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New U.S. Sales Tax Regime For Internet Sellers?
morganew writes "As reported last week on Slashdot, States are pushing for new sales tax rules that would force Internet sellers to collect taxes for up to 7500 jurisdictions. Legislation has been introduced. The House Judiciary Committee held hearings today; here's CNet news on the bill, and here's a report (PDF link) on what it could mean to internet sellers."
...well, not exactly. But once the price advantage of no sales tax goes away, goods that incur a shipping charge will be better bought locally, all things being equal.
Will this put US online sellers at a disadvantage to, say, Canadian ones for importing? For example an amazon.com order plus the taxes verses an amazon.ca order with shipping and the exchange rate differences?
Trolling is a art,
They are trying to turn internet shopping into something similar to ordering out of a magazine...
I like ordering things online because you know your getting what you order(if you go to the right place) and its almost always cheaper, even if you include shipping costs.
This will wreck havoc on all of that though, take away the main advantage of online sellers...
Sigh, net may turn into place to buy specialty items, Best Buy or whatever for non obscure things. I find that kind of depressing really
They would have better luck legalizing and taxing drugs (and it would be more moral) than trying to enforce crazy e-commerce regualtions across state lines. Seriously, the money gets taxed once as income in the state is is spent from and once as income in the state it gets spent in. Isn't that good enough? Why try to put a brake on the great whell of e-commerce that is just starting to get our economy spinning again?
Legalize and tax drugs, don't tax e-commerce. Are you listening, Dean?
When I (in North Carolina) buy something on the Internet from, say, Oregon, where does the sale actually take place? I would certainly say Oregon. Add to that the concept that any extra tax on it by North Carolina certainly is an unconstitutional infringement on Interstate trade. The state provided no benefits to such a sale (one can argue, although lamely, that they provide things like police and fire protection to "real" stores), their only claim on taxing the sale is greed.
I'm an American. I love this country and the freedoms that we used to have.
It seems there's some controversy in how this thing would be implemented. The authors wanted stores with annual sales of less than about $5 million to be exempt from the tax, since keeping track of sales tax for fifty different states is incredibly cumbersome. Amazon, however, wants a much lower limit. They're trying to force businesses who take in at least 25 or 50 grand each year to pay sales tax.
I think it would be a real shame if this thing goes through, with taxes kicking in at sales in the tens of thousands of dollars. As Amazon must well know, setting up sales tax collection and payment for 50 states would be an absolute nightmare for small sites.
I mean, what a disaster. You're running a site with $55,000 in sales, and now you've got to administrate collecting and routing sales tax for 50 different states, even though you only take in 1500 orders a year. Think of all the paperwork and hours lost, all for the sake of, say, $60 tax per state.
That explains why sites like Amazon.com would be willing to endorse a proposal that cuts into their profits. It's obviously worth losing a few percentage points on the bottom line, if doing so creates new barriers of entry to tiny upstarts.
I'm generally "Interesting," "Insightful," and even "Funny" here. What the hell happens to me at parties?
Just after reading the CNet article, this looks as though it could cause real headaches for small business owners.
Let's see. Small scale businesses would be collecting sales taxes for virtually every jurisdiction in the country, dealing with the choking amounts of spam, fending off people who want to steal the domain or commit other mayhem, paying the self-emplyment tax, and contending with all the other paperwork. Where's the incentive to keep going (much less the time to devote to the actual goods or services)?
We could probably save a bundle by doing away entirely with the Small Business Administration. At this rate, they won't have much to administer.
DUCT TAPE: The Election Supervisors' Secret Weapon
"No Tax or Duty shall be laid on Articles exported from any State."
That about wraps it up.
In a globalized economy, taxing e-commerce isn't going to work well. For the sake of fairness, traditional brick-and-mortar retailers shouldn't have to suffer from sales tax either. Time to move to a totally different tax system; I'd propose to tax energy consumption and nothing else (not even income tax); calibrate it so that the total tax burden remains unchanged.
So what is to stop internet sellers from simply putting up a printable order form? If you have to snail mail in your order, it is mail ordered and exempt. No different from the situation now, but it takes a little longer. Certainly worth the effort on bigger ticket items.
But how is it that mail order would be exempt and internet sales would not be exempt in the first place? I'd love to know how they are going to just explain away
"No tax or duty shall be laid on articles exported from any state."
"No preference shall be given by any regulation of commerce or revenue to the ports of one state over those of another: nor shall vessels bound to, or from, one state, be obliged to enter, clear or pay duties in another." (Article I, Section 9 of the US Constitution)
I think that speaks for itself, or shall we have the revisionist telling us that 'vessels' meant spaceships, just like 'the people' means the National Guard in the Second Amendment? Maybe some of our fine lawmakers should have taken the time to read our Constitution at it's recent unveiling.
I asked about this in the previous thread, but got no explanation, so I'll try again... how can such a law be reconciled with what is explicitly specified in the U.S. Constitution?
"No tax or duty shall be laid on articles exported from any state." (Article I, Section 9.5)
That is, after all, exactly what these laws mandate, for merchants to collect a tax on some State's behalf on goods that they are exporting out of the state. How is this legal?
AnotherBlackHat also pointed out another relevant provision:
"No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress." (Article I, Section 10.2)
I am genuinely bewindered as to how proponents of such a law can think it would pass Constitutional muster. If anyone could explain the legal rationale behind such legislation, I'd really appreciate it.
The sale tax situation for internet sales is no different than for mail-order catalogs. They are the same. So things are already equal for them.
All small business owners need is something else to burden their time. Where's the hue and cry against all the "evil-non-tax-paying" mail order companies? Internet businesses are simply mail-order companies. The main difference is only the media of the catalog.
You need to define taxes. If you look at history, they way they have taxed things in this country has changed over the years. Income and sales taxes are relatively recent inventions. But before them, there tended to be outrageous duties on imported goods. Or look at American history. Read about the excise, poll, and property taxes of the revolutionary era. The revolution was based on outrageous taxes on legal documents, aka the Stamp Act, and the more famous tea tax.
I know this is ./, but geesh!
The bill doesn't talk about taxing internet sales, it talks about taxing remote sales. Sales includes mail order, phone order, internet order, any order.
The bill only applies to states that agree on a unified, simplified tax system. The same items will be taxed in every state that agrees.
Let's see. I have a computer. I input the zip code of the person who has placed the order and it tells me the tax. Hasn't anyone reading slashdot heard of computers? They sometimes can be used to do computations for people.
Once a quarter, I fill out at most 50 forms and send 50 checks. A burden? Yes, but not that great. If the system is truly simplified, my computer should be able to fill out the 50 identical forms for me for the 50 different states.
The bill as introduced only applies to those with more that $5,000,000 in "gross remote taxable sales." Note it does not include local sales or sales of non-taxable items.
I don't know about your mom and pop, but mine don't take in more than $5,000,000.
Shout outs to my peeps in Oregon and New Hampshire too! :)
Unless I'm smoking some bad crack, (and I could be ;) , I read that the unified tax system was nothing more than a set of guidelines defining how things get taxed, not if things get taxed.
For example, Orange Juice gets taxed as a beverage as opposed to fruit. But that doesn't say anything about if food items are exempt or not. In some jurisdictions it just plain depends. For example, oregon has no sales tax, but in southern oregon, there is a fast-food tax.
I know when I lived in LA, LA county and Orange county had different tax rates. I've seen some municipalities where zipcodes are used to differentiate tax rates, even if multiple zipcodes are in the same city.
I also remember a while back, it was posted that in Colorodo, some items are only taxable at certain times of the year. I think there was some special holiday where that particular class of item was not taxable or something like that.
All of this really makes it a pain for the seller to keep track of. That's why I think its natural that a seller only be obligated to charge sales tax according to their LOCATION(s).
The logic behind this is that the state where the person lives is generally the one that's losing revenue, since it's assumed that without the online/catalog option people would simply buy from vendors in their own states. Most of the services which sales taxes pay for, education, health, welfare, etc, go to individuals rather than businesses, so it seems reasonable to tax based on your population's spending rather than your business' sales. (though actually it's a lot more complicated than that...)
Of course in a lot of cases states may actually be getting sales tax income they don't deserve, for example in small states like Rhode Island that may not have a lot of stores of their own (when I was living there, at least half of my non-necessity purchases were from Massachusetts) or in a large and high-tax city like NYC or Chicago (almost 9% in each) that's near the border to a state with lower taxes. Those places have the most to benefit from this, since they may potentially be recovering taxes that they wouldn't be earning anyway, while "strip mall" states like New Jersey will be less happy about this.
Canadian incomes are, on average, 30% lower. Because of that, many items are priced less in Canada.
Another factor is that direct consumer advertising is illegal in Canada. (US is one of the few countries where it is legal). So the marketing is done only to doctors and gov't beaurocrats, not consumers.
As for cost shifting, Medicare/Medicaid only pay for 50-70% of the actual cost. The other 30-50% is paid for by higher rates for paying (insured) people. There's no explicit tax raising the cost of pills.
Do you even lift?
These aren't the 'roids you're looking for.
If you really want to be a dick about it, assuming you are an ecommerce merchant, perhaps you could ensure that you only had a physical presence in the least populated state in the continental (to minimize shipping costs) US. That way, only people in that state would have to pay sales tax. Since it is the least populated, the majority of your customers would probably be out of state, and thus would avoid it.
The small, independent, one and two man ecommerce sites are the ones that will be hit the hardest with a new tax system. They really won't have the resources to figure out the tax system. It will pretty much wipe out those silly little independently coded ecommerce web sites that you see here and there.
This is a loss for Linux, as it is easy to talk these small sites into using unsupported ecommerce software running on Linux. Gearing up for a big nex tax will require a type of support the free software business will not be able to deliver.
It is also interesting to see that the government is talking about big increases in taxes at this point of the business cycle.
Greenspan has been pursuing massively inflationary monetary policy for awhile, there's been a gradual devaluation of the dollar. Just about every part of the market is really geared for a big spurt of inflation...except, of course, wages.
Workers and small businesses should be prepared for some very serious belt tightening in the years to come.
You can't always figure out the sales tax rate based on the zip code.
Many of those who do charge sales taxes depend on the zip code to determine how much to charge. I hate having to argue with them every time I buy something.
For example, the Texas sales tax rate at my office is 8.25%. But at home, it is 6.25%. Both are in the same zip code, but my office is in town and I live 20 miles out in the country.
The odd thing is that if Fed Ex drops off my package at the office because they don't have the foggiest idea how to get to the house, the sales tax rate is still 6.25% since the official delivery destination has no local sales tax component.
This bill isn't the answer. The state sales tax situation is a complete and utter mess, and local sales taxes make things even worse.
How does this propose to handle county or city sales taxes? It doesn't.
F'rinstance: in Blount County, TN, purchasers at local stores are subjected to a 6% state sales tax and a 2-3/4% local (county, IIRC) sales tax. Purchases made on the Internet, or via mail order, from outside of the state are not subject to sales tax, either county or state. This bill would subject said purchases to state sales tax, but the county still gets shafted (or the buyer gets lucky, whichever way you want to look at it).
Michigan's state 1040 has a "use tax" line where you can (if you kept receipts) enter 6% (the state tax rate) of the total amount of out-of-state purchases made in that tax year and pay your state sales tax that way, or if you (intelligently) didn't keep receipts, you can "estimate" it using a formula they give (which will usually save you a bundle if you do much out-of-state purchasing) based on your AGI.
What if I'm on vacation in Oregon and buy a backpack, or some other non-consumable item, for use in Illinois? Oregon gets the sales tax money, but clearly, the purchase is intended for use in Illinois, so Illinois is getting screwed here. People who live in states adjoining those where there is no state sales tax whatsoever have the benefit of being able to cross the state line and purchase whatever they want tax-free. Obviously, the bordering states don't like this.
Sales taxes need to be abolished, and the federal government should implement a national sales tax (hereafter abbreviated "NST"), akin to the UK's VAT or Canada's GST. When a remote purchase is made, the state to which the purchase is billed gets that portion of the NST. The state can then let the local governments do their own fighting over whatever scraps are left. I can't say as I particularly like local taxes anyway, and VAT and GST work extremely well in the UK, Canada, Australia, etc., so perhaps these folks are trying to solve a problem by reinventing the wheel...
p
In Korea, long hair is for old people!
This was not a weird tax at all. Peter wanted to move ancient, ossified and bound with old customs Russian society toward much more modern and agile West. As part of that, he wanted to promote Western ideas - clothes, language, customs. Western men usually didn't wear beards then, and in their eyes a beard was probably a sign of a savage.
No state sales tax in Alaska, or Montana.
Using this as an oportunity, someone could start pitching a national sales tax. As much as the states will try, there won't be a law making it legal to tax items purchased in another state. I know that here in Wisconsin we are technically supposed to pay sales tax on out of state purchases via our personal income tax. Anyway, back to my point.
While cash strapped states might not like the idea, the federal government could impose a federal sales tax on ALL items. I would find this ideal over our current tax structure and now would be the perfect time to pitch this federally.
The only fears I have is congress (Money grubbing freaks on both sides of the spectrum) will want to use it as an income suppliment rather than a replacement for our current tax structure.
I'm going to stop short of preaching and trying to sell the idea of National tax and say that States will try, and may even pass laws but in no way be able to enforce such laws.
Proofreading and spelling checking is for losers