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State Technology Taxes Face Stiff Resistance
SonicSpike writes "As the nation moves from a tangible goods-based economy to a service-based economy, a few states are trying to keep revenues robust by taxing technological services such as software upgrades and cloud computing. But a backlash from the high-tech industry has quashed most efforts. As a result, the U.S. has a patchwork quilt of state taxes on technological services. Some states that have tried to impose such taxes have failed spectacularly, and most have not tried at all. According to the Tax Foundation, a nonpartisan think tank that studies taxes, only 10 states (Connecticut, New Mexico, Hawaii, South Dakota, Mississippi, Missouri, Nebraska, Tennessee, Texas and West Virginia) and the District of Columbia tax all writing or updating of software. Only New Mexico, Hawaii and South Dakota levy their general sales taxes on all software services. States with sales taxes do, however, levy those taxes on software that is sold on CDs or other hard storage materials. About half the states also tax 'canned' (non-altered) software that can be downloaded, according to the Tax Foundation. Elia Peterson, an analyst with the foundation, said in a recent paper that states are reluctant to tax computer services in large part because it 'is an especially mobile industry and could easily move to a lower tax state.'"
There ain't no such animal, Jim.
The Tax Foundation is nonpartisan in the sense they are against taxes and regulation and are run by representatives from Koch Industries, Exxon, former Bush-Cheney campaign advisers and Republican politicians. That kind of nonpartisan "think tank".
In Canada, all goods and services are subject to the GST (Goods and Services Tax.) In many provinces, they're subject to HST (Harmonized Service Tax), which basically takes the rules of GST and adds on a provincial percentage.
It hasn't caused our software industry to implode because the taxes are applied across the board throughout the country.
Unlike the US, you can't just lobby your way to a tax exemption here. The goobermint is gonna get their share come hell or high water.
I do not fail; I succeed at finding out what does not work.
Are you a country, or are you a federation of states? If you are a country, then get your taxes sorted out. Your states seem to be willing to deprive another state of $100 in order to get $10 themselves, that way has just led to a crisis in state finances.
As the nation moves from a tangible goods-based economy to a service-based economy
Because in the future, we will all move out of our houses to live in the cloud, we'll forego food in favor of HTTP cookies and email spam, and we will transport ourselves to our destinations not with cars but with through internet traffic.
Now, I know what you're thinking--we'll still need to buy computers to make this magic happen. But, you see, in the future, all of our computers will be virtual machines.
In Canada, all goods and services are subject to the GST (Goods and Services Tax.) In many provinces, they're subject to HST (Harmonized Service Tax), which basically takes the rules of GST and adds on a provincial percentage.
http://www.hawi-tech.com
The faster we can screw EVERYBODY the faster we can get to the point that things change.
I wasn't aware that "as" meant "three decades after".
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
There should be only a single tax. Sales tax. It should apply to all sales equally. There should be no loopholes and it shout not be "progressive" (i.e. higher rate for the rich) There should be no deductions or tax deadlines. It would be very simple and fair. Lastly it would encourage savings rather than consumption which is something we need desperately right now. Our current "progressive" system results in the rich paying less than the poor in many cases because they are better equipped to use the system in their favor. In a sales tax only system they would naturally pay more in taxes because they have more discretionary income.
There is absolutely no reason we need separate little "mini" taxes on every product, sales event, and service there is. The sole purpose of all of our tax mess is to obfuscate the real percentage we're all paying in taxes.
Given how easy it is for tech companies to uproot and move their entire operation elsewhere, we might be looking at a slow end to the effectiveness of state level taxes. Over the last few decades we have been seeing a 'race to the bottom' in some industries, with regions dropping corporate taxes to near nothing or even investing public money in encouraging companies to move there, while shifting the burden of paying for it onto the middle/low end workers. If a state tries to stand up and tax an industry, companies move to another state. The net result is a steady decrease in state's ability to fund themselves and an increasing reliance on federal money (since companies have a harder time escaping those taxes easily).
Long term we might simply be looking at a situation where it is pointless to even try to tax some industries at a local level.
If you want less of something, tax it.
Your assertion only works in a completely fair society. So maybe it would work in Sparta where they everyone grew up in a barracks. Here in the real world it's not 'fair' because the playing field isn't level. That's why the best way to guess the income of a child growing up is to look at the income his parents had.
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In the USA, the fight to tax everything is not over. (Though the tax to tax the air we breath, that is, Carbon Tax, appears to be over.) Since, the citizen, that is, taxpayers haven't given up yet, there is still a controversy, resistance, and a fight against new taxes.
By the way, State and Local governments collect and spend more than the Federal Government according to the latest Main Stream Media reporting.
"Of course if the purchase is of something that thte buyer is going to claim as a business expense, then they may have to pay taxes on it."
That not accurate. The Federal Government has a deduction for business expense for individual Taxpayers. The last year that I had business deductions, I could not claim the first 2% of income. Many years, I didn't spend more than 2% and could deduct business expenses.
The implication is that the Federal Government that the normal Taxpayer should expect to pay 2% (of their gross income) on business-related expense. These would be books, materials, consumables, etc. that are used to perform your job.
Maryland has a new "rain tax". Well only certain parts of MD have the rain tax. The state levied the tax but has never determined how the money will be spent or what can be done to lessen the impact of runoff on the bay. It was supposed to help with runoff remediation but now its just a tax.
You're missing his point. At the point of sale, states have no rights to collect taxes if it's on an out of state sale. Then, once the product is given/delivered to the end user, their home state doesn't have that information to collect the tax normally, since the seller is from another state. The end user is supposed to declare this spending and pay taxes on it, but nobody does, and it's really rough trying to figure it out from the state's point of view. They don't have access to the financials from companies located physically outside of the state, so they're SOL in figuring out that I bought a copy of some software from Amazon.
How does this relate to the GP's point? When a company declares that they bought a copy of Win7 as a deduction, then they also have to pay sales taxes on it, since the state government now has a record of the sale, so they can collect their sales/usage tax. It's the same reason why you don't get away with buying a car somewhere like New Hampshire to avoid paying sales taxes on it - you have to provide the proof of your purchase to your state government in order to register it. There's some technicalities around that, but for the most part, the loopholes aren't easy.
Except get in the way of profit and innovation?
Read "Wealth of Nations" by Adam Smith and take microeconomics 101.
Service economy is a transitionary state where you have no creation of value, and the money hasn't yet been drained, and poverty. People pass around the same dollar bills, but only a tiny minority actually create value. Given the natural system perturbations that must come - that is an unsustainable model. It is the glass vase on the top of the wobbly table. It must crash.
As the nation moves from a tangible goods-based economy to a service-based economy...
"As Americans continue to be ripped off by illegal Chinese currency manipulation..."
FTFY
In collegiate academia with my microeconomics prof. that it's NOT sustainable since MOST guys want the stability & familiarity of ROUTINE (8-4/9-5 job) + don't CARE for a lot of responsibility (what union jobs gave you with SPECIFIC parameters of your task/job as requirements, nothing more, nothing less) - a nice "steady-eddy" pretty much once you got the job down mindless job!
See... You CAN'T HAVE more "chiefs" than "indians" in other words, & what does a "service economy" produce? NOTHING tangible, & that exact phenomenon.
Pretty soon, offshoring for lower wage would happen because of the system itself trying to "maximize profits" which is the "MBA MANTRA"!
(& that is what I pointed out as a young kid only no less),
Since in that very class we WERE TAUGHT that WAGE IS THE SINGLE EASIEST COST-CENTER TO CONTROL & often is!
What is the 'trend' today? That very thing. Fine!
Well - that is, until you have NO DISPOSABLE INCOME in the "hands of the many" that spend FAR MORE than their wealthy 1% counterparts EVER could as a mass.
That's when the "shit starts to hit the fan"... economies aren't HEALTHY unless money changes hands frequently for goods & services... especially ones no longer based on physical good sold for GDP, but instead, intangible 'services'... dumb!
Then, you start to see the SMALL businesses die (which is what is happening - bars, theaters, restaurants - where "fun money"/disposable income go), which in turn, forces prices up from their suppliers, which in turn forces up prices @ the point-of-sale retailer of whatever good/service, & the wheel keeps doing this, until the tire is out of air.
APK
P.S.=> I saw it coming as a kid - anyone with 1/2 a brain & a set of eyes would! I told him "Did you read that in FORBES & just 'spit it back to us' NOT thinking of the outcome, long-term?" To which he said "This is HOW it's going to be whether we like it, or not!" (& that told ME that this entire economic fiasco has been "in the making" for @ least 2-3++ decades now, & here we are, @ the mercy of these "economic geniuses'" plans (for ruin & due to their greed)) - Then, that economics prof. threatened I might not pass the class, to which I told him "I am keeping a current B+ avg. & I am SURE that others in the class would witness for me as to your threat, & I'll take it PAST your dept. head IF NEED BE pal"... needless to say, I left the class with a B+ iirc... ... apk
As it stands every little thing seems to attract a tax. We even do things that are counter to our announced intentions just to find a new source to tax. For example some states now apply a special tax to electric vehicles under the excuse that they don't pay gasoline taxes. You can bet that some governmental idiot is thinking about taxing bicycles as they also pay no gasoline taxes. That makes as much sense as taxing people who walk rather than drive as they also do not pay gasoline taxes and after all cause the city to build those annoying sidewalks.
We do need a Robin Hood tax that taxes financial transactions as that industry gets away with economic murder. For example if your spiffy computer system can trade stocks 1000 times a second maybe a tax on each transaction would stop that kind of nonsense stock sales.
However, other than financial services taxes we need a no new tax law as well as laws that halt all increases in tax rates. We also need to fix the value of a dollar in such a way as inflation does not effectively create a new tax rate for the government.
So, in the states that have sales tax on sales of software on CDs or other tangible media, does this mean we can forego the "license" fiction and consider the purchase to be an actual sale?
What are they even talking about? You buy ANYTHING in the state, it's taxed. Buy ANYTHING from outside the state, it's not taxed. Unless the product is classified specifically as tax exempt, it gets taxed. I know this, as I run a computer repair and accessories store. If I sell a copy of Malwarebytes, it's subject to sales tax because it is a thing and I'm selling it in the state. So saying they might start taxing software sales is idiotic. They either already do or it's interstate so it's against Federal law for them to do so.
This article means that every new release of Debian has to be taxed, and every new release of the Linux kernel? Every couple of hours, Microsoft Security Essentials sends an update. That has to be taxed, too? These are software services, aren't they?
Is it like some future version of a DVD?
Where do I plug it in?
Software should be taxed, just like anything else. And corporations should pay taxes and not get loopholes like Ireland or the Bahamas.
-- Tigger warning: This post may contain tiggers! --
Because I have the commerce clause on my side!
Bicyclists ought to pay for all the bike lanes they are forcing on us. Those are expensive to build!
The cost for sidewalks for pedestrians is hopefully already covered by a property tax.
I think we should tax home owners with a luxury tax if they have a car or boat in their driveway. As I'm sick of looking these toys on every suburban street.
Electric vehicles should pay an EV tax or agree to a GPS recorder and millage tax to pay for public roads. I would be OK with suspending the gas tax entirely and switching everyone over to a fairer mileage based system.
But sudden changes might get ugly for the trucking industry. But the trucking industry isn't really absolutely necessary for our national economy, so I don't buy the argument too big to fail. We could gradually transition back to railroads if they got to be competitive in prices for small goods. (maybe better containers for transporting). Definitely would be complicated and difficult, and some medium sized cities would wither up and die unless new rails are built. Would be really nice to double up all the rail lines to make cross country transport more efficient, but it's such a huge capital investment.
“Common sense is not so common.” — Voltaire
There should be exclusive a solitary tax. Income tax. It should pertain to all income equally. There should be no loopholes and it cry not be "graduated" (i.e. higher charge for the deluxe) There should be no deductions or tax deadlines. It would be rattling sagittiform and funfair. Lastly it would encourage savings kinda than depletion which is something we pauperism desperately reactionist now. Amazon Profit Sniper Our rife "modern" system results in the sumptuous salaried less than the insufficient in galore cases because they are amend visored to use the system in their advance no think we require split immature "mini" taxes on every product, income circumstance, and run there is. The repair purpose of all of our tax muss is to obfuscate the genuine pct we're all paying in taxes.