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Thursday, March 14, 2013 02:44 pm

Springfield small business owner lobbies in Washington, D.C.

Local retailer says “Marketplace Fairness Act” is anything but fair

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Brandi Tolley of Springfield runs her eBay-based business out of her home. She worries that federal legislation requiring online retailers to collect sales tax could harm small businesses.
PHOTO COURTESY OF BRANDI TOLLEY
If there’s a stereotype of a men’s clothing salesperson, Brandi Tolley of Springfield isn’t it. A work-from-home single mother and a military veteran, Tolley started her online eBay-based business about 10 years ago, and she quickly found her niche: buying and selling “big and tall” men’s clothes, sometimes even acting as a personal shopper for her clients worldwide.

Selling online is Tolley’s full-time job, and her selling handle on eBay, buy_big_from_brandi, has more than 8,900 transactions and a 100 percent positive rating. She says being her own boss allows her to spend time with her special-needs child.

But Tolley believes small Internet-based businesses like hers could be in jeopardy because of legislation pending in Washington, D.C. Tolley visited the nation’s capital last week with a group of online retailers from around the nation to lobby against a bill that would require online retailers to collect sales tax.

“I just really think that a lot of the politicians see dollar signs,” Tolley told Illinois Times by phone from Washington.

Currently, Illinois and many other states and municipalities charge sales tax on goods sold both in brick-and-mortar stores and over the Internet. However, a state can’t enforce its laws on retailers operating outside of the state’s borders.

Illinois law already requires residents to report and pay taxes on their online purchases, but only about 4 percent of tax filers paid the tax last year, according to the Illinois Department of Revenue. That’s about 260,428 tax filers with an average payment of $46.65. The Department of Revenue estimates that the state will miss out on $212 million in Internet sales tax in 2013.

U.S. Sen. Dick Durbin, D-Illinois, is pushing for a solution, in the form of a bill known as the Marketplace Fairness Act of 2013.

“Store owners regularly tell me how devastating it is to watch their online competitors offer lower prices for the exact same product because they don’t have to collect sales and use taxes,” Durbin said during a Feb. 14 press conference in Washington, D.C., announcing the bill.

It would require online retailers with more than $1 million in annual sales to collect state and local sales taxes.

Previous versions of the Marketplace Fairness Act contained lower annual sales limits, which Durbin said had been raised to exclude small businesses. While Brandi Tolley’s annual online sales are below the $1 million limit, she says having the system in place at all would take away her incentive for growth.

“I wouldn’t even want to try and grow my business any more, for fear of hitting the cap that they’ve set,” Tolley said.

The legislation attempts to address the concerns of business owners by urging states to simplify their sales taxes according to a standard called the “Streamlined Sales and Use Tax Agreement.” If a state wants to compel an online retailer outside its borders to collect sales tax, the state must become part of a centralized computer database that allows online retailers to automatically collect and remit taxes for Internet purchases.

Tolley says she’s doubtful that a simplified tax software like the kind included in the Marketplace Fairness Act would work well enough to ease the burden on businesses.

“Is it anything like the State of Illinois program that takes me several hours every month just to file for that one jurisdiction?,” Tolley said. “I really think if the people who are backing this could come sit in my shoes and watch me file that once, I think it would be more realistic for them to see how difficult it’s going to be to track and maintain these 9,000 jurisdictions.”

Brian Bieron, senior director of global public policy at eBay Inc., says eBay opposes the bill on behalf of its sellers, partly because it raises questions about interstate law enforcement powers. Bieron explains that the State of New York currently can’t sue an Illinois-based online retailer for failure to follow New York tax law, but that would change under the Marketplace Fairness Act.

“Governments like New York might want to focus on small businesses that are located far away, because they would know that those businesses would have the hardest time defending themselves,” Bieron said. “Therefore, you create a scenario in which state law and tax enforcement power becomes unlimited.”

Contact Patrick Yeagle at pyeagle@illinoistimes.com.

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