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Warming Battle Over Online Taxes
mackertm writes "The NYT (free registration, blah blah) has an interesting story about the fight over Internet taxation. A coalition of states and some big clicks-and-mortar retailers are leading the charge to simplify the process of collecting taxes online. Amazon, Dell, and eBay are the biggest pure e-tailers resisting this movement. It's fun to see Amazon try and talk about how difficult it would be to implement taxes for all states, when it's already doing it for Target and Toys 'R Us."
use the NYT archive
1 7ECOM.html
http://archive.nytimes.com/2003/02/17/technology/
"Clicks and mortar"? "E-tailers"? That alone was enough to keep me from reading the article.
Sure. Double your shipping charge so that you can get out of paying the tax. Legally, of course, you are still obliged to pay use tax to your state (if they require it). These are not new taxes but just ways of enforcing already existing taxes.
Amazon claims "it would be too burdensome to collect and dispense them on behalf of so many different jurisdictions", but the major e-commerce engines (e.g ClearCommerce's engine) have a tax table broken down by zip code. This table is updated whenever the tax regulations change. Little companies such as Apple Computer, who is required to charge sales tax on online purchases, depend on this to keep the billing straight. It's all handled in the software, and has been for a looooong time.
while i sympathize with local and state governments having trouble balancing their books, doing so through value added and use taxes are the worst way to go about it.
value added taxes are favored by (wealthy) tax theorists because they tax consumption and therefore cannot be avoided. however, they are highly subject to the condition of the economy. any economic slowdown and sales taxes drop along with consumer spending. also, they are popular with the wealthy because the tax is paid only when you spend money, and not on income.
which is their biggest problem. low income taxpayers are disproportionately taxed compared to wealthy. for someone making a hundred grand a year, the value added tax on a computer is nothing. but for someone making 20 grand a year or less, that tax becomes significant. because they are a tax on consumption, value added taxes are a direct drain on the economy - they slow down and reduce consumption and reduce the total number of transactions that can take place in an economy.
if states and local governments really have a problem with colecting value added taxes, then the true answer is to drop the value added taxes completely, rely on income and/or property taxes, and build up the infrastructure that will encourage internet and mail order businesses to set up shop in their own state.
when religion is no longer the opiate of the masses, governments will resort to real opiates.
No, where it will hit the small time operator hardest is in implimentation costs.
Toys Be Us and Shit already *has* a presence in all states, and accounting services to deal with it. For them paying online taxes, while costly, isn't really as big a deal as it might appear. It's more a question of how to put it into reasonable practice.
But for the little guy it means setting up tax accounts in every state before he can even do a lick of business, and the cost of maintaining them properly may well exceed his profit margin.
It's already hard enough to deal with the paperwork and compliance issues in *one* state. Having to do it in all 50 will be enough to force many of the moms and pops of the world into tending the fryer istead of being independent business people.
Think about that for a minute and think about why the big boys might be very, very, VERY much in favor of paying all these taxes.
KFG
Target and Toys 'R Us should have been collecting sales tax all along. Since they have stores nation-wide, they have nexus in all of the states. By 'agreeing' to collect sales tax, they're just agreeing to start doing what they should have been doing already.
Behind the scenes, they probably made a deal to agree to these taxes in exchange for the states not going after them for past taxes on their Internet business.
The spin that the stores have put on this is pretty clever. By agreeing to the tax, they put pressure on Internet sites without nexus (like Amazon and eBay) to pay sales taxes on their business. They know full well that Amazon and eBay (without a network of stores) will have a difficult time figuring out how to collect all these taxes. Target and Toys 'R Us already have it figured out. This gives the chains with physical locations an advantage.
Also, this is just the beginning. Once sales tax is collected on online purchases (which won't add up to much money), what to stop a whole new wave of taxes on online sales? It's going to get expensive and complex very quickly.
Worse of all, big sites like Amazon and eBay will find a way to cope, but Mom 'n Pop Internet stores likely won't survive. Less competition, higher prices, less innovation. As is the case with most taxes, the consumer loses in the end...
The Christian ideal has not been tried and found wanting; it has been found difficult and left untried. -G.K. Chesterton