eBay 2009 Annual Report Download - page 43

In addition, Bill Me Later faces other risks similar to those faced by PayPal, including the risk of system
failures, security breaches or other loss of customer data, fraud, intellectual property claims, compliance failures,
and changes to regulations relating to credit offerings described in these Risk Factors, including under the
captions “Government inquiries may lead to charges or penalties” and “If our Payments business is found to be
subject to or in violation of any laws or regulations, including those governing money transmission, electronic
funds transfer, money laundering, counter-terrorist financing, banking and lending, it could be subject to liability,
licensure and regulatory approval and may be forced to change its business practices.”
Our business and users may be subject to sales tax and other taxes.
The application of indirect taxes (such as sales and use tax, value-added tax (VAT), goods and services tax,
business tax, and gross receipt tax) to ecommerce businesses such as eBay and to our users is a complex and
evolving issue. Many of the fundamental statutes and regulations that impose these taxes were established before
the growth of the Internet and ecommerce. In many cases, it is not clear how existing statutes apply to the
Internet or ecommerce. In addition, some jurisdictions have implemented or may implement laws specifically
addressing the Internet or some aspect of ecommerce. For example, the State of New York has passed legislation
that requires any out-of-state seller of tangible personal property to collect and remit New York use tax if the
seller engages affiliates above certain financial thresholds in New York to perform certain business promotion
activities. Several ecommerce companies are challenging this new law. North Carolina and Rhode Island have
also enacted similar laws related to affiliates, and a number of other states appear to be considering similar
legislation. While the new laws in New York, North Carolina and Rhode Island do not specifically apply to our
businesses, the proliferation of such state legislation, particularly as many states seek to expand revenues
generated from broader taxes, could adversely affect some of our sellers at some point in the future and indirectly
harm our business.
In conjunction with the Streamlined Sales Tax Project — an ongoing, multi-year effort by U.S. state, and
local governments to require collection and remittance of distant sales tax by out-of-state sellers — bills have
been introduced in the U.S. Congress to overturn the Supreme Court’s Quill decision, which limits the ability of
state governments to require sellers outside of their own state to collect and remit sales taxes on goods purchased
by in-state residents. Similar legislation may be considered by the current U.S. Congress as a way to enable states
to increase sales tax revenues and help address significant state budgetary shortfalls caused by the economic
downturn. The adoption of any legislation overturning the Quill decision that lacks a robust small business
exemption would result in the imposition of sales taxes, as well as costs associated with complex sales tax
collection, remittance and audit compliance requirements on our sellers, would make selling on our websites less
attractive for small retailers, and would harm our business.
From time to time, some taxing authorities have notified us that they believe we owe them certain taxes. In
May 2008, the City of Chicago notified both eBay and StubHub that they are liable for a city amusement tax on
tickets to events in Chicago, irrespective of the location of the buyer or seller, and has filed suit to enforce
collection of taxes they claim are due. In March 2009, the court ruled that StubHub is not required to collect and
remit the city amusement tax. The City of Chicago has requested reconsideration of this ruling and StubHub has
sought clarification of the ruling relative to the remaining counts as well. In August 2009, the court granted
StubHub’s motion for reconsideration and entered a final order dismissing the case. In September 2009, the City
of Chicago filed an appeal that is pending. The application of similar existing or future laws could have adverse
effects on our business.
Several proposals have been made at the U.S. state and local level that would impose additional taxes on the
sale of goods and services over the Internet. These proposals, if adopted, could substantially impair the growth of
ecommerce and our brands, and could diminish our opportunity to derive financial benefit from our activities.
The U.S. federal government’s moratorium on state and local taxation of Internet access or multiple or
discriminatory taxes on ecommerce was extended through November 2014. This moratorium does not prohibit
federal, state, or local authorities from collecting taxes on our income or from collecting certain taxes that were
in effect prior to the enactment of the moratorium and/or one of its extensions.
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