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Court: Borders Web Ops Must Remit CA Sales Taxes
ScentCone writes "A rather quiet appellate court ruling finds that Borders must start coughing up sales taxes to California. Even though Borders spun off their online business to a separate company (now run by Amazon), has no employees, physical facilities, banking, or other activity in the state, the court found for California. While this is at first alarming (unless you write e-commerce software, in which case this may be the Programmer Permanent Employment Act), the court's reasoning was that despite the separate structures, the Borders brick-and-morter presence in CA, some overlapping board membership, common logos, cross-promotion, etc., meant that the two divisions were too entangled to fend off CA's army of hungry revenuers. Ramifications could include good old print catalog operators, store-less biggies like Amazon that have partnerships with CA companies, and more."
Becuase they do not benefit from state and local services such as police and fire.
Do you have any idea how freaking difficult it is to calculate sales tax for all 4500+ taxing jurisdictions in the US?
Borders approached the problem of how to avoid to paying sales tax in CA - an area where they have a substantial physical presence. Essentially this ruling will be largely limited to entities that have a physical presence in a state but want to try to dodge paying sales tax. Essentially the Appellate court side this is one entity masquarading as two.
Thalasar
Because a buyer in one state is not under the jurisdiction of another state.
You are "magically exempt" from a foreign state's vehicle registration fees as well.
KFG
I think their case is pretty weak in being able to nail Amazon with "presence in the state" based on the fact that Amazon is providing an outsourced service for a Borders subsidiary.
I would agree that Borders corporate structure looked suspiciously like it was set up to avoid collecting sales tax by the online division.
Sort of a variant of making your HQ in the Caymans if you are multinational. Except the latter is legal.
"I'd rather be a lightning rod than a seismometer." -Ken Kesey
Why should online businesses not pay the same taxes brick and mortar businesses do? The time for this subsidy is over. B&N's online revenues are due in part to activities in California. Taxes are due. Simple. Everyone else pays, why shouldn't B&N?
It's called Taxation without Representation! If I can't vote on the tax or vote for/against the guy that votes on the Tax why can he levy it against me?
Slashdot, home of supporters of free software, free music, and free speech.Except for Moderators that disagree with you.
Your argument would also apply to people under 18, all of whom seem to pay sales tax.
"I'd rather be a lightning rod than a seismometer." -Ken Kesey
I recall having this conversation with someone in another country about how the US's tax collection works (local/state/federal), and she didn't understand why everything wasn't federal. People abroad (and a lot of people here) don't realize that the decentralized system is what makes America's economy strong. It encourages competition among the states, and keeps them in check. Don't like the tax policy in one state? Move to another state -- and people and businesses do. It also allows experimentation among states. Apply this same argument to the city level as well.
People are also less apt to rip off the local government, because they see it as directly affecting themselves. Ripping off the federal (or even state) government feels a lot more anonymous.
Unfortunately, the US steadily goes in the direction of more central control. -sigh-
Sometimes it's best to just let stupid people be stupid.
You, as the buyer, are responsible for paying sales tax on out-of-state purchases. In California there's a line on the state income tax form for declaring that. You did pay it, didn't you?
It's not surprising as California is one of the WORST states at managing its resources. If they don't try and steal it from somewhere, they are screwed.
As the operator of a couple of small e-commerce sites, I can tell you flat-out that having to pony up for such software would be the difference between being able to keep those sites running, and having to pull the plug on them.
Never mind the increased cost to my customers of just the taxes themselves. While this might not be the death of e-commerce, it would certainly result in a dramatic narrowing of the online marketplace. Not a good result, any way you look at it (unless through the rapacious eyes of taxing authorities and legislatures...).
Liberty in our Lifetime
This ruling could not possibly be "enforced" on you because you do not have a physical presence in California. If you at some point get one, then of course you'll be subject to California law.
I expect that many people reading this are opposed to the idea of "taxing the internet". Let's get real here. Sales taxes are not going to go away; and the longer we fight it with an "all or nothing" mentality, the more we risk having truly draconian (and incredibly brain-dead) solutions imposed by Congress or the courts.
Ramifications could include good old print catalog operators, store-less biggies like Amazon that have partnerships with CA companies, and more."
This is just such a wrong statement I don't know where to begin. There is so much case law in the US about mail order and catalogue sales that this particular case has nothing to do with upsetting. It's gone all the way to the Supreme Court.
When will people get it through their heads, if a business has a presences in a state (as defined by law), they are responsible for remitting sales tax on sales made in that state, whether the sale was at a local store, by phone or on the internet. If they don't have a presence in that state, no tax is due.
It's that simple (of course the lawyers get involved with what exactly a "presence" is, but that's besides the point).
I'm not trying to justify Borders actions, but what ever happened to the concept of a state cutting its budget deficits by reducing spending? I have no sympathy for CA whatsoever because they put themselves into this hole. It's human behavior that people are more prone to take an illegal action as the stakes rise. It should be no surprise whatsoever that this type of thing is happening. Again, I'm not trying to defend it, but rather explain it.
I don't know how much Borders makes off of each of their businesses, but I'm wondering if there's ever a point where they say "screw it" and closes their brick and morter stores in that state. Sure would fix the nexus problem for them.
If you don't want crime to pay, let the government run it.
Are you sure this is correct?
.
.never realized this and crafted laws the wrong way.
Yes, I have owned a brick and mortar retail store where I did all the paperwork myself, as well as having managed a number of others.
It is also the basis the for Supreme Court ruling exempting businesses for collecting sales taxes for customers in other states.
Neither party is privleged in the transaction, as is seen by states typically also applying sales transactions to exchange of goods for goods (based on fair market value.)
In which case both parties are legally buyers.We aren't dealing with issues of contractual privilege, we are dealing the tax liability. Tax libilities are always explicitly defined.
The relevant law is the one that requires you, as the buyer, to file with the state for each mail order purchase or casual transaction and pay the tax on it.
It's just that most companies charge the consumer (hey, dopey, you voted for the tax, you pay it. We're not!) but sometimes companies do have "we pay your sales tax" sales.
No.
In sales tax states you must acquire a permit from the state allowing you to collect the tax from the consumer.You must collect the tax. In most states you must list the cost of the tax explicitly, you cannot "bundle" it into the price, by law.
In the case of a casual sale the buyer is still repsonsible for paying the tax, such as when you buy a car from a private owner. The DMV will levy the tax against you when you seek to register the car, and the fact that your mom pays it for you as as gift does not alter the fact that you are one legally responsible.
"We'll pay the sales tax for you" is a marketing gimmick, not legal reality, and isn't even legal in some states where it would be considered a fraudulent claim (they've really just lowered the price).
I suppose some states, with ignorant, subgenius politicians. .
But you repeat yourself.
. .
The law is as the law is crafted, however, a sales tax is, by legal definition a tax on the consumer, which is why internet sales companies are "exempt" from them. They do not owe them in the first place. They only collect them. If you do not understand and accept this you will never be able to understand the "mail order loophole."
The problem is not in crafting the law the "wrong way," per se, but rather in using a form of law with consequences they aren't happy about.
A business tax on gross sales is an entirely different legal beasty than a sales tax.In a state with one of these you will not be levied at DMV for the car you bought from your neighbor.
KFG
There's another reason too. States taxing people in other states will tend to tax the bejeezus out of them because they can't vote. Thus, Alaska might place a huge sales tax on oranges but none on salmon or snowballs. New York a few years back got into similar trouble trying to tax people who live in New Jersey who had family members who worked in NYC. This is a very bad thing! Give politicians the ability to tax people who can't vote them out and soon they'll be slaves. Didn't some country once go to war over an issue like that? ;-)
--Brian
Jeeze, these are activist judges, passing legislation and everything!
Democrats should agree with this viewpoint, seeing as how they consider the Roe v. Wade decision to be the "law of the land" and all.
What is needed is a modern VAT system: input VAT is reclaimable by companies, so they don't pay tax except on the "value added."
Like in the EU, each state charges its own rate of VAT. If a company sells out-of-state to a registered business it sells ex-VAT. If it sells to an individual, it sells inc-VAT.
This would also have the advantage of interlocking nicely with Canada's GST making cross-border trade easier. Right now, Canadian shoppers get hammered with Sales Tax and then GST on the whole thing (nice that: GST on Sales Tax). With a proper VAT system, Canadians would import without further GST since VAT has been paid already.
Best of all, each State is under pressure to lower VAT (or face loss of sales). It brings in a bit of competition to tax rates. What's good for commerce should be good for Government, right?
K.