Did Meg Whitman abet and encourage tax evasion during the decade she headed the Internet auction house eBay? That emerged this week as a key question because Whitman, who has virtually no record in public life and little history of even casting votes, repeatedly cites her eBay tenure as a principal qualification to become governor of California. Essentially, she wants to become the state's chief tax policy maker, among many other functions.

Whitman currently leads all Republican candidates in early polling on the 2010 run for governor.

She brags proudly, loudly and often about taking over eBay as a fledgling start-up company, helping build it into a stock market giant and producing thousands of new jobs and businesses along the way.

She can do the same for California, she says, asking voters to see her record at Mountain View-based eBay as the best indicator of how she'd run state government.

One way eBay creates jobs is by encouraging untold thousands of individuals around the world to become sellers of everything from cars and houses to used clothing and fine art. All they need do is sign up with a little personal information that is kept secure by the auction house, then pay a small part of their take to the company. eBay sellers can call themselves whatever they like and most do not use real names.

This makes them very hard for tax collectors to track, both in California and other states and countries. Yet, those states and countries are entitled to collect sales tax from sellers operating within their boundaries, just like they do from other merchants. Order a pair of pants from the Internet clothier Land's End, for example, and you must pay sales tax even though the company's physical presence is in Wisconsin.

But order things from California-based eBay sellers and you will rarely be asked to pay any tax.

One reader of a recent column about the ultra-wealthy Whitman's chances to win the Republican nomination provided a list of more than 200 California-based eBay sellers he said he has patronized without being asked for a penny in sales tax. A random check of sellers on the list proved that claim correct.

The state Board of Equalization (BOE), which collects sales taxes, knows of this form of tax evasion, one that sees eBay sellers undercut their competition by not charging sales taxes that average more than 9 percent in this state. That's like giving all their customers a significant discount. Illegally.

"eBay is not evading here," says BOE member Bill Leonard, a former Republican state legislator from San Bernardino County. "The allegation has been made that many hundreds or thousands of its sellers are evading."

Some BOE staffers say the taxes evaded total in the billions of dollars over more than 10 years.

Leonard, a leading supporter of Insurance Commissioner Steve Poizner, one of Whitman's Republican rivals, confirms the tax collecting board asked eBay for lists of its California-based sellers while Whitman was there, only to be rebuffed. "If we ask for that information, there's no law requiring them to provide it," he ruefully said.

Whitman's deputy campaign manager for communications, Tucker Bounds, responded that "Tax collectors have a job to do that shouldn't require sniffing through the private records of ... eBay users. Meg believes that the privacy of Californians should be respected by government."

eBay continues to protect such privacy even when its sellers evade taxes they owe. The firm also has refused to provide information to other states.

At issue here is not whether eBay under Whitman violated the law. The clearcut spirit of the law is another matter.

"It's not that what they did is technically illegal," said Leonard. "But it's one reason why eBay executives should not run for high office."

The upshot is that an executive who helped deprive California of the chance to collect big money -- thus contributing significantly to the ongoing fiscal crisis -- now wants to manage the state's finances.

In a recent interview, Whitman challenged voters to "evaluate my entire record." This is part of it.

It's true that every candidate carries some negative baggage into any campaign.

The open question: Will public opinion change when voters learn that Whitman's refusal to allow tax collectors access to her company's records has contributed and still contributes substantially to California's financial plight?

Thomas D. Elias is a syndicated columnist on California issues.

(Nov. 3, 2009)