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U.S. Ecommerce To Be Broadly Taxed?
fl!ptop writes "ZDnet has a story about U.S. Senators proposing sweeping changes to how Americans are taxed for online purchases. As proposed, businesses would be required to collect sales taxes and send them to the state the purchase was shipped to. As a small business owner that primarily sells via ecommerce, I am shuddering at the prospect of having to deal with government sales tax forms and coupon books for 30 or more states. Will I have to register with each state's tax department? As an ecommerce Web developer, I'm also wondering what implications this will have on maintaining code that calculates sales taxes, expecially in states like Ohio where they differ by county and municipality."
This is going to be a nightmare for small business owners to implement. Most states make you pay to register with their sales tax department. Multiply that by every state that you have customers in. No wonder big companies like WalMart are supporting it.
Bradley Holt
If your eCommerce business is run in, say California, then it should charge California sales taxes.
It makes no sense for a company in California to try to figure out the sales tax for an order from New Hampshire.
-- Thou hast strayed far from the path of the Avatar.
I am by no means an expert on the subject, but my feeling is that this is somehow against the constitution. And for this to be trackble and enforcable, the states would have to collect their tax money with the federal government as the intermediary. Just on the surface, this idea seems unworkable due to the complexity.
And how about taxes for the local state? Do you get taxed twice or does one take precedent? I speak of situations where you buy from a company online and they have presense in your state as well as others. At present, if the company has presense in my state then I also have to pay local state tax. But what if the transaction is with a company in, say, N.Carolina (just pulled that from a hat) but they also have a presence in Texas where I am at now. Current practices say I have to pay tax to Texas. But with this, am I paying double tax?
http://www.boston.com/news/nation/washington/artic les/2005/12/09/house_approves_561b_cut_in_taxes/
From the above article: "They cut vital programs and services that benefit hard-working lower- and middle-income Americans, and with the money saved, are giving more tax cuts to the wealthiest of the wealthy."
From the ZDNet article:
"...Sen. Mike Enzi, a Wyoming Republican. "This is costing states and localities billions in lost revenue."
So the Senators think they shouldn't tax the rich, but its okay when it is everyone else.
Anyone think that this is unfair? Or is this okay with you?
He who knows best knows how little he knows. - Thomas Jefferson
In the fair tax plan, low income folks are protected.
Poster: As a small business owner that primarily sells via ecommerce, I am shuddering at the prospect of having to deal with government sales tax forms and coupon books for 30 or more states
Article: The legislation would apply only to businesses with more than $5 million in "gross remote taxable sales" each year.
Of course, maybe my definition of small business is different than the posters.
Tis better to be silent and thought a fool, than to open your mouth and remove all doubt --Abraham Lincoln
The Federal Government isn't taxing you for the items, they are considering giving the states authority to do so. As the article explains, currently in states with a sales tax, you theoretically are supposed to pay sales tax on goods ordered from out of state. (There is usually a form for this that you are supposed to file w/ your State income tax.) Almost nobody actually does so. Court rulings mandate that one state cannot collect, or require to be collected, tax on behalf of another state without Federal law giving them that power.
This law isn't really an "e-commerce" law like the article title would have you believe. It would apply to old-fashioned mail-order also. It is just that mail-order has really become MUCH bigger with e-commerce, so it is a bigger problem that it was before.
The justification behind the law makes sense. There is no reason that customers of say, Amazon.com, should be mostly exempted from paying sales tax while customers of bestbuy.com or compusa.com have to do so for the exact same items.
I expect if this law gets passed, there will be:
1) Be cheap software available to help retailers work this out. The software already exists, since web sites like target.com already have to deal with it.
2) A single form you file with your own state taxing authority that you would then list how much tax was supposed to go to each state. I don't think they would require you to register with each state individually.
SirWired
I think it is well past time to ditch the different taxation systems (income, property, inheritence, sales, capital) and replace them all with a single sales tax. That gets rid of this problem and also alliviates the massive problem with a competly wacked tax system that actually increases the difficulty of moving between the different classes.
I don't know much about the so called "FAIR Tax" although I have heard people say that it is similar to this idea. I dislike the flat tax because it unfairly impacts larger families (although I am sure the population nazis would love that).
But in general, why on earth do we maintain this system? It's not efficent, not effective, and benefits no one except politicans wanting to play social engineering!
The system I'd like to see is one that lets me keep ALL my money and spend it how I see fit. You know, like the one the founding father's that drafted our Constitution had in mind.
I think, therefore I doh.
Well, government needs revenue, that much we agree on. If the revenue goes down either they have to cut spending or find a way to increase their revenue. Cutting spending is a nice idea, but it usually requires cutting things that the citizens need or want (like student loans programs, which were just cut yesterday) and you can only go so far with that without causing other problems (like poverty, homelessness, crime, etc - or simply not getting re-elected).
So usually increasing the revenue is the way to go. That can be achieved either by increasing the tax rates, imposing new taxes, or closing loopholes on people that previously didn't pay taxes when they should. Increasing taxes or creating new taxes also has nasty side effects (like not getting re-elected). Closing loopholes, however, tends to be politically viable since it's seen as fair. The tax-free nature of internet purchases is such a loophole. I think the government let it slide for many years while the revenue it represented was still small, but it's becoming harder and harder to ignore since it's growing.
I think the Canadian government has a surplus. I know alberta has a surplus. They're giving a big chunk of money back to each and every citizen. Oh, and Canada doesn't have a deficit.
Anthropic principle: We see the universe the way it is because if it were different we would not be here to see it.
You mean the system where our founding fathers wrote in the constitution the ability to levy taxes?
Wait! How ethnocentric of me. You're probably not from America. You're probably talking about the founding fathers of Fantasyland.
postmodernsideshow.com
Couple points:
1) If somebody comes to my online business hosted in CT from New York, why would I have to pay NY taxes? I have no representatives in New York, I am not a citizen of New York, and my business is not incorporated in New York. We have no New York offices or interests, save being taxed. How then, would I have recourse to adjust my taxation from New York? Move there? Payoff a politician from there? Seriously, how is it that a state in which I have no connection with able to impose it's legislative will on me? And if it is allowed to do so, where does it stop? Can they apply extra taxes to out-of-state purchases to allow for more in-state businesses? Tax certain businesses but not others? States are notorious for adjusting their tax systems to have some sort of social impact. Should CA be changing economic conditions in TX?
2) Somebody is going to start doing the math on this one. If I buy big ticket items, it would probably be best to tranship them to a tax free entity (Canada? NH?), deliver them there, then continue shipping to the original destination. For anything with a tax over 30 bucks or so (and a small item) it would be cheaper. (And for those of you who say it would be illegal, please see #1. Illegal where?)
Town Attacked By Giant Snowman (on my blog)
In general rich people spend a lower percentage of their income than people who's income is closer to their needs. Someone would have to make up for that. That would be the middle class who spend 99% of their income each year.
You are poor at math. Who cares what percentage of your income you spend? The only thing that matters is HOW MUCH DO YOU SPEND?
If you make $500K a year and spend $60K a year, you are paying more in taxes than someone who makes $50K a year and spends $49K of it a year. Right?
This is one reason it is called a FAIR tax.
Similarly, poorer people tend to have more children (this is after all why they are often "poor" or "middle class," because they have more things that need to be paid for. A family with more children, to some extent, will receive more of a credit to cover basic expenditures like food, rent, shelter, clothing, etc. So a single man making $50K living alone will still pay more in taxes compared to a couple making $50K a year together with 2 children, if both parties spend the same amount of money. This is due to the tax prebate built into the fairtax.
The fairtax plan is really smart, clear, and the fairest system I've seen, which is why I support it.
Ironically, the word ironically is often used incorrectly.
This would be a heck of a lot simpler than having every small business in every state register with the tax department of every state. Simply have the small business require out of state sales to be placed on a credit card, and report to the credit card company that the sale was of taxible goods. You credit card company bill you the sales tax, and sends a check to the state.
Another alternative is to have an alternate 10% federal Value added tax (higher than most state sales taxes). A merchant would have the option to _either_ charge its customers their state tax (and fool with all the required paper work) _or_ pay the federal sales tax. A merchant would then have the option of figuring out which was more worthwhile. Give your customers a small break in price, or simply their paper work.
One of the reasons why I like the FairTax is that it takes away a few of the games the politicians can play to repay their big campaign contributors for putting them in office. Oddly enough the Buffet quote you highlighted doesn't seem to illustrate his opposition to a flat tax, but his opposition to special taxation categories, like capital gains and dividends, set up by politicians to benefit their high-dollar campaign contributors. These favored categories wouldn't exist under a the FairTax or flat tax scenario.
To me the FairTax is just that, "fair." Any spending up to the poverty line is essentially exempt from taxes. Everyone, not just poor people would receive a check in the mail every month to rebate the taxes they paid on all essential items. If you choose to consume beyond what is generally agreed on as essential, then you pay the tax.
In the meantime, everyone, gets to take home more of their paychecks and you and I get to choose where that money goes, not the government. If the essentials are tax-exempt, how is it unfair to tax people when they buy a TV, or a DVD player, iPod, whatever?
How does that benefit the rich any more than it benefits the middle class, or the poor? When a rich guy buys a 150,000 car they have to pay the tax, just like me when I buy my 15,000 car, or a $400 MP3 player.
Besides, the theory goes, that with the 23% embedded tax burden removed, even with the added sales tax, we would be paying the same price for non-essentials as we were before the FairTax. So, we pay the same price for things, but we have more of our paychecks to buy things with. That sounds good to me. So, if you're going to attack anything attack the embedded tax premise.
Under the current system a lot of rich folks' money sits legally untaxed in offshore trusts. So, the "soak the rich" mentality only ends up hurting people who can't take their money offshore and/or those who don't receive most of their income through passive investment, namely the middle class.
The weak point to the FairTax as I see it, is the relative leap of faith required that the embedded tax burden is actually 23%, and the all or nothing implementation it requires. It also would discourage the purchase of new items in favor of used items, because used items have already been taxed, they aren't taxed again. Encouraging conservation in our current economic system could be problematic.
If anyone can explain to me why this would only benefit the rich, I would like to hear it. I'd like a reason to maintain the status quo, it's easier that way, right?
Why don't they just implement the fairtax and be done with all these other convoluted ideas?
The fair tax will just change the way people work to minimize taxes - the goal will be to reduce prices in order to lower taxes. So in the end you wind up with as convoluted a system, just with different ways to reach the end goal.
And before someone points out that prices can't go below a certain poiny (i.e. cost); let me point out that price and profit on a sale are not necessarily related.
I'm a consultant - I convert gibberish into cash-flow.
The real solution is to put an end to sales taxes. Sales tax is regressive.
Correction: Sales taxes on essential commodities, such as food, energy, and clothing, are regressive. Poor people spend a greater portion of their income on survival than do the rich.
If you are middle-class or below, sales taxes on non-essential items might sting you pretty hard, but only according to how much non-essential crap you consume. Live the non-materialist life which floaty-headed liberal rags like to advocate, and you'll hardly pay a cent in sales taxes.
Information wants to be anthropomorphized.
Who wants to bet the low/no tax conservatives will let this thing through?
I'd take that bet. Almost every time an Internet tax is brought up, it's by some Democrat jackass like Senator Mark Dayton, and done in the name of "protecting" local merchants. (Never mind that most of the smartest mom & pop stores are already doing a lot of e-commerce on the side themselves.)
When these proposals get shouted down, they are typically shouted down by conservatives and libertarians, who see that the Internet is to the US as Hong Kong is to China: A petri dish of glorious less-regulated commerce, which will continue to make us all richer if we can just be smart enough to leave it the fuck alone.
Information wants to be anthropomorphized.
Before you get too excited, some information: First, the rate of the tax. "Fair" tax (what a misnomer) supporters will tell you that the proposed fair tax rate is 23%. That is total BS. You have to look at the fine print. 23% is the tax inclusive rate. That means it's 23% of the price with tax. I take this example from a JPFO article which covers many of the points I make here, and is recommended reading (http://www.jpfo.org/fairtax.htm). Suppose you have a candy bar, and you pay $1.30 for it, including tax. The candy bar costs $1.00, and you pay $0.30 in tax. Tax inclusive means that the $0.30 you pay in tax is 23% of the $1.30 total, rather than 23% of the price of the actual item. Sneaky little semantic game they play there.
Second, this will have the effect of dramatically increasing individual Americans' reliance on the federal government on a day-to-day basis. Suddenly, everyone's on the dole. It's not bad enough that you have a good number of people stretching the budget and counting on their tax return checks once a year, now everyone's watching the mailbox hoping the fed will be good to them in the form of a rebate check EVERY MONTH. The effect of this dependence on the benevolence of the government is not good. A dependent populace is much more maleable, much more complacent. The damage it would do to the ability of citizens to develop as autonomous individuals capable of self-sufficiency would be devestating.
One of the most devestating effects of this tax system would be the massive black market that would erupt in the wake of it's implementation. Suddenly there's a black market for tax-free EVERYTHING. Such a black market would be enormous, possibly eclipsing the sales volumes of the "legitimate" government taxed market. This would create a new breed of criminal, the sales tax dodger. These people would be stigmatized, scapegoated for the nation's economic problems (of which many, many loom ahead, fair tax or no), and sentenced to inordinate prison terms, similar to what is done with non-violent drug offenders now.
The privacy implications are disturbing. If the fair tax was implemented, the only way to combat the resulting black market trafficing would be to track purchases for each and every citizen. The fair taxers talk about the stresses of April 15th, but the only way to validate that everyone has been paying their "fair share" (as the socialists like to say) of the tax, the government would have to track purchases, which means you've gone from reporting to the IRS regarding your income and tax totals from various sources to reporting EACH AND EVERY PURCHASE. For all intensive purposes, you've gone from filing a tax return to being audited every year. The only way to ensure accuracy and honesty on such an audit would be for the government to become even more apallingly intrusive than it is now ("the financial equivalent of a full rectal exam"). The government would undoubtedly use it as a means to justify further intrustions such as additional monitoring of our communications to ensure no one was buying tax-free online or by mail. Also, the manpower required to implement such an auditing system would be enormous. The fair tax FAQ talks of tax preparers and lobbyists being forced to find more productive pursuits, but in reality, most of them would end up absorbed into the new tax administration bureaucracy.
As to putting an end to lobbyists, I don't believe that for a second. Just as there is now, there will be rich and powerful lobby groups trying to convince the government to make the tax just a little more fair. Why should Bibles be taxed the same as porno? Textbooks the same as comic books? Why not tax cigarettes at a higher rate, since smoking is so un-P.C. now anyway? Lobbyists will not be going anywhere, they'll simply change their approach ever so slightly.
In short, the fair tax is a horrible idea. It has many more problems than I've attempted to delve in
Remember when Republicans eschewed taxes as an undue punishment on trade and wealth? Remember when the Republican Party was committed to cutting taxes? And now a fully Republican/conservative US government wants to implement what would be the biggest tax since excise tax?
Do parties even mean anything anymore?
Terrorists can attack freedom, but only Congress can destroy it.
If they do start taxing internet sales and lots of small companies start having to worry about this, I wouldn't be surprised to see an open-source tax info project come into existence. Getting the individual pieces of information is presumably simple since it is public information and not voluminous or sensitive - the problem is just one of scale. If people were contribute the information for their area, it seems like it would be pretty easy to construct a national database.
Last I checked, "King George" has only lowered taxes. Of course, taxes were lowered for nearly everyone (including me when I was mostly unemployed and earning less than $32,000 annually) so the media called this a "tax break for the rich."
Gamingmuseum.com: Give your 3D accelerator a rest.
People hear no income tax and think "ooh.. how nice, I'd only have to pay that little bitty sales tax instead of my huge painful income tax". This is incorrect. Unless they cut spending you have to pay just as much, just in a different form. Since the tax is regressive a higher tax rate would be needed on most people to raise all the money. In order to average 1/3rd (which is about what income taxes average) it would need to be around 50%. That means that nice things like that new $100 video card would now cost you $150. The $600 one you dream of, now a cool $900. No thanks.
It's basically a cheap way of cutting everyone's saving in 2/3rds. Savings are now post-tax (for the most part.) You pay the tax, then you put the money in the bank. Doing this switches it to pre-tax which basically makes everyones savings double-taxed reducing them by 30% or so.
Sales taxes should be banned permanently. They are evil and unfair and ineffcient and I hope to never live in a state with one.
The answer is simple and hard:
No need to throw everything out, just un-screw up the system that used to work.
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