E-commerce Sites to Collect Sales Taxes Nationwide

aengblom writes "An agreement between 38 states and some of the nation's largest retailers is bringing taxes to the net, The Washington Post reports. In return for collecting taxes for all U.S. sales, the retailers would not be held liable for taxes they 'failed' to collect previously. Best quote: 'If we disclose who these companies are, it's like putting a target on their back.' The Post reports that Wal-Mart, Marshall Fields, Target, Toys R Us and Mervyn's have all 'independently' announced plans to collect taxes nation-wide." Internetnews.com has a story about the taxes and an article claiming it won't hurt online sales.

Comments

Fair Enough

[endoboy]

If (big if...) one accepts the proposition that sales taxes are legitimate, then there's no reason Amazon should be any less taxed than the bookstore down the street....

Last I checked, the UPS guy was driving on the road that local taxes paid for...

Re:Fair Enough

[meowmonster]

Yes but UPS is paying taxes on that road because for them to operate in your state they are being taxed. Their vehicle tax paid for the road along with your vehicle tax. You paid their vehicle tax as part of the shipping fees.

But then again sales taxes are not legitimate, it's double taxation. You are taxed for earning and you are taxed for spending and you are taxed for saving (unless you put it in your mattress, but sooner or later the IRS is going to wonder and you'll be audited anyway). You are constantly being punished for being a productive member of society. If you decide not to be a productive member of society then the income of those that are productive is redistributed to you, therefore you are rewarded.

Yes we need a tax but don't double tax. Make it an income tax or a sales tax but not both.

That started to get a bit off topic, but by paying sales tax for goods and services out of your state you are being taxed for services you do not use. If I buy something at my local target I am driving on the roads, burning fuel and participating in commerce within my own state. That (although arguably) takes resources that the state collects taxes on.

If I buy something out of state, that business does pay taxes on their income in their state so the "cost of commerce" is covered. The truck that picks the packages up and brings them to UPS facility paid taxes to be licensed so that is covered. If it is a ground shipment, most states have regulations taxing the trucks that go through them in the form of licensing or fuel costs (or both) so that is covered as well. I didn't make my money in that state so they are not entitled to my income (that of course leaving out the argument that govt is entitled to any of your money or we would be arguing our own state's taxation again). And the truck that brings it to my door is licensed in my state and the income they earn for bringing that package to me is taxed so my state is already getting their share. Seems to me that any additional taxation is unfounded, not to mention that I have NO say in the state's gov't that I bought the package from so me paying them any kind of tax (directly, as apposed to indirectly like the portion of my money that is income tax for the store) is taxation without representation which is unconstitutional. Isn't that what was behind the revolutionary war (among other things - not I don't need a history lesson), just on a MUCH smaller level?

Abolishing the income tax on ALL levels and going to a national sales tax would of course solve these issues (but create others), then the feds can ration out money to the states based on their population. And when everyone is paying 50% sales tax they will get a better idea how badly goverment is bloated and maybe change their voting habbits...

Re:Fair Enough

[jht]

The traditional ruling on sales taxes has been this:

If a business has a "locus" in a state (basically a substantial business presence), then they are obligated to collect sales taxes in that state.

So your traditional brick and mortar company charges tax wherever they have a store or an office. Mail-order companies meet the same test. Here's a couple of examples.

I live in Massachusetts. When I buy goods from Amazon, I am not charged sales taxes, because Amazon has no direct business presence in my state. However, if I lived in Washington (the state they're headquartered in), or one of the states where they had a warehouse, I would have to pay sales tax on my order.

Related to that, Apple has 2 (soon to be 3) stores here in Massachusetts. So if I buy from Apple.com online, I pay sales tax. However, I had to pay sales tax even before they opened the brick-and-mortar stores here, because Apple has had a sales office in the Boston area for well over 20 years.

What some of these companies were doing to try and get around the tax laws was create "separate companies" that were supposedly independent subsidiaries of the parent company and therefore didn't share all the locii with the brick-and-mortar stores. Ergo, no sales tax was being charged. That was a tax dodge, plain and simple, and in many cases (like Barnes & Noble) it's already been nuked by the courts.

Now theoretically, in states with sales taxes you're supposed to declare your purchases from out-of-state, and pay "use taxes" equivalent to the amount of sales tax you avoided. But in the real world that doesn't happen, except at some of the businesses who can't legally afford to screw the taxman. Individuals never pay it, needless to say - perhaps that just might help explain why so many malls and stores exist just over the New Hampshire state line (NH has no sales tax).

Basically, "Internet sales taxes" are a crock - but the same rules that apply to traditional mail order should apply to Internet-based sales.

Legislative stupidity

[0x0d0a]

So I can just buy from a Canadian e-retailer. Or a Mexican. Doesn't really affect me where they're based, and now they have a 7% price advantage over US-based companies. Way to go in a poor economy, US government. Now, instead of keeping the cash *in* the economy and picking it up on income taxes each time around, we throw it out to other countries. Kind of stupid. AFAIK, mail order companies are still tax-free, to show how arbitrary and lobbist-based this is.

I was wondering how long it would be from the time Bush took office (and left the Clinton/Gore approach of "fund the Internet to build it up, but keep it hands off as much as possible") to the time big companies (brick-and-mortar types) started getting their way legally.

Re:Legislative stupidity

[waterwheel]

So I can just buy from a Canadian e-retailer.
U.S. retailers shipping to Canada are required by U.S. law to charge and remit 7% tax to Canada. Revenue Canada has been granted the right to audit and assess U.S. companies for this purpose. Sounds bizarre - but it's true (I got this info right from Revenue Canada - Canada's version of the IRS). The converse is not true. The U.S. doesn't have a federal sales tax, and if you're out of state you don't have to charge state tax (in some cases anyway). So U.S. to Canada - tax. Canada to U.S. - no tax! Cross border shipping is cheaper from Canada to the U.S. and with the lower dollar in Canada, Canadian online retailers have a distinct advantage over Americans. Combine all this, and how long before the Americans start to figure out that a good chunk of sales are going north?

Some already have been

[ackthpt]

Internet retailers who have a physical presence in California have charged me sales tax, last year. It's not like there's any secret, you get to see your total before submitting payment. A few sites are forthright, displaying the tax policy on their home page.

It's just a leveling of the playing field. At some point I expect mandatory for all businesses, including those without a physical presence, which could be difficult for the Mom & Pop, HOWEVER(!) that doesn't prevent some sharpie from starting up a business to track it for them, if you get my drift.

More About Convenience for Me

[jamesoutlaw]

Shopping online has, for me, always been more about convenience than price. I do shop around online to find good prices for things, but when shipping costs are factored in, you often do not save that much. However, the extra cost is worth not having to go to a mall or other shopping center. The addition of tax to online purchases won't change my online shopping habits one bit.

hmmm

[Gnaythan1]

Looks like a business oportunity for someone in a state that has low or no taxes for forwarding goods to real addresses.

"No really officer, All ten million orders last year went to the same address in Oregon"

Re:It will hurt

[fetta]

>>Only reason anyone buys stuff online is because it is marked down enough to cover shipping...

Not true - I shop online for selection, convenience, and easy price comparison. Not to say that it won't hurt the online retailers from a price competitiveness standpoint, but this decision certainly doesn't mean "the end of online retailing."

Amazon.com

[Digitalia]

Notice that Target, Marshall Fields, and Toys R Us are all affiliated with Amazon.com's online presence. Does this mean that Amazon proper will also begin charging tax? If so, I'll resume purchasing my books at the local dealer.

Use the phone.

[Garg]

Before online shopping, I used to mail-order everything 'cause if you bought out-of-state, there was no sales tax.

So now just look up what you want online, and call their 800 number to order instead of using the Web.

I suppose they'll plug that too though...

Sigh.

Garg

Hmm .. stupid

[RembrandtX]

First off .. we all need to keep in mind that Internet sites that do e-commerce are REQUIRED to collect sales tax if they are selling to a state which they have a Brick & Morter store located.

So Sites like Walmart, Toys R Us, and my own Black & Decker have to pay taxes; Where sites like Crazy Aaron's Thinking Putty or Old Glory Games - do not.

That being said:

If I *DRIVE* to virginia (or deleware etc) and buy a car .. I don't have to pay sales tax on it. [although I do get taxed when I register it in my own state.]

If I order something over the phone, I don't have to pay tax in some states. Same if I order a magazine.

While internet stores are no replacement for a good Brick and Morter store .. they do sometimes fill a nitch. Example .. 3 weeks ago I was looking for 2 things : An Ospry Book for Eastern Front German Uniforms in WWII, and German winter gear figurines (25m) of the same timeframe.

I went to FIVE hobby shops local to me that carry minatures .. and none of them had what I wanted. [I called 6 more .. getting smarter after the 5th to get the same result.] *EVERY* single shop was willing to 'special order' said product for me.

Now, I tried to buy them in a REAL store first .. because I wanted to support my local stores.
Granted - I was looking for some rather specalty items, but when a store CARRIES said items .. at least ONE out of 11 should have SOME representative in inventory.

All my real stores failed me .. so I ordered from an online store.

Internet shopping is only good if you know exactly what you want - its very hard to browse for something on the net .. because its forced marketing - you see only what a seller wants you to see about their product.

Three days later, product in hand .. I had what I was trying to find.

I guess my point is, Internet stores generally do business across state lines. [hence no income tax .. due to fluxing tax rates between states.]
Trying to regulate income tax for a NON store fronted web-store is stupid. If they had a local store, most folks prefer to go to them first. The E-Commerce-replaces-real-stores that everyone was afraid of in retail sales .. never happened .. and honestly .. probally never will.

Which state gets the money?

[spankenstein]

For years mail order has been tax free across state lines. I understood that it was partly because of which tax rate to use and which state gets it, the buyer's or the seller's.

Re:Not a good move at this time

[Voytek]

The Republicans and some Democrats in Congress want to stimulate the economy by giving people a tax break. The theory is that they'll go spend the money they're given, thus stimulating the economy.
Now they want to tax Internet sales.

No, they don't - this is a deal with the States (maybe you've heard of them) which the liberal critics of Bush seem to forget.

Re:Not a good move at this time

[bnenning]

the low end of the income distribution--people likely to spend the extra money

As opposed to "rich" taxpayers who will put it under their mattresses?

Instead, the administration gives huge tax breaks to the wealthy

The income tax reductions actually make the system more progressive. The evil rich will get a larger reduction in absolute dollars only because they pay so much more in the first place. But you knew that.

and introduces new sales taxes

This is an agreement made with state governments. The Bush administration has nothing to do with it. But you probably knew that too.

It's never been tax free in California, anyway

[ahem]

In California, if you buy something from out of state, you're not charged sales tax. However, at the end of the year, when you file your 540, there's a spot for paying your "Use" tax.

Anything you buy from out of state is supposed to be declared and you pay a Use Tax equal to the Sales Tax you would have paid if you bought it locally.

Other states probably have similar provisions.

"Smokescreen"? What are you on?

[VT_hawkeye]

Brick-and-mortar merchants' "agenda" == trying to sell you stuff. Internet == a new way to sell you stuff. And in case you haven't noticed, many of those brick-and-mortar merchants are now selling online as well.

If merchants like Wal-Mart haven't been charging sales tax on online orders (I don't know, I haven't ordered anything online from them), they've clearly been violating the law to do so. State laws almost uniformly say that if the company has nexus (a physical presence, like an office, store or distribution center), it's responsible for charging you sales tax.

On the other hand, you are responsible, in most states, for paying "use tax" (basically a different name for sales tax) on items you buy from out-of-state retailers who did not charge you any sales tax. Betcha didn't know that one. This agreement essentially fixes the problem that almost no one pays that tax, and it catches companies who had been trying to skirt the nexus rules.

Technically Correct, Will Be Constitutionally Fla

[zentec]

Wal-mart and Target have operations in all states. Ergo, they already collect sales taxes for that appropriate state and it's no big deal to include online and telephone sales, which they should have been doing anyway.

Ever notice on television advertisements for "The Osmonds Greatest Hits", you'll see the disclaimer that "residents of New York add sales tax". That's because the company pushing and fufilling the order has offices in New York. They're required to collect taxes for orders going to destinations within the state of NY. So, there's nothing terribly earth shattering about what these companies are doing nor the agreement that has been reached. I argue that Target/Wal-mart are trying to keep their respective tits out of the wringer because they haven't been collecting taxes for online/telephone sales.

In fact, I argue that this is the first step in stricter enforcement of sales tax laws directed at large corporations.

HOWEVER, you'll note that this is a voluntary program. The states can not force the guy at FixYourOwnPrinter.com to collect sales taxes for parts sold to anyone in any state other than his own. It is unconstitutional.

While this voluntary program is technically correct, I think it may be the first step at a wider attempt at regulating interstate commerce. Which of course, the states can not do per the Constitution.

Look for this one argued in the US Supreme Court soon.

Re:No motivation

[derch]

The companies involved have a physical presence in most states. Their dotcom is subsidiary with only a few physical locations. The dotcom thus gets out of collecting sales tax, but only technically.

The agreement should only affect stores with a physical presence in your state. Amazon.com, being little more than a set of warehouses, shouldn't have to collect sales tax unless one of their warehouses is in your state. This agreement doesn't affect them because in the case of having a warehouse in your state, they would've always been collecting sales tax.

Glad Oregon is so close.

[Blimey85]

I live in Seattle... or rather Burien which is 10 miles south of Seattle. Portland is only a couple of hours form here and has lots of nice big stores for me to shop at without paying sales tax. Yes I know that it's my duty as a citizen residing in Washington state to report what I have purchased and pay sales tax on it once I return, but I say screw that. I bought it in another state and WA did nothing at all to earn that money from me so they can't have it.

It's not like they have a way to tell what I bought here and what I bought there. Sure they could have a check point at the border but they don't, and until they do, shop in Oregon I will. I do shop here as well but going to Portland for the weekend is fun and I find myself doing a lot of shopping whenever I'm there. Next month I'm going to be in Ashland, OR for two weeks and will most likely do some shopping on the way home. Sales tax doesn't seem like much but 8% adds up rather quickly.

Sales tax charges in the US

[riflemann]

(not really to do with online sales)

Why oh why do they still insist on charging tax as *extra* in retail stores in the US?

When I buy something, I expect to be told on the price list how much money I will pay to have the item. Including all taxes.

Why cant the US follow the rest of the world and have prices at general retail extablishments *inclusive* tax??

Salesdroid: That costs only $99, sir.

Me: here's a $100 note..

Salesdroid: Oh it's actually $105 including tax

Me: Argh ^%$^$%@!!

In Australia, Europe, etc the price on the tag is how much you pay. In the US it's not.

Don't Blame the Retailers

[bamm]

Why does every comment seem to target the retailer for this? Seems to me that taxing internet sales will not affect them one way or another as long as the playing field is level. The state gov'ts, on the other hand, believe they are missing out on millions of dollars in lost tax revenue. With the economy like it is, and states reporting big deficits, they need a scape goat. Looks like a win/win situation for the state gov'ts. Whether the consumers get torqued at the retailers and stop buying online, or the consumer continues to buy online, the gov't still gets their $$. Sure beats the complicated task of reducing spending and potentionally pissing off the lobbyist that got them their positions within the gov't in the first place.

On another note, I doubt it will affect my online purchases much. Most of my online purchases are for things I cannot find locally or items I am getting as gifts for family/friends who are not local. It seems easier/faster/cheaper to send items directly from the online retailer vice buying/wrapping/sending the package myself.

Bammkkkk

Re:New Hampshire? Delaware?

[Atlantix]

I think the idea is the online vendor would charge the appropriate sales tax for the state the customer lives in. In your case, it would be nothing.

Re:Huh?

[pjrc]

Traditionally, when I order something mail-order over the phone or by mailing in an order, I didn't have to pay sales tax if I ordered from out of state. Has that changed as well?

From the article, what has changed is several large retailers, with physical presence in nearly all states, who were previously charging sales tax in none of them, or only in a small handful where their on-line division had a physical presence, will now charge you sales tax.

The article specifically names Walmart, with stores in all 50 states, as having walmart.com registered in only 9 states. No longer will they be able to charge sales tax in only those few states where the on-line division has a presence, because they stores at in every state.

Of course, you'll still only pay tax if they have a physical store or presence in your state and you live in one of the 45 states with sales tax. At least for now. But the states also want to change that and force all US merchants to collect sales tax, regardless of wether they have a physical presence in the destination state.