Internet sales tax would challenge online mom-and-pop shops

This isn't your typical rags-to-riches story. It's the kind of tale you might read if Horatio Alger had been a clever couch potato.

Armchair entrepreneur Jason Smith has crafted the sort of successful career that is possible through the online looking glass. The Las Vegan is an eBay sales mogul, an eagle-eyed thrift-store shopper extraordinaire whose business has grown substantially since he began hawking items online 13 years ago.

He's also a critic of plans in Congress to compel him to collect taxes from his out-of-state buyers. I'll get to that, but first a little background about his intriguing business model.

At 41, thrifting is in Smith's blood. He grew up hitting weekend garage sales with his mother and grandmother and learned the value of other people's castoffs. After a job-related injury left him rehabbing at home, he decided to put his knowledge to work on the Internet. And Thrifting With the Boys was born.

Smith now spends much of his day scouring secondhand stores for first-rate bargains. From clothes to tiki mugs, purses to board games, he sniffs out the undervalued items and displays them on eBay.

Sound like a nice little hobby?

It's more than that. These days Smith employs assistants and ships 300 to 500 packages a month, up to 700 during the Christmas holidays.

"I make enough that my wife has never bugged me to get a 9-to-5 job," he says.

That much, huh?

What's more, he's also become a spokesman for the online sales phenomenon. He helps others break into the great eBay garage sale and makes speaking appearances to offer his tips to the growing legion of resale entrepreneurs.

"Some people make extra money," Smith says. "Some make ends meet with what we've taught them."

His greatest challenge these days isn't finding a designer blouse for a buck or a signed first edition for 50 cents. It's avoiding getting steamrolled by the growing momentum in Congress to start taxing Internet sales.

That issue led Mr. Smith to Washington recently as part of eBay's citizen lobbying contingent. States facing gaping, recession-related shortfalls are looking to alternative sources of revenue generation. Multiple ideas are making their way through Congress, at least one enjoying heavy support from corporate big-box stores, and are being met with varying degrees of interest.

Count Smith and scores of other small-business operators like him as critics of changes that could take the fun and profit out of their diminutive empires. Their greatest challenge: Calculating sales taxes across state lines. There are only about 9,000 of those jurisdictions in the United States, an eBay representative says.

In Nevada, Gov. Brian Sandoval recently crafted an agreement with online giant Amazon to collect taxes on its in-state sales. For his trouble, Sandoval is being hit by the state's tax-paranoid conservatives.

As for Smith's personal business model, he reminds me that someone already paid taxes on his merchandise when it was new. He paid taxes on it when he plucked it from secondhand-store obscurity. He also believes forcing small and essentially unsophisticated mom-and-pop sellers to adhere to a complicated sales tax scenario will put them out of business almost before they get started.

Paying an in-state sales tax is one thing, eBay government relations manager Caitlin Brosseau notes, but expecting the Jason Smiths of the marketplace to become accounting and tax law experts is wholly unfair.

"There should be protections for small businesses," she argues.

After returning from Washington, Smith went back to working the local thrift-store circuit for bargains. Clothes are his biggest sellers, followed by record albums, ceramics, purses, toys and games.

The tax games being played in Congress are out of his price range.

John L. Smith's column appears Sunday, Tuesday, Wednesday and Friday. Email him at Smith@reviewjournal.com or call 702-383-0295. He also blogs at lvrj.com/blogs/smith.