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

It's bad already

[Rorschach1]

Couldn't be any worse than what California already puts me through. They want you to report sales for each individual tax district in the state. Most of my sales are out of the state, and probably half are out of the country, so I've got very little to report there - I wind up paying 6 cents to one county, 12 cents to another, and so on. Or at least, that's how I'm supposed to do it. In reality I just go nuts and grossly over-pay them all - 50 cents for everyone!

So I'm a little skeptical about just how 'easy' they consider a reasonable system to be...

Wait just a darned minute

[$RANDOMLUSER]

Mail order (catalog or phone) items which cross state lines have never been subject to sales tax; only if the shipper and reveiver were in the same state was sales tax charged.

How is ordering over the Internet different?

Re:It is only a matter of time

[morgan_greywolf]

Oh, it gets worse than that. For instance, what if you're a college student and you live in, say California, so your billing address is there. You use, say, Amazon.com to order a gift for someone's wish list who lives in MD, but you go to school in Texas, so that's where the transaction took place.

NOW who gets the tax?

Re:It is only a matter of time

[EmagGeek]

I don't see how any of this gets around the fact that no State has the right to tax interstate commerce. Call it whatever kind of tax you want to; Sales, Use, Excise, whatever, it is still a tax on interstate commerce and a State has no right to collect it.

Re:Goodbye free lunch

[CrazedWalrus]

...I've always tended to prefer sales taxes over income taxes.

I agree wholeheartedly. Trash the income tax and just tax what people buy! Simpler, less expensive overall (bye bye, IRS...), and allows the average citizen to see very directly just *how much* tax they're paying (25% sales tax?! WTF?! Write the Congress(wo)man!).

Problem is, that whole "trash the income tax" thing just doesn't seem to be pursued very agressively. This is just one more tax -- another liability and barrier to entry for small online business, and an added complication. I don't care how "simple" it is.

Additionally, how will this work for auction sites (E-bay and the like)? How do you determine whether an item should be taxed? Or do we just double-tax all used items sold on E-bay? Seems like a huge pain to enforce otherwise.

Good News for No-Tax States

[smose]

Mail order [across] state lines have never been subject to sales tax...How is ordering over the Internet different?

It's not, which should have mail-order retailers worried about this move, because it would almost certainly end up affecting them.

One way to apply this is to charge it based on the state of origination. It is a sales tax, not a purchase tax, even though the purchaser pays that tax for the seller. The seller would pay the tax on all sales to their home state, no matter where the product is shipped.

This would be good news for no-sales-tax states like New Hampshire, because it would encourage e-tailers to set up shop there. I'm sure that some creative loophole-hunter could work up a way to sell from one state, ship from a warehouse in a second state, to a destination in a third state.

Re:Is it just me...

[BlewScreen]

Or you could ship to Alaska, Delaware, Montana, New Hampshire or Oregon.

No state sales tax there.

If you don't already live in one of these states, you may live close enough to set up a mail drop. If not, maybe you should consider moving - this was the intent of allowing states to set up their own laws - anyone that wants can "vote with their feet".

Yes, I realize this is considered impractical to most, but at what point should we finally say "enough"?

-bs

Re:It is only a matter of time

[zippthorne]

Yet, many states have already been doing exactly this. My home state of RI argues that sales tax is a tax on its citizens (and visitors i guess). therefore, they have a right to tax (last I was there 7%) your purchases regardless of where you bought them.

Since the state is so small, anyone in the state could (and often did) drive an hour and a half to Massachusetts and buy things like cars, appliances, etc. for only 5% sales tax. (ah the boon of living in small state country) You're supposed to declare what you've purchased and pay the difference to RI. Of course, nobody did, so the clever legislature monkeys (who had recently voted themselves a salary increase from $300 to $10k) made "deals" with large-ticket businesses just across the border to report you even if you don't.

This has been challenged many times and upheld on the grounds that the tax is applied equally to both in-state and out-of-state purchases. and so isn't an interstate tax at all.

Tricky lawyering no doubt, but then if they can argue about the definition of the word 'is' they can argue pretty much anything.