Evolution Of The Online Tax Debate

rhwalker22 writes "Last November, the Streamlined Sales Tax Project drafted a plan to make it easier for states to cooperate in collecting sales taxes on products sold over the Internet. That plan is now headed to governors and state legislatures for debate. While that debate begins, the sales tax group is moving into new territory, debating how to apply sales taxes to digital services, like music and software downloads, and IP telephony. Most states participating in the sales tax project have sent representatives to Tampa, Fla., this week to take up this subject, according to a report by washingtonpost.com."

Comments

VAT while across the ocean

[ostone]

When I went over to London I got told about VAT refunds. If you are a tourist in Britain you can get back most sales tax (Value added tax) if you save the recipts and it is over some base cost. The reason I heard for this is that a visiter recives no benefit for the tax and therefor has no logical reason to pay it. This seems to be the case with internet shopping... I don't live in North Dakota so why should I pay for kids to go to school there while not contributing to my state... now if the tax was being proposed from the originating state it makes a little more sense, but is still a streach. The long and short seems to be that the states are strapped for cash and trying to collect more taxes without making new taxes.

Re:VAT while across the ocean

[LMariachi]

"I don't have anything worth stealing, so why should my taxes pay for the police? If don't drink milk, why am I paying for dairy farmer subsidies? I never go hiking, why should my money go towards national parks?" It's called a social contract. Even the childless benefit indirectly from public education, so we've decided that everyone should contribute. You're paying for the right to utilize public schools; whether you choose to exercise that right is your business.

More to the topic at hand, the issue with interstate taxation is that monies you pay to another state do not grant you any representation, privileges, or benefits. If I, a New York resident, pay sales tax to the state of Maine when I order something from Land's End, what am I getting out of it? Conversely, if Land's End is saddled with collecting taxes for New York State, what's in it for them? All they're doing is shipping a package here, so it amounts to an unconstitutional interstate tariff.

(The way some states have been getting around that problem with things like automobile purchases is by dint of a mutual agreement, a bargain you'd have a hard time striking with any no-sales-tax state.)

Ridiculous! What about the US Consititution!?

[Anonymous Coward]

Ridiculous! What about the US Consititution!?

When state Governors are sworn in they USUALLY take an oathe to uphold the US Constitution and to defend it.

They are not if they keep trying to fight it with ridiculous crap like this. Some states have no sales tax for example like the wonderful state of Washington.

As everyone knows it is unconstitutional to tax interstate commerce or subject levies and tariffs.

The only exception to taxing telephone purchases or internet prurchases between two states is when the company collecting the sales tax HAS PHYSICAL BUSINESS PRESENCE in both states.

I hope people see this at 4:49am EST and put his thread to rest.

The whole idea is UNCONSTITUTIONAL. And ammednig the constitution is a dangerous action, once it starts the constitution is open for modification until closed and ANYTHING can happen during the debate.

This stuff makes me sick. California and New York should be ashamed for their socialist spending practices.

what really irritates me...

[night_flyer]

...about this whole thing is the government, especially most of the States, dont spend the money they get wisely in the first place, so we are going to give them MORE money?

For the last 10 years in Oklahoma the population grew at about 6%, government spending grew at about 70%, now there is a budget shortfall and the want to raise taxes!

poof!

[Anonymous Coward]

Once this goes into effect, you'll see the everyone stop buying online. Already most of us here at my office building don't buy from an Texas vendor for just this reason (and any place like Borders.com which charges sales tax because of a B&M presense in our state).

Rebirth of digital cash..

[MikeFM]

I think they'll just encourage people to use digital cash. The lack of taxes has allowed credit cards and even checks to become the common method of payment online. If the government begins taxing these sales it'll encourage people to use digital cash. If there are people willing to use digital cash there will be people that will supply it. Sure most will suck and the rest will battle but eventually one or a couple will become the new defacto standards.

Why would a company provide the framework of digital cash without charging any fees? Simple! You get people to pay you in real money and you give them digital money. You don't have to offer to convert digital money back into real money if you have enough customers that it is practical to buy and sell everything in digital money. Other people would step in to convert currencies if there was enough demand. Therefore you suddenly have a money funnel filling your own bank accounts. Invest that money in land, gold, precious gems, or whatever is pretty stable and you have a fortune and your fortune makes your digital money more valuable thus creating a nice cycle. Just issue yourself whatever paychecks you want and live like kings.

Think of the EBay/PayPal marriage. If they moved their operation out of the US and issued their own currency that was easy and cheap for everyone on EBay to use and made it available to other sites to use as easy as they already use PayPal.. well you see where that goes. It's not that far fetched.

Re:Rebirth of digital cash..

[mark_lybarger]

extremely interesting idea indeed!

first, the governement is taxing too many different things all over the place. most likely so the population doesn't realize the exact amount they're actually paying. don't charge the poor income tax, charge them sales tax. middle income families, they get double wacked. upper income, well, they get a slight hit in the income tax, but they're able to save a lot and can find ways around some taxes. pick one thing uncle sam and tax it all across the board!. i've got 3 different governments wanting sales tax on my income, plus some old-age governement-created-quasi-retirement system that needs to be completely eliminated or at the very least optional.

now, back on the topic of the poster. a company will definately see taxing internet purchases as an opportunity to act as an offshore clearing house for internet sales. the sale will actually occur offshore and no taxes will be incured. or some such. however it's implemented, there's a technical problem that people will be paying internet taxes (the state gov't are in too big a pinch these days and are all looking for revenue from places mostly from overspending during the .bomb era). there will be a technical solution that will be implemented probably first by some h4ck0r, then by a reputable company.

during the late 90's most people didn't mind paying their taxes. but now that the gov't can do what most normal people do and live within their means, they're raping people for more and more when people have less and less to give. my governor (OH-Bob Taft) just proposed raising taxes again on cigaretts and alcohol to cover part of their lack of income. i'm sure the legislature will approve what he wants.

Said it before, I'll say it again

[wowbagger]

ANTYTHING that increases the tax burden on the average person has a harm associated with it. It may also have a good, but there IS a harm to it as well. Remember, taxes are moneys taken from you by force if necessary and spent on items that you did not choose to spend it on.

Back when government did as little as possible the harm taxes caused were less than the good they did. That is no longer the case, as government grows larger and starts doing things that are not in the common interest.

It is therefor the duty of every citizen to see to it that the government gets as little tax money as legally possible.

Giving more money to the government because they are having a budget shortfall is like buying an achoholic a drink because his glass is empty - it might seem like a charitable thing to do, but it really is harmful.

NOTA BENE - I am not a "Business is Good/Goverment is Stupid" sort of person. I don't like big business any more than I like big government - I like small businesses and local government, because they tend to be more responsive to the individual. That is why taxing interstate commerce, be it done via the Internet, via the mail, via the telephone, or via carrier pideons is a BAD THING - it discourages local government and benefits larger governmental bodies.

Productivity

[seanadams.com]

It's amazing how hard people will work... if you let them keep the proceeds. I had a web designer friend who would work until about half-way through October, and then take the rest of the year off FOR NO OTHER REASON than to avoid being put in a higher tax bracket.

Our tax code is fscking horrific. Let's just have a flat sales tax or a flat income tax, and quit the bullshit. Our country would return to incredible prosperity if we could just do that.

I'm not American so the US won't tax me, but...

[mrjb]

...aren't you supposed to get something in return for tax? Taxes should be used for the common good, that's what democracies are about isn't it? You get roads for road tax, social security for income tax and so on. Of course the budgets get shifted around here and there, and 'the state' does get extra income out of it, but you see the point, but what would people get in return for Internet tax? More bandwidth? We're all already getting that. Not to mention that most people are probably *already* paying tax over using the Internet, by means of VAT. Now that the Internet no longer depends on US government funding for its existence, what would the US government offer the people in return to justify the tax?

Re:Why fight "Internet" sale tax ?

[weave]

VAT is paid by everyone along the supply chain. Manufacturer buys raw materials, supplier pays VAT. Then when they resell the goods, they deduct the VAT that they paid for the raw materials, and pay VAT on the goods sold to the distributor. The distributor then deducts the VAT paid, adds their markup, and sells it to the retail place, the retail place pays the VAT for the retail price after deducting what they paid for the goods. At least that's what I know about it. So VAT is normally built into the selling price.

Sales tax, on the other hand, just happens when the end-consumer purchases the product. So the product on the shelf for 99 cents ends up costing like $1.07 when you checkout.

Sales taxes vary by state too. Like, Pennsylvania doesn't tax clothing, but some other places do. Delaware charges NO sales tax. Arizona charges a sales tax, but some cities tack on a percent or two so you have differing sales taxes just by driving around in one metro area like Phoenix.

It's a complicated mess, so the real problem is, how does a net business know what tax to charge each user. It's not just a simple case of doing a table lookup of 50 elements and multiplying the sale value by it. There are thousands of different rates, and just as many rules about certain products which are exempt. Then you have the hassle of knowing what locality to remit the revenue to. Whereas a physical store just has one sales tax rate to worry about and one place to submit their receipts.

The answer being floated about is to have online tax clearing houses for the states so when you make an e-commerce purchase, the site connects to the tax site, gets the amount to charge, then submits that value to the tax site. That site (a private company) would keep a portion, and remit the rest each month to all appropriate localities.

A complicated mess, and some companies have noticed the huge potential to score a percent or two off of every net sale, and are eager to provide the service. The states and localities will accept a lower rate after fees because it's better than nothing.

Meanwhile, ailing dot-com online companies will suffer even more. You already have to pay shipping (usually). If you tack on sales tax and the hassle of waiting for the goods to arrive, most people will just as soon run down the street to buy the stuff where it will end up cheaper.

And that is why bricks-and-mortar stores are all for this idea...