Ebay is fiercely resisting a Bush administration plan it says will force it to snitch on customers who are not paying tax on billions earned on the popular online auction site.
The Treasury estimates it could collect $2bn in unpaid tax if companies such as eBay reported American users who carry out more than 100 transactions worth at least $5,000 a year to the Internal Revenue Service.
But an eBay spokesperson said: “We do not believe it is our responsibility to serve as the go-between. We believe that it is the seller’s responsibility.” The company pointed out that many users file self-employment and business tax returns based on their eBay income.
Ebay said it would co-operate with IRS investigations into specific persons but would not voluntarily report its customers’ sales “en masse”.
The US measure, planned to come into effect on January 1, 2008, would only affect American users of eBay, but separately this week UK Revenue and Customs warned taxpayers to report income from eBay activity or face penalties.
Ebay says the measure is especially unfair because it does not apply to rivals such as Craigslist, the online classified advertisement site, whose business models do not have the auction or payment tools of eBay.
Ebay has more than 200m registered users of its auction services and estimates 4.3m rely on its website for a significant portion of their income.
The company, which has a market valuation of $47bn, has mobilised its extensive lobbying network in Washington to resist the Treasury by challenging its authority and questioning the legality of the government proposals.
Pamela Olson, a tax partner at Skadden, said: “The proposal is aimed at companies like eBay facilitating the sale of personal property for their customers.”
Representative Rick Boucher, a member of the internet caucus in Congress, said he had been in touch with eBay and would rally opposition on Capitol Hill.
Barbara Weltman, an expert on eBay sellers, said the company did little to encourage tax compliance by customers, but already collated the data the IRS was seeking.
“It is a burden but it is doable,” she said.
The company is marshalling legal arguments that it does not meet the government’s definition of a “broker” and that the millions of auctions that take place on its websites are not actually auctions.
“We do offer sellers auction-like transactions but they are not auctions,” said a spokesperson, citing technical definitions in state law that an auction has no fixed end-time.
The fate of the Treasury plan is likely to depend on the success of eBay’s lobbying and wider talks between the administration and Congress about President George W Bush’s budget proposals.
