The End of Tax-Free Internet Shopping?

Mordok-DestroyerOfWo writes "If a little-known but influential alliance of state politicians, large retailers, and tax collectors have their way, the days of tax-free Internet shopping may be nearly over. A bill expected to be introduced in the US Congress as early as Monday would rewrite the ground rules for mail order and Internet sales by eliminating what its supporters view as a 'loophole' that, in many cases, allows Americans to shop over the Internet without paying sales taxes."

Comments

Use tax

[DoofusOfDeath]

Here in Rhode Island we have a "use tax", which basically says if you buy something from out-of-state you need to pay a tax on it which, concidentally, is the same rate as our state sales tax.

I pay it, but one thing bothers me. I thought only the federal government is allowed to tax interstate commerce. Isn't a state "use tax" like the one in Rhode Island doing that very thing, even though they claim they're not? Has this kind of "use tax" been challenged in court on Constitutional grounds?

Re:Use tax

[idontgno]

But it's not a tax on commerce. It's a tax on use. "Use" and "Commerce" look nothing alike. They aren't pronounced the same at all. "Use" taxation is on the basis that you use that thing you brought across state lines. And how do we valuate that property that you're using? Hmm... maybe, what it sells for. A percentage of the sales price in the state you brought it in from. And since you bought it there, you even have the receipt that tells you what the basis of taxation will be!

Yes, the reasoning is specious, fatuous, and bogus. But the shallowest of rationalizations seem to work out just fine in matters of taxation, as long as the government is the one doing the rationalizing.

I wonder what happens if you buy a thing in one state and never use it in your state of residence. Will they charge non-use tax?

Re:which state(s)?

[aoteoroa]

Here in Canada we have always had to pay sales tax on internet purchases. The tax is based on the purchaser's province.

Re:The big question that must be answered

[Buelldozer]

I may be confused but I thought the regulation of INTERstate trade was one of the powers specifically enumerated as belonging to the Federal Government?

Re:Make the Business pay the tax, not the Customer

[Anonymous Coward]

That's how it's done in the EU. Advantage: Truth in advertising. You know what it's going to cost you. Disadvantage: The sales tax is hidden, so there's less opposition to sales tax hikes. Sales tax is comparatively high in the EU.

Re:which state(s)?

[NeverVotedBush]

And it's not just state taxes. There are city/local taxes as well. And since these vary widely, either some database will have to be compiled and maintained or the tax levies will have to be made uniform. Or state taxes will be made uniform and there won't be local taxes. Or it will end up being governed by the state the business operates in - but then imagine states wheeling and dealing with tax rates to get certain businesses to locate in them. Or, you could make the buyer responsible for local taxes - maybe through reporting all mail order / internet sales to the government along with descriptions of what is bought since some locales don't tax food or prescription items.

Or, maybe they could do like what the RIAA and MPAA do and get some kind of royalty built into every item sold that then gets divvied up later however the states decide to divide the spoils.

Yep, the possibilities are endless!

Re:The big question that must be answered

[mkettler]

I'd have to suspect that the case being referred to is:

NELSON V. SEARS, ROEBUCK & CO., 312 U. S. 359 (1941)

This case basically established the way sales taxes for "out of state" orders are handled now. (taxes collected if any in-state branch exists, otherwise not)

This law would appear to contradict the interpretation of constitutional limits on the power of states made in this case.

Re:which state(s)?

[Mr. DOS]

Interesting: I'm in Ontario, and if I buy stuff from DirectCanada, who are based in BC, but ship some stuff from Toronto, I only ever pay GST (5%). And yes, this applies even if stuff is being shipped from the Ontario location.

Maybe PST rules vary from province to province?

      --- Mr. DOS

They already get taxes on interstate commerce!

[jtownatpunk.net]

They get taxes from the fuel used to transport the goods. They get money from the vehicle registrations. They get money from the vehicle purchases. They get taxes from the goods purchased to maintain the transportation vehicles. They get taxes from the corporations that sell the goods and the ones that transport the goods. They get taxes from the employees of both of those groups. THE GOVERNMENTS (local, state, and federal) GET PLENTY OF FUCKING MONEY OUT OF INTERSTATE COMMERCE!!!

Re:Only if you make over $250,000

[KiahZero]

This is a federal bill that allows states to collect taxes which are already owed. Individual tax liability will not increase. Instead, individuals will simply be forced to pay (by online retailers) the sales tax they already owe.

Re:Not a problem

[MarkRose]

Libertarians don't promote "freedom-only-for-the-rich". Libertarians support the freedom for everyone to become rich. Taxes like the income tax ensure those working for a living will have a difficult time getting ahead. It's the current regime of excessive taxation on the little guy that keeps the little guy down. Libertarians want to keep no one down.

Re:which state(s)?

[Registered Coward v2]

So what? I'm pretty sure any online merchant system can handle a thousand numbers.

That's not the problem - it's that a sale may be taxed differently even within a state. For example, one county may have a "Local Option sales tax" that adds to the state tax - so if you live within that county you would need to pay it. However, unless the seller knows what county you are in there's no way to know what tax to actually collect. ZIP codes alone won't do it. Add city sales tax and it gets even more complex.

Then there's the issue of what is taxable. As the article pointed out two similar things - versions of Milky Way Bars - may be treated differently. What about tax Holidays - vendors should not collect taxes on those days but then again what is and isn't taxed varies greatly.

States could enforce use taxes but won't - the political fallout would be enormous and no state politician wants to start that fight. Instead they go after an easier target - internet retailers.