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.

Comments

Where's the value?

[way2trivial]

what exactly, did the state of the purchaser do, or provide to deserve 'their share'
seriously.. I pay property taxes to my community, which benefit my community..
if I don't like them, I can move- and pay taxes (or not) elsewhere...

I can see a state requiring businesses to pay sales tax based on their location- you sell from delaware, you have no other locations, you charge no taxes..
benefit to deleware? lotsa companys move to delaware for real.. and increase the states revenue in other ways (new UPS center, new fedex center, new airports, new train hubs)

you sell fron NYC, you pay NYC taxes, all the way down to the city level......

but, if I sell from delaware, and sell to WA, how is the states infrastructure involved that they deserve anything?
if I am a bad merchant, which states attorney general/BBB is going to be contacted?
(hint, the seller's state)

it should be evolutionary taxation, 50 little economic centers- stodgy states can charge the high/heavy taxes and just have funds from heavy handedness and spend it on tax collection/enforcement, enlightened states can charge no sales tax, and enjoy increased revenues from having more citizens, employed in more jobs....

Re:Not that it matters but ...

[dreamchaser]

I'm not sure I disagree with you, but to play devil's advocate for a moment one *could* say the sale *does* take place in WA. The buyer makes a purchase from his or her home or workplace which is in the State of WA. The *physical* aspect of making a purchase (in this case clicking 'submit order' or whatever) is taking place in that state.

Governments do have to collect taxes. I actually prefer a sales or VAT tax over any income tax at all.

Again, not saying that I think they should necessarily get away with doing this. I *do* think that the entire tax system and code(s) needs a complete overhaul, not just in light of new technology such as the Internet, but also in light of how convoluted and cumbersome it is overall. Of course the politicos on both sides of the isle mostly like complicated tax codes. Makes it easier for them to bury loopholes for their masters...I mean campaign contributors.

Re:Try a 2-party political system, Washington! Duh

[omeomi]

Tired of paying idiotically high taxes which support the bread and circuses that keep the mindless proles from thinking too hard about how much this sucks? Try electing somebody other than far-left Democrats for a change!

Yeah, because those Republicans are doing such a good job at keeping taxes down. I mean, my Federal income tax has been plummeting over the past 6 years of Republican rule. Oh, wait, no they haven't...they've gone up...and they've been spending way more than they bring in, which means they're only going to continue going up. Huh. Well, at least they're still for "smaller government", right? Oh, wait, no, that's just what they _say_ they're for. They're actually all for rolling back civil liberties and spending way too much...

Washington State residents don't file returns

[symbolset]

Looks like Washington-staters won't be able to fib on their tax returns about internet purchases, starting in 2008.

The state has no income tax so for the most part state residents don't file returns. There is a form(PDF) people fill out if they bought things online or out of state but if you were going to lie on that form you wouldn't fill it out at all. Far fewer than 1% of Washington residents fill out this form.

Back when car tabs on a big RV cost more than $5,000/yr it was quite common to go to a neighboring state to buy the thing, which cost the state a great deal of money in lost sales tax. To recover this lost tax an enforcement program was begun, and several people were prosecuted and fined up to the full value of the vehicle. This raised public awareness of the tax to the point where a series of initiatives was passed to make the registration tabs on all vehicles a flat $30. A series of (IIRC) three initiatives was required because each initiative that was overwhelmingly passed was immediately opposed by the government, the courts, and the attorney general's office. It was turning into a parody of democratic principles. They even did a hatchet job on reputation of the citizen who started and pushed the $30 car tab movement, Tim Eyman. Eventually though they got the idea that the people weren't going to tolerate this tax any more and even though the AG had the initiatives that passed declared unconstitutional the legislature reduced the tax to $30 anyway.

Immediately after this Seattle and some other jurisdictions passed new add-on taxes for vehicles but called them by a new name. At present the taxes on vehicle registrations are still much more reasonable even in the worst case. The struggle on this issue in Washington continues and likely will not end.

There is currently a movement to install a personal income tax in Washington in the name of fairness. It is likely to get a lot of press, but no traction. The only way this would get popular support was if it was promised to lower other taxes also and the people of Washington know that would be a flat lie. Besides, several of the wealthiest business people in the world live in Washington and they can afford to have a state income tax quietly killed.

FTA:

The main sticking point revolved around a change the law makes on where sales tax goes when it is collected. Under current law, the jurisdiction where a product originates receives the sales tax. That doesn't help the state, if the product originates with an out-of-state Internet company.

Under the measure, the jurisdiction where the product is delivered would get the tax.

The change benefits some cities and towns, but hurts others. To solve this problem, the measure calls for mitigation, in which jurisdictions that lose money would receive payments from the state.

This "mitigation" sounds like a way for some bureaucrat to increase the "fairness" to his friends and family. That's going to end well.

Re:Not that it matters but ...

[Dun Malg]

I'm not sure I disagree with you, but to play devil's advocate for a moment one *could* say the sale *does* take place in WA. No, you actually can't say that. The law is very clear on this, and predates the internet, having been settled long ago on the issue of mail-order. The sale happens where the money changes hands in exchange for the goods. That location is the business office where they process the credit card transaction, deposit the check, or receive the cash. It doesn't matter if your ass is in a chair on the beach in waikiki or in a barcolounger in cleveland, if you're buying from a guy in Texas, the sale is in Texas.

Re:Not that it matters but ...

[American Infidel]

States get the authority to tax interstate purchases from the same place that software companies get the authority to impose EULAs: from the magic of flat-out lying.

Re:Avoid the tax

[AuMatar]

Reread your economics book. No good has intrinsic value. A good is only valuable if someone else desires it, and only to the degree they desire it. Gold has no special magical property that gives it an intrinsic value.

Re:Not that it matters but ...

[Nullav]

And further, why are people so god damn willing to give up their money to the fucking government?!

You're right. Let's just leave mass transit, maintaining the roads, and law enforcement up to large corporations. Then we wouldn't have to pay taxes to the government.
Of course, then those corporations would need a steady flow of income to make up for how much they're spending on these services. I got it! They could collect fees from people using the roadways at certain points, charge a percentage for all goods sold on their land, and charge everyone in the area based on how much they make each year.

Then we wouldn't have to pay those stupid taxes.

Karma of local purchases

[symbolset]

Is the man who sweeps the warehouse in the MidWest not my Brother also? Is the UPS driver not my neighbor? Is there a way I can choose products where I know all the people involved got a living wage, and not break the benefit of the commerce by making it impossible for me to afford? Does the clerk at your local store make more than the ones at mine? Mine are poor. Do your neigbors not invest their retirement funds in large companies that make these transactions? Is it not a benefit to encourage businesses to compete in the field of supply chain efficiency?

My understanding of hard drives far exceeds the level of maintenance a reasonable person would consider worthwhile. If you require guidance in this area, I can appreciate your willingness to pay a premium for it.

And this "hard drive" you speak of... is it not made in Asia by robots and packaged by enslaved children? When you're done with it, will you ship this toxic component to your local landfill or will you "recycle" it by having it shipped back to asia, where it will be dismantled and strewn across farmers fields for the lead to leach into the groundwater?

I don't see the karma here.

Try and get some facts

[mybecq]

I mean, my Federal income tax has been plummeting over the past 6 years of Republican rule.

I'll see your sarcasm, and raise you some facts:

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.)

Re:Not that it matters but ...

[harlows_monkeys]

I don't think this is legal under the constitution. The sales are made outside WA and therefore cannot be taxed by the WA government. A lot of governors have tried this crap, I don't think any have succeeded though

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.

The Constitution is black and white on this

[Beryllium Sphere(tm)]

Article I, Section 9:
"No tax or duty shall be laid on articles exported from any state."