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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."
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.
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.
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.