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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."
Or consumers will just end up paying more, since more tax will be collected.
Except that big players like Amazon actually want online sales tax. The infrastructure to collect state and local taxes for all 50 states is beyond small retailers, thus either driving them out of business or forcing small retailers to sign up as an Amazon affiliate so they can have someone else deal with the minefield of state and local laws.
I'm a good cook. I'm a fantastic eater. - Steven Brust
There seems to be a mistake with which court ruled and which court affirmed.
The New York Court of Appeals is their highest court; the New York Supreme Court is its "appeals court." Hence, the NY district court ruled, NYSC then affirmed, whereby the high court (NY Court of Appeals) then affirmed once again. Counter-intuitive, I know; but that's the way it is.
that's what the NY court ruled, the quill test is satisfied and there is no conflict
i can buy from lots of websites in NY that won't collect sales tax because they don't have any affiliates here
SCOTUS fails to act against government's financial overreach! We could NEVER have predicted THIS!
I've fallen off your lawn, and I can't get up.
I don't think it will help them much. Brick and mortar still has to pay property tax, utilities, etc. They still have to finance high-value real estate. They still have to have a clean, wide-open space which is aesthetically pleasing but economically wasteful. Anyway, I'm not aware of states with 10% sales tax - usually it is about half of that, and the highest seems to be 7.5% in CA. To get to 10%, I have to scroll down the list and find the highest state taxes and combine them with the highest local taxes.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
Or, as with here in NC, Amazon will stop the associate/affiliate program in states that enact tax laws.
Darryl L. Pierce "What do you care what people think, Mr. Feynman?"
I don't think it will help them much. Brick and mortar still has to pay property tax, utilities, etc. They still have to finance high-value real estate. They still have to have a clean, wide-open space which is aesthetically pleasing but economically wasteful. Anyway, I'm not aware of states with 10% sales tax - usually it is about half of that, and the highest seems to be 7.5% in CA. To get to 10%, I have to scroll down the list and find the highest state taxes and combine them with the highest local taxes.
Fort Smith, AR is close.....9.375 % city & state combined.....
You're messin' with my Zen Thing, man.....
most of the small businesses who sell online use one of the many off the shelf or cloud solutions out there. or they use amazon's website to sell their wares. most of the older crap amazon lists is really sold by someone else.
any small business trying to write their own code for this is plain dumb
Get ready for amazon.ag and overstock.ag.
At least, if I were in charge at Amazon.com or Overstock.com, I'd be looking to move the business out of the USA. As a bonus (outside of avoiding overly-burdensome US tax/regulation bureaucracy and costs), they could offer any US copyrighted work for sale from Antigua without any consideration for US copyright holders.
Strat
Progressivism (aka US 'Liberalism'): Ideas so good they need a police/surveillance-state to enforce.
so?
most of these people have no problem voting in local leaders who like to spend $$$
Simple reason why not: Rhode Island (to pick the smallest state) passes a law saying sales tax 1% for all online sales. Every online retailer “moves” to RI, and every other state loses piles of revenue.
Emphasizing the “use tax” aspect requires tax be paid where the product is in fact “used” and makes it harder to game the system. Unless you happen to have a very accommodating friend/relative in a particular low-tax state, you pay what your local law makers have decreed. No tax havens emerge.
Actually, no, VAT is collected at multiple points, by the producer/importer, the wholesaler, and the retailer. To avoid VAT avoidance.
At least in most countries.
-- Tigger warning: This post may contain tiggers! --
I think this will drive omnichannel commerce and remove the 10% price advantage that companies like Amazon and Overstock enjoyed with respect to Brick and mortar stores. Competition will increase - and it can only be better for consumers.
Bull. Flat out bull.
People don't pick Amazon or Overstock to save on sales tax... they do it because the prices are cheaper. When I head to BestBuy and find a SATA cable listed for 25 bucks, and Amazon has it for 4.50... I don't pick Amazon because I "save" 7.25% in sales tax.
Plus those Brick & Mortar stores don't charge shipping... Shipping is almost always higher than sales tax. Now I know you are going to say "But Amazon offers free shipping for orders of $35 or more!"... So does UPS ship for free on those orders? No. Amazon eats the cost to encourage people to buy more. So why doesn't the Brick & Mortar stores offer "We pay the sales tax for all orders over $X!"??? They can reduce the price by what ever the local tax rate is (7.25%) easily enough. They don't because they know that isn't the reason why people are shopping online.
There is a good reason why the SCOTUS refused to hear this: It would be struck down. Article 1, section 9 of the US Constitution states: "No Tax or Duty shall be laid on Articles exported from any State." To put it simply: If I own a store in New Mexico, and I sell to somebody who lives in a different state... I don't collect any taxes or duties on that item. If I have a store in that state, I will have to collect taxes.
Sears & Roebuck had the same sales model as Amazon back in the late 1800's. They didn't collect sales tax either.
Sears sold things by a mail-order catalog.
Customers would read the mail-order catalog, and use a mail-in order form for items, with payment.
After receiving the order and payment, Sears would deliver the requested item.
Amazon does the same thing, just replace "Mail-order/mail-in" with "Online". Changing the way one reads a catalog, or orders items doesn't affect the law. If somebody uses a telephone, it didn't change it, neither should a computer.
Stores in town lost customers due to this, not because of "They don't collect sales tax" but because they offered so much more, at a cheaper price. The brick & mortars did have a "You get it now" features instead of having to wait 2 weeks... but for many, the savings was well worth the wait.
if (it != oneThing) it = another;
"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.
Companies move to states that have low taxes, good infrastructure, where people need the jobs, etc. That sounds like a win to me - it works better for everyone except maybe the bureaucrats who did a crappy job, having high taxes but not using it to build strong infrastructure, a strong workforce, or anything else that attracts business.
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.
Washington has sales tax paid at purchase. (Local to me it's 9.2%)
Oregon has a state income tax -- so save those receipts.
Thus both states tax their goods, just one more delayed than others, with the benefit that Washingtoninans love shopping in Oregon since they don't pay sales tax and Oregonians (like Alaskans) say "no tax" when purchasing stuff in Oregon.
Laughter is the Spackle of the Soul.
Well, that statement does NOT make sense.
Total prices = Cost of Item + Shipping + Sales Tax
So, yes, not paying sales tax quite often makes the large decision in where to purchase, when total sales tax buying locally is close to 10%, that is a significant cost.
I find that the actual prices at Amazon vs most B&M places local are pretty close, but the lack of sales tax and free shipping make the choice pretty easy for me.
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
It makes perfect sense. Prices are cheaper, and it's not due to that evil sales tax being forced on B&M stores.
Lets look at the SATA cable example.
Best Buy: Cost of Item: $25. Shipping: Free. Sales Tax (7.25%): 1.81 = Total: $26.81.
Amazon: Cost of item: $4. Shipping fee: $4.50 (yes more than 100% of the item's cost), Sales Tax (None) = Total: $8.50.
Which one gets the sale?
Now lets say sales tax is collected (If I live in a state with an Amazon hub): $4 + 4.50 + (0.29) = $8.79. Heck even if the shipping is taxed it's cheaper (+0.62).
if (it != oneThing) it = another;
Amazon should just stop selling in New York to protest the taxes.
What's that? New York has more than 20% of the nation's population? So what? You mean that Amazon might prefer to collect and pay the taxes, rather than lose ~20% of their business? Imagine that . . . .
"Windows is like the faint smell of piss in a subway: it's there, and there's nothing you can do about it." - Charlie Br
For a second example:
Monsters University Blu-Ray + DVD Combo pack (not Collector's Edition)
Local Tax rate: 7.25%
Place: Item Price + Shipping + Tax = Total
WalMart: 29.96 + 0 + $2.17 = $32.13
Amazon: 23.29 + $3.98 + 0 = $27.27
Amazon's total price is still cheaper than WalMart's list price. Even if there was a sales tax, Amazon would still be cheaper. And if I buy a bit more, the shipping cost will be paid by Amazon.
And the "With big items, it makes a difference"... No, it doesn't. Big items are normally... Big and or heavy. Lets say a TV. The shipping cost of that isn't cheap... Very likely it's higher than what any sales tax that would apply. And either the customer pays it (still being cheaper than the B&M store), or the store eats the cost...
if (it != oneThing) it = another;
I'm guessing myself, like many people put up with the 2x day delay in getting something (delayed gratification) due to not having to pay sales tax on orders from Amazon.
How much do you buy that you need "immediate gratification" for? Most of the things I buy are because I have to. Clothes, household items, etc.I shop online primarily for the convenience, with selection and cost coming next. The fewer retail stores I have to spend my time in, the better. Clicking "buy" on a website is something I can easily do with time that would otherwise be wasted. Going to a retail store is a significant chunk of my very limited free time.
If I had to pay sales tax, I'd just as soon buy it locally for immediate gain, and all things being local (if all was taxed) I'd just as soon keep things local.
Shopping at a retail store like Target, Sears, or Home Depot isn't really "keeping it local".
It depends on where you are. Some states tax property, some sales, some income, some intangibles (stocks/bonds). Each state has a mix it feels is the fairest and/or most effective for them.
This is a case of interstate commerce. And for 100 years the standard has been no tax is collected by the retailer unless they have a nexus in the state. The purpose for the nexus rule is that if you are actively serving customers intrastate, you have to obey the laws of the state. The implication is that if you have enough people here to have a store, you have enough to figure out local sales tax.
This is EXACTLY the kind of issue the Feds should be deciding, as the states all have different regulations regarding it. Of all the things that matter in interstate commerce, this is one of the truly important ones where the representatives of the collection of states should agree on a standard.
Is it just my observation, or are there way too many stupid people in the world?
Shopping at a retail store like Target, Sears, or Home Depot isn't really "keeping it local".
Right. The human beings in the store aren't local. The sales taxes aren't local. The property taxes aren't local. You're right. That's a *great* justification for not giving a shit about your local community. You should pat yourself on the back for being such a wonderful person.
I don't respond to AC's.
But the main point is that States simply don't have any legal basis for taxing transactions that happen in another State. Period. That is a violation of our separation of powers.
1) This is not an issue separation of powers. SoP is between branches of government, not between states.
2) This case is not about taxing transaction that happen in another state. This is about who has to collect taxes and what constitutes a business presence in a state.
If I'm in state A and Amazon doesn't have a business presence in state A, then Amazon doesn't collect taxes for state A. But if Amazon has an affiliate or other partners in state A, is that enough to qualify as a business presence?
Can't they just do the DocMorris trick?
Instead of selling and shipping stuff to clients, the shop registers a local sale (untaxed) and the client orders a pickup service to bring it to him. (fully automatic of course, but it's pickup, not shipping)
DocMorris did it because Germany did now allow sale by internet for pharmaceutics.
But just as you can cross the border, buy drugs and bring them home, you can also pay somebody to do that for you.
It's a fine legalese point but it worked.
There is a good reason why the SCOTUS refused to hear this: It would be struck down. Article 1, section 9 of the US Constitution states: "No Tax or Duty shall be laid on Articles exported from any State." To put it simply: If I own a store in New Mexico, and I sell to somebody who lives in a different state... I don't collect any taxes or duties on that item. If I have a store in that state, I will have to collect taxes.
Your knowledge of the appellate process is matched by your understanding of interstate commerce law. If SCOTUS believes that something will be struck down, it DOES grant cert (e.g. accept the case). Refusing to hear the case means that the court believes the lower court decision was correctly decided. As for your comment on "no tax or duty," that would only be relevant if a state were placing taxes on out of state vendors that DON'T apply to in state vendors (i.e. NY wants Amazon to collect 20% sales tax, but Best Buy only has to charge 10%). In other words, it prohibits states from placing tariffs on the produce of other states to protect in-state producers. Again, there is ZERO debate that when a person in NY purchases something from Amazon, sales tax is owed on that transaction. The only question has been whether Amazon is obliged to collect that tax on behalf of the state, or whether the state needs to go directly to the purchaser to do it.
Yes, but clothes and shoes aren't taxed at all until you hit $110, and you can always take the bus over to Paramus and pay no sales tax at all on clothes. Presumably, these same rules will Apply to online retailers. So in effect, nothing will change for those kinds of items.
If you aren't in the market for clothes, I should mention the New Jersey "Urban Enterprise Zones". Those only have 3.5% tax and are easy to get to from NYC.
This is exactly why Amazon doesn't want to pay state/local sales taxes: because the rules are so arbitrary and hard to track accurately, especially since they have a catalog of millions of items and the tax status of the same item varies by area... i.e. some areas may classify footwear as untaxable "clothing", but others may not. There are literally thousands of local tax districts across the USA and they don't all end on convenient city or zip code boundaries.
The problem is that this makes it a huge pain in the ass for smaller online retailers. Brick and mortar retailers only have to deal with the taxes on the particular state and local region in which their store is physically located. Any online retailer potentially has to deal with the taxes in every state and region in the world (anywhere a customer could order from).
This means that only the larger online retailers will have the infrastructure to stay in business. If I'm starting a mom-and-pop online service, I'm either going to have to pay a 3rd-party to deal with all the states' and cities' tax laws or go out of business. Because there is no way some little operation is going to be able to handle collecting all the taxes from Nowhereville, Iowa (including know what they are and where to remit them).
If online merchants were required to collect sales taxes, Paypal and other merchant payment solution providers would offer sales tax calculation as another service for their customers so small merchants wouldn't be left out, they'd just have to subscribe to a sales-tax calculation service if their payment provider doesn't already offer it - it could even become a value-added solution for UPS and/or Fedex as a part of their shipping calculators.
Well, that is the current dream of many.. find ways to have all the benefits of operating in the US without paying for it. Taxes are something that it is in one's best interest to have other people paying.
I don't mind paying taxes, and wouldn't mind paying a standard VAT to sell anywhere in the US. But the local US sales tax laws are a complete clusterfuck. When I'm selling books in various locations, I have to dig up the tax rate for that location It's a hassle, but doable, but some states are really fucked up.
New York is one of them.
Sales tax varies depending on which county, in some cases which city or which part of the city you're in. Tax rates coded to zip codes don't work...some zipcodes span localities with wildly varying sales tax rates. I'lliinois is better, but still, rates vary depending on whether you're in Chicago proper, one of the suburbs, or one of the localities downstate.
Multiply this complexity by 50 states and you begin to realize what a complete clusterfuck it is for any small online buisiness to try and cope with. Shipping a package to Bumblefuck, Nebraska? What's the sales tax? How about Buttfuck, New York? Good luck.
Impose a national VAT of x percent, and kick back some or all of it to the states, and ban local sales taxes of any kind. This needs to be vastly simplified. Even if it were 50 states and 50 different sales tax rates that would be doable, but with many dozens of different sales tax venues with varying rates in New York alone, and plenty of states like Illiinois with a few cities that impose their own surtax to the state rate, figuring this crap out is a nightmare on the best of days. If every state is allowed to impose its taxes on all online folks, only the big players like Amazon will be able to cope. The rest of us, and most new startups, will crumble under the burden.
The Future of Human Evolution: Autonomy
Last weekend, I saw someone walk into a brick and mortar store and using an iPhone app, take a picture and order the product on Amazon, after taking up a salesperson's time answering questions.
We can argue over whether there should be any sales tax at all, but I can't see how you can argue that some companies should have to pay it and others shouldn't.
You are welcome on my lawn.
What rules? That's the whole problem right now - the rules are unclear, non-uniform, and burdensome. There are certain things a federal government is meant for. Regulating inter-state commerce is one of the most basic.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
There is no proof that reducing tax liability on business makes consumers pay less. Demand drives price. Tax has nothing to do with price.
Giving business tax breaks just puts more money in the pockets of business owners. They'll still charge the same and pay their workers the same because those costs have nothing to do with tax liability.
I suggest that if a business can't operate without handouts that it does not deserve to be in business. That is OK because other more efficient and innovative business that don't rely on handouts will take it's place.
See what I did there?
The tax money of the 10,000,000 other peoples belongs to 10,000,000 people. In other words, you can more by being many than being alone. This is why society exists and taxes are acceptable. Now if taxes do not benefit tax payers, there is a problem to solve.