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Controversial Housing Bill Includes Provision to Tax E-Commerce

by Mark Jaffe (06/29/08).

While both house of Congress have been working with dispatch to pass a massive 630-page bill to aid homeowners facing mortgage default – on June 24 an amendment was slipped into the legislation that would have a marked impact on Internet commerce for collectibles, antiques, as well as for small businesses.
The amendment would require credit card and alternate payment processors – such as eBay’s PayPal, Amazon and Google Checkout – to report to the federal government sales made by their customers. The companies would be required to provide the name, address and Taxpayer Identification Number of each participating payee and the gross amount of the reportable transactions.
The housing bill HB 3221 – sponsored by Sen. Christopher J. Dodd (D-CT) – would provide federal loan guarantees to about 400,000 homeowners facing mortgage default.
The e-commerce amendment was added to help the Internal Revenue Service more effectively monitor Internet business and one provision, according to the industry newsletter “payment daily news digest,” requiring the deduction of tax withholding would turn the companies into tax collectors and generate up to $10 billion in revenue for the government.
The proposal has drawn criticism from groups on both the right and the left. FreedomWorks(www.freedomworks.org), a conservative lobbying group chaired by former U.S. House of Representatives Majority Leader Dick Armey, a Texas Republican, calls the bill a serious invasion of privacy since all sales would be logged into a massive database.
“At a time when concerns about both identity theft and government spying are paramount, Congress wants to create a new honey pot of private data that includes Social Security numbers,” Armey says.
The liberal Center for Technology and Democracy has warned that the amendment “could create serious problems for small businesses in the event that credit card companies or other payment facilitators make errors in recording or reporting data; and would establish a dangerous precedent in enlisting private sector intermediaries to track the behavior of customers for purely governmental purposes.”
Both houses are pressing to send a bill to President Bush soon after the July Fourth holiday.
Worthologist Chris Hughes, who regularly engages in online commerce, does not support the provision in Sen. Dodd’s bill. “I recognize the need to tax e-commerce, but the method has to be fair, well-thought-out, and less intrusive than the proposed amendment in this bill. Until this can be accomplished, the government will just have to trust people to maintain their own records.”

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