eBay 2012 Annual Report Download - page 34

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.
Similar issues exist outside of the U.S., where the application of VAT or other indirect taxes on ecommerce providers such as eBay is
uncertain and evolving. While we attempt to comply in those jurisdictions where it is clear that a tax is due, certain of our subsidiaries have,
from time to time, received claims relating to the applicability of indirect taxes to our fees. In April 2012, we received Notices of Reassessments
for tax years 2001-2005 from the Canadian Revenue Agency (CRA) which assert goods and service tax (GST) and harmonized sales tax (HST)
on our fees charged to Canadian users. These reassessments of GST/HST were the result of an audit of eBay International AG and are based on
the CRA's assertion that we were “doing business” in Canada for GST/HST purposes. We disagree with the reassessments and filed a Notice of
Appeal with the Tax Court of Canada in July 2012. Should such taxes become applicable, our business could be harmed. We collect and remit
indirect taxes in certain jurisdictions. However, tax authorities may raise questions about our obligation to collect and remit such taxes, as well as
the proper calculation of such taxes. For example, the Korean tax authority asserted that certain coupons and incentives available on our sites
should not be deducted when computing taxes on our fees. We challenged these assessments and in June 2012 the National Tax Tribunal issued
a final ruling in our favor. Should any new taxes become applicable to our fees or if the taxes we pay are found to be deficient, our business
could be harmed.
We do not collect taxes on the goods or services sold by users of our services. One or more states or the federal government or foreign
countries may seek to impose a tax collection, reporting or record-keeping obligation on companies that engage in or facilitate ecommerce. Such
an obligation could be imposed by legislation intended to improve tax compliance (and legislation to such effect has been contemplated by
several states and a number of foreign jurisdictions) or if an eBay company was ever deemed to be the legal agent of the users of our services by
a jurisdiction in which eBay operates. In July 2008, the Housing and Economic Recovery Act of 2008 (H.R. 3221) was signed into law. This law
contains provisions that require companies that provide payments over electronic means to users to report to the Internal Revenue Service (IRS)
information on payments received by certain customers. The legislation, effective for payments received after December 31, 2010, requires
PayPal and other electronic payments processors, as well as StubHub and similar companies, to report to the IRS on customers subject to U.S.
income tax who receive more than $20,000 in payments and more than 200 payments in a calendar year. This will require us to request tax ID
numbers from certain payees, track payments by tax ID number and, under certain conditions, withhold a portion of payments and forward such
withholding to the IRS. We have had to modify our software to meet these requirements and expect increased operational costs and changes to
our user experience in connection with complying with these reporting obligations. The IRS regulations also require us to collect a certification
of non-U.S. taxpayer status from certain international merchants. The Foreign Account Tax Compliance Act, which takes effect starting in 2013,
is likely to require an increase in the number of non-U.S. customers from whom we must obtain a similar certification, and to increase the
compliance burdens on us. These requirements may decrease seller activity on our sites and harm our business. Any failure by us to meet these
new requirements could result in substantial monetary penalties and other sanctions and could harm our business.
One or more other jurisdictions may also seek to impose tax collection or reporting obligations based on the location of the product or
service being sold or provided in an ecommerce transaction, regardless of where the respective users are located. Imposition of a discriminatory
record keeping or tax collecting requirement could decrease seller activity on our sites and would harm our business. Foreign authorities may
also require eBay to help ensure compliance by our users with local laws regulating professional sellers, including tax requirements. In addition,
we have periodically received requests from tax authorities in many jurisdictions for information regarding the transactions of large classes of
sellers on our sites, and in some cases we have been legally obligated to provide this data. The imposition of any requirements on us to disclose
transaction records for all or a class of sellers to tax or other regulatory authorities or to file tax forms on behalf of any sellers, especially
requirements that are imposed on us but not on alternative means of ecommerce, and any use of those records to investigate, collect taxes from,
or prosecute sellers, could decrease seller activity on our sites and harm our business.
We pay input VAT on applicable taxable purchases within the various countries in which we operate. In most cases, we are entitled to
reclaim this input VAT from the various countries. However, because of our unique business model, the application of the laws and rules that
allow such reclamation is sometimes uncertain. A successful assertion by one or more countries that we are not entitled to reclaim VAT could
harm our business.
We continue to work with the relevant tax authorities and legislators to clarify eBay's obligations under new and emerging laws and
regulations. Passage of new legislation and the imposition of additional tax or tax-related reporting requirements could harm our users and our
business. There have been, and will continue to be, substantial ongoing costs associated with complying with the various indirect tax
requirements in the numerous markets in which eBay conducts or will conduct business.
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