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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."
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
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.
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
Sales taxes in theory should support the government infrastructure a business uses to conduct itself such as the court system, utility infrastructure if it's public, etc.
A business with no physical presence in State A doesn't derive any benefit from the government in State A when one of it's citizens orders something and they ship it from State B. The only company that actually uses resources from State A is the shipping company, which does pay local taxes on it's employees, property, vehicles, and gasoline proportional to the proportion of the transaction that did happen in State A.
That, and there's that whole pesky no tarrifs on interstate commerce by the states clause in the constitution.
This
Are you sure this is correct?
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.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