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States To Try Taxation Of The Net Again
kimbermatic writes "From the Denver Post comes this article that the states are ready to try and tax the internet sales once more. The poor economy is sending the 'hounds' sniffing for more money. An interesting, and alarming read if your interested in protecting online merchants from this taxation plan." 'though it's not really online sales that are the big ones people want -- it's catalog mail order sales, which are still much bigger then online sales.
I do so enjoy it, when people comment without reading the articles first.
It QUTIE clearly says, that in order to get on board with this plan, states have to harmonize their sales tax regimes. So that the state, and local taxes are the same.
"Politicians are interested in people. Not that this is always a virtue. Fleas are interested in dogs." P.J. O'Rourke
I was taxed by a company on eBay a couple of weeks ago and brought this subject up with a state investigator about these matters. Here's the rundown from what I understand.
A company doesn't have to charge you sales tax if they are located out of state. They CAN if they have an agreement with the state you are in if it's different from the state the company. Even if that company doesn't have a branch or whatever in your state. If the company does NOT charge you tax it's YOUR responsibility to go the the local department of whatever and tell them that you bought whatever item at whatever cost from whatever company and you will then pay the tax.
Obviously a lot of people do not follow this course. And most mail order companies don't charge tax because it's apparently a giant pain in the ass for them to keep track of it all. So they don't charge across the board.
So it looks to me that they aren't trying to tax something that's not taxed. They're trying to collect what's suppose to be.
Abiit, excessit, evasit, erupit.
Welcome to North Carolina, USA folks. There is a nice little worksheet on our state tax form to report online and mail order purchases and pay state sales tax on them. So if this is offloaded to the companies selling the products, the prices will just go up. Simple economics.
My state Michigan's state income tax form includes an area where you can calculate your use tax from your receipts or as a fraction of your Gross Income. At my currently salary it comes out to $6/year. At Michigan's 6% sales tax that the same as spending $100 in a store, and I spend alot more online.
So stop trying to group everyone together. Do you pay your use tax?
Online retailers do pay taxes. They pay income taxes. That is not the issue here, however. The issue is whether you and I should pay sales and use tax on items that we purchase from an online retailer out of our own state.
Currently the online retailer is not required to collect the tax since calculating the amount and paying to the various governments is too difficult. It is assumed that anybody purchasing an item online is paying the appropriate use tax for their state on their own.
The states instead would like to simplify the taxation process so that they can rely on online retailers to withhold sales tax.
Well, putting aside for the moment your painful sentence structure of "the Internet" paying taxes or being taxed, let's get to the root of what you mean. Sales tax on items purchased over the Internet are not exempt from sales tax. This is a myth. Look at your state income tax return and you are almost sure to see a line for "use tax." In this line you are instructed to enter the value of merchandise you own/were given/won/etc that you have not yet paid tax on. Now for the second part, why people believe purchases made over the internet are "tax exempt." When you make a purchase at a retail store, the merchant is required by law to withhold sales tax on your behalf and submit it to the local jurisdictions. There is only a single juridsdiction (or group of jurisdictions) that remains the same with every transaction. It would be burdensome to expect a mail order operation, doing business across the country, to be familiar with the hundreds, if not thousands, of local tax jurisdictions and which apply to any given transaction. There is also the small matter of other jurisdictions not having the authority (to require tax collection) over a business outside their jurisdiction. Therefore the individual taxpayer is responsible paying any taxes they incur on a purchase made through the mail.
Is the Internet exempt simply because it is 'too cool' or 'over the head of stuffy old lawmakers'? Perhaps taxation laws are merely over the heads of overexcited teenagers.
Or perhaps you're guilty of not understanding the issues? I certainly hope you impart better research skills to your students at CCBC. With your attitude towards "overexcited teenagers" I would doubt it though.
Can you imagine having to try to figure out what sales tax to charge and who to forward the payment on to if local/state governments are allowed to tax online sales? Not only do you have to contend with different rates for different localities, but you have to mess with different exemptions and ways of classifying products for tax purposes. This will kill the small online merchants in a heartbeat.
The Streamlined Sales Tax Project, currently underway with leaders from half of the states, would set a standard rate for all Internet sales of goods, with the possibility of a second rate for foods. This would eliminate the problem of differing rates based on localities, as the states would agree to accept the same rate.
More information about the SSTP can be found here.
I bought a new G4 a couple weeks ago from the online Apple store and they charged me tax anyway. Is it because they are shipping from California (probably some goofy CA law) or did they forward this on to my state?
I don't know which but I do know that I did have to pay tax and wasn't too happy about it either.
--Won't that be grand? Computers and the programs will start thinking and the people will stop. - Dr. Walter Gibbs
There is no reason... ...for online (or catalog) merchants to be given special advantage over the brick and mortar kind.
There are lots of good reasons, both legal and practical.
First of all, in state catalog and internet sales are already taxed, so let's just assume we're not talking about those for this conversation.
Out of state catalogs and internet sites are involved in interstate commerce, which is explicitly the juristiction of the federal government. These sales are already taxed in almost every state as "Use Tax" instead of sales tax because of this limitation. "Use Tax" is hardly ever enforced for individuals because it costs more money to police it than the revenue increase would justify. This leads to the second point: It would be impracitcal to enforce interstate sales tax on catalog and online vendors. First the state would have no way to keep track of which vendors shipped goods into their state, or what was in the box. Secondly, the 50x increase in the number of forms the merchants would have to file would give them a disadvantage over traditional retail outlets. Lastly, the catalog vendors don't have an advantage of retail stores because there is nothing stopping traditional retailers from selling over the internet or mail-order along side of their regular business.
you can say that no business can be taxed...
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The people who quote Heinlein whenever the **AA come up should also gripe about the advantage given to companies - in this case, those who are given advantageous tax exclusions.
Your argument here is flawed. It is the consumer that is being taxed, not the business. The advantage is given to you not the company you are purchasing from.
The article states:
...
But the Supreme Court has ruled that states can't tax sales from electronic retailers that do not have a physical presence within their jurisdiction.
The court decided the requirement would put an inappropriate burden on e-tailers, especially with some 7,500 sales tax jurisdictions in the country that each have different collections procedures.
The Streamlined Sales Tax proposal, on which delegates from the 29 states will vote on Nov. 13 in Chicago, would simplify tax collection procedures. If passed, it would become effective after at least 10 states meet the provisions of the agreement, which include requiring states and its local jurisdictions to have the same tax rate.
"The end game is to go to Congress and say 'We have now simplified this enough so that it's no longer an inappropriate burden on interstate commerce and we would like you to tell retailers that they have to collect sales tax for states who have joined the agreement,"' he said.
In other words, if the states agree on this proposal, they will then go to Congress and ask that it become law, in line with the constitutional requirements. The state is not taxing the business across the states anyway, they are taxing you, a resident of their state. They're just making the business help.
Actually, I think the legally you are supposed to collect state tax (at least in my state) on garage sales. Of course this goes unenforced due to the scale, but the legal obligation exists.
If you read the article it states:
(quote)"Online companies don't use state services," he said. "If you're going to the store to buy something, you're going to be driving on the roads and the store will be using police protection or fire protection and other state services for which it would be appropriate that they charge a tax."(endquote)
And theoretically the consumer "never" legally gets out of paying sales tax as most states have a "Use" tax equal to the sales tax. But of course everyone scoffs at the use tax and don't pay.
My word, when will these overbearing government goofballs learn that having LOW taxes while surrounded by HIGH tax areas drives business AND revenues up for the low tax area?
Exactly. Here in New Hampshire, we have the highest alcohol purchase per capita of any of the states (and it's about twice as high as the next runner-up). This is because alcohol is really cheap here, and people drive over the border from the neighboring states to buy it.
Actually, New Hampshire's "taxes" on alcohol are "very high" (NH in fact makes more money per bottle than other states), but hard licquor is a state-owned monopoly, so we're still cheaper than everyplace else.
Also, NH has no sales tax, so we get lots of people driving in from that, too.
NH is a great example, in my opinion, of two concepts: The lower taxes (eq prices) thing you mentioned which attracts out of state commerce, and the concept of "state monopoly on vice" being very profitable.
I am not a smoker, and I am continually surprised at how expensive the habit is... I can only imagine how much the state would make if it controlled tobacco sales this way (especially, with tobacco being cheaper overall just like alcohol).
One could also look at this another way:
The states are trying to maximize their tax revenue.
By taxing online purchases, they're raising the final cost to the consumer of the product. There will be a certain number of consumers (the marginal consumers, if you will) who will determine the total price to them too high, and thus will not make the purchase.
Granted, one cannot calculate out the total numbers, but it's likely that the revenues these states expect to gain from this additional taxation may not be at the levels they estimated, and we may be better off as a nation in a time of economic recovery to be stimulating the economy through these additional purchases.
Just a thought.
Chris -- http://www.bitter.net/