IRS Proposal Could Change Ecommerce

    May 8, 2007

The U.S. Treasury Department wants to crack down on Internet businesses like eBay and and require them to share their customer’s personal data with the Internal Revenue Service.

The proposal is an effort to collect unreported income generated by online sales.

It would require online "brokers" to file income statements for all customers who use their sites and have 100 or more separate transactions that total $5,000 or more per year.

The information that online brokers would have to collect includes customer’s names, addresses and Social Security numbers or taxpayer identification numbers.

The proposal would go into effect on January 1, 2008.

The Center for Democracy and Technology says the IRS proposal is disturbing on many levels.

They point out that, "it calls for the collection, storage and transmission of large amounts of sensitive personal information at a time when Internet users are increasingly concerned about identity theft; and when public- and private-sector data breaches have become routine."

Ari Schwartz, deputy director of the CDT says that while the IRS only wants income statements from businesses that earn $5,000 from 100 transactions, most online sites will record personal information from everyone who uses their site.

The reason for that is the sites would be liable under the proposal.

The CDT raises the issue of what this proposal could do to ecommerce.

"Forcing businesses to collect SSNs could have a chilling effect on legitimate e-commerce if consumers balk at providing their SSNs for simple transactions — something most people are not accustomed to doing."

While no lawmaker has come out in support of the proposal, it is in the President’s 2008 budget and the fear is it could slip into a larger legislative package.

It would seem companies such as eBay and Amazon would lobby strongly against such a proposal, along with smaller sellers or anyone involved in ecommerce.

While collecting tax revenue is important there has to be a less invasive way of carrying out such a proposal.