CARY – Since its start in 2005, Michael Ginsberg’s Cary-based Internet retailer has grown to bring in about $4 million in sales a year.
Now, with the U.S. House of Representatives mulling a Marketplace Fairness Act passed in the Senate last week, Ginsberg is concerned it could get much harder to sustain that growth.
“I’m watching the Senate hearings, and they’re talking about these remote sellers and how evil they are, and [how] they’re crushing ma and pa, U.S. companies and they’re taking money from the state,” said Ginsberg, the owner and president of 3Gstore.com. “I’m like, that’s me. We’re not that bad. We pay our taxes and hire employees and do all the things right.”
Because it brings in more than $1 million a year in gross sales, Ginsberg’s company – which sells 3G and 4G products, accessories and services – is among a group of small Internet retailers that are worried new legislation could hurt their business significantly.
Co-authored by Sen. Dick Durbin, D-III, the act would require Internet retailers to collect sales tax at the rate of the buyer’s local jurisdiction. Those with sales of less than $1 million a year would be exempt.
Supporters say the act levels the playing field for struggling brick-and-mortar businesses who frequently fall victim to “showrooming,” in which customers come view and try out products in the store only to buy online.
The act would require states to provide software to Internet retailers that collect the taxes, but Ginsberg isn’t satisfied the software would take the burden off his company.
He said his company spends about four hours a month compiling Illinois sales tax. Having to do that for all the states, he said, is work he’s not ready to take on. He estimates that he’d have to add two employees to his 11-person staff.
Ginsberg also is concerned he could be the subject of audits from other states. He said he recently went through an audit in Illinois, and after 10 months, was told he owed a couple of hundred dollars.
“The amount of time they spent, the amount of time we spent, it was just insane for that,” he said.
For Ginsberg, it’s the added work that is his biggest concern. He’s not concerned that his customers simply having to pay sales tax would drive a significant portion of them away – although, he admits, it could be a different story at companies that don’t offer such niche products.
To reduce the burden on small Internet companies, Ginsberg suggests a service created and moderated by the states. The service communicates directly with the e-commerce platform of the specific site to keep track of how much money is owed and to where.
“This organization would know, ‘OK, Texas, we owe them eight bucks,’” Ginsberg said. “So they withdraw the money from our accounts ... [and] they distribute to all the states.”
For Ginsberg’s company, there’s a simpler solution. If the act would be amended to exempt companies with sales of up to $10 million rather than $1 million, as companies such as eBay have pushed for, 3Gstore.com no longer would qualify.
“Everybody’s not Amazon,” he said. “There’s a lot of small ones that are out there. A million dollars in sales – that’s gross sales. ... It’s not a lot of money.”