Will online sales tax plan hurt small businesses?

(CBS News) The U.S. Senate on Thursday moved closer to passing a bill that could put an end to tax-free shopping online. A final vote has been delayed until May 6, when lawmakers return from vacation.

Right now the law says that if you are an online retailer without any presence in a state, you don't have to charge taxes. In fact, the consumer who purchases from the site is responsible for declaring that money.

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However, as CBS News contributor and analyst Mellody Hobson explains, no one actually follows through on this. The goal of the new law would be to "level the playing field" between online retailers and brick and mortar businesses.

The bill has a lot of supporters who say it eliminates an unfair advantage for online retailers, but some opponents, like eBay, worry it will hurt small business who sell online.

"These are very, very small businesses that employ less than 10 people, or even less than 20 people," said eBay Vice President Tod Cohen. "And for them to take the amount of time and effort necessary to comply with all the laws, and more importantly to deal with the enforcement of those laws, puts them at a real disadvantage to their larger competitors."

Hobson thinks the eBay complaints are "a little flimsy," since there is a caveat in the new legislation that says if your business makes under $1 million a year, you don't have to collect any taxes, so it would not impact the smaller mom and pop companies. Beyond that, Hobson points out that it is only fair that everyone pays the same amount of income taxes.

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On the flipside, Hobson said Amazon is actually in favor in the legislation as the Internet giant's business model actually would allow it to make money off of such a new law. The company has started to build large business warehouses in many cities to help consumers get products quickly, and so already having a brick and mortar presence means taxes would need to be collected.

"I talked to two very senior former Amazon employees who told me 40 percent of their sales are through third parties where they share revenue and they're now going to charge those third parties a fee for collecting taxes, so they'll make money on collecting taxes," said Hobson.

For Mellody Hobson's full interview, watch the video in the player above.

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  • Shoshana Davis

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