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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."
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?
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."
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?
I was beginning to worry that I might actually be able to spend the remainder of the money that that the government lets me keep each payday without having them take more from me. I'm so glad that they're working hard to prevent that from happening.
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.
The difference?
Price Tag: $2.99
Total: $3.15
- versus -
Price Tag: $3.15
Total: $3.15
If someone from Canada buys something, does he pay the state taxes? That would be stupid.
And if a company in Canada sells something to someone in the USA, does he have to collect the state taxes? Good luck with that.
The only sane way to do this is charge taxes based on the shipping address, from sales within the USA only.
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.
"I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes."
"You will not see any of your taxes increase one single dime."
-- Barack Obama
There is no "I disagree" mod for a reason. Flamebait, Troll, and Overrated are not substitutes.
It's all about greed. The internet company operating outside the state (if they're in the state they're already paying taxes) isn't using any of the infrastructure that the taxes pay for. If anything, they should be paying taxes in the state where they do the business, but then you have customers in other states paying out-of-state sales taxes which don't benefit them and aren't fair either.
The current system has worked well for many years. What hasn't worked well over that time is politicians controlling their spending of other people's money in their attempts to buy their way into continued future paychecks. Now they're out trying to steal even more from you.
If we threw out these politicians trying to vote this in as just yet more Big Taxers and Spenders then this stupid and unfair idea might actually go away for a while.
And it goes without mentioning the problems any Internet company would face in computing the proper state, county, city, and even borough taxes properly and paying them to all the proper taxing authorities. This is MANY TIMES the burden any local business faces. Talk about an attempt to kill internet companies - you couldn't have come up with a better scheme.
And think of the companies (FedEx, UPS...) which depend of them for a large chunk of their business. Raise prices, kill off companies, are you really trying to make this recession worse!
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
What is the justification for sales tax on an internet purchase?
Did the state or county provide some service or infrastructure that supported the internet sale?
Did the state or county or city bring anything to the table?
No?
Why then they should bug off!
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
For more than half of the years of my adult life, my out-of-state purchases excluding hotel rooms, restaurants, and other things used out of state were either zero or so close to zero as to be not worth the paperwork.
Most states that have use taxes exclude small items you personally carry into the state such as trip souvenirs and all or almost all exclude items used out of state such as meals or lodging.
The "out of state" sales tax problem has been around as long as there has been both the sales tax and catalog-only sales companies. I wonder if your grandmother bothered to pay use taxes on her mail-order seeds and other domestic items she bought from mail-order-only companies?
When your parents bought their "Greatest hits from the 1950s 8-Track $19.95 TV Offer" tunes 35 years ago, did they bother to declare it and pay taxes? Most people did not.
This is nothing new.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
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.
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.
In Michigan, the use tax (which is the sales tax companion here) is (roughly) 0.04% of AGI for the sum of purchases of less than $1,000 (the purchases can optionally be itemized, but that only makes sense if you have high income and low purchases). So someone earning $100,000 and purchasing, say, $2,000 of online goods, would go from paying $44 of use tax to paying $120 of sales tax.
So I agree that it won't destroy the businesses, but it isn't quite the case that consumers should have already been paying the same amount of tax.
Nerd rage is the funniest rage.
What? reship becasue of a 5% increase?
It would cost you more money, a lot more money.
The Kruger Dunning explains most post on
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)".
I don't mind paying taxes, but I wish the US did something like VAT in Europe.
Basically, the prices you see advertised already include the tax in them. No trying to figure out 8% of some number, no more $2.99 item being just a hair over $3 and filling your pockets with loose change.
Gee, this is terrible! People are using their (post-income-tax) money to purchase things, and the government isn't being inserted into the transaction at all. Anarchy is soon to follow.
Yeah I know it's a troll but I'll bite.
I've paid taxes on internet purchases. It all depends on which merchant you deal with. Most often I've seen it where if you are in the same state as the merchant, to avoid pissing someone off in the state IRS, they charge that tax, but not out of state tax.
And for the record, the progressive left wing of the party finds almost all sales tax to be unfair and regressive. I could go into the details of why we see this, but progressives and liberals find and are far more willing to pay Income tax, not sales tax, because our feeling is income tax is better and in truth fairer for society as a whole. Not all taxes are made equal.
If you want to debate the difference, feel free to follow up and start a whole new flaming thread.
"All great wisdom is contained in .signature files"
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!!!
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
Do you really think that this does not exist? It's a service/software that can be bought from any number of places. This is part of what ERP systems do. I've seen services that translate an address into long/lat and then look it up that way. Though most are simply a database of State/County/City lookups. Traditional companies have dealt with it for many years before the internet, the internet doesn't make it any more complex. Any business that started out taking phone orders has had to deal with this issue already.
Oh sure, you'll come up with the occasional nutty thing here or there. But do you really pass up tax revenue because .1% of them may not be 100% accurate? Not likely.
"Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes." - Barack Obama, Dover, N.H. campaign stop, 12 September 2008.
MSIE: The world's most standards-complaint web browser.
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.
Seller is not obligated to collect tax in CA...
According to my seller permit, I can notify the customer that I do no collect the state sales tax, and that they are obligated to pay the use tax.
Sellers that do this, however, I suspect get audited very very frequently.
-nB
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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!
When the economy was booming, many residents questioned why the city councils were maintaining "rainy day budget funds" they weren't using while they were putting up taxes. So the taxpayers forced the cities to use up these budgets before raising taxes. Now, there are massive waiting lists for council housing; asylum seekers, single parent families, immigrants who cannot find work and can't afford to go home, pensioners who lost their company pensions and the unemployed workers who were paying for everyone else.
Vintage computer adverts: http://www.vintageadbrowser.com/computers-and-software-ads
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."
Please mod parent Funny! He is making an argument for VAT because "math is hard" and "coins are heavy".
I really, really, really hope that isn't your entire philosophy concerning VAT taxes. Otherwise, any tax system, regardless of how burdensome or repugnant could be foisted on you - as long as the reverse engineer it to give you these paltry creature comforts...
One last thing: Sometimes I wonder; "Is that someone's signature? Or do they type that at the end of each post?"
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.
Rules for Wisconsin have been in place since forever ago. If you made mail order (or similar) purchases on which you did not pay use tax for use in the State of Wisconsin, you're supposed to add that on to your income tax return. http://www.revenue.wi.gov/faqs/ise/usetax.html
That people casually ignore this put me at a competitive disadvantage when I was a retailer - they'd come in, look at my product, and then buy the identical item online, to save the price of tax (which they were convinced that by not reporting, they were not obligated to pay). Sucked, not in that business anymore.
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".
This would solve all of the problems. You buy online or in the store, and you pay the same amount in taxes, and incidently, less overall than you would now.
Is the middle of a drastic recession the proper time to go on a wrist-slapping mission through one of the only avenues that is propping up what little consumer spending we currently have going for us? That's not governance, that's vampirism!
Not every person is a greedy money grabbing bastard, there are and always will be those of us who would just like to be able to survive comfortably.
You can't blame people for desiring a better life, that is human nature. In the 'first' world, a better life might be that new flat screen tv, or it could be off the drugs and off the streets, in the 'third' world it could be as simple as getting water / food for your family.
It's all relative, money is just the modern world's necessity to survive, I'm not greedy because I want to pay a bit more to live in a home that's comfortable for me.
- Dan
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.