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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.
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.
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.
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.
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;
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;
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.
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.
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?