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Supreme Court Declines Case On Making Online Retailers Collect Sales Taxes
thomst writes "Robert Barnes of the Washington Post reports that the US Supreme Court has declined to hear petitions from Amazon.com and Overstock.com requesting that a decision by the New York State Supreme Court permitting that state's 2008 law requiring sales taxes be collected on Internet sales, even if the seller has no 'business presence' in New York. The New York Court of Appeals ruled that Amazon's relationship with third-party affiliates in the state that receive commissions for sending Web traffic its way satisfied the 'substantial nexus' necessary to force the company to collect taxes, and New York's Supreme Court had affirmed the ruling. The Federal high court's refusal to hear the petitions leaves the state law in effect, even though it appears to conflict with the Court's 1993 decision in Quill v. North Dakota."
"Just a note, the UK is also going after tax avoiding, not just Italy, and the same goes for the US. ...
Nuff said."
No, NOT "nuff said". This is NOT ABOUT "avoiding taxes". It is about the sovereignty of states and their freedom from interference by other states. The U.S. is not the UK. Our government is organized very differently.
We have 50 independent States which have independent tax authority, and Point 1 here is that no State has authority to tax transactions that occur in another State. That would violate the latter State's sovereignty. Point 2 is that the Federal government has no authority to collect taxes on behalf of any State. We have 200 years of case law and prior legal decisions to back this up. (Which, I should add, the current Supreme Court seems to take pride in ignoring.)
In fact this was a hotly debated issue -- in court -- about 150 years ago, when mail-order businesses became popular. A person could send a check to somebody in another State, and that company would send the product to the buyer. When this happens, there is Point 3: the transaction is deemed to take place at the location of the business. That is the only workable way to do it: the transaction doesn't take place at the purchaser's location, because companies would have to keep track of tens of thousands of individual taxing districts throughout the country, and put up with tens of thousands of different sets of regulations concerning how to collect and distribute the taxes. That won't work. Even today, when computers could tell you what the taxes are, keeping track of how much tax to collect, and all the different reporting and payment requirements, would only be possible for giant corporations. Small companies would be out of business.
Point 4 is that Internet sales are mail order. The single difference is method of payment. Most people today buy via credit card rather than sending a check.
Point 5: The courts ruled that if the business has a "significant business nexus" within the purchaser's State (usually meaning a "physical presence" link a branch store or warehouse), the transaction can be deemed to take place in the purchaser's own state and is therefore subject to the sales taxes of that state. This is not unreasonable.
Point 5: To get around the "foreign transaction" problem, States came up with the idea of a "use tax". Since they have no authority to tax a transaction that takes place in another state, what they do is tax the purchaser for the use of the item they purchased elsewhere. The use tax is invariably the same amount as a sales tax would be, BUT it isn't a tax on the transaction, it is a tax on the use of the item within the resident's state. So it is legal.
Point 6: States must rely on people reporting their purchases in order to enforce the "use taxes", which many people do not do. In fact many people do not even know use taxes exist unless they purchase an automobile outside their state, in which case states pretty much know where you got it (because of licensing requirements) and will charge the use tax. However, that leads to
Point 7: Although States find it difficult to enforce use taxes on internet (mail order) purchases, difficulty of enforcing the law still does not change the fact that they have no authority to violate State sovereignty by taxing foreign transactions.
So that is a bit of history about how this actually works. The conclusion is Point 8: there is no lack of taxing power on internet (mail order) sales. It's just that the States find it difficult to enforce their use taxes. That is why they have been pushing for an (unconstitutional) "internet sales tax".
The very concept of an across-the-board "internet sales tax" is in fact a violation of our separation of powers. There is no legal basis for States to tax transactions that occur in other States. If they could do that, they could tax anything, anywhere. Texas could tax a transaction between an Ohio resident that occurs in Maryland. If that sounds ridiculous to you, that's because it is. There is simply no legal basis for any of this.
No, actually, Amazon has been fighting tooth and nail against sales tax for years.
Amazon has been fighting against having to collect individual sales tax, while endorsing a Federal framework like The Marketplace Fairness Act.