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U.S. Ecommerce To Be Broadly Taxed?

Posted by Zonk on from the the-end-of-the-world-as-we-know-it dept.

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."

23 of 639 comments (clear)

  1. Free startup idea by winkydink · · Score: 5, Funny

    Start a company that acts as an intermediary and provides the taxation service for small businesses.

    Throw in some mumble about Ajax and Web 2.0 and watch the VCs line up to throw money at you and beg you to have sex with their women-folk.

    --

    "I'd rather be a lightning rod than a seismometer." -Ken Kesey

    1. Re:Free startup idea by dfn5 · · Score: 3, Insightful
      Start a company that acts as an intermediary and provides the taxation service for small businesses.
      How about a company that sets up shop in a tax free state, like NH, to accept the deliveries of on-line purchases where the buyer can come and pick it up. Kind of like a mailboxes etc. Oh wait....

      --
      -- Thou hast strayed far from the path of the Avatar.
    2. Re:Free startup idea by pete6677 · · Score: 4, Funny

      Just patent the idea of paying sales tax altogether and collect royalties from any business that wants to operate without being prosecuted for not paying taxes.

    3. Re:Free startup idea by scoove · · Score: 4, Interesting

      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.

      In the telecom world, one does not usually find small business CLECs because we have to comply with several database requirements, including: Vertex (or similar tax databases), E911 and SS7.

      Last time I had to deal with it (late 90s), a Vertex subscription for our Oracle-based billing system was about $220K annually. You are, of course, free to write your own and obtain tax information from every locale independently.

      Of course, you can imagine that these great laws were proudly supported by the incumbant telcos who are pleased to have complicated taxes to merrily pass along to the customer. The more complicated it is, the less likely any up-start competitor can ever handle the up-front cost. Each barrier to entry pushes the benefit to the largest scale of business.

      You can bet Congresspersons are getting heavily lobbied by larger institutions that favor taxes. And since 2/3 of our population doesn't understand that corporations don't pay taxes, customers do, we'll never have enough opposition to these ploys. Worse yet, not only will we end up ultimately picking up the cost of the taxes, but the drop in competition will push up the price of goods for us too. And you wonder why your paycheck goes less far each year!

      A solution is the fair tax, but it's boring to one half of the population and misunderstood by the other half, so expect to continue to get screwed by the partnership between big government and big business.

      *scoove*
      p.s. Did you collect and file taxes on your last Ebay sale?

    4. Re:Free startup idea by operagost · · Score: 3, Insightful
      Of course if the American public continues to vote Republican (or rather, continues to turn a blind eye toward the widespread electioneering going on with black-box vote tabulation servers </brokenRecord>), and the next GOP monarchy continues in the footsteps of King George, then it won't be too long until all US taxes are regressive.
      Could you please provide examples of new regressive taxes imposed by Republicans?

      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.
  2. Sheesh... by armyofone · · Score: 5, Interesting

    Why don't they just implement the fairtax and be done with all these other convoluted ideas?

    --
    "A revolution without dancing is... a revolution not worth having"
    1. Re:Sheesh... by deanj · · Score: 5, Insightful

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

    2. Re:Sheesh... by dark_requiem · · Score: 4, Insightful

      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

  3. Nightmare by mysqlrocks · · Score: 4, Insightful

    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
    1. Re:Nightmare by mysqlrocks · · Score: 3, Insightful

      Oops, I missed this part:
      The legislation would apply only to businesses with more than $5 million in "gross remote taxable sales" each year.

      You now it's just a matter of time before this number gets lower and lower though.

      --
      Bradley Holt
    2. Re:Nightmare by ortholattice · · Score: 3, Interesting
      A few years ago when I dealt with ERP systems, I had to specify one of the commercial sales tax databases. Some of them are customized, or have customization modules, that adapt to particular ERP or order processing systems. They are broken down not just by county or zip code, but sometimes even street; there are places in the US where a given zip code will span two counties or municipalities. Given the huge number of municipalities, the tax database changes almost daily, and there are companies specializing in collecting this information - there is no national central repository. In addition to location, in many cases the tax is based on one of several classifications that a product falls into. By the time you add up all variations of laws you end up with dozens or hundreds of categories, and you need to hire specialist consultants to correctly classify the products in your inventory. These databases are huge and you'll just have to bite the bullet and pay the several thousand dollar subscriptions fees for the continual updates. There is no way you could do this yourself; a lot of these laws are on paper only in local government offices, and you have to have the right contacts to make sure that you haven't missed one.

      If this does come to pass, I would hope that the law would also provide for a publicly accessible database funded by the government. The subscription fees charged by some of these commercial database companies would break a small business, and possibly even one at the $5million level proposed depending on the nature and margin of the business.

  4. Should be reversed by the_skywise · · Score: 4, Insightful

    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.

    1. Re:Should be reversed by donnyspi · · Score: 4, Informative

      NH has no sales tax :-)

  5. 30 states? by Andrewkov · · Score: 4, Funny

    Last time I checked there were a lot more than 30 states .. I'm not even American, and I know that.

    1. Re:30 states? by sglane81 · · Score: 4, Funny

      Last time I checked there were a lot more than 30 states .. I'm not even American, and I know that.

      States like Alaska, Hawaii, and Europe don't count. Go learn some geography.

      --
      This is the Internet. You can say "fuck" here. - AC
  6. Mail order? by kbahey · · Score: 3, Interesting

    I understand that mail order in the USA is not taxed, unless the purchaser is from the same state that the mail order house is in.

    So far, ecommerce had the same rule (or similar).

    If this gets implemented, then will it apply to mail order as well, or will it be for ecommerce only?

    What about if an American buys from a Canadian business via the internet? Will the Canadian business be required to collect US state taxes too?

    --
    2bits.com, Inc: Drupal, WordPress, and LAMP performance tuning.
  7. Re:Once again by Uhlek · · Score: 4, Interesting

    The problem is tax revenue. Sales tax makes up a considerable percentage of revenue for many states, especially states like Texas that have no income tax.

    Back in the day, most people bought almost everything they bought from local merchants, meaning that there was very little way to avoid sales tax. Catalog mail order and later, telephone orders, made up such a small percentage of commerce that the items remained untaxed. The smaller northeastern states, and even some municipalities (like in the Oklahoma City area) sometimes lower their tax rates to encourage people to come shop in their malls. Delaware makes a big stink about not having a sales tax, and there's a lot of outlet malls that advertise as such. Still, it wasn't much money.

    Now, thanks to advances in shipping technology and Internet ordering, people are spending more and more money online, especially in the holiday season. This money isn't being taxed.

    Some states have provisions to attempt to curb this. Virginia, for example, has a "use tax" where if you purchase any item and do not pay sales tax, you have you pay a "use tax" on it. Problem is, it's hard to track and almost no one reports anything, much less what they really spent.

    The tax system is so convoluted and fucked up it should be changed, I agree, but this is totally legal. The sticky point comes in where states are trying to force e-merchants to collect their own sales taxes. Depending on how this is accomplished (i.e., not a federal law) if you've got a state that isn't part of this agreement you're going to see e-merchants move to those states to avoid having the additional burden of collecting those taxes.

  8. Poster didnt read the article either. by Ween · · Score: 3, Insightful

    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
  9. Y2K all over again... by woodsrunner · · Score: 4, Interesting

    Right now, I am working on an app that calculates tax by county. What fun. There are roughly 3200 counties, parishes and independant cities in the US and every one has different rules on what is taxed and how much.

    Something like this is really going offer employment opportunities for programmers. It will be a bigger boon than Y2K! Because if the states are getting their tax money, the counties will want theirs too. Of course it will crush commerce for the small guy and most everyone. Just think of the cost of tracking and sending these funds out on a regular basis. So it will be like a bigger bubble and a bigger crush. The nineties all over again.

    Yow, Where's my aereon chair and foosball table?

  10. Re:Once again by sirwired · · Score: 5, Insightful

    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

  11. Unconstitutional by Guppy06 · · Score: 3, Informative
    "As proposed, businesses would be required to collect sales taxes and send them to the state the purchase was shipped to."
    No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States(.)
    Congress can let them tax ecommerce, but the proceeds can't go into state coffers.
  12. Re:Once again by doubledoh · · Score: 3, Informative
    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.

    Actually, there is a big reason. Best Buy and CompUSA have a physical presence in almost every single state and therefor must collect taxes for the states they exist in. Amazon only has a physical presence in 4 states (and they DO collect taxes from those 4 states). Best Buy and CompUSA a free to kill their physical stores and go with the online-only distribution model like Amazon.com, but they CHOOSE not too. Amazon.com most certainly should be exempt from paying sales taxes in states they are not even present in.

    --
    I think, therefore I doh.
  13. Civil Disobedience... by PortHaven · · Score: 4, Interesting

    No taxation without representation....

    Screw'em. If they want me to pay taxes out-of-state, they can give me a representative to vote on my behald in their state.

    How long until one state makes itself a no online tax state. And a company sets up "receiving/shipping" and you just have it sent to a PO Box and then it's routed elsewhere. You bought it in "x" tax free state.