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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.
In the fair tax plan, low income folks are protected.
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
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