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Posted on Jun 23, 2008 in Across the US, Beltway Politics, Congress, Democrats, Economy, Government, Party Politics, Spending, Technology

Who is behind the Dodd Housing Bill Ebay Amendment? Sadly, It’s a Republican

Sadly, its one of our own that has come up with one of the most ludicrous amendments to what is already seen by many as one horrible package of legislation.

It’s none other than Senator Chuck Grassley of Iowa that has developed the language that would essentially open the door to online merchants like Ebay, Amazon, Google Checkout, etc. reporting all of their transaction activity to the government.

First of all, it’s important to note that this provision was packaged in the Housing Bill, which has absolutely nothing to do with online merchants. The provision was buried amongst 600+ pages of legislation, making it more likely to be overlooked by tired Hill staffers. For those who haven’t read the language, here it is (source):

Payment Card and Third Party Network Information Reporting. The proposal requires information reporting on payment card and third party network transactions. Payment settlement entities, including merchant acquiring banks and third party settlement organizations, or third party payment facilitators acting on their behalf, will be required to report the annual gross amount of reportable transactions to the IRS and to the participating payee. Reportable transactions include any payment card transaction and any third party network transaction. Participating payees include persons who accept a payment card as payment and third party networks who accept payment from a third party settlement organization in settlement of transactions. A payment card means any card issued pursuant to an agreement or arrangement which provides for standards and mechanisms for settling the transactions. Use of an account number or other indicia associated with a payment card will be treated in the same manner as a payment card. A de minimis exception for transactions of $10,000 or less and 200 transactions or less applies to payments by third party settlement organizations. The proposal applies to returns for calendar years beginning after December 31, 2010. Back-up withholding provisions apply to amounts paid after December 31, 2011. This proposal is estimated to raise $9.802 billion over ten years.

It’s quite clear to see the many problems that could be created if this piece of legislation was enacted.

Of course, after this was exposed, Kate Szostak, a staffer on the Banking Committee quickly tried to kill any doubts and/or concerns people had with the legislation:

“This is not a controversial provision or a new one. Republicans and Democrats on the Senate Finance Committee have supported it for months, and it has been included in the Administration’s budget proposal for years. This provision simply requires banks–not small businesses–to report sales transactions to the IRS each year and to merchants at the end of each day. It makes the tax system fair for everyone, without burdening small businesses and without putting consumers’ privacy rights at risk.”

With all due respect to Kate, this is indeed a very controversial provision that could greatly effect how business is done online.

For example, let’s say I sell 500 widgets on Ebay every month and at the end of each month, $20,000 or so is transferred into my bank account. Stop. That is basically what is going to be reported to the IRS and filed away under your EIN or SSN and it should be no surprise that they are going to be there at the end of the year waiting for you to pay taxes on it.

However, if you’re a business owner, there is much more to this equation than the IRS would be seeing. Nowhere in this reporting would Ebay or the IRS have any idea how much each of these widgets cost you. Sure, you might have had $20,000 transferred to your account, but what if you had to spend $19,500 on acquisition and shipping of the widgets?

This number has to first be deducted from the $20,000 before any accurate representation of income can be generated. When you tack on other things like operating costs, it’s even easier to see how the IRS is going to have skewed numbers.

I’m sure many of you are now asking, so what, you’ll report all of this on your tax forms and pay taxes based on that.

The reality is that even if this is the case, with the IRS having all of this data, they are going to be looking harder than ever for anyone that is cheating the system. Any discrepancy on either end could potentially throw up a red flag and lead to an audit. No matter what criteria they create, there is always going to be a discrepancy in numbers, simply because each small business operates in a different way, having different pricing structures, sales models, operating costs, exposure, etc.

With this legislation, I don’t see how the IRS would be able to operate without a major expansion, and that’s just to cover the oversight of this data. There are many other arguments that people have brought up over this legislation, including privacy concerns and other important logistics, but for some reason, some of our elected officials don’t want to bring this up for more debate and are hoping to end discussion of this in the next 48 hours.

So, that’s where we come in and help disseminate information exposing America’s #1 R.I.N.O., Senator Chuck Grassley.


Here are some other bloggers that are also covering this topic, and have made excellent posts.