Slashdot Mirror
Washington State Encourages Internet Sales Tax
prostoalex writes "Washington state Governor signed a tax bill encouraging out of state businesses to collect sales taxes on purchases made by Washington state residents. It should be noted, though, that Washington state does not collect personal income tax, and hence relies on state sales tax for 53.1% of its revenues." As the article notes, "People who purchase items from out-of-state Internet or catalog companies are currently supposed to pay the sales tax, but rarely do." Looks like Washington-staters won't be able to fib on their tax returns about internet purchases, starting in 2008.
1992 1993 2001 2002 2003-2006
-2000
10.0% 10%
15% 15.0% 15.0% 15.0% 15%
28% 28.0% 27.5% 27.0% 25%
31% 31.0% 30.5% 30.0% 28%
36.0% 35.5% 35.0% 33%
39.6% 39.1% 38.6% 35%
I don't know where you got your mathematics degree from, but for me:
2000 -> 2006
15% -> 10%
28% -> 25%
31% -> 28%
36% -> 33%
39.6% -> 35%
Looks like they've gone up doesn't quite fit the numbers.
(Yes, the tax brackets get wider, but they do that every year.)
It is legal, according to the Supreme Court. The main case in this area is Complete Auto Transit vs. Brady.
The state is not taxing the out-of-state sales. Rather, it is imposing an excise tax on possession or use of the items by residents of the state (this kind of tax is usually called a "use tax", and I'll call it that in the rest of this comment). A common example of this kind of thing is taxes on luxury items such as boats. If a state has such a tax, you generally will have to pay it when you register the boat, even if you bought the boat out of state. The same power that allows the state to tax that boat that you are using in-state regardless of where you bought it is what allows them to tax, say, your mail-order books or computers or viagra.
The main limits on this, due to the interstate commerce clause in the Constitution, are that they cannot force merchants in another state to collect the tax for them (but see below), and the tax cannot unduly burden out-of-state purchases. The Court has decided that this means that the total tax on an out-of-state purchase (sales taxes in the state of sale plus the use tax in the buyer's state) cannot exceed what the tax would have been had the item been purchased in-state.
As far as collection goes, a state does not have the power, in general, to tell a merchant in another state to collect this use tax for the state. What I mean by "in general" is that an arbitrary merchant, in another state, that does not have some connection with the buyer's state other than selling items to them, could not be forced to collect for the state. However, if that merchant has some relationship with the state that does give the state power over it (such as it having offices or stores in the buyer's state), then they state may have power over it. This is why major national merchants collect taxes on mail-order purchases, even if their mail-order operation is out of the purchaser's state--they have retail stores in the purchaser's state, and so the state can tell them to collect the tax.
For items where the merchant does not have to, and does not voluntarily decide to, collect the use tax, the state has generally only actually collected on items like cars and boats, that have a registration requirement. But most states do have a (widely ignored and in most cases largely unknown) requirement that you pay your use tax.
Oh, one more thing. I don't remember what case it was in, but I believe the Court has also decided that Congress does have the power to require merchants to collect use taxes when they sell mail-order, even if they do not have a sufficient present in the buyer's state to give that state authority to compel such collection.
Article I, Section 9:
"No tax or duty shall be laid on articles exported from any state."