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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."
While this is at first alarming (unless you write e-commerce software, in which case this may be the Programmer Permanent Employment Act)
Jeeze, these are activist judges, passing legislation and everything!
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
Sounds like a logistics nightmare to me. Does my company based in Mexicao then have to cough up sales tax to every state for every customer that state is in?
My days of not taking you seriously are certainly coming to a middle...
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
Kofi,
I'll keep my sovereignty thank-you.
Texas.
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
This doesn't seem to be predatory or unusual. Borders has stores all over California. Whether the internet sales is run by someone else or not, it still says "Borders" on the web page.
Which state would charge and receive the sales taxes? Which state does the sale take place in?
These are the reasons there were no sales taxes on out of state mail orders. I guess you want both states to charge sales taxes. If that happens, then people living in states with no sales taxes would order from companies that reside in states with no sales taxes, and the number of internet sales would drop to somthing close to zero.
Just my $0.02 worth.
Does this mean that if I buy something online when in Illinois, that I'll have to pay sales tax for something in California? If so, I won't be buying from Borders online but rather going to the B&M Borders in my town.
I am defenseless. Use your button. Mod me down with all of your hatred.
FTA:
Borders says it doesn't have to collect California sales taxes because its online division - since outsourced to Amazon.com - doesn't own or lease property in the state. None of the online division's employees or bank accounts are in California and all Internet orders were received and processed outside the state.
California's 1st District Court of Appeal rejected that argument, ruling on May 31 that the Borders' Web site and retail stores have been too intertwined to call themselves separate companies. The three-judge panel cited in-store advertising for the Web site, receipts that said "Visit us online at www.borders.com"; and the ability of customers to return online merchandise at retail stores.
Since web-only merchants like Amazon do not have retail stores in California, it looks like they are in the clear for now.
What planet do you live on? Certainly not one with nation states. While the current tax structure is bizarre,the one you are proposing has as a founding premise that world goverment is going to be more efficient than a local one. How does that work again?
Thalasar
Ok, let's all join hands around the campfire and sing Kumbaya.
"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.
But more seriously, I don't see how this applies. Sovereignty has very little to do with taxation... or does it? If it does, why is that the case? Why does a group of people have to be taxed by their governmental representatives for that group to be considered sovereign?
Helping with organizational effectiveness is our job.
Believe it or not, there's software specifically for that purpose.
"I'd rather be a lightning rod than a seismometer." -Ken Kesey
When it comes to large infrastructure needs and the network effects caused by them, I do think there is evidence to support the idea that a global administration (doesn't have to be government) would be more efficient. It's just the simple idea of efficiencies of scale, plus efficiency multipliers based on network effects.
Helping with organizational effectiveness is our job.
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 orderd some smokes off the internet (3 cartons of smokes I couldnt find anywhere in florida). I had them delivered to the address I was at, but was not a citizen of florida. basically I was there for a few months working for a company.
The place I ordered from was in Texas.
About 2 days ago I got a letter in the mail from the state of florida saying I owe $10.50 on tax for the cigs.
I still cant figure out why I would have to pay florida tax on these, but just like every other good hearted american, Ill just pay the fee so I can forget about it instead of fighting it.
TruePunk | Games
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.
Efficiencies of scale for manufacturing... sure.. But for service?? (which when you come down to it is what government is) Are you frackin nuts?
While this might work on telcom projects, things like roads are not subjects to network effects (building of roads doesn't make road adaption cheaper elsewhere). Efficiencies of scale work for certain projects but you don't explain how that will help with local schools or potable water.
Thalasar
The tax is not being levied agaist you. It is being levied against Borders. They choose to pass the cost along to you. Bitch at Borders.
Well, that all depends, doesn't it? If you have a physical store presence in California, they can come after you if you don't collect sales taxes. Just like they went after Borders.
If you only have a physical presence in Mexico, then you have nothing to worry about.
And I do think that I will win the lottery. I guess we both have an equal chance of being right.
taxation is a function of sovereignity. It's entirely a sign of it. When's the last time you paid a tax that didn't go to a government?
When's the last time you paid a tax that didn't go to your (local/state/federal government.
Britains don't pay taxes to Ireland. Californians don't pay taxes to Utah. French don't pay taxes to the Columbians.
All this does not apply to taxes paid while people are in a different country (I.E., even though I'm from the US I still pay VAT in Europe, and anyone from Europe would pay sales tax in the US.)
Fly me to the moon Let me sing among those stars Let me see what spring is like On jupiter and mars
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?
No, it's not.
This law only applies to goods sold to CA residents. The very first sentence of the article states this. If this law applies to you, it means you're a Californian and can vote for your state reps.
"If they send someone here, I'll arrange the usual 'accident.'" -- Alice, "Dilbert"
No. Borders has a substantial physical presence in CA. They then set up a complicated legal structure designed to shield them from paying CA sales tax. The court said, "This is a dodge. You are the same company trying to look like two seperate ones." Your company in Mexico doesn't nor will it ever until you have a substantial physical presence in the state.
Thalasar
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.
Big states get to dictate the rules. If this were Alabama or Wyoming, I'd just take their state abbreviation out of the dropdown selector. Simple and effective :)
it's a blue bright blue Saturday hey hey
http://www.google.com/froogle/ or http://www.pricewatch.com/?
I mean, is it really that difficult?
They aren't a CA based company, but they have a physical presence in California, which means purchases from the company to residents of California are subject to the CA state tax.
Borders was trying to argue that their online business wasn't connected to their physical presence in California, excempting them from CA state sales tax.
The court rule that the online store was indeed connected to their physical store, and thus wasn't exempt. This, to me, would seem to be the proper interpretation.
Interstate commerce commission and related laws prevent any state from regulating interstate commerce. It's an old and important law - one that some would say has reached its useful end, but suggesting it should be tossed gets States' Rights people upset.
You certainly can vote for/against the guy who sets up the tax. Just vote in your local election. Sales tax is set up the local and state goverment. Wanna get rid of the tax pull the lever for Libertarian then.
Thalasar
You can't even calculate sales taxes by zip code.
In Texas, for example, the sales tax rates in my zip code are 8.25% in the city limits and 6.25% outside the city limits. There are some zip codes that have three different sales tax rates depending on the location within that zip code.
Even if the sales tax is 8.25% in the zip code, the 2% local sales tax may be due to different local taxing authorities depending on the address. For example, you could have a city sales tax and a county sales tax for sales outside the city. So the company would have to be able to determine which taxing jurisdiction in order to properly remit the local sales taxes collected.
Here are, to the best of my knowledge, the Texas sales tax rules:
case 1: If the order is placed to a company in Texas, the sales tax to use is the sales tax where the company is located.
case 2: If the order is taken outside the state by a company who has no business presence in Texas of any kind, they are not required to collect sales taxes. However, if they wish to collect sales taxes, they may, as long as they remit whatever is collected to the state of Texas.
case 3: If the order is taken outside the state by a company who has a single business presence in Texas, the applicable sales tax is that of the location of that business. For example, if they have a store in Dallas and no other presence at all, you pay the 6.25% state sales tax and the 2% local sales tax which goes to Dallas.
case 4: If the order is taken outside the state by a company who has two or more business presences in Texas, the applicable sales tax is that of the destination address. So if the sales tax rate of every store by the company is 8.25% but the destination is in a 6.25% area, the applicable sales tax is 6.25%.
One surprising thing that was explained to me by someone at the Texas Comptroller's Office when I called up to get some clarification of the rules about three years ago is that it is okay if the company charges too much sales tax as long as all the sales tax collected is properly remitted.
Also, in the case of a delivery by UPS or Fed Ex, it goes by the address on the shipping label even if they end up delivering it to another address. Around here, the UPS and Fed Ex drivers rarely deliver anything out to my house. Indeed, most have no idea how to find the place. Instead, they drop it off at my office in town.
I was concerned that the fact that they drop it off at my office instead of my residence would create a problem since anything delivered to my office has a 2% local sales tax rate while anything delivered to my home has no applicable local sales tax. The guy from the Comptroller's Office said that the applicable sales tax was that of the shipping address whether or not it was ultimately delivered elsewhere.
It's not about being a CA company. Most large corporations are headquartered in places like Delaware or Bermuda so if states could only collect from companies that are HQ'd in them the pickings would be mighty slim. It's about having a physical presence in California. If you put a physical store in a state and sell things from it you're subject to collecting and submitting sales tax. If you have a physical store and sell things via the Internet you're required to collect and submit sales tax on things sold over the Internet (or via phone, mail, fax, smoke signals).
Borders was trying to argue that their online sales and their physical stores sales were so separate (despite using the same advertising, logos, etc.) that they did not have to collect CA sales tax for online sales.
I'm not sure what bothers me more - that you don't see the basic glaring flaw in your reasoning here, or that at least one moderator considers this "insightful".
This is a tax on transactions occurring in California. The taxes are levied by California's government against California citizens. Last I heard, California still had elections.
It's not like California is asking for taxes to be paid by some lady in New York who's shopping at Borders.com.
#DeleteChrome
I for would welcome our new California taxes and uh, uhm, oops. Sorry guys. I have no idea what I was saying.
He didn't know. Thats why he asked.
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
I think that the court found that they did have representation -- that they were the same company as owned the stores in california, and, as such had representation, by being citizens of the state.
RandomAndInteresting.comdefending the world from stupidity since 1979
Because this is Slashdot
Do you honestly expect the United Nations, with all of its corruption, to get the job done? Heavy corruption in the government is the norm in most of the world, and do you really expect the second and third world countries to not rape and pillage the first world?
No thank you. The corruption we have on the national level is barely contained, and by contained I mean regulated enough that we can still function. We can barely hold our own elected representatives responsible for anything, so how do you expect us to do that for a global system of government?
Click here or a puppy gets stomped!
As far as Amazon is concerned with respect to sales tax, you're a bit late on the prediction of ramifications. I'm a resident of Washington state, and I already have to cough up sales tax to Amazon. Fortunately between free shipping (assuming you can stand to wait) and their markdowns on most of the stuff I buy, I still come out ahead of where I might at a brick-and-mortar establishment. I hate to think what their e-commerce software has to do on every single transaction to assess proper taxes though.
--Ford Prefect
This might be a noble idea, but even providing common infrastructure needs can be very political and even destructive.
Take for example the Interstate Highway system. Lots of apparent benifits right? Huge costs, multi-billion dollar contracts, it was a death-blow to the railroads (which when the Interstates were built they were mostly publicly-traded and tax-paying companies), they contributed to suburban sprawl and flight from the cities, and increased the US's dependancy and demand for oil.
But it also created a strong and fast trucking industry, practical bus-travel, and allowed millions of Americans the freedom to just hop in their cars and be hundreds of miles away within a few hours, and it created commerce around its routes.
The only way it can do so accurately is to get input from the user.
I've noticed that a few busineses ask for the zip code and then, if there is more than one applicable sales tax within the zip code, provide another prompt to ask precisely where you live in order to determine the exact sales tax and to which jurisdiction it is to be paid.
Either that, or be able to determine from the whole address, not just the zip code, which sales tax to charge and to whom it is to be paid.
Anytime they purchased something from out of state via mail order, there was a local office they would drive the receipt down to and pay the tax on it. It's technically speaking a violation of the law not to do it. They did it because it was literally both their jobs to see that people did this. So out of a sense of duty, they paid them. Not to mention how much trouble the step-father could have gotten into for letting his own family get away with Tax Fraud.
However, it's incredibly difficult to enforce and very unpopular. So nobody actually does it. However, in most states there is a law on the books that says anything you purchase from out of state, you must drive pay the tax on it. The reason you pay it if the business has a prescense in your state is because, the business can be held accountable, and have to pay the tax because they are within the states jursidiction (and are probably licensed to do business there). It is cost effective to go after businesses that don't pay the sales tax.
It's very similar to why the gov't requires business to withold taxes from your check. If they don't, the business has assests and is cost effective to go after if they are of any size.
It's the same reason that the DMV is the one who collects the sales tax on cars. Even if you purchase the car out of state, you have to pay sales tax in your local jursdiction (along with all of the local property taxes).
Kirby
Maybe it's because when I keyed in his exact same subject into Google, I found a message board posting for someone asking the exact same thing (4th result):& q=Alternative+to+Newegg&ie=UTF-8&oe=UTF-8
http://www.google.com/search?client=safari&rls=en
The lengths governments will go to tax you. Sometimes they'll even make you think they're taxing an evil corporation instead.
You can tell the character of a man by observing those who hate him.
That's funny. The website makes no mention to the historical reason behind the use tax. The first time that I heard about the use tax was to capture sale taxes from Internet purchases. Most people don't know that they are still paying a phone tax to fund the Spanish-American War of 1898.
That will tell you who is cheap, not who is good. I really like Newegg too, and I think they charge me tax, but I order from them. I also like mwave.com, but I think they are based in CA, which may not help the OP.
Wrong.
Very Wrong.
Very, very Wrong.
The sales tax is levied against the customer for his purchase. The store is required to collect the sales tax and pass it on to the state.
In this case, Borders had to remit the taxes they were legally required to have collected, but didn't.
There are pretty specific issues regarding inter-state sales taxes called Nexus. There are reams and reams of case law and it is fairly well defined. If Borders had Nexus with California, then like any business with Nexus in California, they would be liable for the taxes.
There are ways to structure your business to avoid Nexus. Dell is a prime example. Business computers are taxable, but home computers are not.
Evidently, Borders' accounting/tax department messed up.
This is not about Barnes & Nobles (B&N) which is a totally seperate company and their online subsidiary does collect sales tax in several states.
This is about Borders Books and its online subsidiary.
I can't vote for the guy who set up the tax in CALIFORNIA if I live in New York, can I?
Not a Twitter sockpuppet... but I wish I was.
They have a lot of facilities in California too but how does this article boil down to Borders being a CA company?
If I have a store in NY and a store in VT, the store in VT is operating under the legal jurisdiction of VT. If I have a store there, I must file for the various required permits, including a reseller's tax permit.
Where my corporate headquarters happen to be are completely irrelevant to the business' legal status in VT. They can send in actual cops to shut down my actual store in VT, because it's actually there.
The "mailorder loophole" comes about because if I only have a store in NY and ship to a customer in VT VT's cops cannot come to my store in NY and demand tax registration/payment.
It's a pretty simple and pragmatic concept really, you are free to behave in any manner that a cop can't come take you away for.
If he can, you might want to consider taking his advice as to how to behave.
KFG
When you fill out your CA State income tax, there is a place for you to report stuff that you bought out of state and didn't pay sales tax on.
As a practical matter, I suspect compliance is very low on this matter.
Now that you know, don't you feel bad?
This issue is a bit more complicated than you think.
In theory, this should be redundant.
California taxpayers are supposed to pay Use Tax anyways, which is based on your purchases from out-of-state sellers. Thus, even if you didn't have to sales tax to Amazon.com, you have to pay (almost) the equivalent amount of tax on your CA 540 form.
Interestingly, although this tax has been on the books for a long time, the state government only added a line for it on 540 personal tax forms last year.
This creates a dilemma - if you are a CA taxpayer who made any out-of-state purchases (mail, telephone, online), you probably owe CA use tax. But most people I know put "0" on this line - and thus committed fraud when they signed the declaration line at the end of their tax form.
Sales taxes are owed in the jurisdiction where the sale takes place. For mail-order/internet sales that would be the buyers location. What most people don't realize is that most states also have Use Tax. The main difference to the consumer is that for a Sales Tax, the seller charges it and remits it to the state. For Use Tax, it is the buyers obligation and it is payable for anything that isn't charged a sales tax (so all mail order/internet sales that don't charge a sales tax). Anyway, these laws have been on the books for at least 50 years in most states. This isn't anything new. If it had been Sears and QVC instead of Borders, nobody would have even noticed.
Computer Associates is charging sales tax now? And here I thought their licensing schemes were a bit severe. I know ERWIN is good and all, but this is a bit much.
No, but their parents can...whom are their legal gardian and care-giver.
Life is not for the lazy.
BINGO! Pricegrabber has its purpose. But then I have to always sift through who is actually reliable and who is a bait switcher. Newegg, while not always THE cheapest, is usually very close and has a great reputation. I thought I'd ask here to find out what people like, in addition to using pricegrabber star ratings.
You're right, it's not fair to exempt Internet businesses from any tax that B&M businesses have to pay. But this decision isn't going to change much. There's still the fundamental consitutional rule that says that states can't collect taxes from out-of-state businesses. Which means that Internet businesses can continue to avoid collecting sales taxes in states where they have no B&M presence. It's just that Borders wasn't able to have it both ways: operate stores in California, and also have a "pure internet" business that sold books there tax free.
Sales taxes are owed in the jurisdiction where the sale takes place. For mail-order/internet sales that would be the buyers location, if the company has Nexus - or a "presence" as defined by law in the state of the buyer.
What most people don't realize is that most states also have Use Tax. The main difference to the consumer is that for a Sales Tax, the seller charges it and remits it to the state. For Use Tax, it is the buyers obligation and it is payable for anything that isn't charged a sales tax (so all mail order/internet sales that don't charge a sales tax).
Anyway, these laws have been on the books for at least 50 years in most states. This isn't anything new. If it had been Sears and QVC instead of Borders, nobody would have even noticed.
Very good point.
In Texas, many companies handle their own sales taxes. That is, no taxes are charged on any purchase by the vendor whether the vendor is in state or out of state.
The company itself determines what all they purchased and remits the proper taxes to the proper local and state taxing jurisdictions.
In a previous job, I used to carry a stack of sales tax exempt forms with me in my car. When I bought something on behalf of the company, I would have to determine whether or not a sales tax was due on it. If no sales tax was due on one or more items, I'd give them a copy of the tax exemption form for their files.
Just about everything I bought was used in manufacturing our product. The determination of what was exempt and what was not exempt was based on whether or not it was consumed in the building of a product. For example, we had to pay sales taxes on the tools used in building the product but not on the materials used in building the product.
I must have been doing it correctly since we were audited by the Texas Comptroller's Office and they found no problems with any of my procedures and purchases.
If the law is gonna be that Borders must pay sales tax to California for items sold into California ... how hard would that be to implement?
I appreciate that, taken to the extreme, this principle could mean that Borders must pay every little sales tax add-on implemented by every town anywhere. For example, parts of Puget Sound has a special tax to pay for a sports stadium ... lucky for Borders this silly tax is on restaurants, not on book sales, but under the same principle, nothing prevents, let us say, Dallas or Oakland from imposing a tax on books to help out the stuggling millionaires who own their sports franchiases except the political power of people who read books.
However, this is a problem that must affect programmers of cash-registers already. Somebody, somewhere, must be making good money for maintaining a database of local sales taxes. They could make a little more good money renting that database to Borders, Amazon, etc. Then the programming problem is simply to compare the ZIP code of the book buyer to the database.
What could go wrong? It would be computerized!
--- Attorneys Assisting Citizen-Soldiers & Families -
Your argument would also apply to people under 18, all of whom seem to pay sales tax.
Not being adults, their interests are represented by their guardians who, by definition, must be adults and thus can vote.
When information is power, privacy is freedom.
It depends on where the sale took place. Obviously, if you drive to California or your friend buys it there, the sale took place in California and the State collects the sales tax.
If, however, you purchased it online or over the phone, the sale actually took place in your state. The California company would only owe taxes to your state if they also had a presence (something called Nexus) in your state. A national chain store, like Walmart would. A specialty store may or may not.
However, in most states, if the selling store doesn't have Nexus, you must pay something called Use Tax (which is similar to a sales tax). Of course, it is up to you to remit and most likely never detected by the state unless you are being audited.
Put another way, the easiest sales tax calculator algorithm has only fifty tax rates, and matches by state, not by zip code. Simply use the highest rate for any given state.
Check out my sci-fi/humor trilogy at PatriotsBooks.
California got in its current mess by wild overspending and waste, not because it's starved for revenue. Rather than feed the legislature's addiction by bending over for more taxes, our response to demands for more taxes should be, "What the hell did you do with what I already gave you?" Please, depart from California so that I and my brethren have a prayer of reining in the political system that treats the public as an ATM.
Most states have such a use tax. For many states, it was instituted in order to tax print catalog mail-order companies decades ago. Now, it can be used to tax Internet sales or phone-based orders.
Michigan recently used this law to subpoena records for those people purchasing tobacco products online, mostly because people are avoiding the high state taxes; Maryland had this go to a state court and was ruled on by a judge there that claimed states had no right to regulate or tax interstate commerce; Indiana, Michigan, and several other states that I looked up at one time had use tax laws on the books and some went so far to post names of online retailers that did and did not pay the use tax as required by law.
Now why exactly weren't they pursuing these taxes with the companies that weren't in compliance? I suspect it's because the state AG believed they would lose if taken to court. This ruling, however, might encourage many to follow through.
Simple and clean solution: Implement a flat tax for all online purchases for all states (yes, even NH and the other tax-free states). Send the tax to each state based on the ship-to zipcode.
Results: Each state gets a piece of the action and the online stores can't complain about the costs to implement all of the different tax codes all over the nation.
I'm a adult californian immigrant. I'm my own legal gardian, I pay taxes but I can't vote. I guess my only form of protest is to leave the state.
Helping with organizational effectiveness is our job.
The guy from the Comptroller's Office said that the applicable sales tax was that of the shipping address whether or not it was ultimately delivered elsewhere.
So, if you lived near the border with another state;
And you had a friend on the other side of the border;
And the company had no presence in that other state, thus no requirement to collect taxes for that other state;
And you had your order shipped to his address in your name --
Would you then have to pay texas sales tax?
When information is power, privacy is freedom.
Strange. I've worked in quite a few countries. They have all taxed me. But for some reason they never wanted me to vote in their elections...
Come to thnk of it, I wonder how the last US election would have gone if all those tax paying H1-Bs could have voted?
People couldn't type. We realized: Death would eventually take care of this.
Thank all the bloody gods for SOME sense and perspective on this issue. Slashdot has shown a worrisome tendency of late to be massively and overwhelmingly populated by kneejerk monomaniacs with little or no comprehension that there IS a real world that must be maintained. California is already deep in the financial hole and this [Borders'] sort of petty cheating and then attempting to pretend that the [yes, critically important] issue of the freedom of cyberspace somehow justifies that cheating is lame and selfserving crap carefully designed to play to that exact mindset.
Thelma, I'm not making ANY deals.
Given the way that this deals with consumers, it would be a big no-no from the regulators. As far as the states are concerned, it doesn't matter how difficult it is to collect sales taxes(or even to decide what to collect the sales taxes on), it just matters that it is done and that the businesses aren't using those collections to screw the consumers.
In Iowa, we have a 5% sales tax rate, except in some cities and counties where it is 6%, except in some school districts where it's 7% (unless those school districts are in cities or counties without the 6% rate, in that case the rate is 6%). If a business were to collect 7% on all sales in Iowa, the state would probably start enforcement procedings on them because they were harming consumers (our Attorney General loves class action lawsuits, and would jump on this).
On the other hand, it is illegal for a vendor to pay or hide sales tax in Iowa. In other words, if my prices included an "extra" 2% and I only charged 5% on all Iowa sales, but used that padding to pay for the various local sales taxes, the state department of revenue would start enforcement proceedings.
The best bet is that no matter how convoluted a sales tax might be, to collect them in such a way as to tie the rate to the delivery address.
A fine is a tax you pay for doing wrong and a tax is a fine you pay for doing all right.
A lot of local problems could be solved if the tax structure was flipped on its head (with the local governments collecting the bulk of the taxes).
A fine is a tax you pay for doing wrong and a tax is a fine you pay for doing all right.
Comment removed based on user account deletion
Roads: being part of a network of roads provides a larger return on investment, the larger the network is.
Local Schools: pre-fab buildings, standardized curriculum both contribute to efficiencies of scale.
Potable Water: manufacture of water filtration systems, science and technology R&D to develop better water systems also are susceptible to efficiencies of scale.
Helping with organizational effectiveness is our job.
I think the roads in europe would be more effecent if the where built based on where people lived and ignored national boundarys.
/draining all large bodies of water we could have plenty of water. EX: Shiping water from the great lakes to say mexico could provide them cubic miles of freash water.
A uniform supply system could be more effecnt and thus help out schools and other gov projects. A global system could increase the avalibility of potable water by shiping it accross national borders. By taping
Ok, the first thing you have to understand is who the tax is levied on. It is not levied on the business, the business merely acts as the agent, collecting it for the state ( this is, in fact, my primary philosophical objection to the sales taxes. It forces the businessman to be the tax agent of the state in order to do business at all). Sales taxes are consumer taxes.
If you are in CA, purchasing from a CA store, you are both under the legal jurisdiction of CA. A cop can stand there and make you pay the tax, and the business collect it.
If, however, you call up the CA store from NY a NY cop cannot stand in the CA store and make them collect NY sales tax, which is actually the jurisdiction owed the tax, not CA.
It is the buyer who pays the tax, and thus the location of the buyer that determines to what jurisdiction the tax is due. The buyer is not actually exempt from the tax, simply that the seller cannot be forced to collect the tax, being in a different legal jurisdiction.The buyer, in all likelyhood, still owes the tax, and if he does not pay it is a tax evader in his own jurisdiction.
The business pays its own taxes. It isn't "getting away" with anything, except saving a godawful lot of paperwork for itself.
For jurisdictions, such as NH, that do not levy a consumer sales tax, but rely strictly on taxing businesses directly, all such issues disappear.
KFG
Internet businesses are not exempt from all taxes that brick and morters pay, mostly just sales tax (and obviously they will not have property tax except for where they have offices). The reason for this is that these companies do not utilize the services for which the sales tax is supposed to pay, ar at least not all of them. You can make a case about access to the court system, but how about things like the state education system or the State Police? It is inappropriate to tax Internet businesses to pay for these things.
Additionally, there are Constitutional issues involved when you start talking about taxing business that is Interstate. In this case (Borders) it seems pretty clear that the court made a good call. We should be careful about over extrapolating that to other businesses.
It isn't just 4500+ tax rates. What is taxable, when it is taxable, and where it is taxable, all vary. Plus borders for taxation do not have to match borders for ZIP codes. I used to live at a place where my post office wasn't in the same state.
Mea navis aericumbens anguillis abundat
Roads as general network effect is fine. However the thing that is not impacted is the cost of the road. My point is that roads are often built with local funds. The exception in the US was the Interstate highway system which was a tremendous success and actually supportive of your argument.
Pre fab buildings? This is an improvement? Nope. It is cheaper though. A standized curriculm has nothing to do with a global government providing a massive set of efficiencies - which is the crux of your argument. Service based industries such as schools do not scale well.
I suspect that under your proposed world government everything would run about as well as a typical third world nation as any world government would spread its dollars out, resulting in a massive re-distribution to the poorer countries.
Thalasar
Please take the time to read "The End of Poverty". I did not mention a world government. All that is required is a world administration. Not only that, but you have a very significant mis-conception about typical third world nations and why they run poorly. Please educate yourself.
Helping with organizational effectiveness is our job.
If yes then why would the state of california get to tax both amazon and borders for the same purchase?
If no then I can see this going through.
If I'm in a bargain hunting mood, I check out any companies I find on pricewatch via the Better Business Bureau. Usually, though, I just end up buying through newegg.com.
Your courageous and selfless spelling corrections have made me a better person.
A world administration equals a world government as this is a "governmental" function. You cannot propose certain governmental functions be taken over by a unnamed world entity and not claim that entity would have governmental power. Unless of course you could opt out and chose another entity. Is there freedom of choice under your system?
As far as having misconceptions about typical third nations, exactly what are they? I really haven't stated any, have I? I merely pointed out that your proposal would result in a massive income redistribution to the third world, effectively raising the standard of living there while lowering it in the first world. That's too be expected in such a proposal. For some people this is a worthy aim. For me it is not.
Please avoid personal attacks such as "Please educate yourself." At no time have I leveled such attacks at you.
Thalasar
Every legal foreign employee pays income tax in the USA, and in California, without any representation whatsoever. They pay all other taxes as well.
What keeps me going is my inertia.
It might not be long before they do. California can be a real hassle when it comes to taxes.
My father retired from the Air Force and then moved to Washington. It took 5 years to get California to stop sending him bills & nasty letters. They were convinced that he owed them taxes because he was living in CA when he retired.
my sig's at the bottom of the page.
That's irrelevant. Borders doesn't pay the tax--their California customers do, i.e. the people who do benefit from those services.
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.
However, Maine very recently began collecting taxes on all cigarettes purchased over the internet by residents no matter the ties of the companies to Maine. There are no online mail-order cigarette retailers selling from Maine, and they will be collecting several tens of millions of dollars in current and back taxes (they made it retroactive) from tobacco retailers from outside the state. As they say, First they came for the smokers, and I said nothing because I don't smoke...
Even those who arrange and design shrubberies are under considerable economic stress at this period in history.
I lie through my teeth and then I crush you with taxes!
- Governor Arnhuld
And that's a misunderstanding of the nature of sales tax.
The tax is on the transaction. Neither party is the one who must pay it legally. By convention the retail customer pays it. However, some stores do have "we pay your sales tax" sales from time to time.
You will see states try to collect sales taxes on things like farm trades of good for goods. No dollars are involved, but you are still expected to pay the sales tax based on a fair market rate for the exchanged goods. In this example it's much more obvious that neither party is of an advantaged position, as Einstein might say, than when the trade is goods for dollars. It's all stuff for stuff, from the state's point of view.
Having said that, I'm sure there are some states with mentally challenged politicians who do not realize this, and try to word things such that the store paying the tax (instead of the customer) amounted to giving the customer money, and hence was income to the customer, and hence the custo...
God damn it I hate politicians! DIE LIKE PIGS IN HELL!
No, seriously. I wanna hear your fat cracklin' as it lies on the relatively dense lava, which you won't sink into, unlike the movies.
(-1: Post disagrees with my already-settled worldview) is not a valid mod option.
Easy. Only Texas has that real ability. Unfortunately they seem to refuse to do so.
Anonymous Cowards generally receive no replies because you're a coward and I'm a bitch
If Borders donated enough to the Republican Party.
That's gotta fit into your schema somewhere
I call bullshit!
No, not on you. On politicians!
I say we round 'em up and gut 'em. Whose with me boys?
(-1: Post disagrees with my already-settled worldview) is not a valid mod option.
> Sales taxes are consumer taxes.
Are you sure this is correct? 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.)
It is party neutral. 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.
I suppose some states, with ignorant, subgenius politicians, never realized this and crafted laws the wrong way.
(-1: Post disagrees with my already-settled worldview) is not a valid mod option.
Again, are you sure about this? The tax is on the transaction. Why would it be on the customer? The customer is not privleged in the transaction.
(-1: Post disagrees with my already-settled worldview) is not a valid mod option.
There's an easy way for Borders to get around this ruling... it's called:
;-)
Nevada.
So close, and yet so far from the California's revenue authorities.
How is this taxation without representation? You are having to remit the tax to the state that you live in. If you lived in CA and ordered from Borders on the internet, you are paying CA sales tax.
You don't like that, then lobby your state representatives to change the law.
Actually, you are wrong. The tax IS being levied against you, but most state statutes require the seller to collect it and remit it to the state to simplify the collection.
Don't feel too bad for the seller, either. Most states allow them to keep up to 2% of the tax collected, for their trouble. Now, think about how much Borders is making off of your sales tax your state says they must collect.
You're not going to find Borders or any other company complain about that-- just the back taxes they owe and never collected in the first place.
Want to be really sick? Think how much that 2% equates to for somebody like Walmart.
And sales taxes are probably an equal mess everywhere. Why don't they just average all the sales taxes and charge that?
If I read this story correctly, the chain of events appears to "maybe" be a bit more interesting (but I am speculating on some of this).
...
...
...
* Borders was apparantly not paying sales tax (speculation)
* They decided to pay the sales tax
* This might have been encourages by the California Tax
Amnesty program (again, speculation)
* ie, no penalties, but still interest
* Ahhhnolds plan to help balance the budget
* Borders then sues the state to get the money back
* They lost
* Borders then appealed
* They lost again (this is the current case)
In thinking of how borders runs their business, the line
If it looks like a duck
seems to apply.
If you don't like taxes, remember that for every tax that is avoided, there has to be another tax to make up for it.
Of course there is always the line
We should tax all foreigners living abroad.
I agree that the best way would be to do it by delivery address. Here's my logic...
Doing sales tax by business location is a bad idea I would believe. Although logic can state that it pays for the services located in the business's physical location, it's really the people that count I'm told. Businesses aren't people. But then again, there's people operating the businesses. Best solution would be to do a commercial property tax, whereas residential property tax is another subject entirely.
Sales tax should be done on the delivery address. Let say a person orders goods from an online business. That person is located physically in state A. That business has it's webservers located in multiple states all connected, and has warehouses located in multiple places. Of course, you could always do it by warehouse location, but let us not. Let say that the shipping location is different than the person's location at the time of transaction. Shipping location should count. It is by far the easiest way to do things.
Taxes are levied by California against everyone, even those
that don't live in CA and can't vote in CA. For example, a
professional athlete that plays one game in CA, owes the
state income tax, regardless of where they life or what
country they are a citizen of.
The fact that said professional athlete played one game in CA means that he worked in CA, so why shouldn't he/she pay income taxes?
Income taxes are owed where the work is performed. Sales taxes are owed where the sale takes place.
Why can't people understand that? This isn't like recompiling a kernel, you know?
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).
So those stupid "we pay the sales tax" sales are illegal in Iowa? I have to wonder how hard this screws over concessions vendors, which almost universally charge a fixed price including tax rather than line-iteming the tax.
Check out my sci-fi/humor trilogy at PatriotsBooks.
that a lot of companies will be migrating out of California. I'm sure this will help the tax revenue base even more.
The higher the technology, the sharper that two-edged sword.
As far as I can tell. Of course, if you do any looking into Iowa sales tax rules, there's an awful lot of grey areas - presumably there so that the department of revenue has something to do.
I can't speak for concessions vendors, but food is generally excluded from sales tax. I think restaurants charge sales tax on food that they prepare, but I'm not sure if a concession stand falls within that?
A fine is a tax you pay for doing wrong and a tax is a fine you pay for doing all right.
If we do sales tax by the location of the business, what happens when the business has multiple locations? What if I order from an online store, which has multiple locations where it's running it's webserver as a whole, and multiple warehouses?
This isn't how sales tax is done.
If we do sales tax by the physical location of the buyer at the time of transaction or perhaps the shipping address, does that sales tax go to that relative state? If so, how does the business location get it's tax revenue for itself? But then again, that leads to the first problem I mentioned above.
This is how sales tax is done and the seller remits the tax to the state it collected it for, not the state where they are located. The business usually gets to keep a percentage of the tax collected to offset the cost of collecting it.
This will cost money to implement, and money to maintain, but if the company has a presence, that should not be a problem. Either the company is in Texas, in which case it has to deal with the rules of Texas, or it is outside and the consumer is responsible.
As far as you last point, that is no differnt from brick and motor. If you buy something in town, you accept the charge of 2% city tax, even though the product ends up at your house. The same thing relates to outside the city, when you save 2%, even if th product ends up at you office.
Again, these problems seemed to have been solved, and the problem is not small changes in geography. In your example the state just wants to collect enough tax revenue to run, and the Interner has screwed up the budget.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
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 is an easier way. Simply levy the tax directly on the gross sales of the business. This is what NH does.
You, as a consumer, simply see a price on an item and that is what you actually pay. The state gets its cut on every sale, no matter who or where the buyer is, because the tax is levied directly on the business which is physically within its jurisdiction; and under such a system the business is not a forced agent for the state, but merely has its own tax liability.
KFG
You are "magically exempt" from a foreign state's vehicle registration fees as well.
Depends on the state and what you are doing there with an out of state vehicle. There are some states that firmly believe that if you bring an out of state vehicle within their jurisdiction with the intent to work, even for one day before you go back to your home state, you must register the vehicle, otherwise you are in violation of the law. A few years back, Montana used to aggresively enforce this.
On how to dodge paying sales tax...I recommend eveyone in the country cultivate a friend in Wyoming which has no sales tax. Have your stuff shipped there...no tax is collected...your friend ships the stuff to you.
They won't, because they are making a shitload of money in the state.
There are many, many other retailers that have physical stores in the state and also do heavy catalog sales (Williams-Sonoma, Pottery Bar, The Gap, Eddie Bauer, etc, etc, etc.) All those retailers pay CA sales tax because they have physical stores in California. Borders has stores in California. Why should Borders get an exemption?
The cake is a pie
Someone remind me again why out-of-state internet sales are magically exempt from a state's sales tax?
They're not. But a state generally has no legal authority over a company that has no operations or physical presence within its borders (argh, aren't I funny). Just like some random state that you neither live nor work in can't come along and try to extract income tax payments from you, states can't go extracting transaction taxes from companies in other states.
Now nothing prevents states from telling their residents that they must pay taxes on items from out-of-state companies. In fact they do this and it's called a "use tax". But it's hard as heck to collect and the states would much rather audit a few large out-of-state companies than hundreds of thousands of individuals--persons who can actually vote in the state's elections.
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
Ask yourself who is paying the transaction and then ask yourself who is really paying the tax.
No sales tax, but two, two, two shipping charges and perhaps double the insurance if it's something really valuable, which would seem to be the only case where you might come out ahead.
KFG
Believe it or not, there's software specifically for that purpose.
And in some cases it's wrong, or incomplete if you wish to deal in politician-like double-speak. It's basically impossible to accurately keep up with all the special districts and conditions and twists across the US. Which is why I once had a Fortune 500 company tack onto an order of mine a sales tax to a jurisdiction which I lived just outside of. I was informed that the software claimed I lived in the city, not the unincorporated county, and that to have the sales tax taken off my order I would have to go to the courthouse, get an official map of the local tax jurisdictions, and mail it to them.
That is an absolutely outrageous requirement to place on a consumer. Yet in reality it was not an unreasonable requirement for the company to impose. I was in a zip code that was listed as being in city xxx. In fact, the vast majority of my zip code was located within the city limits, and I was only a few hundred feet outside the city limit, and the company had no practical way to verify my claim. Yet the result was that a company nearly 3,000 miles away me from collected money from me and sent it to a city from which I received ***0*** services, because the company had no practical choice. To take my story at face value would have exposed them to fines & penalties far outweighing the value of my business.
That sucked. And it was the result of laws that put far too much extortionate power in the hands of a two-bit podunk city.
Your argument would also apply to people under 18, all of whom seem to pay sales tax.
No it wouldn't. People under 18 are not considered full citizens, and under the law their parents have the right and obligation to represent their interests. Duh.
If I live in New Hampshire, and telecommute for a company based in Texas, who has an office in California which performs consulting work for a company in Hawaii, and I do the work on my laptop while on a plane flying from Florida to Iowa, where is the work performed? To whom would I owe income tax?
I'm sure Borders is raking in all the corporate welfare (tax breaks, write-offs, exemptions, etc.) that California has to offer. State "services" aren't limited to police and fire.
Most likely they'd all say you owe it to them, fortunatly state taxes are deductilble from your federal taxes so might have a few pennies left.
- I voted for Nintendo and against Bush
So I don't think my definition is really all that far off... I just add the part about "for the common good" (my bias).
I am sorry to have used the phrase "please educate yourself". As soon as I hit the submit button I regretted it and I agree completely that it was inappropriate.
Your original statement about third world nations:
made a very strong implicit statement that a typical third world nation is run poorly. Assuming (possibly incorrectly) that that implication was indeed intended, then my comment that you have a significant mis-conception about the third world stands. I believe that mis-conception to be that third world nations are typically run poorly due to mis-management. On the contrary, the evidence (presented in "The End of Poverty" and elsewhere) suggests that third world nations are poorly run because they do not have the funds to deal with unavoidable externalities such as virulent strains of Malaria, poor geography for international trade, and the biggest one, the apathy and cynicism of the international community (partly a result of long-standing prejudices).After all this, I admit that my proposal was not terribly well thought out. In fact, I think that solving the problem of a fair tax system is beyond my ability. However, I do think that there are two components that must be incorporated: a global vision of social good, and voluntary contributions. I am not personally impressed by the idea of taxes that are backed up by punishment.
Helping with organizational effectiveness is our job.
When you buy something at a store, the store is essentially acting on behalf of the state or as an agent of the state by collecting the sales tax. If they do not collect sales taxes when they should, the state will go after them for failing to collect the sales tax. If the store collected the sales tax but didn't turn them over to the state, the state will also go after them.
A company can, at least in Texas, take care of their own sales taxes. In that case, vendors don't charge sales taxes. It doesn't matter if it is local, mail order, internet order, or what. The company itself calculates the sales taxes and pays them.
I don't really understand why. I think it is probably that it makes it easier to pay the correct taxes and not overpay them. If the company is a manufacturer, whoever places the order wouldn't have to be knowledgeable about what is taxable (for example, tools) and what is not taxable (for example, items consumed in the manufacturing process). Instead, that determination is made by accounting who are usually considerably more knowledgeable about the applicable laws.
When Lands' End was acquired by Sears, and their merchandise began appearing in all Sears stores, they had to collect sales tax in all these various jurisdictions. The software to do this already exists. They got something that plugged right into their IBM mainframe CLI green screen system. It is certainly a burden for an online merchant to do this, but not that difficult.
cd
I am a partner in a small specialty by-appointment bookstore in Los Angeles with a strong web presence and average internet sales of about $75 per. We charge 8.25% for orders sent to California addresses even if they're in San Diego (7.75%), San Francisco (8.5%), or Salida (7.375%). Every year without fail we battle some library or museum that insists on paying their local sales tax. They're generally slow payers (not nearly as bad as film studios though) but when we fill out the tax forms in January they ask for 8.25% and we have a healthy fear of audits. Whether a California customer calls, writes, faxes, emails or orders through our website we charge the same as if they were in the store.
The majority of books offered for sale (although not necessarily the most prominently placed) on these mega online bookstores are owned, shelved and shipped by small independent booksellers. They collect the money and deposit it into our account minus their commission and we drop-ship the orders. An order can be shipped across town without the big boys ever seeing the book and without depositing a dime into the state's coffers. Our sale is to the ethereal, tax sheltered Amazon not John Doe.
WARNING - RANT It amazes me that perfectly rational geeks will allow themselves to be fleeced by these online Wal-Marts when they can go to a site like http://addall.com/ or http://bookfinder.com/ and pay up to 25% less for the same books often from the same seller. Our websites might not be as fancy but why order from an ethically questionable corporation when you almost as easily get the exact same thing and pay a little less dealing with an independent bookseller. Plus I think it's nice to get a personal email from a human being thanking me for an order.
This isn't how sales tax is done.
Notice I said "If".
Also, different locations do sales tax differently. For example, in certain locations, if someone buys something from a given store in person, they may or may not pay sales tax depending on where the buyer lives. I think that's how it's done in Vancouver, Washington with some Oregonians.
For example, see this post. Notice the startling similarities, particularly the reference to "office junior," the three paragraph format, and the unfortunate demise of the technology-using overling.
Whoever is posting these is putting an inexplicably large amount of effort into it. Don't fall for it. This is just troll bullshit, posted by some Luddite with an axe to grind.
I modded it "-1, Troll" then, and I would again, if I had mod points.
People abroad (and a lot of people here) don't realize that the decentralized system is what makes America's economy strong.
This "decentralized system" is why we have rampant corporate welfare. This "decentralized system" is why the tax burden has shifted more and more away from coporations and more and more onto individual taxpayers. The "state competition" you refer to does *nothing* for the people living in the state, nothing for the workers, nothing for the taxpayers when it encourages companies to move once their incentives for moving to that location run out. The *only* people who benefit from this are the companies who offer to bring 2,000 jobs to a community in exchange for a ten year break from taxes, sometimes even getting the community to build some of the companies facilities, and then leave when the incentives run out. It's a race to the bottom.
Anywhere there's a Dell store is a Nexus point for them. If I had a Dell computer (home section) shipped to my home in TN, I'd get charged sales tax because there's a big Dell store (over in Nashville, I think). If I had it shipped to my parents place in AR, no sales tax, they have no Dell store in AR. And TN sales tax is pretty high too (no state income tax).
- Give a man a fire and he's warm for a day, but set him on fire and he's warm for the rest of his life.
This will cost money to implement, and money to maintain, but if the company has a presence, that should not be a problem. Either the company is in Texas, in which case it has to deal with the rules of Texas, or it is outside and the consumer is responsible. RTFA. Borders-the-website isn't in CA, but because their logo is, they're treated as if they were. So now they have a presence in multiple states. And they now have to figure out how to do salestaxes for CA as well. As soon as each and ervery state jumps on the bandwagon, you'll have to do it for each individual state. Joy.
cutting budgets. are you insane. children will starve, old people will die, schools will close, evil I tell you, pure evil. we can't cut any spending, it's all necessary. don't you rememebr when, a few years back, there were literally thousands of people dying daily, just wasting away right there in front of our eyes, on the streets. and we did nothing until, mirable dictu, a government program saved them. except those greedy bastards won't pay ever higher taxes and now we have deficits.
you have no sympathy for us californians. you greedy evil right wing religious extremists, sexist, bigoted, homophobic, hate-monger. what do you have for breakfast? flesh of the downtrodden. you actaully expect us to reduce our spending? how can you be so cruel. have you no humanity?
My problem? I was perfectly gruntled, until some numbnuts came by and dissed me.
Unless the company is owned by Enron. Then they just collect the sales tax, pay no taxes and keep the money collected and consider it "profit".
They did that with PGE in Oregon. For some odd reason, it is not against the law here! The state is trying to get it changed, but the Republicans are resisting a change in the law. (They claim that it will have unspecified bad consiquences, but they cannot tell you what they are.)
"Trademarks are the heraldry of the new feudalism."
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.
People abroad (and a lot of people here) don't realize that the decentralized system is what makes America's economy strong.
Strange.... I could have sworn you used the words "America's economy" and "strong" in the same sentence. Gotta get more sleep...
In the same state where you are paid.
I believe THAT one was solved when people started doing the traveling salesman thing across state borders.
It sounds like NH is where you'd pay the income tax.
Mycroft
https://signup.leagueoflegends.com/?ref=4c3ed6600b6ea
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
The ruling deals with state sales taxes, NOT local taxes. Thus no matter where you live in Texas you all pay the same ammount of sales tax to the state, the other taxes that you list are for local governments, counties, cities, whatever. Thus there are only really 50 different possible taxes and it is very easy to determine what tax should be paid for the given item.
All of this is just a load of BS though since WHATEVER you buy you are supposed to pay the state taxes on; i.e. if I buy something from Border's, reguardless of their physical location I am supposed to pay taxes on that for my state. All of these laws are just so that companies can help people NOT pay taxes they should be paying.
I'm all for singing Kumbaya around the campfire, believe me, but I fail to see how giving money to the government enhances the experience.
Frankly, my bile rises with the notion of some glorious global uber-government that skims ten percent off my paycheck in exchange for vague promises of global peace and freedom. It sounds suspiciously like the national governments that have failed to make life better for us for all these centuries.
"OH SHIT, THERE'S A HORSE IN THE HOSPITAL!"
The discussion had, by this point, morphed a bit away from the ruling. Clearly, any discussion of Texas or any other state but California is not about the ruling.
If you are required to collect sales taxes in Texas, you are required by law to collect any applicable local sales taxes as well. I suppose that a company with no physical presence in Texas might be able to get by with charging the state tax rate of 6.25% and remitting that to the state. But most such companies would just avoid the heacaches anyway.
There are exceptions. If you buy something for resale, you don't pay sales taxes. The sales taxes are instead collected on the final sale of the item.No.
They are about the fact that a business that has no physical location in a state cannot, at this time, be required to collect sales taxes on behalf of that state.
One other thing.
There is also the fact that some items may be taxable in some states but not in other states.
If I understand it correctly, regular grocery items, a five pound sack of flour for example, are taxable in Oklahoma and not taxable in Texas.
Suppose you have an on-line store in California and have a physical presence in Oklahoma and in Texas. If you sell a sack of flour to a customer in Oklahoma and a sack of flour to a customer in Texas, you would be required to collect sales taxes on the sack of flour from the Oklahoma customer but not from the Texas customer.
That's not the reason, though. A state (or US territory) could easily set up a simplified sales tax for out-of-state purchases that uses a single rate for the entire state. Now you're down to 50-something taxing jurisdictions in the US, which would be freaking simple to calculate.
This law only applies to goods sold to CA residents.
Not exactly. The law was ruled to apply to Borders Group Inc., which isn't a CA resident but a Michigan corporation.
Two possibilities on the type of tax you had to pay: It was either a "use tax" (not likely) or a special tax levied on any cigarrettes sold in the state (most likely). These special taxes (you know those stamps you see on the carton) are not part of the "sales tax" regime.
My suggestion is to stop smoking. Or, just switch to a brand you can buy tax-free at your friendly local neighborhood indian reservation.
This is a tax on transactions occurring in California.
Most judges and legal scholars agree that a mail-order transaction takes place in the state in which the product is sold, not the state in which it is bought.
The taxes are levied by California's government against California citizens.
And California is forcing a Michigan company to collect those taxes.
I think we should let Lex Luthor out and let him finish his little West Coast landscaping job.
In your case, it would be New Hampshire. However, if you were living in New Hampshire and working in Vermont, then it would be Vermont.
Firstly out-of-state sale are NOT exempt from sales tax, normaly a seller has a physical presence in a state, and a reasonable good knowlege of local law, so the state forces the seller to collect the sales tax from the purchaser, for goods and service for consumption inside the state.
The state then assumes that the seller has collected the tax, and collect it's percentage from the gross reciepts. The State cannot force foriegn (as in out of state or out of country) bussinesses to pay; so the purchaser is responsable for making the payment of the sales/use taxes at the end of the year with their income taxes, which of course almost nobody does( I remember a certain TYCO CEO got burned on this a while back). I had a small website a whiile back and on the final confirm page it said, please print this page, you may neeed it for your tax records just to cover my ass.
The case was not about if the taxes were to be paid, but about who was going to pay the taxes; the seller who was taking a calculated risk by paying the law very close to the edge, or the purchaser who was going to play stupid. The States when face with one easy to find big-fish and a million minnows is usualy going to go after the big-fish.
Apocalypse Cancelled, Sorry, No Ticket Refunds
Hopefully it will prevent corporations from opening bogus operations in states that don't tax. For example, the state of Washington is loving millions of dollars in taxes from Microsoft because Microsoft has opened entities in Nevada which doesn't tax them. If you want to read how Microsoft is screwing the state of Washington, look here: http://www.seattleweekly.com/features/0439/040929_ news_microsoft.php
Let's see:
Presuming that Borders has a shop in every state, and since their website doesn't ask where you live, essentially this means that their ENTIRE BODY of online sales are exposed to taxation. From every state. Which means that if they make $100 sale, they should plan to pay:
-4% ALABAMA
-5.6% ARIZONA
-6% ARKANSAS
-7.25% CALIFORNIA
-2.9% COLORADO
-6% CONNECTICUT
-6% FLORIDA
-4% GEORGIA
-4% HAWAII
-6% IDAHO
-6.25% ILLINOIS
-6% INDIANA
-5% IOWA
-5.3% KANSAS
-6% KENTUCKY
-4% LOUISIANA
-5% MAINE
-5% MARYLAND
-5% MASSACHUSETTS
-6% MICHIGAN
-6.5% MINNESOTA
-7% MISSISSIPPI
-4.225 MISSOURI
-5.5% NEBRASKA
-6.5% NEVADA
-6% NEW JERSEY
-5% NEW MEXICO
-4.25% NEW YORK
-4.5% NORTH CAROLINA (6)
-5% NORTH DAKOTA
-6% OHIO
-4.5% OKLAHOMA
-6% PENNSYLVANIA
-7% RHODE ISLAND
-5% SOUTH CAROLINA
-4% SOUTH DAKOTA
-7% TENNESSEE
-6.25% TEXAS
-4.75% UTAH
-6% VERMONT
-5% VIRGINIA
-6.5% WASHINGTON
-6% WEST VIRGINIA
-5% WISCONSIN
-4% WYOMING (3)
-5.75% DIST. OF COLUMBIA
= 248.525% cumulative sales tax
= $248.52 in taxes, BEFORE they even pay Federal Corporate Income tax.
-Styopa
As a Hoosier I'm not in the least alarmed, and not just because IN is not CA. Here, if a remote vendor doesn't collect sales tax, we're required to figure it ourselves and send it in along with the income tax. Since I pay the same either way, I'd much rather have the vendor send it in for me. He's got to have tax calculation code for *some* state anyway, so why not put in the full set of tax tables?
One of the arguments I use against the whole ecommerce should be forced to collect state sales tax is that it is currently fundamentally impossible to handle every tax juristiction using any sort of automated process. Even with the simplified state sales tax initiatives, the situation is still a nightmare.
Why should some of my customers who have small web shops and brick and morter businesses have to spend substantially more on tracking and reporting such sales tax than those who don't have an online business?
So, if we want to make things really fair what we should do is require that every business check the drivers license of everyone who buys anything and charge appropriate tax for the juristiction that this person comes from. Therefore if product a (say, produce) is tax-exempt in my state, but it is bought by a tourist from a state where this product is taxed, then the store should collect the state and local sales tax and remit it to the proper authorities. I think everyone can see why this is so problematic.
Finally, businesses are exempt from collecting and remitting sales tax to states where they have no physical presence. However, such purchases are not intended to be tax-free. Most states with a sales tax also have something called a use tax. This means that if you pay no sales tax on a taxable item, say because you purchased it in a state with no sales tax, then you owe the state you reside in the tax. Most consumers safely ignore this law, but businesses usually pay the use tax.
LedgerSMB: Open source Accounting/ERP
This ruling doesn't really have broader application; it was a ruling by a California court, not a Federal one. What did Borders expect, that California was going to decide it couldn't tax them?
If they wanted to argue they didn't have a California nexus, they should have arranged for the case to be in Federal court.
While this might not be the death of e-commerce, it would certainly result in a dramatic narrowing of the online marketplace.
How do you figure? Let's say all e-commerce is eventually taxed. Okay, so how does this affect e-commerce? B&M sales have been taxed since the beginning of time as far as anyone alive is concerned.
The allure of online sales, to me, is not the lack of taxes. That's just a nice by-product. The allure is not having to leave the house, 24/7 access, being able to shop without being pestered by salespeople, and being able to do thorough competitive shopping. All of those advantages remain when e-commerce is taxed.
It would be better, sure, but that's the way the cookie crumbles. My last house was physically in 2 different counties. The line ran through the living room in the front, and out the kitchen in the back. We had to pay 2 different (proportional) property taxes, but it comes with other advantages, like choice of school district. The zip code serviced both counties (it was mainly by proximity to the post office). We paid sales tax to the cheaper of the two counties, for bigger purchases.
Waiting for ad.doubleclick.net...
The details of the case can be found at http://www.courtinfo.ca.gov/opinions/documents/A10 5488.PDF
With a policy like this, CA (and probably any other state in need of some extra cash) could argue that the online company was just an extension of the brick-and-mortar Borders stores located in the state.
Let's say I'm sitting here in the Caymans, selling lemonade online. I've contracted with a loosely organized network of 7-year old kids, who deliver the actual product through a series of sidewalk stands across CA. I collect $.25/cup and I pay each kid $.10/cup they deliver. Am I liable for sales tax in this case? If so, how much?
Now pretend I sell books and that I have contracted with UPS to be my sole delivery service. Since UPS has outlets in CA, I tell my customers to make their returns at any UPS Store. Do I need to pay sales tax because of my implied presence in CA? If so, do I pay tax on the price paid for the product or for the delivery?
Except you usually have a lot more customers than stores. Dealing with the data for a few stores is relatively easy. Dealing with data on all of your customers is a lot more difficult.
The tax should be based on where the store is, regardless of the nature of the transaction. O(c) vs. O(n).
A Pirate and a Puritan look the same on a balance sheet.
Except, the dodge may be completely legitimate on paper. By nullifying this "dodge" the court may be creating bad side effects that go beyond this case.
You shouldn't set yourself up to go on continuing to punish the innocent just so you can stick it to a single sleazeball.
THAT is bad jurisprudence.
Besides, these shenanigans need to stop anyways. The feds should step in and actually regulate something that sensibly falls under the ICC.
A Pirate and a Puritan look the same on a balance sheet.
On Amazon, the book came up in 2 seconds, price new was $9.25, with used options down to $6.29. Also, I got a cover image, reviews, publishing information, comments from other readers, and free shipping with a $25 purchase. My name, address, and credit card information were on file.
On Bookfinder, it took ~30 seconds to come up with only used selections, the cheapest of which was $12.55. No additional information was provided. Shipping was $3.49 and it shipped within 2-3 days. The best shipping deal, BTW, was $3.49 for the first book, and $1.49 per additional book. Buying the book required registering for some random bookseller's website, and typing in a bunch of information.
To be fair, once I got to the actual reseller's website (alibris.com, not the actual seller, which was some outfit in Georgia), I did receive some reasonable, but minimal information about the book.
Call me a perfectly irrational geek if you want, but I'd buy from Amazon.
Yes, in some cases I might be able to find a deal there... But we're talking about a bestseller here, not some obscure Golden Age pulp, and there weren't even any new copies available, much less at a bargain price. My time is worth a lot more (this posting notwithstanding).
I am a lawyer, but this isn't legal advice. If youneed legal advice, find an attorney located in your jurisdiction instead of expecting free online advice.
The Supreme court previously ruled on this for mail order businesses.
They did *not* rule that the state taxes aren't due. They ruled that, at the time, it was far too burdensome for states to impose requirements on out of state firms, which would leave each firm subject to massive reporting and compliance costs.
The court also noted that Congress had the power to deal with the situation.
My pet solution is to do it by five digit zip code. Jurisdictions that share codes will have to come to terms on how the code's revenue will be split, or see it all go to the state. Monthly or quarterly, firms would file a single report and write a single check, along with an electronic form showing how much in each of perhaps four categories was sold in each zip code (perhaps food, clothes, another category, and other). A single federal defnition would be used for the categories, not the local definitions.
I'd also allow multiple entities to handle the collection/redistribution. They would be entitled to a commission (probably a fraction of a per cent), and could compete based upon service and possibly a rebate to the companies of part of the commission.
hawk
>Never mind the increased cost to my customers of just the taxes themselves.
:(
You misspelled "never mind the increased cost to those no longer able to commit tax fraud."
p
hawk
A few years ago, a man got fed up with New York City.
.
He sold his home, car, and business, and then moved to Florida, bought a new house, a new car, and started a new business.
NYC still tried to claim that he was a resident and tax the Florida business . .
hawk
I don't know about other states, but in Ohio sales tax varies by county. I live in Columbus (Franklin County) and sales tax here is 6.75%. I think the statewide base sales tax is 5.75% though, not 6%.
But, uh, in regard to your comment itself, they would just have to figure out which state's (or which county's!) sales tax to apply. So, $6.75 tax if I bought it.
Well with the common good portion added, home owners association fees would not count. Why? Because they are fees for the common good of the association, more akin to union dues.
As far as freedom of choice is concerned (I can not pay this or choice another provider), that is indicative of whether or not the entity is a government. If you have no choice, it's most likely a government. As someone said earlier about Borders, if it walks like a duck and quacks like a duck, it probably a duck.
I will agree that many third world nations problems stem from a lack of funds. Other examples such a Nigeria, a country with an abundance of oil wealth is pretty poorly run. So just not having money, and you cannot blame the prejudices of the world community for Nigeria's problems.
As far as my statement about your proposed government and third world nations, I will retract it. A largely world governmental entity such as that would undoubtedly poorly run. It would just be to unresponsive to local conditions. The bigger the entity, the bigger the institional inertia and bureacracy.
Thalasar
Your logic faulty. Since I don't eat at fast food joints (they're unhealthy, you know), that tax would never apply to me. Even if I did eat Big Macs (which I never have, so sue me), there's no way I could eat 200 billion Big Macs to pay for the Iraq War. Are you the same AC idiot who confuses me with God?
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.
Actually, that won't fix it either. Cali has these insane laws about nexus and sales tax. The company I work for had a problem with this several years ago. We are NOT based in California, have no employees in California, no buildings in California, nothing, but we attended a TRADE SHOW held in California. Because we attended this trade show, the California department of revenue, or whatever they call it, sent us this nice letter saying we had nexus in California and had to send them taxes. Not only that, but once we had nexus, we couldn't get rid of it. We were forced to continue collecting sales tax for CA customers.
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Not sure if this is the case everywhere, but it where I live this even works for city tax. My parents live outside city limits, if they purchase an item and have it delivered to their house they don't have to pay city tax, but if they go to the store and pick it up they do.
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Can't get any bigger than the Cosmos. I just love my adoring fans, even the dumb ones! :P
Very few companies are headquartered in Delaware or Bermuda. I think you mean to say the companies are incorporated in Delaware or Bermuda.
What you say doesn't make sense, either -- most states charge income tax to the companies incorporated therein (there's also a foreign corporation tax, but that's another matter), and your message is equally non-sensical if you apply it to income tax.
I don't think you have any idea what you're talking about.
With great power comes great fan noise.
You're right, I meant to say incorporated rather than headquartered.
As for the rest of your comment, you're not making a lot of sense. We're talking about sales tax not income tax.
"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."
:-). "In theory" car taxes should pay for the road infrastructure, American federal income tax pays for WWII, and British Income Tax supports the war against Napoleon.
What a naive statement
Taxation is all about governments taking money to do what governments do, good or bad. They will always try to take as much as they can without damaging the economy or causing public outcry. Justification of any given tax is purely PR; in reality everything goes into the common pot. So called "tax cutting" administrations are more often "tax moving", either onto another type of "stealth" tax, or off into the tax burden of future generations.
This is not CA or even USA thinking. Every tax systems in history across the planet has been the same.
of course the lawyers get involved with what exactly a "presence" is, but that's besides the point
No, that exactly is the point. In the case in question, the fact that the online Borders brand has no nexus in California other than brand and marketing similarity with the separately incorporated brick-and-mortars, wasn't enough to insulate them from remitting CA sales tax.
In this case, it's pretty clear that Borders was trying to be a little slippery, but at a technical level, they're exactly as removed from nexus in California as, say, a small mom-and-pop mail order operation in South Dakota might be.
If a local retailer in California that sells some complementary product or service does any cross-promotion or referring to that business in South Dakota, that mom-and-pop could wind up in exactly the same boat. Likewise basic web affiliate marketing... any affiliate who happens to be in CA, referring traffic to a non-CA business (and there are thousands of examples of this) could be dragging all of those companies into the CA revenue stream by proxy. Likewise, any intermediary (like Commission Junction, or Performics) that enables that activity, could be a bridge to making their entire network of merchants "entangled" with California businessses.
Borders' web ops do not have a presence in CA "as defined by law", but the court found that it was close enough to count. Result: taxes due, despite that lack of nexus. Other indirectly related companies will find themselves in the same boat, by the thousands, given CA's dire finacial straights.
Don't disappoint your bird dog. Go to the range.
No, that exactly is the point. In the case in question, the fact that the online Borders brand has no nexus in California other than brand and marketing similarity with the separately incorporated brick-and-mortars, wasn't enough to insulate them from remitting CA sales tax.
Since I can order a book online from Borders but return it to the local Borders for credit, Borders has nexus. Barnes and Noble tried the same thing and loss in a different state.
As a followup to this, you would also need to look at their SEC filings and their federal tax returns and see how they view themselves for reporting purposes, too.
It's a lot more complicated than just having a brick and mortar storefront.
QVC got in trouble, because they were owned by Sears and used Sears warehouses for storage purposes. Even though the goods were separated and they paid "rent," they were deemed to have nexus, since the rent went to the parent company and was eliminated for tax purposes.
Microsoft got it, because they would send sales reps into various states for institutional sales.
Nexus refers to a financial presence in the state, not necessarily a physical one (ie store front).
It is a pretty well defined concept and if Borders lost the case, then they were trying to do something to get around it and the courts didn't buy it.
Again, if I can return an online purchase locally, then the local store is what probably triggered the nexus.
Or, if they don't have your brand, request it.. you'd be surprised how many smaller businesses with a storefront will carry a recommended, or requested brand...
Michael J. Ryan - tracker1.info
LOL, It occurred to me just after I posted that there might be a house which sat right on the line. So you could maybe save tax by getting things shipped to the front door rather than the back one?
Confucius say, "Find worm in apple - bad. Find half a worm - worse."