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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."
More taxes... I'm sure everyone feels a lot of sympathy for them with it being tax season and everything. I'm sure it will be a lot of fun for small mom and pop retailers to deal with filing paperwork and collecting tax in 50 states just in order to sell trinkets off a small business website.
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.
It will be interesting because they probably don't have standing to collect. They would either have to collect from the customer or setup a customs system when the goods enter (are imported?) to the state.
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?
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!!
When is Slashdot going to add a -1 moderation option for people who actually RTFA?
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.
This doesn't bother me, not in the least. I can remember a day, when any use of the Internet to sell anything was abhorent. Advertising of any matter was viewed with disgust.
Now, due to the greedy bureaucratic fatcats who wish to tax the little guy to the bitter end, we might see a drop in pointless port 80 communication. (Present company excluded, of course).
I say bring it, lets clean the fat off the bone.
Hi, I Boris. Hear fix bear, yes?
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!!!
There are ALREADY laws and taxes in place! A state does not have legal authority to impose taxes on a sale made in another state. That is, it cannot force an Oklahoma retailer to collect California sales taxes for a sale made to a Californian.
However, as far as I am aware ALL 50 STATES have "use taxes" in place, that are supposed to be paid for out-of-state purchases. In most cases the amount of use tax is identical to what the sales tax would have been if the sale had been local. The difference is that the purchaser, not the seller, is responsible for paying the tax. This is the way it MUST be... neither the individual States nor the Federal government have the Constitutional authority to force a business to collect taxes for the other 49 states. And even if they could, it would be an excessive burden... trying to keep track of tax rates for different kinds of products in 50 individual states is beyond the reasonable capabilities of most small businesses, which even today are still the backbone of our economy. Further, the Federal government also does not have the authority to collect State taxes on their behalf.
The taxes are already there. The laws are already in place. If they don't like the way that works... too bad. They just do not have the Constitutional authority to do this. And there is nothing new here, either... people have been buying by mail-order for at least a couple of centuries now, and this debate has been going on all that time. DO NOT let them try to tell you that eBay is forcing their hands. Hogwash.
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 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
> 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
This is not a dem/rep issue, or a congressional issue at all. It is a supreme court ruling. Simply the Nexus issue means that a state cannot force citizens of another state to collect their sales taxes. There really isn't anything the congress can do about this.
Now there could be a federal sales tax, and that could be appropriated to the states somehow. But I don't think there is a snowball's chance this would pass. People will scream and hop around, but you are simply not going to get around this.
However, just because Amazon doesn't COLLECT the sales tax, does NOT mean that it is not owed. A sales tax is less commonly, but more correctly called a USE tax. And it is supposed to be paid, even if it is not collected by the merchant. This means there could be a reporting agreement made with major retailers at least, and they could send you a bill for the tax that you are required to pay.
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?
http://www.american.com/archive/2007/november-december-magazine-contents/guess-who-really-pays-the-taxes/
Its pretty well established that "the Rich" pay an overwhelming proportion of the tax bill - the top 10% of people pay about 70%....so in response to your statement, how exactly are you making the rich richer ?
If you want to say that those with a soul must agree with you, you may want to get some facts straight first.
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.
moving offshore can work very well for small items.
jersy is a classic for this. It is not part of the EU VAT system. It is also very close to britan (and to france too for that matter, I dunno if there are french companies who use the same trick).
So small items which are under the threshold for import VAT are frequently shipped from there to UK customers hence avoiding the VAT on those items.
note: i'm known as plugwash most places but i screwd up registering that here somehow in the past and now can't register
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.
The end of the internet tax subsidy is long overdue. Why should local businesses be at a disadvantage to mail-order companies that have zero commitment in the local community? These local businesses (most of them small businesses) provide the vast majority of jobs in a particular region. Exempting mail-order houses from certain responsibilities essentially encourages outsourcing of jobs.
It's not true that the mail order industry pays for what it uses through fuel taxes and other fees. Sales taxes are an important resource for local units of government. Roads get built with them. Transit gets built and operated. Services get provided.
Taxes are the way we invest in our community and our common future. Why should some companies be exempted from their civic responsibility?