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End of the Internet's Tax-Free Ride?
News.com has a piece looking at renewed efforts by both state and federal lawmakers to subject Internet sales to state taxes. "Two bills are pending in Congress that would allow tax collectors to target out-of-state Internet and mail-order retailers, and their supporters are optimistic about their political prospects... Meanwhile, pro-tax states are trying their own ways to circumvent a long-standing rule saying a retailer must have physical presence before it can be forced to collect taxes. One effort came from New York state, where legislators recently approved a measure requiring Amazon and other online retailers (that lack a physical presence in the state) to collect sales tax on New Yorkers' purchases... This is not exactly a new debate... But now, with a Democratic Congress and a potentially Democratic administration next year, the arguments may gain more political traction."
When is Slashdot going to add a -1 moderation option for people who actually RTFA?
For starters, this is about state sales taxes, not federal income taxes. Lowering or raising federal income tax doesn't directly affect state tax revenues.
I get the feeling you don't run a business that collects sales tax then. PayPal may collect the sales tax, but the business is still on the hook for sending the tax into the state.
not quite.
It's intent is for mail order items to residence.
So if I am living in Ca, and buy 10.00 widget from acme widget co, located in BFE, mid-west I pay my 7%(whatever) to the state at the end of the year.
The Kruger Dunning explains most post on
Paypal behaves in some ways like a bank (They maintain monetary accounts for customers and allow the transfer to and from these accounts) but they are not classified as a bank and as such do not need to follow banking laws. This has led to Paypal doing things like locking a person or organizations account citing "suspicious behaviour" and offering no further explanation or directions as to how to get there account unfrozen forcing people to spend months of time and effort to get often times significant amounts of money back from Paypal.
I may agree with what you say, but I will defend to the death your right to face the consequences of saying it.
Seriously, most of the federal deficits of the last 30 years have been under/due to spending under Republican administrations. How long do you think your $9 trillion debt can continue to increase before the world starts treating dollars as toilet paper? You think oil is expensive now?
Yeah, he's that bad. He's less in touch with reality than Tom "Scientology" Cruise (that other "Maverick" pilot).
Laissez lire, et laissez danser; ces deux amusements ne feront jamais de mal au monde. - Voltaire
It isn't that simple. There isn't a single "State" sales tax, at least in the states I've lived in. Often there is a base rate for the state + an additional rate for the county and another rate for each city. In addition different taxing authorities (city/state/county) have different ideas of what kinds of items are taxable and at what rates. For example, in a nearby city you wouldn't pay any tax on a hamburger patty and a bun from a supermarket but those same items purchased from a restarant are taxed, and at a much higher rate than other kinds of items. I wouldn't be at all surprised if the cost of complying with this mess ended up being more than the taxes themselves.
The only real negative effect for internet businesses is that they've been evading sales tax for years
That's just not true. Here in AZ at least, our "Sales Tax" (really a use tax) is considered a tax on the business rather than the consumer. What that means is that I already have to pay taxes to AZ on everything I sell no matter where the buyer is so in effect I'd be taxed twice if I had to pay again to the buyer's state as well. If anyone has been evading taxes it's the citizens that havn't been reporting their out of state purchases and paying the relivent taxes to their own state.
I posted this on CNET, but I might as well post it here as well:
Is there anything better than sensational bogus statistics? Some politicians claim states would lose half a trillion dollars in tax by 2011? Do they think most Americans didn't make it past 2nd grade math? Let's examine that claim with real math and logic:
Here are the e-commerce retail sales for the last 9 years:
2007 $136B
2006 $108B
2005 $86B
2004 $69B
2003 $57B
2002 $44
2001 $34
2000 $29
1999 $15
Source: http://www.census.gov/eos/www/archives.html
That's a total of $578 billion in revenue for 99-07.
Now, if we assume an average of 7% sales tax, and we assume that ALL items are taxable (which in most states they are not, like food and clothing), you would need $7.14 trillion in revenue to accumulate sales tax of $500 billion (which is the claimed lost tax by 2011).
That would mean that e-commerce would have to magically jump from $136B in revenue to an average of $1.6 trillion each year for 08-11. I mean, seriously, their figures are not even in the same ballpark as reality.
People who say "money does not buy happiness" are just people without money trying to make themselves feel better.
There is no way this will work without a unified sales tax system. State taxing is ridiculously complex and there is no easy way to automate it.
First off, Internet businesses are not avoiding sales tax; they are exempt from collecting it in states they don't operate in because every state has a different law on how much to collect and when it needs to be paid, therefore it is left to the consumer to pay this tax.
I'd say 90% of the people I know could currently be thrown in jail for tax evasion for failure to pay Use Tax (mentioned in TFA).
This is non-trivial, and NOT solvable by changing a program on PayPal. Why? Take Minnesota, with a 6.5% Use Tax, but a threshold of $770 payable yearly on Tax Day (April 15). Until $770 is spent, purchasers don't need to pay tax on catalog or Internet sales - how does PayPal know when $770 is spent? It doesn't - it only knows what is spent on PayPal. Furthermore, this tax is paid separately using a different form (as it is in every state that has it, I believe), so prepaying and rebating it is giving the government a free loan on a purchaser's money (I certainly would take it to court on those grounds).
Then there are the punishments for late payment - say you live in Vermont (due monthly on the 20th) and your PayPal account doesn't have enough cash on the 20th of the month. Suddenly you owe $50 more, 5% additional penalty per month + interest. Do you assess that on each purchased item, once for each purchase, or just once for the entire thing? The law isn't clear.
What we need is uniform sale and use tax laws like the mentioned Streamlined Sales and Use Tax proposal, but some states don't want to concede because if the tax is, say, set at 5%, you piss off brick-and-mortar retailers in states where tax is greater than 5%. To be fair to all states you need to set the tax at the maximum tax used in any state, which is currently Tennessee's 9.4%. I have serious doubts states with no sales tax will agree to a 9.4% tax.
I've covered a fraction of the states - now lets toss in counties, boroughs, and municipalities. Alaska, for instance, has no state sales tax, but 95% of boroughs issue one, so to be fair to retailers, you would also need to collect for the borough.
So there you have it, all the issues involved (at least that I can think of) - got an easy solution? I certainly can't think of one.