Small Businesses Received Relief From Congress – But Not The Way You Think

With Congress out on summer vacation for a few weeks, the passage of the economic competition package (formerly known as the CHIPS and Science Act) brought some relief to small business owners, not through the inclusion of new programs but by excluding harmful legislation.

Originally, included in this legislation were three harmful provisions:

• The SHOP SAFE Act: This bill would have imposed new restrictions and requirements on marketplaces such as eBay, Etsy and Amazon, including a mandate to ban sellers after three complaints of counterfeit listings. Sellers would have been presumed guilty until proven innocent, forcing them to fight some of the world’s biggest brands.
• The Import Security and Fairness Act: This provision would have imposed tariffs on low-value imports from China by eliminating the customs “de minimis” threshold. There are a lot of small businesses that rely on the de minimis threshold to be competitive. The elimination would have raised consumer prices and further complicated supply chain disruptions.
• Country of Origin Online Labeling Act: This proposal would have required online sellers to disclose the country of origin of all products they sell online, including used goods sold domestically.

While preventing these proposals from becoming law was a big win for small businesses, there are still two additional provisions receiving significant support from marketplaces as they believe these would be good for small business sellers.

• The INFORM Act: This bill would improve the safety and transparency of online marketplaces while including workable protections that would aid the safety and privacy of online sellers. Originally, eBay, Etsy, and some other marketplaces opposed this bill. But since then, lawmakers made significant changes to gain industry support. Passage of this bill would eliminate the need for sellers to comply with a patchwork of different state laws.
• 1099-K Reporting: This one is the big elephant in the room that will impact many small lower volume sellers this year. Under new 2023 IRS rules that became law via the passage of the American Rescue Plan Act of 2021, online marketplaces and payment processors must issue a 1099-K form to all sellers that sell a minimum of $600 on their platform. That is a substantially changed requirement from the previous federal threshold of $20,000 and 200 that applied to most sellers (some states had lower thresholds already). A coalition of online marketplaces, including eBay, Etsy, Poshmark, Mercari, OfferUp, Reverb, and Tradesy have formed a coalition to try to change this regulation. Learn more here.

Small Businesses Continue to Face Challenges

It’s been another eventful year with inflation dampening online commerce growth and raising prices on many small businesses.

While inflation affects all businesses, larger companies are usually better able to adjust to such headwinds. Small business owners, often afraid to raise prices, or make significant changes to their operations, tend to face more existential challenges.

With three regulations thwarted, the two above remaining ones need attention to help small businesses and marketplaces thrive. Especially the 1099-K situation is potentially giving many occasional sellers a huge pause leading into the holiday season.

Note: The information in this post was inspired by an eBay Government Affairs update from last week.

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