California Balks At Internet Sales Tax

bob_calder writes "California has walked away from $2 billion a year in revenue by declining to get on board with a group working to standardize tax rates so a national tax on Internet sales could eventually be implemented by Congress. Supporters of the tax think they still have a chance in New York, Texas, and Florida. At the moment the largest states pursuing the Streamlined Sales Tax Initiative are New Jersey, Michigan, Indiana, and Ohio. California didn't want to give up its autonomy in setting taxes to a coalition of smaller states."

Comments

Who is the "orginization" behind this tax?

[Mc_Anthony]

I searched around and wasn't able to come up with the name of the group pushing for this Internet tax. Does anyone have more information on them? What are their politics? Who is funding them?

Re:Who is the "orginization" behind this tax?

[i2amsam]

Something I actually know about!

My Dad is working on Streamlined Sales Tax Committee
It's an initiative that's being run by the states, but
the big push is from big online realators like Amazon and
E-bay because they don't want to face 50 sets of rules of
tax for all of the 50 states.

The current system is stupid on the face of it, since now
most states only tax commerce for corperations which have
a actual physical presence in that state, it encourages
companies to not setup any investment in states where they
do a high volume of sales.

It's been going on for *years* and I don't know that they're
making much progress, too many cooks.

Re:Who is the "orginization" behind this tax?

[maxume]

Look up 'use' tax. Most states charge it, it is a tax on goods purchased in other states; in my state, it isn't owed on goods that have already had sales tax charged on them. It's on the honor system, so people don't worry 'bout it much, I imagine the state pays more attention to rich folks. For a lot of people, because the law is written with people not keeping track in mind(there is an option to itemize small purchases or pay a standard amount), it amounts to cheating for about $20-30.

Re:Who is the "orginization" behind this tax?

[Maxo-Texas]

The problem is that sales taxes are spent in the state, not at the point of sale. Sales tax cover costs for roads and other services to brick and mortar establishments. All they are on the internet is mostly a money grab. In a lot of cases, the products being sold are not even delivered from the state where the sale was registered.

The second problem is that if states 1 to 47 have sales tax and 1-3 do not, then a lot of business is going to gravitate to those last three states.

Of course, if they tax them to be the same as brick and mortar, then folks will just shift back away from the internet.

It's called Use Tax

[Anonymous Coward]

California already taxes internet purchases via a Use Tax law which is imposed on all goods purchased and then brought into the state by residents. You have to calculate the tax yourself when you file your state income tax return.

Re:It's called Use Tax

[AuMatar]

And amazingly, 99.99999% of Californians don't buy anything off the internet, as shown by their use taxes. Its an amazingly offline state.

Re:It's called Use Tax

[walt-sjc]

Most states have this, but compliance is pretty low, and nearly impossible to audit. While they could force you to give them copies of your credit card receipts, they would have to prove that you purchased items for yourself and not as a gift to Aunt Millie in Alaska, or something that you used on a trip in the state your purchased the item in...

I think the biggest challenge to a standardized nation wide sales tax is states with ZERO sales tax. So what are you going to do in these anti-tax states? Force them to implement a tax? Is it going to be a compromise mid-level, or is it going to be on the high-end like California?

I looked at my own internet purchases last year, and a number were from companies that already collect local sales tax since they have a business presence in my state, and the tax on everything else is a few hundred dollars at best. My state requires that I itemize everything for the use tax collection, which is just nuts. I put down zero as I have done every year for the past 25 years.

Re:It's called Use Tax

[Professor_UNIX]

What I don't understand is why vendors aren't required to charge sales tax on out-of-state sales, collect the money, and then give it to the state in question.

Article 1, Section 8 of the Constitution: The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

...

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

The States don't have the power to tax interstate commerce, that is a power specifically allocated to Congress by the Constitution... that's why they try to skirt the issue by demanding "Use Taxes" and the only time you need to pay sales tax is when a company has a brick and mortar presence in that state.

My favorite internet tax quote:

[andres32a]

"The debate over the taxation of the Internet isn't about feeding the already well-lined coffers of government. It's about the fundamentally American idea that there should be no taxation without representation.

"While there is no evidence that Main Street firms have lost business due to tax differentials, that is beside the point. The answer to these concerns should not be to raise taxes on the Internet, but to lower taxes on Main Street businesses."

Colorado Governor Bill Owens
In a letter to Congress urging the extension of the Internet tax moratorium, and opposing his fellow governors' plea for Congressional approval to force collection of sales and use taxes from remote businesses.
August 20, 2001

I thought us Aussies were taxed weird

[inphorm]

That is a strange tax law, this is from TFA

"The state also requires its residents to report purchases made over the Internet and pay taxes on them"

How can they enforce that? Our tax laws are pretty uniform across the country, but I buy something from overseas, I don't have to pay our local GST (Goods & Services Tax) of 10% on the item. I may or may not have to pay the import tax to get it through customs, depending on what it is and how it is sent over.

I see buying something over the internet as the same as actually traveling to the state / country where the item is and buying it. As long as the seller obeys local tax laws, who cares what the buyer does?

I may have an overy simplistic view of things though.

- paul

http://www.paulpichugin.com.au/

Re:I thought us Aussies were taxed weird

[ScrewMaster]

I may have an overy simplistic view of things though.

Perhaps, but I think it more likely that our elected leaders have an overly complex view of things.

More than just the autonomy.

[WindBourne]

Many of the servers reside in CA. In addition, so many sales. As such, CA gets to collect the sales tax on those sales. Once an internet tax comes through, then you can bet that many of the servers will change location basically to asia. Now California loses not just the tax base, but all those lucrative jobs.

California wants to be a State now?

[Speare]

In the last story, California wanted to be a bland featureless part of the Federation letting someone else manage the citizen identification issues. Now in this story, California wants to retain full sovereignty over taxation. I know there's more than one person, and therefore more than one opinion on the whole statehood thing here, but come on, fellas.

So you want to tax the baby boomers twice?

[Ungrounded Lightning]

And while we're at it, let's also overhaul the tax system [linking to the "fair tax" {a national sales tax proposal} wikipedia page].

Federal sales taxes have a number of problems.

The biggest, IMHO, is that switching to them ends up taxing people's savings - especially retirement savings - twice. It was taxed once, at various rates, while it was was being squirreled away. Then it gets taxed again, at confiscatory rates, when it is spent.

Right now is especially nasty, since you've got the entire baby boom just reaching retirement age. They've already been massively soaked by the Social Security pyramid scheme to give bread and circuses to previous generations - amid constant predictions that it would collapse when THEY retired. So they had to build their own retirement nest-eggs on top of it, while paying the ever-climbing interest on the national debt (which first became intractable when their parents ran the Vietnam War on credit, back when the bulk of the boomers were opposing it). Now, as they're about to retire and have to live on what little they were able to save: And people talk about "replacing" the income tax (which they already paid on much of that money) with a similar percentage of sales tax.

That's one big voting block that will oppose such a measure until they die - by which time additional generations will be in a similar situation.

Next: Like all taxes, once imposed it will never go away and will always go up. Sales taxes, being largely hidden, make it much easier for the government to jack the rates. (See the "value added tax" debacle on the other side of the Atlantic pond for details.)

And: Sales taxes zap the lower income earners harder than the upper (since the lower-income people are working hand-to-mouth and need to spend pretty much all of it, while the upper can avoid spending much of it - investing it to make more, moving it to places and situations where the tax can be avoided before spending it, etc.). This scheme attempts to avoid the effect by "rebating" a certain amount of tax to each individual - approximating a flat-tax plus dole scheme. What a massive opportunity for cheating (by creating multiple fake identities to get multiple "rebates".) What a massive excuse for the government to impose a national ID / registration / citizen tracking system.

I could go on...

Re:why standardize tax rates?

[walt-sjc]

The problem is bigger than you realize. It's not just 50 different state taxes, it's local taxes too. Cities in California can add their own sales tax. Also, in some places clothing is taxed, and not in others. The exceptions and special cases for sales taxes nationwide is a total freakin nightmare.

Re:True fair tax formula.

[Ibag]

I think this is an overly simplistic view. If my rich friend invites several people out to an expensive restaurant for his birthday, some people share dishes while others get for themselves, with one person getting something obscenely expensive that nobody else could even afford, what is the fair way to pay the bill? It wouldn't be fair to just split things evenly, because not everybody contributed to the cost equally. It could be argued that the fair way is for everybody to pay for what they ate, but what about the people who can't afford even that, and wouldn't have come unless explicitly asked to? Maybe, since it is his birthday, the rich friend shouldn't have to pay anything? Maybe since he invited the people out, he should have to pay everything? Maybe just the tip should be split evenly? There are dozens of different ways to split the bill, each with it's own rationale, and none of them clearly "the" fair bill payment method.

Taxes are the same way. Not everybody uses government services the same. Many government services (like having a military) are not directly used by the majority of people. Everything needs to be funded* somehow, and charging the people who both use less and make less an amount which is more than their annual salary is not fair by any means. What is the most fair tax plan, then? It doesn't exist! But a system that charges more money to the people who can afford it or who use more government services is a lot more fair than charging a homeless man more money than he has spent in the last decade while charging Bill Gates less than he makes in 5 minutes from bank interest.

*let's not debate whether the budget is just or not.

Re:should there be a sale tax on online purchases?

[i2amsam]

What I'm saying is that the states are activly discouraging investment from companies, because that might force those companies' customer's to pay state sales tax. (E.g. there was talk back when Amazon never charged any sales tax except CA that if they built a new data center in state X, that residents of X would have to start paying tax on their Amazon purchases, which discouraged Amazon from brining that investment in)
1) All tax is a money grab by the states
2) Everyone wants lower taxes, but the current setup clearly creats a loophole where I'm encouraged to buy out of state because I can get it "tax free".
Right now if I buy a $100 widget in NY I'll pay $7 to the state for that right, or if I buy a $100 widget in TX, I'll probably pay (I don't know) $6 for that right. But if I buy it from woot.com with $5 shipping, I can get it from TX to NY for $105, saving me $2. Does that mean I'm "getting" NY? No, they'll make up their $7 loss with a raise in the Income, Gas, Sales, Luxury, etc. etc. tax, or a decrease in subsidies for farmers, or lowering of state employee raises or whatever. Who wins? I either pay the same amount in total tax burden, or get less services from my state, so it's a wash (remember, I only made $2, NY lost $7) or worse for me. Woot.com got the sale over NYBasedStore Inc, and FedEx / UPS got the $5 shipping. Remember, TNSTAAFL