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Analyzing the Real Impact of Taxing E-Commerce
sashae writes: "We've heard a lot over the last couple of months about the gigantic dollar-figure sales the net has been generating, that the US Gov't has missed out on taxing. American Outlook magazine has an article about the true impact of Internet sales on taxes that the states would normally collect. "
When telephone service and credit cards became common, making it easier and faster to order from mail order companies across state lines, the government didn't decide to tax those sales. now, the internet has made it possible to do EXACTLY the same thing (only easier and more user-friendly), and the government wants to tax it. why should transactions completed online be treated any differently than those completed over the phone? businesses like amazon.com must have warehouses or NOC's somewhere, so why not tax purchases in those states? if you look closely, ordering online is not fundamentally different from ordering from a catalog by phone, so don't treat it differently!
If you are in any doubt as to what that dose to an economy you need look no farther than Jamaica. Right now we carry a heavy tax burden. Our government is still trying to figure out new ways to bleed money from the economy. These include;
:)
25% income tax
15% sales tax
40% import duty on consumer items ( like cloths ).
20% Duty on trucks
40% to 280% on cars ( depending on the CC rating. There are around 3 Cadilacs in kingston
1/2 the cost of gasoline and electricity are tax.
In fact the only sensible thing is that most computer equipment attracts only the 15% sales tax and books and magazines of all types are tax free.
What dose this do to an economy ?
17% to 35% unemployment ( depending on which figures you trust )
Devaluation ( from J$5 to U$1 in 1989 down to J$42 to U$1 now )
Low tax revenue. The cost of servicing the government debt actually exceeds the total tax revenue. Seriously, the old concept that "the more tax you charge the less you collect is true.
If you Americans want to follow the same path then go right ahead. Tax everything and tax it heavily. Maybe after a few decades of such abuse you will drop into the same hole as we are.
BTW : Our government has not figured out how to tax eComerse yet anyway.
--= Isn't it surprising how badly I spell ?
Businesses are always one step ahead of lawmakers (that's what corporate lawyers are paid the big bucks for). Pick at random a large mail order business , say BMG or one of the other "12 for the price of 1" CD resellers. Look at the package your new Backstreet Boys cd came in . Note that the address is usually from some sparsely populated midwest state (North Dakota, Iowa, etc). Reason? These companies calculate where their business comes from and move their location to areas where they get the least amount of taxable sales. I assume most companies have avoided Alaska simply because of the expensive shipping costs, but if 6% sales taxes were levied in all 48 continental states you can bet there would be a huge jump in land prices in Anchorage. And don't get me started on how the state government would prove that these purchases actually occured. If i ever get a letter from the state of California that starts out "While routinely sniffing your ISP's network, we found a rather large set of encrypted packets which resemble a credit card number", I'll rescind my citizenship and head to the Keys. Of course, Uncle Sam can still tax my income for a few more years, but that's another story...
--BlueLines "The cost of living hasn't affected it's popularity." -anonymous
Also note that any future big dollars in general Internet retailing are likely to come from companies that also have a physical presence in most states, such as WalMart, and will therefore be required to pay sales taxes without any new laws.
This is true about walmart... at least it was. My roomate works in their internet engineering "team". After walmart online came "online" they realized this about the taxes and sold the online store to another company (that does not have stores in all 50 states). Now they dont have that nasty sales tax problem.
john
-- john
(I'll start with the standard IANAL disclaimer...)
;)
As far as I know, in the U.S., tax can't be charged on transactions across state lines. You'll see the simplest example of this on a mail-order catalog, where you only pay tax if you live in that state.
Now, for the Internet, the dilemma is that it has become very EASY to purchase goods out of your state. UPS and Fed Ex, and even the good ol' US Mail are getting very good at delivering things quickly. And sometimes, you can even download what you purchased.
No more 6-week waits to ship. This has made traditional merchants and the federal government fearful of lost revenue. So they say they want to tax the Internet. But the thing is, IT IS ALREADY BEING TAXED. Inside your state. The way it's supposed to be. The same rules mail-order catalogs use.
So in reality, the government wants to CHANGE the rules on us. So ok... let's say there's some flat tax on Internet transactions. Who ends up paying, really? The merchants (and I expect small business owners will get screwed even more, as usual).
Why? Because the tax rate, combined with the cost of shipping will make Internet purchases generally more expensive than traditional retail. So in order to maintain customer bases, the Internet merchants will have to either lower their prices (and profit margin), or find ways to make Internet shopping preferable, which is difficult. You are already removed from personal interaction with the customer by the nature of an online business.
I think tax changes will only benefit the old-school retail businesses. And I'd expect them to be lobbying heavily for it, if they aren't already. Oh yeah, and they'll probably want to vote for Gore too
Best regards,
SEAL
I haven't run any numbers on this myself, but that fellow's arguments look sensible. Wholesale isn't taxed anywhere in the U.S., the value of the transactions which are taxable will certainly fall if a tax is imposed, and so on. I think his basic point is sound: attempts to tax e-commerce will fail, and do far more harm than good in the process.
Another poster, above, pointed out the obvious: the solution is to eliminate sales taxes on the local merchants,too! That levels the playing field in a sane fashion. This is a solution that both ends of the political spectrum should like. Liberals are supposed to be against the sales tax because it's regressive. Conservatives are supposed to be against it because it puts a disproportionate burden on small business, and because it is economically inefficient. We need to make it clear to all who will listen that this is an opportunity to get rid of sales taxes everywhere. How to replace the revenue? Let each state figure that out for themselves. At least one will probably come up with a good idea.
See what I've been reading.