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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."
How will this mesh with the Sears decision by SCOTUS? My understanding (I'm not a lawyer) is that taxing interstate commerce is prohibited by the constitution (the root of all US law).
Any law geeks out there want to pick this one up?
DISCLAIMER: This post was not checked for speling and grammar- if you complain- you're a whiner
Overtaxed as we are already, this has been occurring in NYS for quite some time now. Some retailers like newegg resisted, but Amazon and others charge it even though they're not legally inside NYS's jurisdiction.
I personally don't shop from amazon any less, but I've never been one to buy things off the internet I can't get locally (to impatient to even wait for overnight shipping).
"Give someone a program, frustrate them for a day... Teach someone to program, frustrate them for a lifetime."
9 times out of 10, shopping online will STILL be cheaper than retail.
If big box retailers think this will save their ass, they're in for a nasty suprise.
And I agree with the FP, sounds like this is going to be a mass of red tape. Think of the fights over who gets the sales tax from amazon...
Sounds DOA to me.
This 'loop hole' has been in existence since the beginning of the mail order business.
love is just extroverted narcissism
I really don't have a problem with paying sales tax, or taxes in general. Of course, I may not be thrilled with how my tax money is spent, but that's another matter. Taxes still play a major role in implementing civilization. And I ,for one, prefer civilization to the freedom-only-for-the-rich promoted by libertarians.
Caveat Utilitor
From the FA:
"California residents, for instance, are now burdened with a sales and use tax of at least 8.25 percent. State law is strict: if Californians travel to a state with a 5 percent tax and shop there, the law requires them to cough up the 3.25 percent difference when they return. Online purchases are taxed as well."
This kind of thing really bothers me. It's as if all our money, wherever we spend it, belongs to our home state. I'm sure not many people actually "cough up" the difference, but just the principle of it really burns me up.
Ok...so which state will the taxes be going to? The state in which the business operates out of, or the state in which the purchase was made in, or both?
Probably both. Everyone that really matters (i.e. NOT the consumer) is happy and retail stores use the "double" online sales tax as a marketing point for you to buy at their physical stores.
I can almost hear what they're thinking right now and it kinda sounds like "CHA-CHING CHA-CHING CHA-CHING".
any taxes on their internet purchases.
LOL.
They talk a good game though.
No they won't. 5% directly passed onto the consumer isn't going to destroy these businesses.
This is a tax people have been paying all the long.
well, they were supposed to be paying it, they could be criminals and just whining because the can't commit their crime any more.
The Kruger Dunning explains most post on
OK,
My money has been taken out of my check, automatically, without my permission, and being used to pay for services I will never be able to benefit from. I then pay MORE taxes, to even more agencies for infrastructure maintenance that I have no say over what gets fixed, or when. THEN I get to pay even more taxes on the goods I purchase with what little money I have left after all those previous taxes, and now they've found ANOTHER whole new way to tax me.
I understand the whole "taxation without representation" thing, but this is getting as bad. Why am I paying into programs that, because I'm 27, will never be able to use because they'll be long bankrupt by the time I'm old enough to benefit from them?
Also, how are they going to dictate who gets this tax, and how is it reported? and what do they do in an international purchase? Will I have to pay tariffs for items purchased overseas? Will they charge me another tax, to pay for the foundation of this new taxation system?
America is going tooooo far with what is expected of it's citizens to pay already!!!
We've somehow now become endebited to the banks, because we'll get stuck paying for the bailout. Though it would have been CHEAPER to just hand every American Citizen over 10 Million dollars a piece. We're seeing record highs in unemployment across the board, it is becoming more and more frequent that companies are cutting cost of living increases and merit wage increases, not to mention bonuses, 401k matches, etc.
How do they expect us to now pay MORE with LESS? It's incredible that people are ignorant enough to think that it is somehow OK in this nasty economic climate to impose even MORE cost on normal citizens for something we already can't afford!!!
"This is the value of a summer spent and a winter earned"
Comment removed based on user account deletion
I live in NH, which has no sales tax, but the issue you mentioned is by FAR my single biggest pet peeve, and the only complaint I have about any taxation in our country.
It's inconvenient. I dont like to drive 10 minutes to Mass, see something that says $5, and be asked for $5.20 ... regardless of any semantics over who "pays" if the price tag said $5.20 my objections would vanish...
You raise an interesting issue. Let's say you download some music, software, movies, etc from teh pirate bay. Today, that's not a crime (uploading -- distribution -- is). But tomorrow, you may be charged with tax evasion or conspiracy to commit tax evasion.
Do you even lift?
These aren't the 'roids you're looking for.
State law is strict: if Californians travel to a state with a 5 percent tax and shop there, the law requires them to cough up the 3.25 percent difference when they return. Online purchases are taxed as well.
But compliance is spotty at best. California's Board of Equalization estimates the state lost $1.34 billion in 2003 because residents aren't paying use taxes--and attributes $208 million of that to online purchases.
This reminds me of the RIAA's definition of "lost revenue". The state didn't lose anything... with a law as badly thought out as this, any money they did collect should be treated as a windfall. When you create a law where the only possibility of any compliance at all is people's innate honesty, just be glad that so many people are basically honest and bank what you can.
Not exactly. You have to pay tax if the seller is operating (or has operations) in your province. Otherwise it's free!
Not exactly.
Obviously, in Alberta and the territories where there is no provincial sales tax, you don't pay the tax.
In the HST provinces, you generally pay no matter where in Canada the seller is, because he has to collect GST and, that usually means collecting HST if he's selling to and HST province.
In the individual pst provinces, BC, SK, MB, ON, QC, PE the out of province seller isn't obligated to collect it... but you are still legally obligated to pay it. That means you are supposed to self assess the PST you owe and send it in yourself. In practice, nobody does this, except businesses (who get audited regularly to make sure they are self assessing pst on imports and consumed goods).
Individuals get nailed much more infrequently, unless its an item where they have to register the transaction. (For example, if you sell a car privately in BC for example you wouldn't normally collect PST from the buyer, but the buyer gets nailed for it anyway when he registers the car for insurance.)
I work for an online retailer here in the state of Washington. Recently, our state passed a law forcing all state business to collect sales tax based off local jurisdiction, instead of our home jurisdiction. They then allowed only two companies to actually handle all that info, with whom you are required to deal with in order to collect the proper amounts. Needless to say, the complexity involved was not fun. Not to mention the thousands of dollars it costs to deal with the "government approved" sales tax info vendors.
Having this kind of thing go nationwide makes me quake with fear.
Don't apply logic to law, you'll only hurt yourself.
The Goal: A long simple life filled with many complex toys.
What? reship becasue of a 5% increase?
It would cost you more money, a lot more money.
The Kruger Dunning explains most post on
First, taken in context it's pretty clear that he was talking about taxes coming out of your paycheck. Even politifact agrees with that sentiment (http://www.politifact.com/truth-o-meter/promises/promise/515/no-family-making-less-250000-will-see-any-form-tax/)
Second, this isn't really a tax increase at all since you're supposed to be paying taxes on online purchase as it is. It's called a Use Tax and just because you haven't been paying it doesn't mean it doesn't exist. Besides, there is no reason why purchases made online should be tax free other than it is difficult to enforce. I would even say that it gives online vendors an unfair advantage over local stores.
I think a lot of Americans just got grateful for our low state taxes. We pay 4% state and another 4% city/county.
What is the justification for sales tax on an internet purchase?
"We want more money (because what we take from you already is being misused)".
No... the retailer spent a lot of money on that retail space. They'll say it's simpler, because it will be shipped from the local store to your house, which is why you already pay tax if you buy something at Lowe's, they have a nexus in your state.
What if we did not want those services in the first place? In that case, we have a legitimate reason to protest.
President Obama does not control state sales tax.
President Obama's plan does not introduce legislation to allow collecting state sales tax on internet purchases.
So within the realm of what President Obama can control and what he has proposed, he has completely fulfilled his pledge.
If this were a bill being passed by the Congress in the state of Michigan, you'd be correct. Unfortunately, this is a bill proposed by the United States Congress. The President has veto power over that bill. This is within his control.
There is no "I disagree" mod for a reason. Flamebait, Troll, and Overrated are not substitutes.
Yes, that's the argument... but isn't it odd you don't need to pay to use things you buy in state? Hmm... I really hate the judges that buy these garbage arguments. Use tax should never have flown.
A company such as BestBuy, Borders, and so on already collects sales tax for the states where they have a presence.
A company such as Amazon does enough volume of commerce that they can afford the accounting to figure whose tax is owed to whom.
But a small company may have only a few cents to collect for a given state over a day, week, month or even year. Counting the beans costs more than the beans are worth.
Most likely, "Sales Tax Clearinghouse" companies will crop up, which will offer to file your forms with each state and distribute... for another fee.
When we ran an online store (selling Children's Books), most of our customers were out of state, but we did collect for our home state... which amounted to less than $50 per year most years, especially as many in-state customers were schools and churches (which do not pay sales tax). Multiply that by, what, 48 states that collect sales tax? The paperwork is horrendous.
Design for Use, not Construction!
Americans in general are not unwilling to pay for government... they just want less of it.
Unfortunately, I think it's more like Americans in general are not unwilling to have government... they just want someone else to pay for it.
Space game using normal deck of cards: http://BattleCards.org
Well, with this, my taxes will go up, and my family makes under $250,000/yr
But you aren't legally required to pay a dime more with this law than you were legally required to pay before the law existed. By that logic, increased funding for IRS audits also increases the taxes you pay because it would be riskier for you to try to cheat on your income taxes. There is no change other than enforcement.
The fact is, you were getting away with violating the law before, now you won't be able to. Get over it.
These taxes already exist. People are evading them since it's currently infeasible to audit citizen's online purchasing history, but those taxes are already owed.
This isn't akin to a new tax; rather, it's as if stricter auditing were leading people to have to pay taxes they could previously dodge.
I'm a lawyer, but not yours. I wouldn't represent someone who thinks taking legal advice from Slashdot is a good idea.
Taxes are not going up, most states have a "use" tax. Just because you don't pay it and this will force you to stop breaking the law does not make it a tax increase.
If you are currently paying $0 in taxes because you've found a way to dodge an audit, and the IRS figures out a way to force you to pay taxes you already owe, did they just "raise your taxes?"
If you think they did, your definition of "raise your taxes" is stupid.
I'm a lawyer, but not yours. I wouldn't represent someone who thinks taking legal advice from Slashdot is a good idea.
1. They make the implicit assumption that everyone has a sales or use tax, and that people are avoiding it. That may be true in many cases, but not mine, since my state has neither. I don't
2. Similarly, it's unfair for businesses operating here. For a business located purely in my state, it's not a fair burden for them to have to calculate and collect use tax for any of the hundred (cities, counties, states, and various other revenue districts) that someone might be in when they click their mouse to order. I don't mind the "nexus" argument for sales tax (hey, the company chose to set up shop in a state? Then you can learn the tax rules and when to collect them), but extending it to use tax isn't fair. If a state really feels they need a use tax, it should be their responsibility to figure out how to collect it, and not involve companies that don't even have nexus in their state.
3. They talk about simplifying it, but there's already enough cases that I can this not working correctly (person in state A buys a gift from vendor in state B for shipment (from state C) to the recipient in State D).
I say get rid of the sales tax. They aren't necessary, we've got several states (including my own) that get along just fine without them.
Yeah, it's kind of sad how people keep going on about this, but Obama's spending so far is not really any different from Bush Jr., Bush Sr., and Reagan who in turn each ran up the largest deficits in spending than any president since WWII. As conservatives often point out, Reagan constantly called for a balanced budget amendment, but he himself never actually proposed a budget that was balanced. Small wonder then that between congress and he the deficit ballooned. I'm guessing that it will be very difficult for Obama to increase the deficit in the long term, thanks to recent republican president's propensity for long, expensive, unnecessary wars and their inability to balance a budget. It has nothing to do with political ideology, it's how much U.S. debt the world economy will support.
If I stop think about it, it really pisses me off that conservatives are so easily hood-winked by the rich upper class and Wall Street who call for smaller government and lower taxes whenever a democrat is in power, but what we end up with is tax cuts for the rich, benefit cuts for the poor, and a huge deficit to boot. Stupid.
Gentlemen! You can't fight in here, this is the war room!
Also the purchase may travel through several other states. And what happens when I am physically in Alabama (while travelling), order an item to be sent to Montana, use a company credit card based in Delaware and have a home address in California with the item shipped from Colorado manufactured by a company in Ohio, via a website located in Washington.
I'd much rather see sales taxes abolished since they complicate retail and hurt the poorest people the most (they have to spend most of their income to live and hence proportionally pay way more sales tax).
New York has one. You're either supposed to say how much stuff you bought on the internet, or pay a flat $20 in sales tax. On the average year I buy $4-5k of stuff online. That $20 is pretty attractive.
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?
I think the decision-making went something like this:
"We want a sales tax that we can impose on interstate commerce."
"But you can't do that, the Constitution forbids it!"
"Well then, we will call it a 'use tax' instead of calling it a 'sales tax' and that will make it okay! It's the exact same thing called by a different name, but it's somehow completely different and not illegal or illegitimate in the slightest! By the way, I don't understand why the people don't respect us?"
It's just a blatant attempt to circumvent the Constitution, only the average person is too stupid or too apathetic to recognize the threat that this represents if it remains unchecked. If you can ignore or get around one part of the Constitution with impunity, you can do the same with the rest of it.
It is a miracle that curiosity survives formal education. - Einstein
Probably about as often as tax cheat Republicans paid their tax on internet purchases.
But probably far less often than moral conservatives get high on pain pills after railing against "druggies."
You're right. All we have to do is cut military spending, from a trillion dollars per year in 2008 to something more reasonable, like 500 or 400 billion.
It's funny, that never seems to be an option for the ideological right.
The business DOES pay the tax, and we are subject to audit, the fun kind of audit where the taxing authority comes in and says 'you owe us one meeeelion dollars' and you have to disprove us.
We charge YOU taxes because WE are responsible for paying them to the government.
Now multiply this by millions of possible variables.
My business, and online retailer, would track all of the sales and use and VAT and blue and green taxes that apply by product type, color and aroma, all this for each of thousands of taxing authorities, and then pay these taxing authorities according to their rules, with supporting documentation, AND we make sure we can survive being audited by all of them.
Side note, a business CAN sell things with the taxes included in the price, if they display this to the purchaser. A good example is a bar, they'll have a sign that says taxes included in the purchase price. If they don't, they can be hit for taxes, again, by an auditor, happens all the time.
Yes, I'm sure the majority of my taxes go to education and fighting Somali pirates
Yes, ideally, folks should save for their own retirement. However, practically, most people except the most hardcore libertarians are against deciding you should starve to death because you ended up with insufficient cash when it came time to retire. What do you do for folks that lose their money through theft? They get to starve because they were unlucky?
Many of the "problems" with Social Security come when people think of it as a govt. mandated retirement fund. Yes, when looked at in that light, the costs are high and the returns poor (although the requirement to invest only in T-Bills was a stroke of genius; if the trust fund were in private investments I can only imagine the pork-barreled SNAFU that would be.)
However, Social Security was not conceived as a retirement program, it was conceived as an anti-poverty program for the elderly and unable to work. Looked at in that light, it makes a lot more sense: we (the citizens of the U.S.) achieve a jointly decided on societal goal of trying to keep penniless elderly and disabled fellow citizens from literally starving to death due to hunger.
There are real problems with Social Security as it currently exists, but its very existence is not one of them.
SirWired
Idiots! We are in what is being described as the biggest economic calamity
since the Great Depression and these idiots want to discourage people from
engaging in consumer spending.
Brilliant.
A Pirate and a Puritan look the same on a balance sheet.
There is already taxes collected on *anything* that ships.
:)
Unless it is a download only item (software for example) taxes or other fees are paid on *at least* all of the following:
- Sales and excise tax on fuel for the truck moving the product
- IFTA fees
- Apportioned vehicle resigistration fees
- Property taxes paid by warehouse facilities of shipping company
- Income taxes paid by shipping company
This is what came to mind off the top of my head. These are specifically taxes associated with *shipping* the product. You're now paying on top of that as well if they enact interstate sales taxes. I realize that any product purchased in a retail location paid many of these same taxes (via shipping costs) as well, but the point still stands - folks are already paying on this.
Plus the single most important part of all this - everyone who lives in a sales tax state pays Use Taxes (FL), right?
Illiterate? Write for free help!
If was I assured that the government was using my tax money efficiently and productively, I wouldn't have an issue paying them. However, the government uses our money neither wisely nor efficiently.
Here's a small example of how wasteful my city is. My city has a budged deficit like virtually ever level of our inept government all over the country. During a radio interview during the winter he said we were one snowfall away from declaring bankruptcy. It's the same song and dance year after year. Somehow they never set aside enough money to cover snow removal.
But here's the good bit, after he made that statement we had a fairly minor snow storm, amounting to maybe a couple of inches. And yet I distinctly recall plows running up and down the streets of my neighborhood to clear the small bit of snow lying at the edges of the street. The street itself was mostly clear of snow. This nonsense went on for two days.
In addition to that these idiots in the snowplows did their plows into the pavement. Every time one of the trucks goes by the rumbling is intense from these plows and sparks are flying. So what's the end result? Sometime this summer crews will start patching all the potholes. And the stretches where the streets are really torn up they'll end up repaving everything, and some of these streets have been paved within the last 10 years.
But then they complain that they have no money. And they can't cut spending even if they wanted because every last department and union refuses to make cuts. The head of the board of education, who earns nearly $200,000 a year for not doing much of anything refused to forgo a raise because she needed it to cover cost of living increases.
And god forbid anyone propose cutting taxes in certain areas, like education. Nevermind that my city spends, on average, significantly more per child than any other country on Earth and I'd say that the quality of education is crap in comparison to what I've seen overseas. There are some good people out there, but money is squandered carelessly and apparently a lot of this money goes to the fat cats running the system.
So what's the solution? Like a bad welfare case or a drug addict the government resorts to squeezing a little more money out of people. Property tax is already ridiculously high in my city and we're looking at it going even higher this summer.
With utilities or any company I have the ability to dispute charges. I can moderate usage, or if I'm unhappy with a provider I can cut service. What the hell can I do with the government. Nothing. The buck stops there. I don't pay and I go to jail. And good luck trying to dispute anything.
What's really bothering me is this blind faith I see in the government nowadays. Like anyone who questions the government is doing something wrong; just look at the media's response to those tax rallies yesterday. And then there's the frustrating nonsense about how we need to punish the wealthy. More like punishing success.
And I love how tax rebates are portrayed as gifts from the government. It's my money, first of all. And secondly, this is simply a nice way to guarantee that these "tax cuts" are temporary. And third, this way they can give handouts to people who haven't even had to pay taxes, but do already enjoy the benefits of our welfare system. I'm all for putting money towards educating people out of poverty and ignorance, but I am completely opposed to handouts. Time and time again it's proven to be a failure, remember those FEMA debit cards?
And the problem isn't only the obvious taxation on income. It's all the other fees the government slips in there to screw us out of our hard-earned money. Like this damn internet taxation. It's a nice way of spreading out our tax burden so that we don't notice how bad it actually is. Sometimes I wonder if what we pay to the government doesn't already rival what Europeans pay.
Technically, I don't think mail order is a loop hole as much as it is a tool of free trade. I think the origin to this "loop hole" is a free trade agreement between states established by the federal govt. Not having taxes between states benefits competition in the market place.
In CA, the state charges a tax on everything that is sold. This tax is paid by the business for the privilege of operating in CA and of course passed on to the consumer. If I live in CA and buy something from another state, I'm technically supposed to declare "use tax" for the goods bought elsewhere, but used in California. Of course, no one does that, but that's another problem.
Within the European Union, there is a similar free trade agreement. Countries are no longer allowed to tax goods and services coming from other country. The difference to the US is that EU countries are better at collecting the "use tax".
Alas, the problem is that you cannot reliably distinguish a wolf from a sheep, so you wind up having to give the wolf veto power in a check and balance case rather than risk giving them steamroll power in a "single point of failure".
The issue isn't authorization and validation, it's authentication.