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Ban On Internet Sales Tax Ends Saturday
donnyspi writes "As reported in the Rocky Mountain News, among other places, the 5 year ban on collecting sales tax on purchases over the internet is scheduled to end Saturday. 'The original moratorium was established in 1998, renewed in 2001 and is set to expire Saturday. The U.S. House of Representatives passed a bill in September that would expand the ban and make it permanent. Similar legislation hasn't yet been voted on in the Senate.'
I bought it over the internet, obviously, and they still added $80-odd to my bill for sales tax. If the ban wasn't over yet, how come sales tax applied to my purchase?
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Technically states can and do tax out of state purchases. If you buy something in another state and bring it back home youre expected to pay the sales tax. Same if you order something through the mails. If you buy from a large enough company that has a presence in your state you will pay the appropriate sales tax. Funny thing is many years ago I bought a 20 meg bernoulli drive for my Mac. The drive was made by a company called berring and about a year later they called trying to collect the new york sales tax because they had been informed they had to.
Anyhow this probably won't be a big deal for most internet businesses except for the paperwork. It might not hurt them at all if there is a provision made for the expense of collection. It will hurt those that were only in business because they were a tax dodge.
A lot of the major sites (Amazon, Best Buy, Circuit City) don't charge for shipping on most orders. Most other sites charge relatively reasonable shipping fees. It's usually just the smaller sites that try to lure people in with low prices then overcharge for shipping that cause the problem.
If I save $10 in tax but have to bay $5 shipping, I still come out ahead and I don't even have to change out of my pajamas.
I don't think that the lack of a sales tax is a very big reason that people buy online. Look at any online store. What you gain in not having a sales tax, you lose in paing $ for shipping (especially if you expedite shipping), and paying your time for shipping (i.e. you have to wait for the item to be shipped to you).
The main thing about online shopping is convenience, and perceived cost savings. You can get in your car, go out to your local Barnes and Noble, and fork over twenty bucks for a book, OR you can sit in front of your CRT, click a few buttons, and pay $15 for the same book.
(Nevermind that you pay $5 for shipping, and the book doesn't arrive until the next day).
Moreover, if we're lucky, governmental officials will not impose a tax.
Consider:
If they're really smart, they'll realize that the Net benefits greatly from having no sales taxes.
If they're just of mediocre intelligence, then they'll either not notice that they can start taxing online sales, or they'll be too confused about who to tax (buyer or seller, what rates, etc.) to actually implement any taxes.
And if they're just dumb, then we'll have net sales taxes.
But even then, the online stores will have to compete on their own merit. Remember from your econ classes? Competition is good, and it improves efficiency!
Just a few ideas rolling - I'm sure /.'ers will come up with more, and comment on this specific case. Not being an american, I lack the general "feeling" on the workings of the american economy.
0) Both empirical data and theoretical elaboration seem to concurr on that an Added Value tax would be the most efficient kind of taxation. Sales taxes don't quite distribute tax burden efficiently along the production chain. But how complex is really the production chain in a high added value internet reseller?
1) In countries with a high unemployed capacity, sales taxes will be very hurtful, as they will reduce consumption. But in a mature economy like the US, a carefully planned combination of consumption taxes and investment exemptions could encourage savings - and americans save four to five times less than their european counterparts.
2) The deadweight burden (the loss in welfare that doesn't become govt revenue) of a tax depends (among other supply-related factors) on demand elasticity - how much will demand react to a change in prices. If internet buyers are more price-sensitive than, say, buyers at the Walmart station in Dullsboro/OH, this could be hurtful to profitability perspectives as a whole.
3) How will this affect e-commerce with other countries? Foreigners are never happy to pay US taxes.
4) From a general equilibrium viewpoint, how large is the internet retail market in comparison to the large scheme of things? If not large enough, could it be the proverbial butterfly in south america causing a month-long storm in India?
5) I don't know if product-factor (Leontieff) matrixes are done by US bureaus of statistics regularly, but it would be interesting to take a peek if they did. Leontieff matrixes attempt to capture the interdependence of sectors in the economy - and while not being theoretically strict from a general equilibrium viewpoint, they're a very practical statistical tool. Anyone knows something about this?
6) Are they just trying to alleviate the govt. deficit? It doesn't seem to me the administration really cares about govt deficit.
7) Are they trying to impose stricter regulations on the internet on the grounds of tax evasions?
8) etc. etc.
It is amazing how quick government can be when they are getting money by their actions
"I always wondered what the "multiple or discriminatory taxes on electronic commerce" part of the law included.
It kinda sounds like "we won't tax electronic commerce" to me.
a) Moratorium.--No State or political subdivision thereof shall impose any of the following taxes during the period beginning on October 1, 1998, and ending 3 years after the date of the enactment of this Act--
(1) taxes on Internet access, unless such tax was generally imposed and actually enforced prior to October 1, 1998; and
(2) MULTIPLE OR DISCRIMINATORY TAXES ON ELECTRONIC COMMERCE."
Quoted from another post, you can verify this by reading the bill at a few different places. They are both in the same damn law. This is further backed by the supreme court decision, so that even after this bill expires sat the states still won't be able to do what they want.
As the subject says. At least that way I have a choice in paying it. Taxes are one of the two sure things in life, I'd rather have a choice in paying for it.
I agree with you. On a recent trip to California, I was really peeved at the way prices are never what they seemed.
In certain places, like McDonald's, you paid what you saw. $1.99 for a McWhatever.. you paid $1.99. But at In'N'Out (oh I miss that place), for a $2.99 burger, you ended up paying like $3.23 or some similarly bizarre amount. Shopping at Ralph's was as interesting, which certain trips resulting in no tax, and others resulting in a few dollars (I believe this is because food is exempt from CA sales tax?).
In the UK, however, almost everywhere includes the VAT (like a 17.5% sales tax). So much so, that most people don't realise that most items have 17.5% tax.
The only places that predominantly list prices without VAT are trade magazines, parts catalogs, and so on.. because most businesses can 'claim the VAT back' from the taxman on purchases for business use.
The one BENEFIT I see of not including taxes on the display price is that people learn that their government is taxing them heavily. As I said before, most British people just pay the sticker price, and go on their way.. Americans, however, have that tax burden in their face everytime they go to In'N'Out. This might make a difference when it comes to voting on taxes in the future.