online sales that we've been talking about and the fact that 45 states do rely on sales taxes for some, if not, the -- a very large part of their revenue base. As online sales grow and online sales that for which no taxes are collected, states are really losing a lot of money. The estimate right now that we get from the National Council of State Legislatures is $23 billion a year among all of the states. But the real answer is if we're going to see online sales double over the next six years...
REHMIs that the prediction?
BERNSTEINThat's the prediction. Then my question is, will states have to look to different revenue sources if this situation is not addressed? Because if the sales tax is basically gut it and you have this really unfair competition between online and brick and mortar, you have two choices if you're looking for that level of revenue. You either need to raise the tax on people complying, which is very unfair, or you need to look to other kinds of taxes. So I think that this is going to be a very big political question into the future if the issue is not addressed.
REHMAll right. To Rene in Phoenix, Ariz. You're on the air.
REHMGo right ahead.
RENEI was calling because I wanted to say that in Arizona, we have an Amazon warehouse, so I've already had to pay sales tax on most of my online purchases. And I feel like these online retailers should have to apply to local sales taxes to help bring money back into those communities because they're already taking money away from other sources and from stores that are investing in the community.
BIERONWell, Diane, I'm struck. First of all, I would've thought by this point in the program, we would all be agreeing that the idea that there is any retail that is sort of like stores versus online is really like a 10 year ago part of the debate, and that today, really, everybody is using the Internet to some degree so that would be helpful. But on the question of, you know, the collection and whether or not essentially we're going to have, like, a flat tax version of sales tax, you know, the idea that there will be a different...
REHMNo. I simply enter my own zip code. The tax is calculated before I check out, and that's it.
BIERONNo. My point is, is that it strikes me odd that in this one part of the tax code, the idea that there would be a distinction between very small business and very giant businesses is, like, a radical idea when actually throughout our tax code there are progressive aspects where smaller businesses and lower-income people are treated differently than the giant or the rich. And that's what we're looking for is some balance in this.
REHMThere was a time, let's remember, when you had tiny little mom-and-pop stores. You paid your tax when you bought something. Or you went to a huge big-box store, and you paid your tax because you bought something.
WEISMANYou know what, can I say something here? I mean...
REHMWhat's the difference here?
WEISMANIt's not -- I'm a little baffled by some of this conversation because the retailers aren't the ones that are paying the taxes. It's the purchaser that's paying the tax.
WEISMANI understand that there is, you know, it's not easy. You -- there is -- you have to collect the tax, and you have to remit the tax, and there's a cost to it. But the small retailer, online or otherwise, is not the guy who is taking -- paying the tax. I'm paying the tax when I go and buy something.
BIERONBut If I could answer, Jonathan, that's not true. There really is a difference between a sales tax and a use tax, and it comes when there's a question about whether the right amount was paid or whether the business was supposed to be collecting. And that is that a sales tax -- the state can go after the business when it's a sales tax. They have to go after the consumer when it's a use tax. And this is an example where, you know, a real world kind of thing that could happen if this goes through.
REHMWait a minute. What is the difference between a sales tax and a use tax?
WEISMANWell, it's the idea of what Brian is saying is, if a retailer's collecting the taxes and the state or the local government doesn't feel like it's remitting the taxes owed, it is the business that is liable. You're not -- the individual is not being audited. The business is being audited.
REHMSo each business has got to be honest and pay its taxes.
BERNSTEINWell, that's right. They -- well, they have to -- it's not its taxes. Again, it's still is the consumer's taxes…
BERNSTEIN...but they collect the taxes...
REHMBut they collected them.
BERNSTEIN...and they're the ones that are audited. And so I have -- so my field is really more tax law than it probably is government relations and maybe more on the federal level but -- than on the state level. But I would also say from what I see from our retailers, too, you don't often see the IRS or probably the state auditors going out after the teeny little companies because they only have so many staff people to do the audits, and they go where the money is.
BERNSTEINNow, I don't want to say to everybody out there, you know, you're fine, and you're not going to ever get audited. And there certainly are triggers we all know to try to do that. But in terms of worrying about what it's like to put up with the state tax -- sales tax audit, you see that at the largest levels. My prediction is you're not going to see that from the very small companies.
REHMAll right. To Cape Girardeau, Mo. Good morning, John.
JOHNGood morning, Diane. My stance on this is I'm a small business owner here in Cape. And, you know, how I see it is if I have a product that I'm selling that we collect tax on, then that same product can be bought online, and no tax is collected. You know, I don't see the -- how that's equitable. You know, the same product can be sold into the same area, and tax is not collected. Now, I'm generally not a tax person, but it just seems for the area and, you know, not just the business but just in general, why isn't tax collected?
WEISMANI mean, your argument -- that argument is the argument that really is swaying a lot of politicians. And Cape Girardeau is being represented by solid Republicans for a very long time, but if you call your congressman, I'm sure you're going to get a receptive ear.
REHMAll right. Let's go to St. Louis, Mo. Good morning, Josh.
JOSHGood morning. My comment is about the difference between infrastructure versus legislation. I'm a Web developer, and I've built a website for a client in Washington State. Now, the Department of Revenue in Washington State has a lovely website that I was able to tie in, where I was able to just supply the address, and it would calculate the county level sales tax, even on the state level. And it would do all this for me kind of magically, and it made my life easier making that website.
JOSHNow, I wanted to build a website for my own business where I live in Illinois, just on the other side of the river from St. Louis. And Illinois doesn't provide anything similar to Washington State. And in regards to that, when I call the state of Illinois Department of Revenue and I ask them about the county level sales tax, they say, go call the different counties, go ask them. So it's a matter of infrastructure not being there that I see as the actual problem.
BERNSTEINAnd I think that that issue is going to be addressed by this legislation because they are telling the states, if you want to be able to collect, you need to provide all of this information. And again, you need to provide free software. You need to be able to tell people what the taxability is of the different products that are being sold there. And that that's a requirement and that that'd be done before the state can collect dollar.
REHMAll right. To Grapevine, Texas. Hi, Paul.
PAULHi. Thanks for taking my call.
PAULI do Internet management, marketing and advertising for a car dealership or an independent dealership as opposed to a franchise dealership. We happen to be one of the larger car dealerships that sells on eBay. We sell 90 percent of our vehicles on eBay to every state in the Union. And when you start talking about charging sales tax -- when we charge sales tax to an out-of-state customer, that also means that we have to title the vehicle. We have to register the vehicle.
PAULAnd that involves all sorts of laws, you know, that differ from state to state. There is software that can help you with that, but it's not cheap. It doesn't make it easy, and it's not offered by eBay, which I don't I think it should be offered by eBay. And I guess my point is it just seems like another case of policymakers making policy without being an expert on the issue that they're dealing with.
WEISMANYou know, there are always going -- that's a great -- I really appreciate your call. That's a great example. And every time Congress makes laws, somebody like you is going to come and find it difficult to comply with. Compliance is an issue. I'm not sure how many online eBay car retailers there are that we're going to be worrying about -- who are worrying about taxes and titles like that. And I'm not sure if the numbers are going to be enough to sway the debate, but it's an amazing story.
BIERONWell, no, I mean, I think it's funny how much emphasis is being put on a fight about whether or not little $10 million businesses who are literally...
REHMHe says he makes $10 million weekly.
BIERONRight. No, no, no. I'm not -- that's -- and that's great, by the way. I'm glad he's a big business on eBay, and he's growing. And that's wonderful. What we're saying is that the number that we're offering is to try to inject a little balance into this bill because, again, as he points out, taxes are more than originally the number, like that's just the beginning. There are a lot of costs behind compliance and enforcement later. Every state would be able to audit every one of the businesses between one, you know, over 1 million.
BIERONThat's a huge difference from today and a huge difference from any business today in retail who's just in one state, and there is no software for that. That is a huge complexity issue, and it tilts the field a little more in the direction of the biggest. And they are the ones behind this campaign. The ones funding the fight are really big retailers who would, of course, love to pitch the -- just a little, just tip the balance a little more in the direction of the big guy against the small guy. We say, protect the small guy.
REHMBrian Bieron, he is senior director of federal government relations for eBay, and you're listening to "The Diane Rehm Show." To Utica, N.Y. Good morning, Andy.
ANDYHi. Good morning. I'm the owner of a small manufacture company and -- manufacturing company in Utica, N.Y. And I know a lot of people are probably cringing on your guests as, you know, it exempts businesses, 1 million or less or 10 million or less thinking, oh, he is crazy. That's a big business. It's not.
ANDYJust to set up the infrastructure of a small manufacturing company with one person, just to stay in business with no employees just to keep things going, you have to do 250, $300,000 a year just to pay the basic expenses, product liability insurance to get the patents and to pay your rents for your facility and heating and everything else that goes with it. You have to do a tremendous amount of business manufacturing in the United States.
REHMSo, Andy, you think that charging the buyer tax would be too much of a burden for you?
ANDYIt's totally -- I'm totally against it. We have dealers in eight countries, OK? A lot of them sell on the Internet. There's a lot of expenses already there at the state are involved with selling in the Internet. The caller that called earlier that was upset about other companies selling products in his area and not paying tax, well, he can get on the Internet and sell products in other areas and not pay tax, you know, and make it a more even playing field. But having said that, the costs of doing business on the Internet are expensive. You've got to advertise in the Internet to even be seen.
REHMOf course, and same with brick-and-mortar stores.
BERNSTEINWell, brick and mortars have obviously a lot of infrastructure stores 'cause -- because they are -- they've got to either pay rent or own their property. They've got -- they have to have -- they end up having more sales people because customers are coming in all of the time. They are paying local property taxes. And we are also are talking about retailers who don't necessarily have their own products to sell some place else. The nature of retailing obviously is that you very often are selling other people's products in a community. So it's a different line of business as well.
REHMJonathan, where is this going?
WEISMANYou know, it's -- I predict that it will be passing the Senate this week, possibly today. They're just trying to get an agreement on what amendments they're going to vote -- be voted for before a final vote.
REHMWhat's your prediction about amendments?
WEISMANYou know, they're just -- I don't think -- because the supporters of the legislation have such overwhelming support, I don't think that they need to accept amendments that would overtly change the bill very much. I think it's basically going to pass as is.
REHMWith what kind of...
WEISMANI think it's just going to stick about the million threshold, that really the fight now moved to the House where there'll be more receptive ear to the arguments just against facilitating the collection of taxes. And -- but, you know, I was talking to Steve Womack -- he's a very conservative Republican from Arkansas -- who is sponsoring the identical bill in the House, a Republican who is in negotiations now.
WEISMANAnd he is the one who was talking to me about the mom-and-pop retailers in his district who are just drowning out the voices of opposition. You know, it's going to -- it's harder to get things to the House like this. And I think that this fight will take a while. It might not pass. You know, the House, it's very easy to bottle things up. But I don't think that we're done with this. I think the Senate passes this and it becomes a very, very live issue.
REHMAnd, Rachelle, you've said it's not when -- not if it's when, but then the question is, would it be challenged?
BERNSTEINWould it be challenged in court? Is that what you're asking?
BERNSTEINI don't know the answer to that. It's probably better to ask Brian whether what -- but I think that the bill will -- should stand up well. I think the issues are it has -- is there enough simplification to address the concerns that were raised in the last court case? And I think that there are lot that have been added, and, you know, we would be optimistically -- optimistic about it.
REHMAnd do you think it's going to pass?
BIERONWell, I think it's a question of if it becomes more balanced, and it really keeps the Internet open for small business, so that all the mom-and-pops, whether they're on the Internet now or not, they all have an ability to get on the Internet. That's what will clear the biggest hurdle for this thing. And, by the way, that's what keeps it from getting challenged, by not treating the small business really fairly.
REHMBrian Bieron of eBay, Rachelle Bernstein, she is tax counsel for the National Retail Federation, Jonathan Weisman of The New York Times. Thank you all. We'll see what happens.
WEISMANThank you, Diane.
REHMAnd thanks for listening, all. I'm Diane Rehm.
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