States Push to Collect Online Sales Tax

Carl Bialik from the WSJ writes "On Saturday, 18 states will implement the Streamlined Sales Tax Project, which will make it easier to collect local and state sales taxes on purchases made over the Internet while offering amnesty on uncollected taxes. In their longstanding opposition to collect sales tax, many online retailers 'have cited a 1992 Supreme Court ruling that said that it would be too onerous for e-tailers to calculate all the permutations of differing state and local tax rates,' the Wall Street Journal reports. 'One goal of the project was to remove the ruling as a key defense for online merchants.' Is your state involved? 'The states that have signed on are Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, New Jersey, North Carolina, North Dakota, Oklahoma, South Dakota and West Virginia. Five more -- Arkansas, Ohio, Tennessee, Utah and Wyoming -- are in the process of finalizing the requirements needed to join, while Washington, Texas and Nevada are in earlier stages.'"

Comments

Goodbye free lunch

[tnk1]

Well, it sucks that they are getting around to figuring out how to tax online purchases. However, I can't really fault them for doing it. As more and more sales go online, there is a real issue with decreasing tax revenues. It probably won't be a critical issue for decades, but the fact is that governments need taxes to operate and I've always tended to prefer sales taxes over income taxes.

Re:Goodbye free lunch

[Civil_Disobedient]

Trash the income tax and just tax what people buy!

This would put a far larger burden on those with lower incomes. For instance, the family making $50k a year spends most of it in living expenses (if not all of it, considering our outrageous consumer debt). But once living expenses are covered, the rest is "gravy". Certainly, those who pull in more money a year are going to be buying more expensive things (bigger homes, nicer cars, etc.) but by the large, they can also use that extra wealth to leverage more money (through investments, real-estate, etc.) Thus the rich get richer, while the poor and middle class stay in "their place."

"So what!" you may decry. Well, unfortunately that creates a system where you start getting largely centralized accumulations of wealth. And as the saying goes, "It takes money to make money". The United States is already set up to give enormous advantages to those with cash (easier to raise capital, lower interest rates on loans, etc.); this would enable those "have's" to rapidly force those "kinda-have's" into "have-not's", and the "have-not's"--well... they haven't started charging rent for prison (yet).

Re:Not quite

[swillden]

While I disagree with this arguement, it *could* be argued that the Internet creates a presence in every state, far beyond the old days of mail order catalogs.

Seems like a pretty shaky argument. Because the buyer and seller can swap IP packets the seller has a local nexus? Exchanging messages over the Internet seems precisely analogous to exchanging bits of paper (catalogs and order forms) via the postal service.

A most welcome development

[csoto]

For years, there was a myth that online sales were "cheaper" because you didn't pay sales tax. Rather, the truth is that states, counties and municipalities were being cheated out of collecting legal sales and use taxes.

If you don't like sales tax, then fight your local/state sales and use taxes on principal. But as long as 7-11 down the street has to charge it, why should a company that's in another state be exempt?

Charging tax is truly hellish technically

[br00tus]

I have been running "e-commerce" sites since 1997 when I set up a site that used Broadvision (and Taxware on the backend). Right now I run a site using osCommerce.

The article mentions how some states consider candy different than other food as an example of the many little differences in tax code. Another one is different counties charge different taxes - in New York state, Queens county and Nassau county have slightly different tax rates. And then these tax rates change every time a new law is passed. So you have to update your tax tables whenever that happens. Most people who are truly concerned about this pay thousands to get regular Taxware updates. Luckily, right now I only have to worry about one state.

Now in general terms, I would not mind if some flat, national tax were charged on items going from me to a consumer. I could just say "add x.y%" to every sale, just like everyone else would be doing. But the way this is being done is ridiculous. What has happened in the US is that federal taxes have remained the same, I suppose to pay for the increased military spending for the war in Iraq and whatnot, while money the federal government used to give to the states was cut. So now the states are all scrambling to get money, and since the politicians don't want to go after locals, they are fighting to gouge out of state people for taxes. So we have this mess. And it doesn't effect Amazon.com who can afford to pay for Taxware updates and whatnot, it hurts the small businessman like me, who now has a lot more work to do and may have to buy expensive Taxware updates to be in compliance with this. If one steps back and looks at the whole country, this is a ridiculous way to do things. It's not even that I have to pay the tax, if everyone else had to, it's that now I have to be concerned about not just the tax laws of each state, but the tax laws of each county in each state. It's ridiculous. So much for "state's rights".

More of our Constitution erodes

[Anita Coney]

Article. I, Section. 10., Clause 2 specifically forbids states from collecting intrastate tariffs. But, for some strange reason if they call it a "use" tax it's ok. I'm also guessing that if the south reinstituted slavery under the term "Happy Fun Work" it'd be legal.

Surely if I got to California and buy something, take it back to my state, I'm not obligated to pay a sales tax back here. And if I asked my brother to buy me something and bring it back from California, I wouldn't have to pay my state's sales tax. But for some reason, could it be greed?!, if I pay FedEx to bring it to me, suddenly I have to pay.

I have NO problem paying sales tax. I think that if I buy something shipped from California, for example, California's sales tax should be added to the order. But I see no reason to flush the Constitution merely because states are greedy.

Re:Wait just a darned minute

[loucura!]

What demands does an out-of-state company place upon the local infrastructure? They don't require police or fire protection from the local infrastructure, they don't use the telecommunications, they don't even use the roads that your hypothetical "local retailer". Since they require no services from the government local to the purchaser, why should they be required to collect and pay taxes for those services?

Re:It is only a matter of time

[Alex P Keaton in da]

The tax goes to where the item is delivered, or "used"
It is the same way with counties and cars (and other big ticket items) here in Ohio- If I but a car in Cuyahoga County where the sales tax is 8%, but I live in Summit COunty where the tax is 7%, I pay 7% tax on the car....
Technically, If you live in a high tax county, and buy stuff in a low tax county, you are supposed to send the county/Sate gov't the difference each year. But of course if you live in a low tax county and shop in a high tax county, you dont get a refund at the end of the year.

Re:It is only a matter of time

[dcavanaugh]

I agree with your last sentence about cutting the pork, but you are wrong about everything else up to that point. Government expenditures always rise to meet revenue (and then some). Therefore if the Feds sent my $300 to my state government, they would have spent $350, which means they would still be looking to tax Internet sales. Government (at any level) won't even consider spending cuts until they have positive verification that the money is gone and borrowing is maxed out. The only way to put a limit on what government spends is to put a limit on how much they take in.

because of the Constitution?

[YesIAmAScript]

That says they have no ability to tax or regulate interstate commerce?

The supreme law of the land does mean something, you know.

Quit taxing our hard-earned wealth!

[tbone1]

They tax you when you make it, they tax you when you save it, they tax you when you spend it, they tax you when you win it, they tax you when you invest it, they tax you when you inherit it, they tax you when you buy food, they tax you when you buy clothing, they tax you when you buy shelter, they tax you when you do anything. In short, we are taxed for living until we are taxed to death.

When is enough enough? I know we need taxes for things like policmen, firemen, the military, the courts, roads, etc, but fer cryin' out loud, when I have to work until July 1 just to pay my income, property, sales, gas, ticket, etc etc etc taxes, I'm ready to spend the winter at Valley Forge. If a politican and bureaucrat are getting less of our money to waste because there is no on-line sales tax, and they complain about it, then I for one am against any internet tax.

*sigh* Sorry, I'll go cheer myself up by reading some Thomas Payne and James Madison ... until the government tries to ban those books.

Re:California charges it

[IthnkImParanoid]

42%? Interesting. I make "fairly decent money" and my state income tax is about 5%. I played around with the Franchise Tax Board's tax table calculator, and couldn't get it to go over ~9.2%. Of course, my federal tax is 25%, so I'm assuming you're counting federal tax.

Combining federal tax tables and state tax tables, I'd guess your income is at least $146,000 a year (33% federal + 9% state). If you are working 10-12 hours a day you are spending too much time at work. Scale back your lifestyle a bit. I make $47,000 (working eight hours a day) and am happy doing it.