Congress Reconsiders Internet Sales Tax

FatHogByTheAss writes "The ability of local governments to collect sales and use taxes from Internet transactions was argued strenuously during a lengthy Senate hearing Wednesday, as time runs out on the existing federal moratorium on Internet taxation."

Comments

They'll need a constitutional amendment

[tuffy]

Section 9, clause 5 of the US constitution: "No Tax or Duty shall be laid on Articles exported from any State."

So, unless the internet tax is going to be a federal tax, the states cannot collect money from stuff imported from other states without amending the constitution. At least, that's how it appears to me.

Re:They'll need a constitutional amendment

[DunbarTheInept]

...states cannot collect money from stuff imported from other states...

Yes, but that's not what they are talking about. They are talking about the state in which the seller is located having a sales tax, not the state in which the buyer is located. The idea is this: Let's say you live near a state boundry, and you nip across state lines and buy something in the neighboring state, then drive back home with it. If it is a brick-and-mortar business then you end up paying sales taxes for the neighboring state in which you bought it. If you do the exact same thing on-line and have them deliver it to you, then you don't. This is just an attempt to make the online businesses and the physical businesses live by the same rules. I don't see anything wrong with that. If you complain that sales tax is wrong on internet transactions, then it should be equally wrong on brick-and-mortar transactions.

I'm sick of online rules being different than physical rules. If we want to argue that the CDA is unfair because it puts internet speech under more restrictions than traditional speech, then we have to, in all fairness, accept that the sales tax should be the same for both physical and internet sales.

Re:A big win for accountants!

[Ian Wolf]

I believe it is going to be calculated based upon the customer's location.
That's fine with me, I live in New Hampshire, where we _currently_ don't have a sales tax.
This brings up several other questions, though. What if the customer's billing and shipping locations are different? Would the shipping address or billing address be the taxable location?
I was about to say that the obvious choice is the billing, but it isn't. In fact, the shipping very easily could be.
A couple of years ago, a friend of mine who lived in Andover, MA needed some furniture. We went to a couple of places in NH and he found a living room set. When he asked about delivery, they told him if the furniture was delivered to him, then he would have to pay Mass sales tax. However, if he picked it up, he wouldn't have to pay any. Apparently, the way the law works in regards to taxes (at least AFAIK) the transaction's location is determined by where the goods are received.
How would the taxes collected be distributed to each locality. Would the taxes be payable to the federal government, who would in turn distribute monies to the appropriate localities, or would the web merchant be responsible for mailing out tax revenue to hundreds of different local governments?
Well, I don't see how the first option could ever work, call me skeptical, but I don't think the states will be crazy about this one. On the other hand, if I recall correctly, businesses are under no obligation to pay taxes to governments they do not have a presence in. In fact, I think I remember seeing the arguement made that online businesses should be treated the same as mail order businesses the last time this debate came around. This is why you'll often see that box on the bottom of mail order forms that say something like "CA Residents Only add xx.x%".
How would this system be integrated into existing e-commerce solutions? How much time and money would it cost to upgrade current order processing software to automatically charge and allocate local sales tax for each order?
Well, I suppose it depends on the e-com solution in place. For the ones that were well thought out, it might actually be a breeze. I would think companies who already do some form of their business in the retail or catalog space this will be an easy thing to do. The online only "e-tailers" may have rough seas ahead. Of course, all this would depend greatly on how this tax plan is put in place.
How would the government propose to enforce that sales tax is actually being collected and paid out? What measures are in place to ensure that vendors abide by these regulations?
I'm not sure about this one, but we could probably see a greater emergence of eCom in "tax havens" (using the term very loosely). Depending on the implementation of this tax, some of these businesses could move into more "tax-friendly" states or even countries. As for enforcement, the big guys in the ecom world would probably be watched pretty closely, while the smaller vendors could/would slip through the cracks, at least for a little while.
How would orders placed on international websites for delivery in the US be affected?
I'm pretty confident that this base will be covered to some extent. It'll be hard to enforce, damn near impossible, on the consumer level, but business would probably be hit with use taxes or some other kind of delivery clause. Something like I mentioned above.
The idea is feasible, but it seems like there are quite a few questions that need be answered prior to implementation.
Definitely!

Why a Universal sales tax makes more sense

[MagikSlinger]

So you buy a case of your favorite BBQ sauce from Wyoming to be delivered to your home in Massachusetts. Your Wyoming webtailer charges you Wyoming sales tax and Massachusetts sales tax. Cheaper to go the Safeway, isn't it?

That's going to happen unless you deal with the fundamental issues at the bottom of this:

1. Local & State governments practically have no other source of income.

2. The Internet blows away jurisdictional elements and creates the equivalent of a tarrif between states (illegal under the U.S. Constitution)

OK, so how can you get local & state governments their income without having a jurisdictional nightmare?

A Universal sales tax. Everything ordered out of state is exempt from local & state taxes, but must pay a Federal sales tax. This includes mail order, telephone ordering, Internet, etc.

How to you distribute it? By population to all 50 states. The Universal sales tax will be aportioned to the states depending on their populations. It is then the responsibility of the state government to distribute it to their local governments.

I'm sure this will be a touch controversial, but it's sure as heck better than dealing with 7000 taxing jurisdictions.

P.S. I place this idea under the GPL. Take it, use it, extend it, print it out and use it for toilet paper. Hopefully this way, no one will patent it as a "business process. :-)

can't say that i like this

[Hellasboy]

>>"The 'Main Street' retailers have a legitimate fairness argument when they see customers come to the store to locate items they want to purchase, only to leave and order the items over the Internet just to escape the sales tax," C'mon, who buys stuff off the internet to avoid paying sales tax? go to pricewatch and you'll see incredible ram prices but with 13$ shipping charges. I've shipped ram before, and i know that it doesn't take 13$ to ship. But, even with that high shipping, it's still cheaper then stuff they sell at Best Buy. I buy stuff over the internet because I don't feel like paying the high mark-up that local stores add. The best prices that i've seen come from small businesses. This isn't about people escaping sales taxes, it's about the 'Main Street' retailers not being able to maintain their profit margins on items. If this passes, the computer and internet industries will follow Nasdaq. I'm not a Republican, but keep government out of the Internet.