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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."
It is important to note that anytime sales tax isn't collected for you by the company you buy from you still have to pay that tax when it comes to April 15th. This is called Use Tax. The only problem is it operated on the honor system so I'm sure only a small percentage of this tax is ever collected.
If you have a small mom and pop and operate on the Internet most likely you didn't design your shopping cart from the ground up. A popular free solution comes from Paypal. It isn't just for paypal accounts anymore. They allow you to accept credit cards as well. So the only company that would need to make the change is Paypal and I'm sure it won't be too burdensome for them.
Not to put ideas in their pointed little heads, but I'm surprised that the feds don't just impose a uniform federal tax on internet, mail order, and all other non-local sales of goods or services, with some small percentage earmarked for the states based on where the federal tax dollars come from.
:(
Of course, they'd never consider REDUCING SPENDING, not so long as there's any citizen's assets left untaxed at a rate lower than 100%
~REZ~ #43301. Who'd fake being me anyway?
Which, if you're a major retailer, is probably the point. With the stroke of a pen, all of your smaller competition can be eliminated.
It doesn't have to be that sinister, of course. It could be as simple as the fact that it's an election year, and what better way to raise money for Congressional campaigns (and make sure that retailers throw a few bucks for ex-Congressmen currently "working" as lobbyists) than to threaten to do something unpleasant between now and the election...
Isn't this illegal, since only the feds can regulate interstate commerce?
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You had me up until you got to that last sentence. More election year tripe. Woooo, the evil Democrats are going to tax my intarnets!!
Prediction: The real iPhone killer is going to be sex robots from Japan. Think about it.
New Yorkers are already required to pay Use Tax, though most people probably don't do it. Are they going to get rid of the Use Tax when they implement this Out of State Sales Tax? I doubt it. Do they have jurisdiction to require an Out-of-State vendor to collect Sale Tax on their behalf? I doubt it. Do they have jurisdiction to demand payment from said Vendor? I doubt it.
What they are trying to do is shift the burden of collecting tax from themselves to somebody else, the vendors. They have already successfully done this for in-state Vendors via sales tax collection, and also shifted the burden of collecting income tax, Social Security and Medicare to employers. All they really have to do anymore is sit back and get paid.
The problem with requiring Out-of-State vendors to collect sales tax, is that there are approximately a half million tax districts in the United States. As a vendor, I know that there are over 15,000 in my state alone. They change constantly. I get notices in the mail every two to three days of a tax district instituting, increasing, occasionally decreasing or abolishing a sales tax rate. A brick and mortar can just plug in the tax rate for their current community into the desk calculator and they are good to go. A mom and pop internet outfit would have to spend probably 24 man-hours a day updating sales tax rates, or spend extra money to pay an outside outfit to calculate their sales tax for them.
I am sure new York just wants money without having to pursue it themselves, but the assumed unintentional side effect is that they are going to hurt small business on the internet by and large without effect on the large businesses.
If you are not allowed to question your government then the government has answered your question.
Maybe if some of these states (including my own) were actually more business-friendly, they wouldn't have to worry about taxing online venues. As it is, these states seem hell-bent on chasing jobs out and have to go looking for "free money" to funnel into their pockets.
Chas - The one, the only.
THANK GOD!!!
Comments in the article say it all:
"...money has been unfairly left in taxpayers' pocketbooks. "
"Verenda Smith, government affairs associate for the Federation of Tax Administrators, framed the decision as a moral one of sorts: "Do you want to be a good American, or do you want to be an American who wants to cheat your government deliberately?"
It's not your money. You are cheating the government out of funds to spend on their favorite pork project.
> > >We don't need no steeekin'.....oh wait, my wife says we do.
from a nut job candidate, big deal.
The Kruger Dunning explains most post on
> not so long as there's any citizen's assets left untaxed at a rate lower than 100% :(
Oh of course not! And why should they when they consider it their money in the first place. How else to explain the mind set that calls every tax cut 'a giveaway to the rich', refers to how much a tax cut will 'cost' the government, how much it will 'cost' the government to implement a tax cut, etc. In their evil brains it is ALL theirs and they begrudge each and every cent they are forced to 'spend' when they allow a taxpayer to have a dollar with no strings attached.
And the summary is spot on folks. Since the Internet becane bigtime either Congress of the White House has been outside the control of Democrats so the net was safe. Divided government is usually the best kind. Something the Dem leaning slashdot users might want to keep in mind come November. Congress is almost a statistical certainty to remain in Dem hands so ask yourself, Is Maverick really THAT bad?
Democrat delenda est
I thought that was in the constitution... nothing supersedes constitutional law.
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The business may be on the hook, but that doesn't mean PayPal can't implement a simple automatic click-through system so you basically just need to print out and sign some automatically-generated forms at the end of the year. I'm sure other similar services will implement the same thing. One also suspects the states themselves will be on board to make it as easy as possible to send them money, so I don't see this being much more onerous or difficult than any other business tax.
The only real negative effect for internet businesses is that they've been evading sales tax for years, and now their customers will have to pay more. Which I find personally a little annoying, but I don't really oppose it, it was kind of inevitable -- the only reason this loophole existed in the first place is that online commerce became so big, so fast, that the tax system hadn't yet adjusted to the changing consumer behaviors. Effectively, we've been experiencing a decrease in tax during the past several years while it was easy to purchase anything online tax-free, which was not the case pre-amazon. And decreases are nice for the individual, but the balance had to come out somewhere...
I am the man with no sig!
The US budget calls for spending the equivalent of $10,000 for every man woman and child (3 trillion / 300 million pop.). When is it enough? Isn't there some point where we can say that the people are taxed enough?
How about the fact that federal receipts went up after the Bush tax cuts? It's called the Laffer curve.
Now, if you subscribe to Keynesian economics, you could argue that an increase in government spending by the same amount would have been more effective than cutting taxes because that multiplier is higher than the tax multiplier.
But, it's really time for the "tax cuts for the rich" propaganda to stop. Small businesses (LLC-types) are taxed as if they were individuals. If you want economic growth to happen from small business, you have to stop taxing the $200k income bracket to death. A lot of the "people" who fall in there are mom and pop shops.
Besides, nobody's moving the Alternative Minimum Tax. With any luck and present inflation, soon nearly everyone will be taxed under the AMT. This means that we'll have a de facto flat tax on income.
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This would not be possible without changes to the tax code. To pay state taxes, the business in question would need to open an account with the appropriate agency in each of the fifty states (assuming they had customers in each of the fifty states). Having gone through this process for Maryland, DC, and Virginia, I can tell you that the administrative burden this would put on small businesses would be very severe. This alone could probably keep an employee occupied full time for weeks.
No, they haven't. Tax evasion is what happens when you fail to pay your taxes, or use phony deductions to lower your taxes. Internet businesses haven't been paying sales taxes to other states in the past because the law said that they didn't have to. If this law goes through, that will change until and unless the courts say the law is unconstitutional.
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You may also be surprised to learn that it also disproportionately taxes the poor, because when you are making just enough to live and eat, that 8% can make a huge difference. When you have enough money to live comfortably, that 8% will basically eat into the amount you put into the bank, not the amount you put into your mouth.
Income taxes are written to be more like Robin Hood; take from the rich, give to the poor (well, in theory... but as the saying goes, the difference between theory and practice is greater in practice than it is in theory).
Just because you don't like the truth, does not make it false.
No, he had it exactly. Use tax is generally exacted on every item, regardless of origin, then waived for items on which sales tax has already been collected.
It's an end-run around regulation of interstate commerce being reserved to the federal government. It's arguably unconstitutional in concept. I'm unsure of existing court rulings on it.
The real problem, as mentioned elsewhere, is that New York doesn't have standing to collect from Amazon in Washington (they can't possibly enforce this). Quill Corp v. North Dakota established that you may not even try to compel a company to collect sales tax for your state unless it has significant physical presence.
NY-based affiliates may be a different story, but even then, I'm pretty sure NY needs to collect from the affiliates in their state, not Amazon proper. I'm pretty sure it's more or less the same mechanism and legalities as eBay/PayPal collecting money for auction sellers.
As it stands, at least from media readings of the law, I fully expect this to get struck down, either in a limited way against Quill v. North Dakota, or in a wider way that puts use taxes in general in question.
Yes, it's the time-honored strategy of "doing things voters hate during an election year". Its strategic value has never been accurately estimated.
It's rare that you're presented with a knob whose only two positions are Make History and Flee Your Glorious Destiny.