Slashdot Mirror
The Inevitable Internet Sales Tax?
shankwound asks: "My company is going through a Pennsylvania State tax audit. The auditor claims that we owe sales/use tax on all of our Internet purchases. I thought that there was some kind of federal moratorium on Internet taxes. Apparently I was wrong. Our friendly auditor has worked up quite a bill with tax and penalties. Paying this bill off won't be fun. Although computer related services are exempt under PA law, online purchases of tangible personal property are not. On the federal level, U.S. Rep. Christopher Cox seems to be leading the battle against "new" Internet taxes, but that doesn't stop any already existing state sales/use taxes from being applied. The federal law has specific exemptions that don't cover existing taxes. I bet the general consensus is that you don't owe tax on Internet purchases of any kind. I'm wondering what Slashdot readers think about issue and if anyone has had a similar experience with their state auditors. Don't be caught off guard. Check your state's Internet tax rules before you're audited." For those of you running e-Commerce sites, now might be a good time to check those local tax laws.
There's a similar blank for use taxes on the Indiana tax forms. Of course, Indiana also expects you to pay IN state taxes on cars, boats, and farm equipment that you bought in another state even if you already paid sales tax in that state. If it weren't for basketball and not having to change your clocks twice a year, there wouldn't be anything good about living in Indiana. Sigh... I miss it.
Illinois has a write-in blank for use tax but doesn't list the Internet yet. They do list buying over the phone, so maybe if you had an analog modem you're still liable, but not cable modem subscribers. Of course, none of the directions in the state tax forms tell you to fill out that page and/or add it to your total (the use tax page is at the back, away from the other tax forms) so I'm not sure if you're really required to fill it out or not.
Your right to not believe: Americans United for Separation of Church and
In all states that charge a sales tax, you are obligated to pay the tax on goods purchased out of state. You must pay the tax yourself, as states are prohibited from forcing out-of-state businesses (meaning businesses with no physical presence in the state) to collect the tax themselves. The moratorium on "Internet" taxes only applies to tax laws that singled out internet transactions for special treatment.
The enforcement for out-of-state purchases has been somewhat lax, but nevertheless, you are leagally obligated to pay it. (Voluntary compliance is the backbone of the American system of taxation.)
SirWired
If we could somehow eliminate these two problems, then Americans wouldn't see taxes as a four-letter word.
America was founded by the actions of tax protestors. The American people have a looooong history of resisting taxation. Can you imagine what we'd be paying if it were otherwise?
Most Americans grumble, but don't begrudge local sales and property tax, because they can see the results of paying it (police, fire, streets, libraries, schools, etc).
Most Americans deeply despise and strongly resist federal income tax, because they can see the results of paying it (pork-barrel programs, overflowing welfare rolls, vast and unresponsive bureaucracy, corrupt legislators, Oval Office blowjobs, etc).
======
"Rex unto my cleeb, and thou shalt have everlasting blort." - Zorp 3:16
Sacred cows make the best burgers.
(Warning: I am not an accountant.)
Now wait a second.
Sales Tax is levied against the state of sale, not the state of purchase. If your company has legal presence in Pennsylvania, and purchases something in Pennsylvania, you're obviously liable for Sales Tax.
However, if your company has legal presence in Pennsylvania, and you're purchasing something from Illinois, then the right to apply Sales Tax to that purchase falls to Illinois, not Pennsylvania. (Of course, if you've got legal presence in Illinois as well, they're going to make you pay.)
If Pennsylvania is attempting to tax a sale that did not occur within their jurisdiction, they're likely violating interstate commerce laws. At minimum, you might be able to argue away the penalties on the basis that you couldn't reasonably have been expected to interpret the tax code in the same way as the auditor. Most likely, you should retain a genuine taxation attorney and ask his or her advice. It's likely to be less than the cost of your painful tax bill.
Yours Truly,
Dan Kaminsky
DoxPara Research
http://www.doxpara.com
Our constitution prevents taxation without representation. State Taxes are used for that state's roads, schools, parks, community development plans, etc. I don't have a presence in that state, therefore, I should not have to pay taxes there according to our nation's constitution.
I've moved to a permanent job. I was a visiting professor at UNI, but now I'm regular faculty at Penn State. A couple of days on the road, a few more unpacking, and then fighting the dark side on my machine. Now that I have FreeBSD installed, the world is right again (or will be once I figure out why it won't give me libXpm when I install X, blocking me from running fvwm and building lyx . . .:)
:) 8x8, half a second floor, and maybe attachable walls for the winter (windows will go from about 3 feet up to the roof during summer).
I'll be in and out all summer, probably only coming in a couple of days a week. I'm long overdue for some time off and a lot of playtime with the kids . . . and I'm going to build them the mother of all playhouses
hawk, a daddy, too
That's what it means to live in a democracy. You're free to you opinion, but that doesn't give you the right to break the law. The law is supposed to be based on what the majority of the population wants. If you don't want your tax money going to an abortion clinic, go out and start or join some political campaign. If it's not important enough for you to go to that effort, don't complain.
All goods sold in the UK that are rated for VAT must have the VAT charged on the sale price - in the UK it isnt the consumers responsibility to pay the tax, its the vendors. They have to account for every item sold and pay HM Customs the VAT for that sale. No exceptions - every business with an annual turnover above a certain threshold has to do it and it is based on turnover not profits. Charities and other non-profits have to account for it too. The problem is that goods sold for export shouldnt be taxed as they are assumed to be taxed at the borders of their destination country.
Thats why theres a customs booth at all UK international airports where you can present the VAT receipts for your purchases whilst visiting the UK, fill in a form and claim the VAT back. Note that you're paying it along with the sale price but the vendor is collecting it for the Customs, thus it is the Customs that pay it back to you when you show 'em the item and say "look, I paid this much vat on this but its going abroad with me, back to where I live" I dont know how the system works with items ordered for overseas delivery but you might consider looking for a contact address for HM Customs and asking them - or perhaps the trade section at the nearest UK embassy or consulate.
# human firmware exploit
# Word will insert into your optic buffer
# without bounds checking
I had a
As a lifelong resident of PA, and as a tax-paying computer technology business in the state of PA, I can hnestly say this guy either needs to hire an accountant, or become one. This is a mix up that should not have happened. Internet purchases are handled just like mail-order purchases. The vendor is only required to collect tax on purchases from customers in states where the business has a physical presence. If the customer is out of state, then the customer is required to pay the appropriate sales tax to their own state as part of their tax returns. Failure to do so can result in penalties and fines, as well as payment of back taxes.
That is what this gent was hit with, NOT an Intenet tax. Sales tax. He failed to note this in his post. I'm sure the auditor pointed that out when making his calculations on 6% of those purchases (6% is the PA sales tax rate).
The Internet Tax Moratorium prohibits federal taxes from being levied on anything Internet for now. It also tells states that they are not to levy taxes against the Internet per-say. But it doesn't stop them from making the access fee we all pay ($20 for modem users generally) for our Internet accounts taxable under sales tax laws. No state can create any NEW taxes pertaining to the Internet.
It's complex, but it can be boiled down quite nicely. Unfortuantely, this gent's situation can and will happen to folks in every state of the US. This is a sales tax situation on mail-order purchases. Some auditors are more lax on mail-order taxes than others. Unluckily, this guy pulled a hard case.
jX [ Make everything as simple as possible, but no simpler. - Einstein ]
My state is actually Nevada, but that's anothe rstory :) I just arrived in Pennsylvania . . .
:)
Anyway, the tax isn't on the business, but the consumer. It's just that for in-store sales, the business is required to collect it.
The taxes on sales to refurbish a particular area
are a particularly dumb idea, even for governments--they actually discourage people from buying in that area . . .
I dunno about sin taxes--I like taxing other people's vices. So better beer (Sam Adams is my lower limit), single malt whiskey (not just scotch; the best single malt in my collection is actually Irish [Bushmill, I think; no, not their regular whiskey]), and heavy red california wine should not be taxed. Swill-grade beer (coors, bud, miller and down [*shudder*]), french and eastern wine, vodka, marijauna, and prostitution should have a tax rate that maximizes revenue
hawk
It's not really sharing then is it?
This
Taxes have one major benefit for the people: They fund public projects. Public projects are good, they are things like roads, schools, libraries, busses etc. Without taxes you don't get these things.
If you poll most Americans (or read existing polls which have been done on this subject), you'll find that most Americans are willing to pay taxes if they know the money will be spent on worthwile public projects. That is, they're willing to pay more in taxes if they know the money is going to fund schools or libraries or whatever. Recently, in Fresno (for example), the voters overwhelmingly voted themselves a tax increase in the form of the "Arts to Zoo" proposal which would increase funding for libraries, museums, the local Fresno Zoo, and other similar projects--and pay for them in an increase in the local sales tax levy.
The problem that most Americans have with taxes is that they appear to believe that the majority of taxes is being "wasted" on "pork-barrel" projects and on paying bureaucrats who are "out of touch" or are "unresponsive" or "do not care." To support this assertion, we are constantly bombarded with reports of a $3000 toilet seat or an 8-lane highway built in the middle of nowhere.
The other problem that most Americans have with taxes is the belief that taxes are being assessed "unfairly"--that is, they believe that the rich are somehow not being forced to share their fair load, and that the middle class is having it socked to them. And in a sense, if you count Social Security (where 15% of your income up to around $70K or so goes to social security, but each dollar you make above that cut-off is only taxed at 2%), then there is a middle-class "vortex" where the combined income and social security taxes take a greater percentage of your income than those who are rich and paying the top income bracket.
If we could somehow eliminate these two problems, then Americans wouldn't see taxes as a four-letter word.
Oh, and in Los Angeles, traffic is worse than it is in Seattle: yesterday, my drive at 6:00 in the morning (when traffic is supposed to be "light") to the LAX area from Glendale (about 30 miles) took me about an hour and three-quarters. The reason for this, though, is that the city of Los Angeles and the State of California, instead of spending money to widen the freeways, spent several tens billion dollars on a subway and light-rail project which only has a maximum capacity of a hundred-thousand or so per day, and has a fixed commute pattern (from the outerlying communities to downtown Los Angeles) which runs counter to the decentralized commute patterns that are normally used by Angelinos.
This is a perfect example of why Americans have problems with paying taxes: because no effort was made to increase the capacity of the freeways here, average traffic speeds during rush-hour traffic is now down below 17MPH (yes, seventeen miles per hour), yet even if the entire LA metropolitan area could rearrange itself to maximize use of our new multi-billion dollar subway system, we'd perhaps reduce traffic by a couple of percentage points.
I'd rather have taken the money used to pay for the art installations around the Hollywood subway stop and used it to help support the LA county museum of art. But no-one asked me...
If anything people will have more disposible income due to a) lowered tax rates for most people and b) lack of withholding from your paycheck will give you a great deal more "take home pay"
More disposable income, yes. But they'll be disposing of it a hell of a lot faster.
- StaticLimit
Depends what you buy on-line. Software that you download directly is free of the GST[1].
Tangible goods ordered on-line are not. If the goods get physically shipped, good old Canada Customs will make sure that you pay the GST on them[2].
England's VAT is kinda weird though. I ordered some software from England last year and I still had to pay their VAT on it. Seems strange as I live "across the pond" as it were. Got away with not having to pay GST as the declared price on the package was in Pounds. Mr.Customs agent did not do the conversion 1 Pound == 2+ CDN. So the package was under the GST limit.
[1] The government might have different opinion. I'm sure I'm not going to tell them about this loophole.
[2] Only if the goods are above a certain value $20-$30 CDN AFAIK/IIRC.
-- Spammers: My E-mail server is in California. Consider yourself warned.
Ok, So how many individuals voluntarily write their states a check for purchases made out of a catalogue or online? It isn't until you get caught that there is a problem. It doesn't matter if the goods I purchased online are resold, they are taxed because I didn't buy from a distributor, even if I'm a reseller. There were a few local articles here that suggested that online purchases were not treated as mail order purchases and that PA was not collecting Use or Sales tax on these items.
Dept. of Corrections...."Most inmates receive at least one shankwound within their first 6 months of incarcerat
Bzzzzzt! Wrong! In fact, calculating the appropriate sales tax to collect is still practically impossible. A lawyer might deem this a trivial task (a "lookup table by zip code...") but in fact any quick survey of states where local sales taxes are permissible will instantly reveal the fact that zip codes and municipal boundaries frequently do not coincide.
Consider California: the state has a sales tax, each county can assess a sales tax, plus each city can assess a sales tax. In addition there are several special sales tax districts such as the Bay Area Rapid Transit District that can assess a sales tax. Zip codes in California do not necessarily map to county or even city boundaries. (You can view California sales tax rates, by county, here.)
This is an excellent example of a looming problem in government: Hawk, the writer of this post, is a legal scholar who "gets it." He was an authority cited by SlashDot when Judge Jackson's findings of fact in the Microsoft case were issued. He's the kind of lawyer that other lawyers will ask for guidance on public policy issues like assessing sales taxes. And, in fact, (on this specific issue) he's flat wrong. Calculating local sales taxes is anything but trivial, and you can't use zip codes to do it. Am I dumping on Hawk? Not really--I'm using this as an example of the serious problem we as a people face as our elected representatives try to come to grips with the Internet and the digital age. It's easy for a congressman or a judge to hear a Penn State professor say, "it's trivial" and blithely charge ahead--or write a decision--with that in mind. And having heard once that something like this is trivial, they aren't going to be dissuaded by anything less than an overwhelming amount of data. He's a professor, after all.
Moral: Do not ask a database programmer to write an appellate brief for you. And do not ask a lawyer to explain computer technology.
Since the Federal system is suppsoed to handle intrastate trade and State systems hand interstate trade, doesn't this fall solely into the Federal Category? Otherwise, what's to stop say Virginia from charging a tax on all American citizens who use the internet because we got Internic and AOL. States like California are already very agressive on claiming tax on residents of other states, this could get really fun before its over.
Glad to hear all is going well. Just don't let your kids catch you reading Slashdot -- you want them to respect you, you know! :)
Save the whales. Feed the hungry. Free the mallocs.
From the US Constitution, Article I, Section 9:
"No tax or duty shall be laid on articles exported from any state."
End of story. Unless Congress passes an amendment to the Consititution (and it is ratified by the requisite number of states), sales tax is only applicable if the product does not cross borders.
It opens up governments to tax competition. Lower the taxes, encourage more businesses to move to your area.
I live in the UK - 17.5% sales tax (They call it Value Added Tax for irony).
Deleted
The Cure of the ills of Democracy is more Democracy.
Erlang Developer and podcaster
This is, of course, flamebait. Enjoy.
Sales taxes are fundamentally flawed. The greater burden of taxation does not fall on the greater income or wealth level. Indeed, it is quite often the opposite. For one example, a newlywed couple buying furniture for a home, or buying the seemingly endless supply of clothes and food for a young child, will always carry a larger tax burden than a corporate manager who purchases relatively little, yet makes twice as much money as the newlywed couple. Does anyone seriously suggest this is fair?
Taxes have one major benefit for the people: They fund public projects. Public projects are good, they are things like roads, schools, libraries, busses etc. Without taxes you don't get these things.
In Washington, the state vehicle registration tax was recently reduced to a flat $30 fee. This cut millions of dollars from bus and road funding, forcing Seattle Metro to scale back some bus routes. Various other agencies are also wondering where they are going to come up with the missing cash, all because people are too greedy.
The bit that gets me the most out of this is the horrible traffic situation in the Seattle area. A 40 mile commute takes me an hour and a half, an average speed of 26 mph. With funding for busses (I no longer drive, but ride the bus) and light rail this traffic dissipates, but if you have no money, how do you start?
--
Eric is chisled like a Greek Godess
marotti.com
There are exceptions, but for the most part single mothers made mistakes in the past and should overcome them. It's her fault (most of the time) that she did not pick a father that was mentally stable, or that she is mentally unstable to the point where she decides to live off the government instead of dealing with real life problems and relationships.
Widows are a special case, and none of this argument is directed at them.
Yes divorce happens, but it shouldn't have to, and the government and taxpayers shouldn't be forced to pay for the mother's mistake. If she can't provide for her children by herself, she shouldn't have concieved them. If she needs help, that's what family and neighbors are for. That, or she should go live in a country which explicitly believes that people should be dependent of the government.
Yes it's extreeme, but shit, there should be limits to both sides, and the welfare system should not be expanded any more than it already is. A saftey net should not be a way to provide capabale people with a reason not to work or to find another means of support.
My head is out of my ass. If you want communism, move to Cuba.
Nix.
It was not simply 'because of taxes'.
It was because England was taxing the colonies, but the colonies viewed this as one way. They were essentially self-sufficient.. why should they pay taxes to the motherland?
This is far different than us paying taxes to collectively build schools, roads, and an army...
That the person selling you the item is responsible for collecting the sales tax, not vise versa. When I go to a store, the clerk tells me how much tax I owe, I don't have to figure that on my own.
"Stop whining!" - Arnold, as Mr. Kimble
The idea of an additional tax above any existing sales tax for buying a product, just because you used the internet is a ridiculous one. I suppose the idea it that the internet based companies have an "unfair" advantage over traditional companies due to lower costs etc. but thats not a good reason.
The internet is simply an alternative means of communication in this context. Imagine if an extra tax had been invented when phones of even fax machines were introduced, in order to protect high street stores from these new fangled mail order companies.
In any case, the main advantage IMO that internet companies have is tha ability for the customer to browse an up to date list of all the stock in detail from their own home. If a new tax is introduced, all that will happen is ppl will use the web pages to select the items they want, and then phone to place the order. Tax avoided and nothing the govt can do about it. All they have achieved then is extra time wastage and administration for everyone involved.
-- MartinG To mail me: echo kewyjlcxyzvjfxbqwh | tr bcefhjklqvwxyz
Just nit picking.. but wouldn't 'interstate commerce' be commerce between different states, and 'intrastate commerce' be commerce solely within one state?
(think.. intravenous injection... international.....)...
Uhh.. correct me if I'm wrong.. but if you
a) live in PA
b) buy jewelry in PA
but
c) have it shipped elsewhere so the store doesn't charge you tax...
isn't that what they call the federal crime of 'tax evasion', and isn't it punishible by prison time?
Politicians keep talking about tax cuts, but they don't seem to materialize. Clinton's administration has seen a budget surplus for the first time in years, but this money is mostly being funnelled (or will be; the cash seems not to have materialized yet) back into crippled or near-useless programs (As early as the 1970s, it was recognized that the individual taxpayer would never see two-thirds of their Social Security benefits).
It is unsurprising, then, that the government is seeking ways to take more of our hard-earned wealth. Already, the average taxpayer must relenquish a third or more of their income for taxes--taxes that fund multi-billion dollar programs of questionable effectiveness and value (see the current tussle over the latest proposed ballistic missile defense).
In a culture as deeply rooted in consumerism and the pursuit of the almighty dollar as ours, is it any wonder that governments and corporations are doing their best to separate citizens from their money? Not at all. A poor citizen is in many ways a powerless one, and is that much easier to control.
Save your money. Invest it wisely. Beware the wolves and robbers that will try to steal the fruits of your labors.
www.alarmist.org
And if the U.S. institutes a nation-wide Internet sales tax, Americans can purchase from some other country. As long as there's open (and international) competition on the Web, there will be ways around the government greed.
Wrong. If an employee doesn't like a job is or maltreated, they can get another job somewhere else with an employee that treats them better. Ever hear of labor markets?
When is an worker not an asset or an investment? They are not one in a economic system that focuses on equality above skill and self-motivation. Have you heard of communism?
And don't give me bull about unskilled, untrained labor. This is the land of opritunity, and if you've got what it takes, go for it. If you don't, then get the fsck out.
If a four-eyed college dropout can create the most valuable company in the world, than you are capable of doing anything if you put your mind to it. Microsoft would not have succeeded in any country but this one, and computer technology as a whole would be in the gutter if not for the US's unique, and mostly-effective economic system.
Right now, buying over the internet is essentially considered the same thing as mail orders through a catalog. If you buy something from a biz in another state, you don't have to pay sales tax. If you buy something from a biz in your state, local sales tax is applicable.
I guess some people don't understand this, leading to confusion and added expense/frustration.
Delaware has no sales tax, but Pennsylvania does. As one can guess, lots of Keystone Staters buy lots of big-ticket items in Delaware. (Heck, the slogan on Delaware's "Welcome to Delaware" signs on I-95 proclaim Delaware to be "The Home of Tax-Free Shopping.") About ten or so years ago, if not more, the Gov. of Penna. went to the State of Delaware and asked them to pass a law requiring Delaware merchants to collect Penna. Use Tax on sales made in Delaware to Penna. residents. It took then-Governor Castle at least fifteen minutes to stop laughing.
These are the same people who complain when Penna. residents circumvent the expensive state-run liquor stores (a leftover from the post-Prohibition years) and buy their booze in NJ or DE. Stupid, expensive taxes do nothing but encourage tax evasion.
I don't know about LA, but, where I live is a hole among mountains, so road building is an expensive and difficult thing.
Anyway, the local govmt. keeps our taxes busy building infrastructures. Preparing to be a 21st-century metropolis and all that.
But htey have found that, with the recent economic prosperity, people can buy cars and take them to the road faster that they can build roads. And newer roads are more expensive (tunnels, splitting hills, landfilling).
As a result, whenever an accident or a protest blocks a bit of a road, it's kilometers of traffic jam.
They are building public transportation systems and people use them but not quick enough.
Anyway given the recent upsurge in em
__
__
Men with no respect for life must never be allowed to control the ultimate instruments of death.
GW Bu
Max Headroom and that girl in the William Gibson episode of the X-Files used cyperspace to avoid it.
You may note, though, that each of those is a fictional character.
Our secret is gamma-irradiated cow manure
Mitsubishi ad
We apologize for the inconvenience.
The point is that these purchases were small and there is a lot of misinformation about whether PA sales/use taxes were actually applied or exempt on Internet purchases. I never consulted my accountant because the purchases were small. The taxes add up to the price of a few good SCSI drives. Of course there is a USE tax in PA, but there has been talk of legislation that would have put sales/use taxes on Internet purchases on hold. I never check the validity and of these rumors and took a chance. It seems that most respondents fork over the money of their own volition. It's just like speeding. It doesn't matter until you get caught. Once caught it doesn't matter whether you knew the speed limit or not, you still have to pay.
Dept. of Corrections...."Most inmates receive at least one shankwound within their first 6 months of incarcerat
...you're right, dammit! We have to let them know we're not gonna take it! We need to send them a message, and there's only one way to do that.
Boycott Pennsylvania!
Boycott them til they go out of business. Money grubbing bastards have no respect for the consumer.
---
"Duane Dibbley?" -- Duane Dibbley
I don't think getting rid of taxes is the solution. I understand that money is needed to keep the goverment running. But, is there really that much needed ?
The goverment seems to want to nickel and dime us to death. It adds up, and very quickly. Think of this senerio, what happens when you buy a car. Think of all the things that are taxed. Oil, gas, insurance, tires, spark plugs, etc... Think of th whole life of the car. Then think about something else...
I think you get the idea.
until (succeed) try { again(); }
a) Consumption taxes are also a more stable revenue stream than income taxes. My personal preference is for a single-stage, single-rate tax that makes the cost of government explict and the government more accountable to the citizens. Hidden taxes are just a way for the government to take in more money than you'd normally allow.
b) Absolutely. I'd fight any sales tax from the feds unless they eliminate the income tax at the same time. The 23% rate bill [HR 2525](that also includes SSA/Medicare taxes and ends all payroll taxes) I know for a fact defunds the IRS and makes federal income taxes illegal. I'm pretty sure the other bill [HR 2001] also does the same thing, but I'm not as familiar with it.
c) I've tried to answer the regressivity claim. The fact is, because of the hidden taxes already in the costs of goods and services, this shouldn't be much different than the current system in terms of burden of taxes, just more explicit.
d) I didn't bring it up so as to not worry our non-US friends. A survey of multinational companies showed that a move from the income tax to a sales tax would also mean a massive relocation of production facilities and (to a lesser extent) corporate headquarters to the US.
--
My oldest prefers FreeBSD to Windows--quite astute for an eight year old (when the preference formed :)
:)
.)
:)
.)
When she's old enough, I'll show her slashdot
(she needs something to do before she's allowed to date at 30 . .
I do recognize the surrealism of a getting a phone call at work from an eight year old in tears because she's having trouble booting unix . . .
hawk
p.s. she's nine now, and still prefers unix . . .
p.p.s. I skewed the playing field by onlyt allowing FreeBSD and not Windows to access the ionternet . . . (for security reasons . . . honestly . .
Another threat of this tax is that it will repress consumption.
You misspelled "encourage savings". If anything people will have more disposible income due to a) lowered tax rates for most people and b) lack of withholding from your paycheck will give you a great deal more "take home pay"
DrLunch.com The site that tells you what's for lunch!
Of course the big worry is that the internet will encourage gov'ts with localized (ie State, Province, Canton) taxes to move to national consumption taxes like Canada's GST or the VAT in Britain. In Canada a lot of mailorder businesses moved to Alberta where there is not Provincial Sales Tax... GST kinda took the shine of that
2 1337 4 u!
Actually, anything actually parked within the state of PA, like planes or cars, or computer stuff gets slapped with a Use tax even if it is a Delaware corp... which we are. You have to actually have all your stuff in DE or they get you anyway.
Dept. of Corrections...."Most inmates receive at least one shankwound within their first 6 months of incarcerat
The European VAT system does not work like this since companies can deduct the amount of VAT they paid for products they bought from the amount of VAT they collected from products they sold. Balancing these out against each other means that in effect only the consumer pays a fixed percentage of the price as tax.
--
bgphints - internet routing news, hints and ti
This has always been true for mail-order purchases in the states I've lived in, and I'm pretty sure that almost every state does it. If you buy something, you pay sales tax.
Why should the Internet be different?
One of the main arguments for the national sales tax back when Dick Lugar (Republican Sen. from Indiana, ran for president 1996, Eagle Scout, generally highly respected fellow) proposed it when running for president (crackpot schemes generate publicity, and Dick was too boring and wholesome) was that it eliminates all the burocracy and paperwork associated with the income tax. Lugar suggested we could eliminate the IRS.
But the problem IS the regressiveness of it. And the only way to fix the regressiveness is to offer refunds based on income level (Do you see where this is going?). That means an agency to replace the IRS that refunds tax money based on income and numerous other factors that Congress would add on to alleviate tax burden. So the burocracy argument for national sales tax is short-sighted because in practice, the paperwork will end up being the same.
Refunding money to the poor at the end of the year is pointless of course because the poor need to buy food (pay rent, utilities, buy clothes, etc...) TODAY, not when they get their refund. The point that's missed by the great thinkers is that giving them the money up front won't help either! Why? The poor don't have any experience at all in saving money. They've never had the chance too! Some people will save the refund money because they have the vision to know that they'll need to spend it slowly for 12 months. It's likely that most won't. They'll spend it quickly, and probably to buy things that the middle class takes for granted, but nonetheless, they'll be hurting until refund time again.
Another great argument against it is that it will slow down consumption, which drives the economy. A fact touched on quite well in other posts.
And refunding to the poor still doesn't change the fact that the rich get off ridiculously easy. Progressive taxation IS a good idea. The government has long been in the business of protecting the interests (and therefore wealth) of the rich (including corporations) and I see absolutely no justification for the rich not paying far far more than the middle class folks who truly drive the economy. And don't give me that trickle-down crap either. Trickle-down is just that. A trickle. It doesn't work, it didn't work under Reagan, and human nature will prevent it from ever working.
George Carlin summed it up best: "The rich have all of the money, do none of the work, pay none of the taxes. The middle-class does all of the work, pays all of the taxes. The poor are just there to scare the shit out of the middle-class".
- StaticLimit
One problem I see with a high country wide sales tax is getting depressed with high prices. Even though it may come out to be the same in the end income taxes only depress you once a year (or quartly) instead of getting depressed by paying a high tax whenever I went to buy something.
If you look around on ebay and several online retailers, you will see a list of states in which you have to pay taxes, due to their tax codes. Many sites have already dealt with this issue. It is particulary hard on sites that deal with multiple dealers, since tracking is difficult (IE some auction sites). Alas, some friends of mine and myself are boning up on this since we may be doing work for an e-commerce firm ourselves.
Eh...
Remember, an internet sales tax only happens if you let it happen. Throughout all of history, taxes have happened when people let them happen. If we don't let it happen, it won't happen. Think back to the boston tea party. We didn't want to be taxed, and we started a revolution! Revolt against the taxing republicans who also pander to big businesses. Remember, DeCSS is counting on you!
-o Disclaimer: My employer doesn't even agree with me about C indentation style. o-
First, that's why Pensylvania and other states who levy such sales taxes are hoping no-one takes them to the supreme court--because the legal justifiation for such taxes is questionable at best. (They may be able to justify it by calling it a "uniform consumption tax"; that is, a tax which is equally levied on it's citizens for consumption--which they may try to argue is not an "import tax" as it is "uniform" and taxed against it's citizens and not against "imports.")
Second, that's why all eyes are on Congress to pass a nation-wide uniform Internet tax, and all eyes are on Congress to give the states consent to levy additional Internet taxes.
On NC's state income tax form, there is a space for you calculate and write-in sales tax for internet purchases. Yeah, right. I don't personally know anyone who's been audited, though.
I am not your blowing wind, I am the lightning.
Seems to me that any CPA (let alone tax attorney) would have to know which taxes are due and on what.
Perhaps this audit isn't random?
Wrong, VAT has been designed to prevent this problem: businesses pay the VAT on goods sold, but get a refund of the VAT paid on goods purchased.
In the end, the consumer ends up paying a tax on the value added, once and only once.
As for the fact that VAT places the most disproportionate burden on the poorest segment of society, we have (at least in France) different levels of VAT:
2,6% and 5,5% on basic products (food,books mostly)
20,6% on everything else
It should be noted that VAT is the french product most copied in the world :)
For example, I bought my car in NH, where there was no sales tax. When I registered it in MA, I had to pay the 5% sales tax.
My inlaws live in NH. They sold us their old car for way below blue book. But in order to register it in WA (where I lived at the time) I had to either prove that sales tax had been paid on it at one time (even by another purchaser) OR pay it myself at blue book value. When I explained that the original purchaser was in a no-sales-tax state, it cut no ice.
I realize that people pull "scams" (although I am less and less convinced of the immorality of this) to get around sales tax, but that doesn't mean that *I* should get screwed.
To put this post back on-topic: I would be in favor of a law that required every penny tax to have a clearly defined recipient (a department or project) AND to have a mandatory public vote every 5 years. I'm getting pretty sick of this entitlement crap: "Hey, we're losing dollars from sales tax!" "No kidding! You are also providing fewer services that need to be paid for: less land than a brick-n-mortar, less traffic, MORE USPS usage, etc".
--
Linux MAPI Server!
http://www.openone.com/software/MailOne/
(Exchange Migration HOWTO coming soon)
One key distinction of the recent Internet sales tax law is useful for those selling services that have no non-Internet equivalent. Essentially, if you sell something on the Internet that can't be bought anywhere else, you don't need to collect sales tax (yippee!). For my business that is key, we sell access to an advance stock screening tool (http://www.traderbot.com). Since this can't be offered on a non-web basis, Uncle Sam has no claim on our receipts. I had to research this a bit, but it wasn't too hard to find on Chris Cox's web site. Almost enough to make you vote Republican.
So I go to Georgia, buy a... big peanut... or whatever they sell in Georgia... Pay a sales tax in Georgia and then another one in Florida. That's real good, guys.
From what I gather, many (possibly most) states have similar laws. Which by and large get ignored most of the time.
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
since nearly all online purchases are made by out of state people, and the purchased object arrives by mail, shouldn't the "sales tax not applicable for out of state residents" apply here?
Makes me wonder how long it will be until states are going to try to track personal sales on sites like ebay and throw taxes on that. I know that I've made quite a bit re-selling stuff.
Ohio seems to be pretty good about sneaking up on you with taxes on items that they can track, notably vehicles. I remember being ticked off when I was 14 and had to pay a tax and penalty for buying my moped without handing over the sales tax. Even though it didn't have a title, they got me when I registered it.
Realisticly though, it seems like there is too much commerce going on over the internet for it not to get a tax slapped on it at some point.
+++ ATH0 +++
f you call a store and order something by phone, you have to pay the tax.
Err, no you don't. When you order something over the phone from a company which has no presence in your state you pay no sales tax (theoretically you still owe use tax to your state).
In fact, internet retailers are currently operating under exactly the same rules as "phone" mail-order businesses. There is no difference at all.
Kaa
Kaa
Kaa's Law: In any sufficiently large group of people most are idiots.
I am a lawyer, but this is not legal advice. If you need legal advice, contact a lawyer nlicensed in your jurisdiction.
There's nothing new here; you've generally been liable under use taxes for new property purchased from out of state. Mail order purchase have never been tax free, either; it's just that most people dodge the tax.
Mail order vendors do not collect taxes for other states not because it isn't owed, but because, at the time it was litigated, it would have been horrendously complicated for a firm to fill out forms for 50 states on a regular basis, not to mention the political subdivisions (states, counties) with their own taxes. At the time, the Supreme Court did not rule that it was illegal, but that if the taxes were to be directly collected on such interstate transaction, it was up to Congress to find a way to do it.
Today it would be close to trivial to implement such a system--the lookup table by zip code for the tax to be collected would be easy. Extensions to existing software would be minor.
I'm puzzled by the very notion that buying on the internet should somehow circumvent existing tax laws. Your owns state has sales and use taxes to pay for the services provided in your area. As a sidenote, as an economist I'd rather replace all income taxes with consumption taxes anyway [*replace*, not supplement. No VAT without income tax repeal!]. The local government's claim to tax the purchase is exactly the same as their claim to tax whatever you buy at the local store; it's a way to allocate taxes, charging more to those who purchase more.
As a side not, the federal government does *not* have the power to stop states from imposing taxes on their own citizens (not that this will stop Congress; the last limits of the Consititution have not been restored since FDR trampled upon them). There is *some* ability to regulate what happens when the goods are shipped interstate, but if the state taxes the good, rather than the sale, it's a stretch for the feds to be involved at all.
hawk, esq., and professor of economics
Sig, we're not talking about a tax for doing business on the net. We're talking about a simple case of mail-order sales tax. For transactions which happen in-state, you simply have to pay the same sales tax you would if the order were placed over the phone. That's all there is to it. Nothing to see here but business as usual, please move along.
Tobacco taxes aren't paid mostly by the poor, they are paid mostly by people stupid enough to purchase tobacco.
There is no line item veto. It was declared unconstitutional by the supremes.
Put another way, the consumer pays the full amount, fixed percentage, and all companies "in between" are responsible for collecting a part of it.
So no, VAT is not a cascading tax.
--
bgphints - internet routing news, hints and ti
b) The NRST is framed as an exise tax, not a direct tax. Therefore it is not a Constitutional amendment and the defunding of the IRS is a stauatory matter. The bill also includes a resolution calling for the repeal of the 16th Amendment, but that will still require legislative action separately, however, in the interim, they make federal income taxes illegal from a stauatory level.
d) I've got some friends helping me search, but I've found a reference to one of these surveys in an article from the Princeton Economic Institute -- the part of interest is:
The PEI proposal is not exactly the same as the NRST (it seems to be more of a hybrid approach) but the principle is the same -- get rid of the corporate income tax and businesses will flock to the US.
I'm still looking for an online transcript, but the following quote comes from comments made by Rep. Archer (Chairman, House Ways and Means Committee) in 1996:
The unnamed survey or surveys he mentions has results very similar to the PEI research above, so it may have come from a more complete report from them.
--
What is important is the amount of surveillance and repression needed to enforce anything like a net-tax now that the net is becoming a significant fraction of commerce.
The "old world" is based on situation where transactions between individuals could be differentiated from transactions between individuals and businesses. Basically, garage sales and such were ignored by the system since they couldn't amount to much. The internet world lumps everything together. Since the internet cuts out the middle man, like a garage sale, it cuts the difference between a business and an individuals.
Individuals will continue to not pay taxes on person-to-person transactions.
If the government winks at this, the speed of the internet would allow this kind of activity to start involving billions of dollars quite quickly.
If the government attempts to reign this individual activity in, it will create an enforcement that dwarfs the drug-repression monster.
So, sooner or later, we will the latter, tax enforcement involving things like massive search engines, artificial intelligence (with all the natural stupidity that this involves), and seize-first-ask-questions-later approaches.
Basically, this is going to come once the government sees the net as "mature." Mature meaning that the market has been divided up into fixed number of big fish who will then be happy to let the little fish be trampled.
So, our task is to see that the internet never reaches this magic maturity, see to it that technologies like gnutella and freenet are supplemented by dispersed E-commerce efforts.
Get on it boys and girls, Joe
You're correct that there's no exemption for sales/use tax just because purchases are made over the Internet. The moratorium is on on computer services like AOL. Unfortunately, states have a hard time enforcing their sales tax because its the seller who has to withhold and payover the tax, and most don't bother. Also, there's a Supreme Court case which limits states from imposing such a burden on companies who do little more then drop ship items in state. The bookend to the sales tax is the use tax, which requires the buyer to pay tax on tangible goods which it uses in state that aren't subject to sales tax. (Like if you bought a car in Oregon to avoid sales tax, you'd pay use tax when you registered it in California) From a policy perspective, I say good. I don't want Amazon, CCD Online having an advantage over my local bookstore and video shop. As long as they have to withhold, so should a retailer. It seems like if you want online speech and online copyrights to be subject to the same rules that apply to written or spoken speech and written copyrights, then consistency rquires treating internet commercial activity the same as brick and mortar activity.
My understanding of the moratorium is not so much that all purchases happening over the internet are exempt, but merely that no state may pass a law that specifically taxes 'internet' sales. If you are in a state that has sales tax, selling to others in that state, it doesn't matter how you sold the items... you do owe state sales tax. I don't see how anyone could think you don't have to pay just because it's on the net.
continueing the stream of letters . . .
:) ]
:) Besides, for the rich to avoid taxes, they need to not consume, meaning they invest or lend the money--which will boost economic growth and real wages for the middle class.
:)
a) to elaborate further: I've come to oppose payroll witholding for the same reason. There's a *huge* difference in effect between a $1000 pay level which turns into a $750 check, and a $1000 pay, $1000 check, and $250 bill for taxes . . . Even though I'd known what the levels were on an intellectual level, I was stunned when I actually started writing the checks. [And then I gave up my practice to go back to school, and began living on a monthly net check only a few dollars off of my old monthly check to the IRS, but I digress
b) I'd need to look closer at the bill. It will take an constitutional amendment to impose the tax, as Congress is explicitly forbidden from imposing direct taxes unless in proportion to the populations of the states. The amendment could easily repeal the income tax and ban other payroll-type taxes, but defunding the IRS would be a strange thing to put in an amendment--we've never been *that* detailed before, and I'm leery of the precedent.
c) I'm really not worried much about it, partly for the reasons you give, and partly because the middle class has most of teh wealth, anyway
d) awwwwe. Maybe we could carefully bait the brits, french, and german, and make them blame one another somehow?
more seriously, can you give a pointer to the studies. That's exactly what I'd expect as an economist, but data is always nice. And I'd expect a good portion of those to come from EU countries that complain about Ireland's "predatory low taxes" [their words, not mine].
e) hmm. Now I forget. oh, well; I had another bit of this to bring up . . .
You're right about the 6% (7%) in PA. Between State Tax, Consuption tax, City wage tax (for those of us "lucky" enough to work in Philadelphia) not to mention all the other federal taxes, I am surprised anyone comes away with any money, besides the govt. The great part is that you dont get ANY of City Wage Taxes back! All so we can tear down Chinatown to build a stadium that we dont need! They would tax a rock if they could squeeze a few bucks out of it.
There is so much shame in rebooting.
Look at the sites I referenced previously. They address all of these problems. I'll just hit some of the highlights.
Been there, done that, bought the t-shirt.
The fundamental problem with all of these sites and other proponents of replacing income tax with a VAT or a national sales tax (NST) is that they assume that consumption is a constant against income. That is, for such a tax to be properly progressive, they assume that consumption is a fixed percentage of the income someone makes, (say) around 90%.
But in the real world, the "rich" are able to save more than the middle class, and thus would be able to enjoy a larger percentage of their income "tax free."
Because of this, if the NST was 23%, and a typical middle class family spends 70% of it's income on taxable consumables, while a rich family spends more like 50% on taxable consumables (I'm assuming things like rent are not taxed), then the middle class family is actually paying 16.1%, while the rich family is actually paying 11.5% of overall income.
One way of thinking of an NST is to think of it as allowing savings and certain forms of spending (such as paying rent) as tax-deductable activities. That is, we could gauge the effect of an NST by making it rougly equivalent of the existing income tax system by beefing up the schedule A deductions to include all activities which are not consumption-oriented: that is, allow people to deduct savings (or rather, by treating all savings as an IRA without an early withdrawl penalty), and to allow them to deduct those services which are not taxed, such as paying rent or morgage.
If we do this, we realize that as an NST has a much smaller percentage of one's overall income being taxed, in order to make up for the lost tax income (as we both know that any change in the tax code will be revenue neutral), we will have to crank the NST to be much higher than the 16-25% rate that is often quoted by NST advocates. (The only reason why a VAT of around 23-25% would work is because a VAT tax is added every time goods exchange hands, even companies paying for raw materials pay a VAT tax. Thus, goods wind up getting taxed several times through the production cycle. This double, triple, or quadruple taxation makes the overall amount collected by the government greater than the VAT rate suggests.)
Is it any wonder, given the fact that rich people are able to save more than middle class people, that some of the biggest supporters of a NST are the wealthy? Personally, having made it out of the middle class vortex, a NST would save me thousands in taxes. However, there is no such thing as a free lunch--for every dime I don't pay in taxes, someone else has to make that dime up.
And guess who that will be? The guy paying 16.1% of his overall income? Or the guy paying 11.5%?
Incorrect, VAT in European countries is charged to the end consumer only - resellers claim back 100% on goods bought for resale.
As you state, European VAT rates are high - 17.5% in the UK. However, many goods are tax-exempt - for example in the UK there is no tax at all on food, drugs, children's clothing, books and many other products.
Nick
-- "It's a sad day for American capitalism when a man can't fly a midget on a kite over Central Park" - Jim Moran
Actually it is only the end consumer who pays the VAT. Companies in the middle get to claim it back. In Europe you only pay tax once on any product. Second hand good are not taxed.
Jumpstart the tartan drive.
You misspelled "encourage savings".
"Encourage savings" or "repress consumption", the effect is the same: people buy less stuff. And when people buy less stuff, there is less demand for stuff.
When there is less demand for stuff, companies make less so they don't have to warehouse stuff no-one wants. They then lay people off. Prices also drop in order to clear out the stuff that is just sitting around.
And what do economists call a cycle where there is both a productivity slowdown and falling prices in a sector? A depressionary cycle.
Likewise, if there is more money available for investments, that'd be good, right? But if companies are in a depressionary cycle, they won't need as much money from investments to pay for production of goods no-one wants. Given that there would be grater investment money and less demand for that money, that means the amount someone would be willing to pay for investment money would go down. (Supply and demand, right?)
That means the amount of returns you would get on your investment dollar would go down.
Overall, the whole thing would work itself out, but with a smaller economic engine than we have now. That is, it would depress our overall GDP by a small amount.
Furthermore, given the fact that the middle class would wind up sharing the greater part of the tax burden (because any new national sales tax would have to be revenue neutral, and the middle class consume more as a percentage of their income than the rich, and so would pay more of their overall income in sales tax than the rich), the overall effect of this would be that the middle class would be worse off both in terms of the rate of return on their investments and on what they are able to purchase with their dollar.
One positive aspect of consumption vs. income taxes is that they encourage people to save their money more. However they are also regressive, that is, poor people end up spending a greater percentage of their income on taxes than rich people. Leaving aside arguments why regressive taxes aren't so bad (I don't want to hear it right now), how might consumption taxes be designed so that they weren't regressive? There are already so-called luxury taxes on some things (yachts, furs, etc.) but I don't think those could really address the disparity, just add some top-heaviness to it.
This same thing has happened to several companies in Louisiana. The part I'd like cleared up is whether any new "Internet taxes" will be on top of the existing sales and use taxes collected by many (if not most) States. IE, will companies have to pay the local sales/usage tax on top of an Internet tax, or is the Internet tax being pushed as a standard way of collecting State taxes for Internet purchases?
Bob H.
It's always darkest before
Read some books and stop watching tv.
The US pres doesn't set the budget for the US gov. The Congress does. All the pres gets to do is propose a budget, just as any citizen can do and which the congress is completely free to ignore. Which they usually do. Other than that, all the pres gets to do is face lots of cameras and microphones and talk about how good his budget is and how bad Congress is.
After the budget is passed by Congress, all the pres gets to do is sign it or not.
Good judgement comes from experience, and experience comes from bad judgement.
- W. Wriston, former Citibank CEO
(BTW: For anyone getting engaged or married, have the jewelry store ship the ring to an address out of state. You'll save $$$ by avoiding PA State tax. I did this and it works great!)
"Violence is the last refuge of the incompetent."
Some people take their .sig way too seriously
Thanks for the info -- I'm more familiar with the Canadian system, which is a total mess. Between the GST and an income tax, how do Canadians actually ever manage to buy anything?
--
That is what they would be doing -- but they would force companies to enforce the use tax, which is more complex than enforcing a uniform sales tax.
If you buy a VCR from the internet, you're supposed to remit a use tax to your state -- if it applies. No one does. The government can't figure out what everyone in the state is buying through the mail.
What the government wants is make the companies collect the tax from you, and then remit the money to the state. This wouldn't be so hard on businesses if the tax codes were the same from state to state -- but state codes vary from state to state, county to county, and city to city.
Imagine if such a law goes into effect. You're a small business selling on eBay. Someone from Kalamazoo Michigan buys an item from you. You have to figure out:
- If your item is taxable in Kalamazoo. Some items are taxable at different rates, like clothing, which is taxable if it is more expensive than a certain price in some states. Not everything is taxable in each state.
- How much the tax rate is, including state, county, and city.
- At the end of the year, how much to pay to each state, county, and city. The postage to all these entities would kill you alone!
Of course, there are companies out there who claim they will make their life easier on you -- they will collect the tax and remit it for you. But don't be fooled into thinking that this will be cheap -- they will probably add 3-5% onto every transaction to cover their costs. So you'd be taxed by a company that is collecting your taxes!Ralph
http://www.hockeydb.com
Okay, there's a difference between sales tax and use tax. Not all states have use taxes.
Currently, for the purpose of taxation, internet is the same as mail-order.
Where a company sells in a state, that state may require the company to collect a sales or use tax, assuming nexus is established. Whether a company is liable for a tax depends on whether the company has nexus in the state. It also depends on the tangible or intangible nature of the product or service sold.
Nexus for sales and use tax is different from nexus for income tax. A company may have nexus for one and not the other.
Sales tax is a tax based on the gross sales price of property. It is collected by the seller of the property. The consumer of the property may be an individual buying the product from a local retailer, or a business buying a product which is "consumed" in the process of making other products.
There are a handful of exemptions from sales tax. The most common exemption is the purchase of an item for resale. The exemption that we are concerned with here is the exemption for a sale to an out-of-state buyer.
When a company sells to an out-of-state buyer, the sale is usually exempt from sales tax in the seller's state of residence. For instance, a retailer preparing a California sales and use tax return would find that "sales in interstate or foreign commerce" are exempt from sales tax. The instructions to the California form indicate that exempt sales are "those involving shipments or deliveries from California to points outside this State which are exempt from tax as interstate or foreign commerce. In order to be exempt, property must be shipped to a point outside this State, pursuant to the contract of sale, and delivered by the retailer to such point by means of facilities operated by the retailer, delivery by the retailer to a carrier for shipment to a consignee at such a point, or delivery by the retailer to a customs broker or forwarding agent for shipment outside this State." California's rules are fairly typical of the way out-of-state sales are treated.
A retailer making an out-of-state sale is usually not liable for sales tax in the retailer's home state. Neither is the retailer liable for sales tax in the state where the customer is located, unless the retailer has nexus in that state. It is possible, then, for out-of-state sales to be completely free of sales tax.
Use tax: A sale that is not subject to sales tax in the states of either the buyer or seller is a serious problem. States have attempted to remedy this problem with a use tax. A use tax is exactly the same as the sales tax, except that it is charged to the buyer of property by the state in which the property is used. For example, a mail-order computer company may not be required to collect a sales tax. The buyer, however, is required to compute a use tax and pay it to the state in which the computer is used. Use tax, for all practical purposes, is the same as sales tax, and is meant to pick up sales which are not subject to sales tax.
The use tax is imposed on purchasers, not sellers. Out-of-state sellers with nexus in a state may be required to collect the use tax, but that does not change the fact that it is imposed on the purchasers. If the out-of-state seller does not collect the use tax, the state can come after the purchaser for the tax.
The difficulty with the use tax is that there is almost universal noncompliance. Most buyers do not know that they should pay a use tax. There are a few exceptions, however. For example, automobiles and boats purchased out-of-state must be registered. Use tax is payable at the time of registration.
Because of the difficulties involved in getting purchasers to remit use tax, states have attempted to get out-of-state sellers to collect the tax. The Supreme Court has consistently held against states unless the seller has nexus in the state.
States continue to seek ways to collect the use tax. In 1988, a group of states began developing lists of purchasers from mail-order companies. Each state shared information with other states based on their audits of mail-order companies headquartered in their state. Several years later, certain states began sending out forms to these purchasers. The forms requested the purchasers to verify reported purchases and pay use tax to the state.
Obviously, such efforts are only a drop in a very large bucket. Substantial mail-order business takes place without sales or use tax being charged, and with no chance of the consumer voluntarily paying the tax, or even knowing the tax is due. The states will have no chance of capturing even a small portion of this tax.
---
- Give a man a fire and he's warm for a day, but set him on fire and he's warm for the rest of his life.
If you purchase something from a vendor in a state where your company has a nexus then the vendor should charge you sales tax. If the vendor did not, the vendor is eventually going to get nailed for back taxes.
If you purchase something from a vendor in a state where your company does not have a nexus, most states will require you to pay a "use tax", which is normally charged at the same rate as the state sales tax. This is simply a way for states to get their sales tax revenue from "mail order" sales.
The fact that a purchase was initiated via an internet connection rather than a phone call or fax makes absolutely ZERO difference to the state tax man.
It sounds like the company in the original post was not filing a use tax return, or was exempting internet purchases from their use tax return. The bean counter should have known better.
These things are an absolute nightmare for any politician, and here's why:
There's a standing expectation of a shakeout throughout e-commerce. Nobody knows when it'll happen, but companies are being valued less than the cash they have in the bank. Yeouch.
Any politician who applies the tax before the crash will get blamed for that crash, and will see his career disappear with the stock value. Any politician who applies the tax after the crash will find himself kicking an industry when their down, and blamed if it doesn't get back up again.
The only thing that might work is if an e-commerce tax is used to pay for an Internet Bailout. I actually see that as the most likely exit strategy for alot of institutional investors--Be There For The Bailout.
Could be wrong, though.
Yours Truly,
Dan Kaminsky
DoxPara Research
http://www.doxpara.com
This won't be popular, but it is not flame bait...
Understand, as well, I am fairly conservative and I hate the fact that half of my salary goes to the US Government either through the deductions in my paycheck or through the state sales tax or tolls or stamps or property tax... And when you consider that the government can't make money on a simple #'s game like Lotto you have to wonder if they are worthy of 1/4 of my salary.
BUT
It simply is not fair for Johnny Bookstore owner to go head to head with Amazon.com when with everything else Amazon has they also don't charge tax!
Yes, there is the delivery charge, but *oddly* most people don't mind that as long as they aren't paying that 8.25% sales tax. People hate taxesthat much (and rightly so.)
Further, states are losing tons of money to this sort of thing. NJ recently tried to TICKET cars with NJ plates parked in DEL malls b/c NJ felt it was losing tax dollars to DEL sales since DEL doesn't have sales tax. The thought process being, "If they bought their Levi's and Birkenstocks right herre in Jersey we'd be up $18." States won't put up with this forever.
It *seems* unfair b/c we think we're outside of normal society and we've been *getting away with it* for so long, but ultimately this day was going to come.
I realize most of this will be trashed and I will bet that CmdTaco will personally remove my account for my hideous views on taxation but fair is fair. You cannot reasonably expect anyone to compete with an *e* site if the *e* site isn't playing by the same rules as the rest of the resellers.
This
If you don't owe sales tax on it, you (probably) instead owe use/consumption tax on it, apparently.
After a lot of thought, a national sales tax might not be a bad idea. It's certainly less intrusive than income taxes...
DNA just wants to be free...
I think all states should have the right to tax all internet purchases, regardless of where the buyer and/or seller reside. If you live in Ohio and buy something from a company in Arizona, shouldn't California be able to collect something? Seems to me like their the ones getting screwed, since the buyer and seller both chose to be located someplace else. Who knows, the packet confirming the sale might have gone through a routed in California, so the sale might actually have been concluded there! I think all states should just divide up the money equally amongst themselves, and then at the end of the year a subsidy would be paid to the company that sold the item. And then they could pay federal taxes on that.
-Vercingetorix
"Necessitas non habet legem." -St. Augustine
The fact is, there is already a 20-40% price increase built into the costs of goods and services due to corporate taxes of all forms, the complaince costs of those taxes, and costs due to higher interest rates. Couple that with having to use after-tax dollars, I'd say the middle class is better off under an NRST.
--
Good for what? everything you mentioned I can get online from somewhere else, or I dont need cause im online...
I wont need busses or roads on the info superhighway, and as for schools and librarys I have access to lots of online training and books at my disposal anytime I want it, not on they're hours, its 24 hours a day on the internet
Life moves at brainspeed
Just a rant.
moo.
You're right, this should be "just like mail order." You DO pay taxes. You buy from out of state, YOU are legally obligated to pay the sales tax directly to your state's government, rather than paying it to the retailer, who then forwards it to the government.
It's called a "use tax." rather than sales tax.
I realize that most people don't even know this, let alone pay it, but it is a tax that has been on the books for decades. It's nothing new.
We also all know the damage that can be done by a 40 year old drunk-off-his-ass hick can do too, but their allowed to get away with hell.
The argument that it encourages saving comes up a lot, and it would be an ironclad argument if sales taxes only applied to purchases that weren't necessary. Purchases that do more than simply preserve a reasonable standard of living (And of course, reasonable is a highly debatable term)
However it simply doesn't work against the new couple situation. It costs a lot of money to raise a child. Ask your parents how much they spent on clothing and feeding you for 15 to 20 years.
If sales tax as we see it today does indeed encourage savings and discourage wasteful consumption, are we to believe that raising a family is an act of consumption that should be discouraged?
The rebate is based purely on family size, not on income. There goes the need for the IRS or similar agency out the window. No one needs to file a detailed financial statement of themselves to the government. I'd hope the ./ crowd is libertarian enough to appreciate the significance of that.
Everyone gets the rebate. You, me, Bill Gates, the homeless person on the street corner, the single mother working two jobs. Everybody.
The calculation of the rebate is the tax rate times the poverty-level income line for a family of the given size (I believe with a minor adjustment so that married adults receive the same rebate as if they were two single adults). This rebate is paid in advance to any family that registers themselves with the Social Security Administration, which is tasked to handle the rebate. (The registration is not invasive, it's as much, or less, information that you need to provide to register to vote.) The rebate arrives monthly based on 1/12 of the annual amount.
The basic idea is, "$X (the poverty line) is what is required to buy subsistence-level items, therefore the first $X * tax_rate is exempted from the tax. Rather than force people to keep receipts and submit them for the rebate, we'll just assume eveyone spends that and rebate everyone. We'll also pay it in advance so that those who need it the most won't be hard-pressed until it arrives."
As I've pointed out, and AFT has tables to show this, the rebate makes the system progressive, not regressive. Bill Gates' effective rate is a fraction under the nominal rate (no one, unless they choose to not apply for the rebate, will have an effective rate of the full amount) -- a starving grad student has a zero or negative effective rate.
The rich do not get off easy. People generally have three choices with their money: invest it, spend it, or give it away. It's not being stuffed under any mattresses. Investment means an influx of capital into the workforce. (Combine that with the movement of foreign companies to the US [see another sub-thread] and that means more domestic goods available and more and higher-wage jobs.) If they spend it, it's taxed, and their effect rate is virtually the maximum. Or they give it away to someone who will put it to some form of productive use.
The current tax system is far more regressive than you might care to believe. The first $70,000 or so each person (not family, person) makes per year is taxed at a 15.3% rate for SSA/Medicare and 20-40% of the costs of goods are due to income taxes and their related effects on corporations. That puts someone who has to spend most or all of their income just to get by at a minimum of a 35% tax bracket, assuming they pay no personal income taxes!
--
...but first, compare to taxation in every other first world country, and witness how little it actually is. And while you're at it, consider how many services you receive for that 55%....
``This, too, shall pass.'' ---Eastern proverb
--
First of all, the middle class makes up the bulk of the population and therefore it's perfectly fair that that group pays the bulk of the taxes. In realitly, that't not how it is. The upper 5% actually pays about 80% of all personal income taxes. And what about corporations?
-----
Do you even know anything about perl? -- AC Replying to Tom Christiansen post.
Well... although this might sound like flamebait.. there is another way you perhaps would rather have it.
If government were to collect no taxes, (it has happened before), they would instead print more money as they needed it. THEY WOULD. The current US ecomonic system does not function this way, but in other countries, it has happened.
It's called taxation through inflation. So.. instead of collecting what they think they need directly from you, they just devalue what you have and add to their own wealth. It amounts to the same thing, only more sneaky.
So the real answer is not to abolish taxes, but to make it so that we know how and where our money is spent, and not let it get out of control.
Where have you been, sir? We've missed you!
Save the whales. Feed the hungry. Free the mallocs.
isn't the esteemed governer of virginia opposed to internet taxation? maybe he better read the tax code a bit.
at least he is getting rid of the tax on personal property
Someone help me out here - I took ECON 201 about five years ago, and all I remember is those supply and demand curves.
It seems to me that lowering the taxes people pay (no matter how you do it - changing to federal sales tax, income tax cuts, etc.) will only lead to everyone having more money, which should directly lead to inflation to compensate for the effect. What am I missing here?
LL
"If you are falling, dive." -Joseph Campbell
Before I start ranting, let me say that I do agree with much of what you say here. Taxes are a necessary evil if we are to have any kind of social projects, roadways, etc. I'm taking issue with the idea that we are somehow greedy if we oppose a tax. Saying it that way makes it sound as though the government is being gracious by allowing us to keep as much of our paychecks as we presently do. This attitude is pure horse shit! We (the people) are, in theory, willingly giving up a portion of our income to the government so that they might be able to take the money and use it for the overall good. Is is *not* the government kindly allowing us to keep what they think we should have. *I* am the one who goes to work every freaking day and earns my paycheck. It is not greed if I want to keep what I've busted my butt to earn. I sat down a little while back and figured out just how much of my money goes to taxes. When you figure federal income, state income, local taxes, sales taxes, property taxes, usage taxes, and whyeverthefuckelsewewannalevythem taxes, over 55% of my income goes to the damn governments. Am I now greedy because I want to keep the remaining 45% of my wages? *Reasonable* taxation is necessary to maintain a functional government. I think we're well beyond the point of being reasonable here in the US.
Go ahead and run the numbers. See how much the government takes from you *then* ash who is being greedy.
The issue here is very simple.
The moratorium on Internet Taxes does *NOT* mean that any transactions over the internet are free of all taxes.
It simply means that there would be no federal taxes on internet transactions, and they would not be considered until the moratorium had ended. This is to ensure (and it's smart) that the internet can grow and become something without having taxes impede it. WHen it stabilizes, the government(s) will make a decision.
As for state taxes, it would be absolutely correct to assume that everything is as normal, just as if it was phone-in or mail-order, or people coming in in person.
If it is an in-state sale, it doesn't matter if it's over the internet, or snail-mail, or phone, or in person.. you *must* pay sales tax.
And if you thought otherwise, where is your accountant through all this?
Software Industry Issues: Use Tax Information Page
I've always been a bit annoyed with Use taxes. Use taxes generally tax you for anything you buy in a situation where you haven't paid sales tax. The constitution does not permit taxing interstate commerce directly, but states that want sales tax revenue generally levy "use" taxes on things you purchase from across state lines to get their cut. In a way, this benefits your local merchants, though, because it means you aren't encouraged to mail-order solely because of the tax benefits. Still, Use taxes aren't reported, since a Washington State company has no duty to report that you bought $50 in books while in CA, and so while you can be caught, most people generally never pay this tax.
Sales Taxes come into effect whenever you buy from within your state (if your state HAS sales tax), or whenever you buy from an out-of-state company which has an "in-state" presence. In other words, if you're in TX, and you order from a mail order company in CA, but they have a branch office in TX, then they must collect sales tax. That's how I understand the mess.
I haven't paid a lot of attention to the Internet Tax moratorium, and so I've wondered: what do they plan on taxing? Another "internet" tax on TOP OF sales/use tax? I'm sure brick and mortar merchants would love it, but I don't see it really benefiting state governments a lot. If the customer state gets the tax, why not just enforce their use tax? How will they force another state's company to track the taxes? And if the shipping/merchant state gets the taxes, I see a lot of migration of internet companies that don't need to be centralized to other places -- maybe Oregon -- that don't charge sales tax (and therefore, in my mind, would not levy internet taxes).
And in the larger picture -- can't the government just pick a tax? Maybe they just don't want people to know how nickel and dimed they get. Add up income tax, sales tax, property tax, social security, state income tax, plus possible self-employment tax, car registration fees (which in some states are so exorbitant they are clearly just another tax), etc, and some people find themselves paying 60%+ to the government. That's just lame.
Lots of knee-jerk reactions and no sense. Take this from someone with his own business:
1. If you're in business, you have to pay Sales Tax on things you purchase for your business. If you buy something from out of state, you pay Use Tax in most states. This only applies to things you purchase for business (software, office supplies, furniture) and not the things you sell.
2. When you sell something, you have to charge sales tax to people who live in the same state as you. Technically, you don't have to charge them sales tax; you can pay it yourself if you want to (to make things less confusing for customers). Lots of craft fair booths and such do this.
For a long time--going back 20 years or more--the idea of collecting sales tax from out of state customers, depending on the state they live in, occasionally comes up and is dismissed. This would be a paperwork nightmare, because small business owners would have to pay taxes to fifty different state governments.
Right now, the internet is handled the same as mail order. So the original poster should have known that he had to pay use tax. The internet has nothing to do with his case; he should have known better.
The European taxes are actually value-added taxes, not sales taxes, and therefore the true costs are higher, but hidden. Additionally, they cascade on each other, so that you have tax on tax.
There are actually two proposals active in the U.S. House to eliminate the federal income tax and replace it with a single-rate, single-stagenational sales tax on first-use retail goods and services only. One plan sets the rate at 15%, the other at 23% and also elminates Social Security and Medicare payroll withholding.
"Holy sh*t!" might be a common reaction to rates that high, but the fact is that corporate income taxes, other hidden taxes, and complaince costs already add 20-40% to the price of everthing we buy -- and buy with after-tax dollars. Of course, it's also a good kick in the pants to Congress to think about trimming down some of that pork-barrel spending so everyone can get a tax cut.
As to regressivity, there are two ways to eliminate that. One can either exempt certain items from the tax, which is a bad idea because it sets a precedent for loopholes and exceptions, and is horrendously complicated to administer. The better way is to provide a rebate to everyone, based on family size instead of income, that refunds the amount of tax paid on subsistence-level spending. The NRST proposals do this latter approach, and even pay the rebate in advance. As such, a family living at the poverty line pays, in effect, no taxes yet still has a 23% tax rate at the register.
For more information on the national retail sales tax proposals, see Americans for Fair Taxation (AFT) or Citizens for an Alternative Tax System (CATS).
--
Interstate sales tax is unconstitutional, so if your business is not located in PA you don't owe any PA sales tax.
States, counties and municipalities have gotten around this by passing "use" taxes. These are levied on the purchase of goods outside the jurisdiction. Basicly, a sales tax in all senses but name. Use taxes have been upheld by the Supreme Court in cases where the vendor either has a presence in the juristiction (store outlet, resident sales rep) or even sends mailorder catalogs (the rationale is that the state or city has to deliver and dispose of the paper & etc.). 45 or so states have use taxes and some counties, towns, cities also have use taxes. I think that there are a few thousand entities in the US levying taxes on out-of-jurisdiction sales.
The use taxes are owed by the purchaser to his or her local taxing entity(ies). It is not the responsibility of the vendor to collect these taxes. Most people aren't aware that the taxes exist or that it is their legal obligation to report and pay them. Consequently, the use taxes are almost never payed or collected. There have been attempts to get vendors to collect the taxes on the behalf of the state/city/etc, but these are not practical (too many taxing entities with no centralized listing of taxing schemes) or, I think (check with a lawyer if you really care), enforcable.
In my state (Indiana) they have a "Use Tax". This has never been anything new, it's always existed. It's purpose was to keep people from going over the state line to get things at a cheaper tax rate.
In Indiana, the rule is somewhat special. The tax here is 5% mandated by law. If you go to a state and pay no sales tax or a tax less than the mandated tax, you must pay the difference on a line item.
In Iowa, and probably other states, there is not a line item on the tax form that you have to send in. The use tax is buried in the instructions, and you must send a check to a PO box.
Note that they don't give you a refund if you pay a higher tax than the state you're living in.
What it really is, is a way for the state to penalize people who don't keep records for purchases, then when you get audited they can ream large fines up your ass and call you a "Tax Deviant."
e.g. The last time I checked, food was non taxable in Iowa. If I go to Iowa, buy some non-taxable food, bring it back to Indiana, where it is taxable, I would be break the Indiana state tax law if I didn't submit the dfference in taxes. Amazing, isn't it?
As to regressivity, there are two ways to eliminate that. One can either exempt certain items from the tax, which is a bad idea because it sets a precedent for loopholes and exceptions, and is horrendously complicated to administer. The better way is to provide a rebate to everyone, based on family size instead of income, that refunds the amount of tax paid on subsistence-level spending. The NRST proposals do this latter approach, and even pay the rebate in advance. As such, a family living at the poverty line pays, in effect, no taxes yet still has a 23% tax rate at the register.
The problem with this is that if it's coupled with a reduction or elimination of income tax, will solidly nail the middle class. Think about it: the poor will get a rebate, so they will only pay a small percentage of their taxes (or, for the poorest, perhaps even get a "refund" that is greater than what they paid in various VAT or sales taxes). The rich who save more than they consume will pay a small percentage of their income in taxes--as a smaller percentage of their income goes to consumption. Further, as more of their money (perctange-wise) is going into savings and investment instruments, their ability to make even more money through returns on their investments is virtually assured. Those who will pay this tax (and thus, shoulder the majority of the burden, at least percentage-wise) will be the middle class.
Another threat of this tax is that it will repress consumption. While on the one hand that may seem like a good idea (as anything that reduces the amount of consumer goods we consume will help alleviate the pressure on various resources used to make those goods), this will have a "slow-down" affect on our economy, and may push various sectors of the economy into a depressionary cycle.
Any new tax structure (or for that matter, any tinkering we do to the existing tax structure) needs to address the twin problems of alleviating the middle-class "vortex" which causes the middle-class to bear the greatest tax load (percentage-wise), and to make sure that sectors of our economy aren't pushed into a depression.
Unfortunately, most VAT or national sales tax proposals I've seen go by will make both problems substantially worse.
The US Constitution reserves the right to regulate interstate commerce to the federal government. The purpose of this is to prevent things like states from imposing tarriffs and stuff on goods coming into or out of a state. Can you imagine if each state treated import/export regulations the same way a country like the United States does with the rest of the world? It would be a total disaster; particular if I had to truck my goods all the way across the country and was subject to taxation at each port of entry.
This same constitutional clause prevents states from collecting sales tax on goods bought from another state as this would effectively be a tarriff. The states (including my home state of Utah) have done an end-run around the constitution by calling it a use-tax instead of a sales tax. In these scheme, you are taxes for using/consuming the item in the state instead of for the actual purchase.
Oddly enough this would apply to non-mail-order type things as well. The law here is that you get to reduce the use-tax rate (which is the same as the sales-tax rate) by whatever amount of sales tax you have already paid to another state. This means that if the neighboring state has no sales tax and I drive across the state line and buy it, bring it back to Utah, I am then subject to use-tax on it. Similarly, if the neighboring state has a 4% sales tax rate and Utah has a 7% sales tax rate, I have to pay a use-tax rate of 3%, regardless of how I obtained the product.
I am a huge fan of states-rights and the 10th amendment, but this just happens to be one of the areas where the Constitution is explicit. Somebody should seriously challenge these laws up to the Supreme Court as they seem very much against the spirit of the Constitution if not the letter of the Constitution.
What people don't seem to realize is that forcing Internet vendors (I refuse to use the lame buzzword "e-tailers") to collect sales tax would put an undue burden on them. Many online vendors already have enough to do as it is, and the added baggage of having to collect money for the government doesn't help things at all. After all, people who sell things over the phone or through catalogs don't have to collect sales tax from their out-of-state customers .. why should it be any different for Internet retailers? The code should be applied uniformly, or not at all.
If local governments really are "feeling the pinch" from lost sales tax revenue, the best thing to do would probably be to revoke the tax-exempt status of religious institutions (again, because the code should be applied uniformly, or not at all.) This would provide extra income for local government. As churchgoers buy more and more goods from the Internet, their sales tax savings will add up and that will allow them to make heftier contributions to the offering plate on Sunday, which would allow the church to pay its taxes. The neat thing about economics is that it all evens out in the end. The only thing that we need to do is make sure that our tax burden is fairly spread and consistently enforced.
Slashdotters fail to understand the basics of government.
Sales taxes are STATE taxes. Every state has slightly different tax codes. Some obviously make the purchaser liable. Some make the seller liable. There may be exemptions if you are operating a business and purchasing products for that business (there are in my state). Think for letting me know how anti-business your state is, though. I'll be sure to never start a company there. That leaves me 49 other states to choose from. Well, 48. California will try to tax me if I even mention their state in my office.
My advice -- Quit wasting your time asking these questions on Slashdot (where most of the people skipped civics because they were working on a Perl script) and talk to an attorney licensed in your state. Uhhh.... Your company DOES have an attorney, doesn't it?
Save the whales. Feed the hungry. Free the mallocs.
I have personally worked on and setup e-com software that does work out taxes. I hadn't thought about whether the fact that this is netside would change the effect of taxes. Personally, I think that the normal tax laws should apply. There's no point in making up new laws just because the mode of communication has changed. It's not like the 'net itself has been the shipping medium, or the physical space where the product was created.
Seriously, if all the laws are duplicated for 'net use, the resulting spaghetti of codified rules will inevitably result in a grand contradiction.
---
script-fu: hash bang slash bin bash
[ approaching AI ]
But I digress of course. The states as such have no concept of value added tax (there's a sales tax, but that's dependent on the state or even on the county, but I might have the details screwed),
Within every Europeong country value added tax is enforced on a federal level. The rates might vary (slightly), but it's considered a quite vital part of state income.
Therefore I don't believe that it will be such a big issue, since when you buy a Mercedes (or the services of a psychic for all it matters) there's anyway VAT added to the price. So folks probably won't get all worked up when the same applies on net purchases.
What probably also adds a big deal to the fact that nobody much gives a fuck here is that the tax is included on purchases. Sort of like an airport tax on your flight ticket.
We'd probably take a dim view on (ah! hell for the sake of the example) the pricing structure of a virtual restaurant meal. Let's see:
The net-special (foie gras, then the chateau briand and a desert plus a bottle of '87 Chateau Palmer) goes for 100$. Now, when you get it served herearound it doesn't go for 100$ in the first place, but it's charged at 135$, which includes the tip and vat. Now, what would appear odd to us is seeing the 100$ price tag on the virtual menue, but then get billed the 135$. (Service charge is included in most Europeong countries, but you're welcome to overtip of course).
Another difference is the perception of tax as a conspiracy between the devil, Bill Gates and PacBell which is not necessarily perceived that way by our good citizens. Not that we feel that every tax $ is spent for a worthy cause, but the necessity to provide money for a working infrastructure slides (at least that's my perception) down a European throat easier.
The big challenge will be to find common ground upon implementing it within the EU and associated countries...
ich bin der musikant
mit taschenrechner in der hand
kraftwerk
I live in PA, I believe that it's called a usage tax, or consumption tax or something like that. You're supposed to get forms from the state and pay your 6% state taxes on catalog and internet purchases.
Buying from out of state isn't a way to "LEGALLY" get around sales tax in this state. They are going ot get their 6%(7% if you're in Allegheny county, we have to build two new sports stadiums you know.).
LK
"Hi. This is my friend, Jack Shit, and you don't know him." - Lord Kano
Here in the US, you are supposed to pay taxes on merchindise you purchase that is shipped from outside your state of residence. However, since you will get taxed on your state's rate, and since they aren't obligated to know your sales tax rate, you are obligated to send your state a check for the taxes. In CA I think you need to contact the State franchise board.
This assumes you live in a state with a sales tax, obviously.
So it's not really an Internet tax, its paying your state tax on out of state purchases. BTW this ruling is older then the internet.
The Kruger Dunning explains most post on
If you spent $150,000 on luxury items, you obviously made a lot more than $150,000, so $300,000 would be a good guess. The bum in your example paid tax at 6.5% of his 'income'. By your math, and assuming that as your income, you paid 3.25% of your income in sales tax. The sales tax is regressive because the poor pay a much higher percentage of their income in sales tax than do the wealthy or even the middle class.
..last post?
Mr. Last Post
Ok, here's the skinny.
First, there will be a national sales tax on Net purchases by 2005. Mostly due to the fact that the EU will be taxing the Net prior to that. I don't mean the ISP, I mean the purchase.
Secondly, a state can tax it's own citizens. Without federal action, they can't currently tax citizen's of other states.
Thirdly, a county can tax it's own citizens. See above.
Fourthly, a municipality can tax it's own citizens. See above.
This is all still a mess, and will be so until about 18 months after the election, when George W Bush has to pay back for those hundreds of millions of dollars in campaign contributions. Big business wants a level tax field with a national clearance center, or will soon. Of course, they don't want to pay any taxes, but they're not stupid.
And if Al Gore wins, it will still happen.
Expect trade disputes between the US and other nations over Net taxation for the next 20 years, since we dominate the sales picture. For an analogy, think back to the 50s and 60s when we dominated world trade with our international sales.
Yes, lives will be lost over this issue. We don't have a military budget that big just for show - we will find some pretext for using gun boat diplomacy over Net taxation - Virtual Bananna Republic wars if you will.
No, I don't want to hear why this will never happen - check back with me in 4 years and I'll pay you $10 if I'm wrong. And you pay me $10 if I'm right. If you won't take the bet, you're just in a do while loop with a memory leak - go get a job at MSFT where you can continue to ignore reality.
Will in Seattle
bigdavex just hates sales taxes: ... Regulating commerce between the states is a power of the U.S., not of the states.
That's not how I interpret the terminology, but no matter. How about the so-called "Inter-state Commerce" clause in the enumerated powers of Congress?
Well, seeing as how sales taxes have been around a pretty long time, and just about every state in the union has one, I suspect they may have survived one or two constitutionality challenges over the last 211 years. But you're welcome to try.
You're prepared to have higher property and income taxes, though, right?
----
lake effect weblog
{Network engineer in Chicago--looking for work!}
To quote Ronald Reagan, "there you go again!"
Zip codes are not the province of state or local authorities. They are the province--the sole and exclusive province--of the U.S. Postal Service. And if you think that handling sales taxes on out-of-state purchases is a thorny political issue, just contemplate what would happen if Congress required the Postal Service to redraw all the zip code boundaries to coincide with political subdivisions (county, municipality, etc). (Remember all the screaming when area codes got split? Just a dim rumble comparatively.)
Lots of people have contemplated the problem of identifying and paying local sales taxes. The problem has existed in Texas, California, and New York since (at least) 1987, when I first confronted it. In order to assess sales taxes at the local level every database would have to include a county identifier, a municipality identifier, and at least two special district identifiers (some states assess additional sales taxes within areas served by mass transit; others assess sales taxes by school district; etc.). And yes--you would have to maintain both municipality and county, since there are municipalities (New York City and Bethlehem, Pennsylvania for two) that span counties. Better yet--every database system would have to be able to identify that a consumer was filling in appropriate values. (So, with a zip code of 18091, I don't fill in Centre County in order to avoid a local county sales tax.) Vastly complicated and hugely burdensome are two phrases that spring to mind....
The best solution is Delaware's: don't assess sales taxes. Then your tax-paying businesses have nothing to fear from e-commerce, and you can become a "haven" for e-commerce businesses. Sales taxes are also hideously expensive to collect, audit, and enforce. They are a huge pain to retailers, and the only people who like sales taxes are small biz accountants, since tax audits represent such a nice chunk of business.
Assess taxes on income. Taxes on property get bucks from well-heeled society matrons, but bankrupt senior citizens. Taxes on consumption hike the price of Ferraris, but hit the poor hardest of all.
1) She works 2 jobs, say at McDonalds and Taco Bell, in order to put food on the table. (If you think that's unrealistic, try supporting yourself and a child on minimum wage sometime. I still don't know how my mom did it, and I don't think she could have if my Dad hadn't paid child support.)
2) She stays home, takes care of her kid(s), teaches them right from wrong, provides discipline and a structured environment, and collects wellfare.
3) She does neither of these, lives with her kids in a station wagon, cardboard box, etc., and maybe her kids are put into the foster care system. (I went out with a couple of girls who were/had been in foster homes. Believe me, it's not a system that works)
So, my question to you is, which of these scenarios caries the greatest benefit for the rest of society? I think any rational adult who knows anything about child developement can see that it's #2. There is a reason wellfare exists, and one of the most compelling is that it keeps a lot of kids from breaking into your house and stealing your stuff.
A few more things to think about: for various reasons, single parents (generally mothers) have always been an issue that society has had to deal with. The costs of providing a support structure for these unfortunate people is far lower than the cost of not providing it. Also, having broken into a few houses, I can tell you with absolute certainty that there is no such thing as security, so don't tell me these problems don't effect you.
That said, I think you really need to pull your head out of your ass.
Under capitalism man exploits man. Under communism it's the other way around.
SuperCorp buys $100 worth of iron, pays $17 in VAT.
SuperCorp then uses that iron and creates widgets that sell for $200. They collect $34 in VAT from the consumer.
By deducting out the BAT that they paid for the iron purchase, SuperCorp ends up paying $17 in VAT, and the consumer $34. SuperCorp is thus paying 17% on the Value Added to the iron (started out worth $100, ended up worth $200 - they added $100 in value).
So yes, VAT is a cascading tax.
Stop by my site where I write about ERP systems & more
In the end it works out for people who own property. For kids or people who rent, it works out a lot better. I mean, would you rather keep 85% of your income or 70% or even 67% of your income?
There are four boxes used in defense of liberty: soap, ballot, jury, ammo. Use in that order.
I beg to differ, I've called retailers out of my state and made purchases with no sales tax involved. Any item exported out of a state shouldn't be taxed according to the US Constitution.
Politics is a funny thing sometimes. Governments can only raise taxes (whether by raising the tax rate or by closeing loopholes) when they don't need the money. If they wait until the next recession, when the surplusses are gone, it will become a political hot potato that no one will touch.
It's days later, so noone will probably read this, but . . .
:) However, not repealing the 16th before implementation is a deal-breaker for me; I'm *not* going to trust the government that far . . .
b) that's one hell of an excise tax
d) intriguing.
hawk
--
-- Slashdot sucks.
I would tend to agree to a certain extent, tobacco taxes are a tax on behavior, not on income. While it is true that a disproportionate number of smokers are poor, for example, putting a percentage tax on tobacco products based on price instead of a flat per-pack tax on cigarettes would allow higher taxation on 'luxury' tobacco products such as expensive imported cigars which might help to balance things out a little.
My biggest problem with tobacco taxes is how little sense it makes that we subsidize the hell out of tobacco growers, then turn around and tax the product to supposedly discourage consumption. If we just quit subsidizing the production (maybe pay farmers NOT to grow tobacco if we are worried about starving farmers), it would raise the price up on tobacco. What subsidies really do is act as price supports to the big tobacco companies so they can continue to make big bucks. Then the government sues the tobacco companies...
What a tangled, damned mess.
Relating this all back to internet taxes, there has been a big stink lately due to out-of-state companies selling tobacco online (out of states like Virginia with very low state tobacco taxes).
The state I live in considers any tobacco bought by mail/phone/internet that is shipped in from out of state that doesn't have the local state's tax stamp on it to be contraband and anyone receiving such shipments is guilty of smuggling.
Same thing is true of beer/wine/spirits.
The big bad problem with not levying sales taxes on internet purchases is that counties and cities rely on sales taxes for operating budget. Let's break that down:
*We pay Income taxes to the Federal Government. Sometimes, if they're feeling friendly, they give some of that money to the state you live in. They may not give the state its population's fair share (however you define that) of the money given to all states, but some of it goes back to states. And, if the Feds are in a budget-balancing mood, they can cut those givebacks without so much as a by-your-leave.
*We pay Income taxes to the State Government. Sometimes, if they're feeling friendly, that give some of that money to the county you live in. Once again, the county may not get its fair share. Once again, the State government can balance its books on the backs of the counties.
*We pay assessments to counties and cities. These are now often capped by law or consititutional amendment.
*We pay property taxes to counties and cities. These are also often capped by law or constitutional amendment.
*We pay sales taxes. These are levied seperately by states, counties and cities (or not, depending on where you live).
That's basically our taxation structure here in the US. Of all those monies, the only ones that go directly to cities and counties -- the governments which are, after all, closest and most responsive to you -- are sales taxes, property taxes and assessments. The Internet threatens to take away 1/3 of the ability (and much more than that in dollar terms) to raise money of local government.
Let's take an example of this, in case my logic isn't clear. I live in Los Angeles (this probably makes me singlehandedly responsible for the downfall of American Civilization). In the mid-90s, Welfare Reform (a laudable goal)took away much of LA County's medical care income. At the same time, the state went into recession. The State Government kept the books balanced by sending less money from the various State taxes and assessments back to the counties. The result? A massive, multi-billion dollar budget shortfall.
That's what all local governments are in for without sales taxes. I agree, there's big trouble, federally, with the tax system we have. But let's worry about funding our communities first.
I should also mention that because of the rebate, the tax is actually progressive, not regressive. Someone at or below the poverty line pays no taxes and may even receive additional credit (as they do now with the EITC and other credits), while as spending increases, so does the effective tax rate, until it asymptoticly approaches the 23% level.
And to the other issue about the rich not paying taxes because they will invest rather than spend, this is a good thing becuase the investments will help grow business and increase wages (and therefore the tax base, which in turn leads to lower tax rates). Besides, when was the last time a poor person ever gave you a job?
--
One little point. What happens when you spend the money you've already saved? You pay all of the income taxes on it with our current tax law, then you pay again with higher sales tax when you spend it. Anyone near retirement would be hit very hard.
I think there is a mistake in your post:
in Europe the VAT does not cascade - it is only
charged on the sale to the end consumer. E.g.
a business to business sale is not subject to
VAT. This at least applies to Germany, but I don't
think it's handled differently in other European
countries.
I can understand this from the goverments point of view. (Somewhat) They are loosing tons of tax money due to the internet.
BUT, I do not like being tax 99% of my money. I make a salary which is taxed, I put in to the bank which is taxed, I pay bills which are taxed, I buy things which are taxed, I put it into a reteriment fund which is taxed, I die which is taxed, my kids get the money which is taxed.
What ISN'T taxed these days ??? Tax the internet ? Sure, but, greatly lower the other taxes.
until (succeed) try { again(); }
This tax isn't an "Internet" tax... it's a "sales" tax.
An Internet tax is a tax on Internet usage (charging a tax on your dialup fees, for example).
Sales tax applies to sales, and it doesn't matter how the item is purchased. Interstate sales (such as those handled on the 'net) taxes are only different than "standard" sales taxes because they're not collected at the time of purchase.
I ran into this problem in the past when ordering items from (paper) catalogs. I live in Indiana, and was ordering items from other states (most from California). Few states require companies to collect sales tax for out-of-state purchases, and this was the case for me. Still, for every purchase that I made via catalog, I was required to pay Indiana sales tax.
Why is it any different when the catalog is on the 'net?
- Rob Cottrell
Most US states have a "use tax" on buyers that complements the sales tax on sellers - if you buy something out of state, and haven't paid sales tax on it where you bought it. So if you buy that mail-order PC from some other state, the sellers don't pay sales tax on selling it, but your state will want to collect their cut instead; if you drive across the border, buy the PC from the store and pay sales tax on it, your state normally doesn't get a cut, though if the place you bought it has a lower sales tax, many states want the difference. If you're a business, the rules on use tax may be different; many businesses don't have to pay sales tax on purchases because the state gets their cut in different ways, so check with your accountants.
Back when I lived in New Jersey, where lots of people buy stuff in Delaware (no sales tax) or New York (higher taxes, but PC stores will play games like shipping you the power cord by mail and letting you carry the fragile expensive parts yourself), the State Tax Goons would send a mailing with the state income tax form saying "Yes, we know there's absolutely no way we can enforce this, but tell us what you bought anyway and send us the tax payment", which everybody ignored. And New York City (which has an even higher tax than New York State, which was higher than Jersey) would send tax goons to cruise mall parking lots in New Jersey taking down license plate numbers of New York cars and sending them "Better tell us what you bought and pay up" letters.
Bill Stewart
New Fast-Compression-only CPR http://preview.tinyurl.com/dy575ks
The only reason they're pulling this crap is so we can pay for Reagans little "Star Wars" accident that's rusting in space. They don't understand the internet community isn't bound by a "government". Click here.
Hey baby, how bout I treat ya to a candlelight breakfast at Waffle House?
Sales over the internet have ALWAYS been taxed, in exactly the same way as mail-order sales. This is because, for all practical purposes, e-commerce IS mail-order. Look at all the catalogs that just add "order on our website" to mailing in your order or calling it in.
/. post I've made re: taxes where I didn't go off on an anti-tax libertarian rant. If you hate taxes as much as I do, visit the Libertarian Party)
Anyway, what this means is that if you buy (over the 'net or not) from a company is based in, or has a major operation in your state, YOU PAY STATE SALES TAX. On the other hand, if you buy (over the 'net or not) from a company based in another state, that has no operations in your state, YOU PAY NO TAX. If this state tax auditor of yours is trying to tell you that you owe taxes on purchases made from out-of-state firms, then you'd best dial up a constitutional lawyer or something because he's either full of shit or Pennsylvania has some blatantly unconstitutional taxes (only the federal gov't has the power to levy taxes on interstate commerce).
(This may be the only
MoNsTeR
This basically is a scheme to get money out of people who don't actually live in New Hampshire, since a vast majority of NH property is owned by people who live in other states. (Vacation homes and the like.)
You are in a maze of twisty little relative jumps, all alike.
You purchased and used tangible assets. That conduct is subject to tax, either in the form of sales tax or use taxes. In many over-the-counter transactions, the seller collects the taxes pursuant to law for you. In other transactions, they do not.
But in any case, you are liable for the taxes. That's just the way it is.
The fact that goods were purchased by a transaction, in whole or in part, conducted over the Internet has no impact on this whatsoever. If you were advised by a tax counselor or lawyer that you could avoid sales tax to your detriment, sue them for their malpractice, but against the government you have no gripe. If you simpy assumed you could avoid taxes on that basis without the advice of counsel or a tax advisor, then you have no gripe either, but you also have nobody to sue.
Look guys, as much as many of us like to pretend we live in some extra-territorial world here in "cyberspace," that's just a convenient fiction. We live in the real world, with only the two traditional certainties.
To claim surprise for being taxed on use or sales of tangible personal property is, well, just naive.
I gripe about taxes, too. That's one thing. To claim special treatment for e-commerce transactions, well, that's just silly.
The constitution forbids a state government from making any laws which attempt to regulate interstate commerce. If that pie ends up in a different state than the one it begins in, either the federal government decides who gets it or no government decides who gets it.
At least, that's what the surpreme court has been saying since, like, what, 1800?
If i am wrong, or the totally unsurprising possibility that the U.S. law has changed in the last 200 years has occured, feel free to correct me. Then go to John Marshall's grave, read this slashdot article over it, and listen for a spinning noise just underground.
Irritable, left-wing and possibly humorous bumper stickers and t-shirts
The only reason that people have got this foolish tax-free notion about the internet being "tax-free" is because these people havn't been observant enough to see whether they are buying in-state or out-of-state. If you buy online in-state, you pay the same sales tax you would at your local store. If you purchase out-of-state, there's no immediate sales tax, just like if you used a mail order catalog.
Each state has it's own regulations about reimbursing its residents for sales tax paid out of state or for charging sales tax on items that didn't have an immediate sales tax. They have had these laws on the books longer than I've been alive. The people who think that they don't have to worry about online sales tax are obviously the same people who think that they don't have to keep track of the sales tax they pay on vacations out of state (surprise people, check your local laws, you probably were supposed to report it).
As for a national sales tax (which would be necessary for a uniform internet tax), it is an incredibly foolish idea that udermines the federalist system that this country is supposed to be operating under. Power to the states, not Washington D.C.
Now, don't get me wrong. I love that fact, being as I can fly airplanes and as long as an instructor steps foot in my plane, I don't pay sales tax. However, being as airplanes are hideously expensive (>$50/hr to rent) isn't it evident where the rich are getting out of paying these taxes? The poor don't use these services. They cut their own hair, wash their own cars, and, unfortunately, can't afford to fly airplanes.
Here's where the internet comes in.
If we can keep taxes down on purchases on the internet, then the poor will have an out. A way to keep from being swamped by taxes. (My college friends in Montreal are dying under the burden of a 15% sales tax. They can't afford to buy anything!!!)
The states should tax the sevices that are provided locally. The gov't should force the states to get rid of sales tax, and then should implement a small sales tax (1-2%) accompanied by (better if it were preceded by) a reduction (1-2%)in income tax.
Of course, there is a whole hord of problems with this, such as the fact that the poor can generally not afford a computer, nor do they have credit cards, etc., but technology access is increasing at a blinding pace. Schools, libraries, and other public, free places give internet access. Likewise, paypal provides an easy way to turn g-money into e-money.
Just an idea for the future.
www.eissq.com/BandP.html Ball and Plate System. Amuse your friends. Crush your enemies.
Not in Minnesota, at least.
My Topaz has a blue book value of about $2,500. According to the make/model/year book they have at the DMV, my car has a value of $11,000!
This really shocked me, especially considering I received the car for free (in OR).
(She even showed me the page and she was right...)
So, I gave the lady at the DMV a really sweet deal, she could take my car for $7k, as is.
Needless to say, the first person that genuinely offers me $11k for the car can have it. I know its worth that much, at least to the MN DMV.
;)
-Vel
... there's also the "regressivity" problem that consumption taxes hit the young and the elderly more than the middle aged, since they buy more stuff (the young are buying clothes, houses, appliances, etc. the old travel more, have more medical expenses, etc.). The AARP always opposes these taxes & they're one of the most powerful lobbies in the country.
So even if a sales tax or VAT were a good idea (I'm dubious), it would likely be killed by our increasingly aged voters.
IANAL, but I have had some relevant experience with this in my state (Ohio)
If you buy something from out of state that would normally be taxable if you had purchased it in the state, then you must pay the sales tax by writing a check directly to the Secretary of State.
This is no different from how it was before the internet came along. This rule was previously applied to stuff bought mail order.
The fact that almost nobody pays attention to this rule doesn't change the fact that it is a state law.
I suspect other states have pretty much the same setup. Of course now that state governments sense a migration of sales to the internet they are screaming about lost revenues (despite another state budget surplus!).
IMHO, the whole freakin' US tax system is jacked up beyond repair. I'd much rather have one tax bill for each of the three taxing authorities I pay to so I would send one check to city, one to state, and one to the national government. Instead I pay sales tax, gas taxes, property tax, income tax, fishing license fees, E-Check (Ohio EPA required emissions check fee), estate tax, capital gains taxes. The list is endless. I'd rather just pay my share of what my governments cost and decide for myself if I'm getting a good deal or if it's time to move.
We are a decentralized metropolitan area of tens of millions of people, with no fixed transportation patterns.
:)
This is an effect of not having a proper public transportation planning from the start.
The Los Angeles area is built on geographically unstable stuff that requires a lot of engineering to tunnel through.
Actually, I am betting a major earthquake will hit LA anytime soon. It's amazing the (economical, cultural) risks the world is taking about it.
It seems it would be better to bulldoze and start elsewhere, or was it in SimCity?
__
__
Men with no respect for life must never be allowed to control the ultimate instruments of death.
GW Bu
Dell never had a with charging me sales tax a long time ago. They are the only internet company that I ever ordered from that actually obeyed the whole 'ship across state lines' tax rule.
Keeping
Do you want the pilot of your plan being able to fly with only having 10 hours of "practice". We all know what damage a naive, inexperienced 16-year-old with a 1-ton piece of machinery can do.
Which state gets the right to levy the tax? Pennsylvania, where the purchaser resides, or, say, California, the state of the seller's residence.
Knowing all governments' tendencies for getting as much as they can, I would be willing to bet on both trying to get their fingers in the pie.
Lightning never strikes twice. Too bad the same cannot be said of taxes.
I have a strong belief in the Second Amendment.
Although I disagree with Internet sales taxes, I do feel it is inevitable. So, I believe it should be the exact same as the person's home state sales tax. Therefore, those of us in New Hampshire still won't have to pay any of that pesky sales tax (and still no income tax either :) ).
There are four boxes used in defense of liberty: soap, ballot, jury, ammo. Use in that order.
That's hilarious! Loitering!
---
As copyright owner of this comment, I authorize everyone to defeat any technological measure which limits access to it.
A. Keiper
The Center for the Study of Technology and Society
Washington, D.C.
I still don't see how a state can charge taxes on something that has crossed state lines, unless there has been some kind of piror agreement between the two states.
But was not the reson for America breaking way from the British all those years ago because of taxes?
If I am right with that, then why do we put up with taxes now.
Also, do what I plan on doing when I graduate collage, and leave this poor excuse for a state (maybe the realname might shed some light, it is not realy a state it is a "common wealth", is not china also a common wealth, ie steal from the people to work hard to make a living and give to the lazy who just sit at home and do nothing, dont get me wrong, welfare was a good idea but a lot of poeple abuse it)
This isn't an Internet tax however, it's just a sales tax thing that is actually documented, just not understood well.
Give a hand, not a hand-out.
The reason is that the Constitution prohibits states from imposing tariffs on interstate trade, IIRC.
Get a life!
I'm trying to hang on to the life I have; it's just that the government keeps taking more of it all the time.
But purchases brought into the state have to pay state/local taxes. For example, I bought my car in NH, where there was no sales tax. When I registered it in MA, I had to pay the 5% sales tax. Cars and boats are easy to catch with this, since they have to be registered, and you have to list where you purchased it.
NY a few years ago sent unmarked police cars to Reading PA (big outlet town), marked down NY license plates, then sent the owners a friendly reminder that purchases from PA have to pay NY sales tax. There was nothing in the note saying "we know you bought XYZ, so send us money", but more a reminder that they may owe taxes.
-- Ever notice that fast-burning fuse looks exactly the same as slow-burning fuse? I didn't... (Edgar Montrose)
.. moderate me down.. but, I find it fascinating that whenever there is some legal-related article on /. every post is preceded by IANAL.. but a blurb about taxes brings Accountants out of the woodwork!. How refreshing and interesting.. does this mean more accountants read /. than attorneys? Or do more accountants post than attorneys? Or is the real truth that attorneys aren't interested in providing any meaningful insight and dialogue to a discussion unless there is a buck in it for them? ( Yes, I did see the post farther up from the one attorney, with the " this is not legal advise .." disclaimer. ) So he is the exception to the rule...
/.
I know, off-topic,sorry but I found it revealing about the types of people that read and post on
Back to your topic- move along..
3C
I think I read somthing about the possibility of suing your accountant for damages, in the ammount of the late fees and penalties, if they prepare a non-compliant tax return without advising you of the risk. You would still have to pay any owed taxes yourself.
If this company used a real accountant, then they should have been told about catalog/internet purchases having state tax liability.
A lawsuit may be a bit over the top, but I would definitely talk to any certification, licencing and professional organizations where the accountant is a member.
But IANAL (Hawk?)
- bridgette
In most states sales tax is the duty (ha) of the consumer. Companies doing business in the state must collect that state's tax for them, but businesses and individuals who buy stuff from out of state (catalogs, the net, etc.) are supposed to pay it themselves. Now, I've never heard of a state going after individuals since they aren't required to keep detailed records of these things, businesses are fair game.
This is covered by the Uniform Code I think (not the new UCITA, but the part governing commerce, etc.)
> "Holy sh*t!" might be a common reaction to rates that high, but the fact is that corporate income taxes, other hidden taxes, and complaince costs already add 20-40% to the price of everthing we buy -- and buy with after-tax dollars.
There is no way that american corporations will adjust their prices to allow for the hidden taxes. If they can get an excuse to increase their effective prices by 20-40%, no matter HOW unjustified that reason is, they _will_ do it, and do it in such a way that you can't boycott the companies who rise prices by 20-40% because they've _all_ done it, so there are no _other_ companies to go to instead. Meanwhile almost all of the american populace won't notice the effective increase in cost of goods was done not for the purpose of paying for a 20-40% increase in taxes, but a 20-40% increase in profits.
> Of course, it's also a good kick in the pants to Congress to think about trimming down some of that pork-barrel spending so everyone can get a tax cut.
Congress will not cut the pork barrel spending. If it is a republican-led congress, they will cut welfare. A lot. If it is a democat-led congress, they will cut something other than welfare. Meanwhile almost all of the american populace either doesn't vote, doesn't care about this, or votes solely based on who can create pork-barrel projects that benefit them.
Welcome to America.
Am i being cynical, or realistic? Is there a difference?
Irritable, left-wing and possibly humorous bumper stickers and t-shirts
It doesn't lead to everyone having more, it just effects who has more. The money that we send to the government, in the form of taxes, always ends up going somewhere. It's going to the pork that the government funds, the interest on government bonds, etc.
---
As copyright owner of this comment, I authorize everyone to defeat any technological measure which limits access to it.
To the anonymous above... As was stated above, tax is only applied when purchasing within the same state. I really surprised that has lasted this long. With all the internet purchasing I've done, and countless others, states must be losing lots of tax revenue. Funny thing though, most states have had a budget surplus lately. I guess it's tough for them to scream they aren't getting thier fair share when they have more money than they can budget. Freedom Surfer p.s. It is only a matter of time though...
I do do not believe that the states have the right to levy such tax on these purchases. Here is article 1, section 10, paragraph 2 of the Constiution of the United States: No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.
-Dave
Okay... I read some of the comments that been posted here. Now... I have several questions that need to be answered before I get side-swiped by this tax fiasco here.
I am working on opening up a new datacenter here in Florida in Tampa area. The few questions I have is regarding about the sales and use taxes here. Granted.. most customers will be probably be out of state.... Note: International Clients...and do I have to charge the sales and use tax on them? That is the biggest question here. I think they do not get to pay those.
But here is the main question though. I know some of the questions are geared to E-Commerece sites...but what about co-location and webhosting facilities? Do the customers pay sales or use taxes on the servers that we lease or sell to the customers to be hosted on the premises? Same applies for the web sites that we are hosting for them.
That is what I am little fuzzy on and I figures other people out there can help on this subject, so I know what to expect regarding the tax laws. I mean... most of the customers are basically going to be calling it in or ordering it though the website instead of in person. So...how do I deal with the tax issues on those purchases that is being hosted on the premises?
This issue is probably the biggest issue that most ISP and Co-location providers usually faces, when it comes to the sales and use tax issues.
-- Amazing how the Internet still humms along.... -- Dispite all the flaws of Micro$oft in their software!
If there's one thing I've learned, it's to take anything a government employee tells me with a grain of salt, particularly if there's revenue involved. A company I worked for in California was audited and assessed a big sales-tax bill for sales of software. They got an attorney specializing in tax law involved. After a few letters and other bureaucratic folderol, poof, the tax bill vanished, because the auditor either didn't understand the law, or decided to go ahead anyway in the hope that the company wouldn't put up a fight. At the very least, it's worth running the audit past someone with your interests in mind as opposed to the government's.
Which is why you'll see forms that charge sales tax only for residents of, say, Georgia and Pennsylvania: that business does business in GA and PA.
Either way, the purchaser is responsible for paying the tax on items they purchased but have not paid tax on -- items ordered through a catalog or purchased out-of-state. (This also depends on the specific laws of your your state.)
Please note that most European countries have a VAT (Value Added Tax) which is not quite the same as a sales tax.
In regards to the Federal Sales Tax, I read that one of the proposals would mail a rebate check (monthly/quarterly/yearly -- I'm not sure) to all taxpayers, thus making it less regressive than a plain old sales tax.
-bluebomber
The Daily Build
The Federal Laws seem to be designed to prevent the e-commerce sites extra paper work. However, audits like this tend to make it seem like that with a little work the e-commerce sites could collect the relevant sales tax and save an audit headache.
Of course intra-state commerce is taxed. Here in New York State, for example, the tax is something like 8.5%. Some goods are exempt.
The deal with the Internet tax moratorium is that there is no Internet tax. In other words, if Congress were to decide to institute one, then purchases over the Internet would be taxed simply because they were made over the Internet. This would be in addition to any other sales taxes.
The original poster confused this with thinking that all Internet purchases were automatically exempt from sales taxes. This is not true. Buying over the Internet is like buying over a phone: if you're in the same state as your customer, you pay, and if you're in different states, then interstate commerce laws apply (i.e., no sales tax).
I don't get this story. Most states that have sales tax also have "use tax". When a business buys something they don't pay tax to the retailer normally. Instead they simple pay the use tax on the item. This hasn't changed.
Buying from the internet bacisally follows the same laws that buying from mail order would be.
IANAL, however, the proposed laws I see for net taxes usually are the following:
Taxes on internet service: In most states there is no tax on "service" or "labor". Most ISP's aren't charging taxes to their customers. States look at this as an area to collect revenue.
Manditory reporting: Some states want to ensure that they know when a business buys online to verify that use tax is collected.
On the consumer side some states fear that increase in Internet Shopping will pose a threat to sales tax revenue. The premise being that out of state purchases will cut into that tax stream. Just like mail order would, but at a much larger rate.
For the most part these are reasons. California is a good example of sanity when looking at Internet taxes. In CA business are audited on a schedule. This ensures "Use Tax" complience. The largest stream of income to the state is cars and trucks. And the internet doesn't save you paying the DMV. The view is that auditing based on sales tax costs far more then could ever be recapped.
Todays Factiod: In Minnesota, you are required to claim mail order and internet purchases on your taxes if they exceed a certain ammount. Although the law has been on the books forever, the 1999 tax year was the first time the law was highlighted in the general instruction book. At the same time Minnesota runs a multi-billion tax surplus.
Pushing taxes are a liberal thing. They do it to steal from the rich and give to the poor, rather than encourage the poor to earn a living and get a paycheck for thier work, a paycheck that tends to come from the rich. There is a difference between pandering to big buisness and letting buisness be themeselves without regulating every aspect of operation. You really need to get a clue.
Of course, I'm one that firmly believes people should not be penalized for choosing not to have children. If govt wants to give a $1500 tax credit to families for children, a couple with no children should also receive the same tax credit. Perhaps they are saving money to start a family...
Either way, I feel equal rights are important. People shouldn't be penalized for saving.
I know I'm a cold hearted sob but I don't want to support children that aren't my own.
Hehehe, now how's that for flamebait? (or trolling)
-Vel
Actually, if the company does business(meaning physical presence, such as a warehouse, etc) in the same state as the ship to(? or is it billing) location, then sales tax should be applied. That is, if the state has a sales tax (go delaware!) Who cares if the internet was the vehicle to make the transcation. A sales is a sale.
If you purchase something outside of Idaho, via mail order, the Internet or however you manage to do it, and have that item delivered to you, you owe some sort of tax on it.
If you paid sales tax based on where you purchased it, your tax obligation has been met. But if you didn't, then you owe a "use tax". It's (technically) not a sales tax, but you still owe it. 5%, in Idaho. And the state income tax form gives you a place to calculate the total of your non-taxed purchases, then pay the appropriate use tax.
Does anybody actually do that? Maybe a few people. Should businesses be aware of it? Of course. The company I work for keeps meticulous records and pays their use tax at the end of the year.
This shouldn't be any surprise. The fact that it is speaks volumes about the quality of your accountants' knowledge.
This business about taxing business on the Internet is a red herring. Business is already taxed. Those who support sales tax collection on the Internet are really just looking for a federal version of existing state laws. Naturally, it's easier to deal with one federal law than 50 state laws, but that's a whole 'nother issue.
=h=
This is nothing new in California. A business has to pay sales tax on all tangible items regardless of where they are purchased. This is the number one moneymaker for the auditors and explains why they collect an average of $4000 per hour of audit time. This really doesn't have anything to do with the internet.
They stab it with their steely knives,
But they just can't kill the beast.
IANAL but it seems to me that it should work just like mail order. If I purchase something from a catalog and the company is in another state, I don't pay sales tax UNLESS the company has a presence in my state.
If the Feds want a piece of this action, then let's abolish the income tax and move to a national sales tax!
One of the reasons why interstate sales taxes in general have been frowned upon by the Federal Trade Commission is that states will tend to dispute who should collect the tax. The states where the item is sold from will insist that they should collect their sales tax. The states where the item is sold to will insist that they should collect their sales/use tax. In the end, if there are no restrictions on what the states can do, we could all be stuck paying double sales tax on all mail order, phone order or internet order sales. Don't forget too, that some people want to start collecting a Federal sales tax as well. That means that if we aren't careful we could end up paying rediculously high sales taxes like they do in Europe (12 to 17%). People should keep in mind that sales taxes place the most disproportionate burden on the poorest segment of society, so they are the most regressive form of taxation.
IIRC, when you buy something from another state in such a way that you don't immediately pay sales taxes (e.g. ordering from out of state online or print catalogs) you're required to remit the appropriate amount of sales taxes that you would pay had you bought it in your own state.
For some items, in some states, paying sales tax in another state and then bringing the item over may require you to pay an additional 'use' tax. You generally see this for big-ticket items like cars, where a neighboring state has a significantly lower tax. Sounds a little too much like an interstate duty for me to be happy with it (why do we have a Federal government then?) but this won't stop the man from making you pay.
Normally of course, unless you're audited, no one ever pays these taxes. Bad luck for you, I guess.
-- This and all my posts are in the public domain. I am a lawyer. I am not your lawyer, and this is not legal advice.
I am see this turning into a way for some states to encourage internet companies to build there. You simply pass legislation against collecting sales tax on products sold on the Internet. You then pitch the state as "e-buisness friendly" since you don't charge sales tax on Internet orders. This could be serious leveraging for non-technical states to get in the industrry.
--- Linux... a college project gone horribly right
Additionally, at least some, and I suspect most or all, states require that any items purchased from out of state that have not been taxed are subject to a "use tax" equivalent to the sales tax, that is to be remitted to the state. Of course, this is probably the second-most violated law in the country (after speed limits), because most people don't know about it and the risk of being caught and prosecuted is so low.
--
So what's the big deal, exactly?
logan
A state cannot tax mail order from another state. They cannot tax or even regulate a transaction that happens across state lines (i.e., niehter state can). Any state law that does this or attempts to do this is UNCONSTITUTIONAL! The Constitution states that Congress shall have the sole power to regulate interstate commerse. There have been numerous supreme court cases to establish the precident that a transaction which crosses state lines cannot be regulated or taxed by either state. That is a power reserved for the federal government.
I live in wisconsin, the third highest tax state in the country. You'd think that everyone complains about their state taxes, but for the most part we don't. Why? Because the state has excellent roads, great schools and a kick ass (and cheap) university system... things that we all see and every citizen benefits from. We see the state government try to lower taxes on a regular basis, and they actually succeed at it... Clinton stole his federal welfare reform plan from WI, where we've had it for about four years. Welfare rolls are down 50% and statewide unemployment is 4%. Oh, and the state has no debt. The point is: we see the state government put our money to good use, and not waste it!
The problem with federal taxes is not only that they're so high, but they seem to go down a dark hole. $2 billion a year for a 'strategic natural gas reserve'? $3000 toilet seats? $500 hammers? Twice as many $1 billion B2s than we need? None of which are properly taken care of? Give me a break!! Of course everyone hates federal taxes: we don't see any of it go to good use! (with exception to the occasional treat like watching mars rover)
-----
Do you even know anything about perl? -- AC Replying to Tom Christiansen post.
The auditor is correct. You're supposed to pay use taxes on anything you purchase out of state--just like you're expected to pay for all your shareware.
I agree with the above...A company I worked for some years ago went through a similar audit and had to pay a "use tax" for all relevant items purchased out of state. The use tax was equivalent to the state sales tax. This was true for things purchased via the net, but also by phone, fax, letter, pigeon, etc. Everybody in states with laws like this is *supposed* to do this, although not everyone does. Until they get audited.
Someday a Slashdot ID of 177180 will mean something.
Don't forget New Hampshire. Not having a sales tax certainly rocks!
"The words of the prophets are written on the Slashdot walls."
I know this opinion isn't popular, but they do make sense. If you call a store and order something by phone, you have to pay the tax. Why shouldn't you pay a tax when you do the same over the web. Do you imagine is, in the 30's they would have said that anyone who takes his car to shop doesn't have to pay a tax. It just doesn't make sense. Either you have a tax or you don't, but if you do, everyone needs to pay it.
Opus: the Swiss army knife of audio codec
In the left corner!
"Everyone has to pay their fair share. Taxing Internet sales is good sense. It is not fair to the rest of the world when some rich, corporate, pig can buy $1000 dollars of stuff of Amazon.com and not pay tax on it. The have-nots have to pay his fair share when making purchases at traditional, brick-and-mortar businesses".
And in the right corner!
"Taxing Internet sales is another example of a government spinning out of control towards socialism. It is not right to penalize my success and support of online businesses by paying taxes to support a bunch of lazy, malcontents. You will get my money for taxes when you pry my wallet from my cold, dead fingers!"
And in the center corner!
"I don't trust online buying, some hacker may get my credit card and spend it on porn!"
And in the rear aisles, behind that wicked post!
"I'm John Katz, has anyone seen the Open Source popcorn guy?"
Get this. Oregon's tax brackets haven't changed in 80 years. Bit of trivia. :)
Businesses need regulation, because otherwise they will pursue their interests without any thought to the welfare of their employees or the people of the country that said business operates in.
In Michigan anyway, you are supposed to report your purchases made over the internet / through mail order catalogs on your state income tax return, and then you pay a certain tax based on this amount.
| Reality Avoidance Therapists Homepage |
Laughter is the Spackle of the Soul.
The poster (and Cliff) both seem to think that "no internet taxes" means that the internet is treated differently than the real world.
All that "no internet taxes" means is that internet purchases are treated just like any other transaction (there are no ADDITIONAL internet taxes).
This audit would be the same if you had purchased your goods through mail-order -- most places don't bother to pay the sales and use tax on mail-order goods, but legally you are required to do so and can be caught in an audit because of it. For private citizens this is not a big deal because you're not talking about much in the way of taxes, but a company that buys $100k of goods a month online should have their accountants paying attention to this.
This goes back to the issue of being a professional -- if you're running a business, you should have an accountant advising you on these matters, not the collective "wisdom" of slashdot (g)...
Recursive: Adj. See Recursive.