California lawmakers thought they were targeting Amazon.com, the out-of-state giant, when they voted last week to force Internet retailers to collect sales tax.
It turns out eBay Inc., California's own golden child of e-commerce, isn't so thrilled about it, either.
The San Jose online auction company says the legislation would hurt its business model, which relies on thousands of entrepreneurs who sell goods on its site.
The intent may have been to go after Amazon, but "we're literally caught in the crossfire," said David London, eBay's senior director for state government relations.
Legislators have tried for years to tax Internet commerce. Last week, they passed the latest version of the so-called "Amazon tax," requiring online retailers to collect California sales tax from their customers.
Gov. Jerry Brown has given the legislation his tentative blessing, telling reporters last week that it's a "common sense idea."
The legislation, AB28 X1, is in some limbo. It was part of the budget package that Brown vetoed, and legislative staffers have been trying to determine whether the Internet bill can go to the governor as is, or must be passed again by the Legislature.
The idea behind the legislation is twofold. Besides raising an estimated $317 million in additional revenue, lawmakers said the tax is designed to create a level playing field for brick-and-mortar California merchants, who already collect sales tax.
They say it was written in a way to prevent any harm to eBay.
"By no means is the bill targeting eBay," said Assemblywoman Nancy Skinner, D-Berkeley.
With eBay in mind, the legislation exempts out-of-state sellers who sell less than $500,000 a year worth of goods to Californians. (Under existing law, in-state sellers have to collect sales tax if they make more than three sales a year to Californians. That won't change.)
But eBay argues that the exemption doesn't go far enough. The company told lawmakers that many of its sellers generate more than $500,000 a year worth of business in California, and will be forced to collect the tax.
"We will continue to advocate for a small business threshold above the current $500,000," London said.
Skinner said lawmakers believe $500,000 represents a "sweet spot" -- a compromise that exempts smaller eBay sellers while still accomplishing the legislation's main goals.
eBay wouldn't say how many sellers would be affected by the legislation, nor would it say how it would respond if Brown signs the bill.
For its part, Amazon has threatened to sever ties with its California "affiliates" -- several thousand businesses that earn commissions by referring customers to the Seattle company. Overstock.com, based in Salt Lake City, has issued a similar threat.