Slashdot Mirror

← Back to Stories (view on slashdot.org)

Ban On Internet Sales Tax Ends Saturday

Posted by ryuzaki0 on from the salivating-pigs dept.

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.'

32 of 192 comments (clear)

  1. I bought a laptop last monday from Dell... by llamaluvr · · Score: 3, Interesting

    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?

    --
    Insightful: 76, Off-Topic: 379, Flamebait: 24, Funny: 152, Interesting: 201, Underrated: 55, Troll: 9, Total: 896
    1. Re:I bought a laptop last monday from Dell... by Anonymous Coward · · Score: 2, Informative

      You probably live in a state where Dell has a physical presence. If you didn't, that's where the question of Internet taxation would apply.

    2. Re:I bought a laptop last monday from Dell... by blazer1024 · · Score: 5, Interesting

      State sales tax laws are a bit weird.. IANAL, but from what I've researched on it, if a company has ANY physics presence in the state where you are purchasing an item, you must pay sales tax on that item, regardless of how you order it, or where you placed the order. What matters is your physical location.

      So it's quite possible that Dell has a physical location in the state where you live, and therefore you have to pay sales tax. If they do not have physical presence in your state, then you were inappropriately charged sales tax and you may be able to get it back.

    3. Re:I bought a laptop last monday from Dell... by kaleth · · Score: 3, Informative

      Because it isn't really a sales tax ban. If you have a physical presence in the state, you are still required to collect sales tax. Only interstate purchases are exempt, because of the difficulty in complying with all of the different sales taxes laws.

    4. Re:I bought a laptop last monday from Dell... by Mantorp · · Score: 5, Informative

      From The electronic commerce associationThe Supreme Court blocked the states in Quill Corp. v. North Dakota, 504 U.S. 298 (1992). In Quill, the Supreme Court held that, because state sales and use taxes are so complicated, a state cannot require a remote seller to collect sales or use taxes unless the seller has a physical presence, or "nexus," in the state.

    5. Re:I bought a laptop last monday from Dell... by w42w42 · · Score: 2, Interesting
      So it's quite possible that Dell has a physical location in the state where you live, and therefore you have to pay sales tax. If they do not have physical presence in your state, then you were inappropriately charged sales tax and you may be able to get it back.

      Getting slightly off topic, but I'm curious how manyoutfits on the 'net do this: If they charged you sales tax for a state they do not have a presence in, that can equate to fraud. Every once in awhile you hear people on the news charging illegal fees for items or services, fake taxes being a favorite. It is very illegal to collect money on the state's behalf and then not turn that money over to the state.

    6. Re:I bought a laptop last monday from Dell... by ennuiner · · Score: 4, Informative

      I had the [mis]fortune of working for Dell's consumer sales phonebank this summer. This was a constant source of annoyance for customers who wanted to buy at advertised prices. They understood shipping, but did not quite understand why we had to charge sales tax in states where we had a business presence. Unfortunately, Dell has sites in some big states like Texas and Florida, too. Anyway, the states where Dell has to charge the full sales tax are Texas, Tennessee, Florida, Ohio, Pennsylvania, Kentucky, Nevada, North Carolina, and Oregon. If the machine has an on-site service contract, like desktop and some notebook systems, Dell charges tax on the value of the service contract in all states with sales tax. The contracts are handled by a third-party contractor, Banctec, so Dell isn't the company with the business presence in that case.

      --
      Somebody please, tell this machine I'm not a machine.
    7. Re:I bought a laptop last monday from Dell... by cluckshot · · Score: 2, Informative

      Having worked for the State of Alabama Department of Revenue, Sales and Use Tax Division, I might know a thing or two about this. The issue is NEXUS (Connection) and an issue of where the sale occurred.

      Generally the Law has held that the location of purchase is the point of Delivery of Title to the object. This might seem to be that when you get something in the mail or by freight currier that it was sold to you when you picked it up. This is not so. The issue is where did it become yours. If you paid freight, the the item became yours when and where it was handed to the freight currier. (Free on Board[FOB]) If the freight is paid for by the Supplier then it becomes yours at your door unless you accept it as FOB at their dock. This is sometimes confusing to people.

      The issue of collection of sales tax at the FOB point is generally one of the State in Question will not charge Sales Taxes on items shipped out of State because the item is for "Export." Please note that the definition of "State" is Nation just like Germany or France. We are 50 NATIONS not one. We are Federated. (Allies with a common control of foreign policy externally) The state where the goods come from generally likes to see lots more business and knows that if it taxes sales to outside, then it will lose business. The state receiving the goods is offended as it undercuts the taxed business base. This problem within the USA is a private low key war among the States.

      The real solution is contained in the US Constitution where the Federation is empowered to resolve such matters under the power to regulate Interstate Commerce. This being one of the powers that Congress is doing its best to forget that it has, we suffer the problem of not having our tax bases of our various States protected by the Feds. I know that people don't like paying taxes, but we have to do so to support our government. This is undermining our Federation. It threatens our security.

      Prior to the Internet Catalogue Sales did the same thing. Generally the cost of freight and such made the effect minor until the late 1960's. With the advent of large efficient Freight and communication services (including but no limited to the internet) we began to see serous problems. With the Advent of "Free Trade" (allowing non-federation States into the trade mix) this has become a serious threat to the existence of our States. 44 of the 50 US States are in serious financial problems due in no small part to this problem. The loss of the "Internet Ban" does little here. The real issue here is if the Federation will come in and do its job assuring that if one state drops its sales tax on mail order or internet order sales as "Export" goods, that the other state will get to pick up the "Inport" Status. The State of Alabama has a "Use" Tax. The "Use" tax taxes the use of an item if it did not pay sales tax. As such nobody in Alabama legally did not pay these taxes already.

      Frankly the various US States need to stop this Low Key War on each other's tax base and start cooperation. The proper forum for the peace settlement is CONGRESS.

      The problem of stopping the DOMESTIC US tax war will not alter the problem of the Extra-Federation tax war against the USA generally. That too needs to be addressed by the US Congress and most specifically by not writing Trade Deals which give the WTO or similar bodies power to stop us from dealing with this and by repealing NAFTA and GATT and USSFTA and USCFTA.

      So long as one party is held to trade handicapped with a massive tax burden and his competition is free to do so without taxation, this constitutes de facto illegal status on the taxed party. His trade is fined and thus essentially illegal. This was recognized in the US Supreme Court Rulings of 1820 that prohibited taxation of Federal Institutions by States and of Churches by States. It was ruled that "The power to tax was the power to destroy."

      The general demand of States for an end of this both domestically and externally, has been bra

      --
      Never Politically Correct ~ I prefer the facts If you don't like what I say, get a life, or comment yourself.
  2. While we're at it... by Capt'n+Hector · · Score: 4, Funny

    Can we ban charging for shipping too?

    --
    Quid festinatio swallonis est aetherfuga inonusti?
    Africus aut Europaeus?
    1. Re:While we're at it... by IthnkImParanoid · · Score: 2, Funny

      I thought the whole point of having the Internet was to get free stuff.

      /me hopes Orrin Hatch doesn't blow up his computer.*





      *Sarcasm. All in good fun, Mr Hatch!

      --
      It's nothing but crumpled porno and Ayn Rand.
    2. Re:While we're at it... by DrEldarion · · Score: 2, Interesting

      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.

    3. Re:While we're at it... by stefanlasiewski · · Score: 3, Funny

      And while we're at it, lets ban the charge for the actual item as well.

      I work hard. I think I deserve a free plasma television.

      --
      "Can of worms? The can is open... the worms are everywhere."
  3. RTFA - It's not a sales tax ban! by kaleth · · Score: 5, Informative

    The ban that is about to expire is the one on taxing online services (such as ISP access). The "ban" on collecting sales tax over the internet is because of a law, but is the result of a court decision (which originally concerned catalog sales).

  4. There is NO ban on sales tax collection by siskbc · · Score: 5, Informative
    No one really ever has understood the law passed in 1998, evidently including the person who submitted the article. The tax ban was on internet *access*, not on internet sales tax collection. Ever notice that you DO pay sales tax if you buy something in the state you live? There's no ban, obviously - the problem is a jurisdictional one (interstate commerce, namely). In short - there has NEVER been a Congressional ban on collecting sales tax over the internet.

    If Congress wants to allow taxing of internet access by the states, they will now have the ability, though they probably won't. If they want to allow taxing of internet sales, they'll have to get around Supreme Court decisions that say states can't collect taxes on residents in other states. But the issues are NOT related, despite the frequency with which people screw this up.

    --

    -Looking for a job as a materials chemist or multivariat

    1. Re:There is NO ban on sales tax collection by shaitand · · Score: 2, Interesting

      "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.

  5. Why Internet and Not Mail Order by Davak · · Score: 5, Insightful


    When mail order business was getting started, the traditional businesses and the government moaned and groaned about the lack of tax return... However, today nobody is looking to tax mail order. Why not?

    Mail order is been around far longer than the internet.

    The internet is a wonderful business model and vector. Let us not soil it with taxes just yet.

    Davak

    1. Re:Why Internet and Not Mail Order by ad0gg · · Score: 2, Insightful

      Any attempt at a unified sales tax for the internet will get struck down in court. The constitution bans any taxes or levies on products that are imported from other states.

      --

      Have you ever been to a turkish prison?

    2. Re:Why Internet and Not Mail Order by zilym · · Score: 2, Insightful

      I disagree. The local brick and mortar stores have significant advantages over their online counterparts. Sales tax, with its current bias, helps level the playing field.

      People are more inclined to buy from local stores because they don't have to pay for shipping, they get instant gratification, and they can bring the product back in if they have problems. The shipping fee by itself makes up for any sales tax fees.

      I think if you taxed online merchants equal with the local stores, it would severely hamper online businesses. May even drive them to extinction. The dot com bubble has already burst, why would be want to try to take out the remaining (somewhat) successful online businesses now?

  6. Catalogs by andyrut · · Score: 5, Insightful

    I see no reason why Internet sales should be treated any differently than catalog or telephone sales.

    If I buy a widget from Company X via a catalog when I live in a different state than Company X, I'm not charged Company X's state's sales tax. But when this moratorium expires, I could be charged state sales tax if the purchase were over the Internet. And then, which state's sales tax would I have to pay?

    Why should the medium of the purchase dictate the taxation rules? I, for one, would like to see sales tax laws universally applied for interstate commerce.

  7. Going to be interesting to see the difference by Crashmarik · · Score: 2, Interesting

    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.

    1. Re:Going to be interesting to see the difference by Jin+Wicked · · Score: 3, Insightful

      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.

      You'd be surprised how much a little extra paperwork can cripple a sole proprietorship (I'm not allowed to have employees unless I change my business status and incur another whole world of complications), already being run in combination with a second job, like me. Collecting and remitting state sales taxes, along with regular accounting, and reconciling that with federal income taxes and piles of extra forms is already a huge hassle and confusing as Hell. The ONLY way internet sales tax will work is if they establish a tax system outside of the existing tax codes and districts... like if I no longer remit TX state sales tax and just collect (for example) a "national internet sales tax" of X% that's divided between the states or something.

      If you ever looked at the tax districts, codes, what goes to states, city and metro jurisdiction... well, it's forked up. If they try to dump a convoluted national internet sales tax thing ON TOP of that, I think it would force a lot of small internet businesses like me to just throw their hands in the air and give up entirely.

      --
      My Webcomic: Asylum on 5th Street
  8. This does not ban sales tax by bnavarro · · Score: 3, Informative

    It bans "use tax". It prevents states from taxing ISPs based on people simply connecting to the internet, like they do now for phone lines.

    State sales taxes on internet purchases have been, and are still legal, and congress is doing nothing to stop them.

    In fact, right now it is only possible for a state to successfully collect sales taxes if the e-commerce provider has a presence in their state, but the states are banding together to try to rectify this "problem", by creating a uniform sales taxation scheme that will force an e-comerce dealer in, say, New Hampshire, to collect and forward California state sales taxes from anyone residing in California.

  9. Re:Death of internet sales by grEchelonSurge · · Score: 2, Interesting

    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!

  10. Tax systems by Knights+who+say+'INT · · Score: 5, Interesting

    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.

  11. I'd rather have a sales tax than an income tax. by Rotten168 · · Score: 2, Interesting

    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.

  12. Should expand to include tax on phones... by weedenbc · · Score: 2, Funny

    If this bill banned taxing internet access I think we should be lobbying to get them to expand it to cover taxing telephone access. My phone bill would probably be cut in half if I didn't have to pay all the different taxes they sneak in.

    --

    "Trying is only the first step towards failure." - Homer
  13. Slightly OT rant about taxes... by DCowern · · Score: 3, Insightful

    Warning: This is slightly offtopic but applicable to internet taxation nonetheless.

    One of the biggest complaints about sales tax is that (in brick and mortar outlets) you never know exactly how much you're going to pay for something. For example, I run over to Walmart and I want to buy a can of Spaghetti O's. The label reads $0.79/can. If I have $5.00 in my pocket, I can buy 6 cans... or can I?

    If I'm in an area with a different sales tax as the one I'm familiar with (in Louisiana sales tax varies from parish to parish where parish is the rough equivalent of a county), I may miscalculate the tax and I might not have enough at checkout.

    I REALLY wish the government would pass a law that all taxes must be included in the labeled sale price. The seller should take into account the appropriate sales tax when deciding how much to sell an item for and the state should just take a percentage out of the seller's gross sales. It would take an unneccessary burden of the consumer.

    If they did this and got rid of the penny, think of how much easier shopping would be. Keeping track of $0.50 for this, $0.35 for that, $20.50 for something else would be a lot easier than $0.39 for this, $1.99 for that, $19.99 for something else plus tax.

    They should do the same thing for the internet if they levy an interstate sales tax on items bought on the internet. Granted, it's a lot easier to hit "cancel" on a web checkout form than to put things back at a grocery but it would set a nice precident.

    P.S. -- VERY OT, has anyone else been getting lots of Server 500 errors when browsing Slashdot over the past week? I used to never get any and now I'm getting them in roughly one out every five page views... weird.

  14. Sales tax ban NOT expiring! by russotto · · Score: 3, Informative

    If only there was a "WRONG" moderation and it applied to the blurbs!

    The fact that Internet and catalog retailers don't have to collect sales tax for states they don't have a business presence in is a result of a Supreme Court decision and the Interstate Commerce Clause of the US Constitution (which reserves regulation of interstate commerce to the federal government). That doesn't expire. The states have been trying, since before the Internet was a big thing, to get Congress to change that. So far they've failed, but they are still trying.

    What does expire is a moratorium on a tax on Internet services themselves -- e.g. a tax on your ISP's services.

  15. That's how it works in the UK by Peter+Cooper · · Score: 2, Interesting

    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.

  16. I like buying on the internet because.... by Charcharodon · · Score: 2, Informative
    Well frankly I live way the hell out in the middle of nowhere. The closest mall is 45-50 minutes away and with gas still hovering around $1.65 thats just under $10 plus my time to go buy a single item. For half that (shipping and handling) plus no sales tax (thank you california 8.25%!!!)I don't waist my time and gas driving and then having to fight the crowds and taking the chance they don't even have what I'm looking for.

    Other than some kinds of clothes there is very little I haven't bought on the internet. Parts for my computer, photo gear, clothes, scuba gear, stuff for my dogs, presents, and yes even toilet paper. Other than perishable food items I buy every thing online that I can.

    Mostly because of convience and savings, but at the same time it's on principle since I live in the People's Republic of California, the third largest communist country after China and the EU, where the politicians have a nasty way of pissing away our tax money like there is no tomorrow.

    A good example is the fuel tax, at $.18 a gallon, they collect over $16 billion a year with this tax. You know how much of it they actually spend on roads? Less than 1/4 of it, California by the way has some of the worse roads in the country.

    I make it a point not to buy from any company that charges CA sales tax, even if it mean it will take an extra few days to get it shipped in from New Jersey. Funny though, even with the extra shipping charge the prices still usually manage to come in under those based in CA.

  17. Very OT by wadetemp · · Score: 2, Funny

    P.S. -- VERY OT, has anyone else been getting lots of Server 500 errors when browsing Slashdot over the past week? I used to never get any and now I'm getting them in roughly one out every five page views... weird.

    Yes, I have. Also I noticed that http://www.slashdot.org started redirecting to http://slashdot.org:80, instead of just http://slashdot.org, at about the same time I started seeing the 500 errors occasionally. It must mean they've changed something (in the Matrix.)

  18. History Repeating - Unfortunately. by WaxParadigm · · Score: 2, Insightful

    "Government's view of the economy could be summed up in a few short phrases:
    If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."
    -- Ronald Reagan

    We need to put an end to this aweful cycle.