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Internet Sales Tax Bill Dead In Congress
jfruh writes: Last year, a bipartisan coalition helped get the Main Street Fairness Act approved by the U.S. Senate. The bill would have allowed state and local governments to collect sales taxes on Internet sales by companies in different jurisdictions. But House Speaker John Boehner, a longtime opponent of Internet taxes, won't bring the matter to a vote in the House before the end of the year, which should kill it for the immediate future.
Technically, you still have to pay state sales tax on purchases made over the Internet. You just exploit the fact that the states can't force Internet retailers to collect those taxes and send them to the state as a way to skip out on paying your taxes.
-TheDawgLives suckitdown
There's no state sales tax on out of state purchases; that would be an unconstitutional tax on interstate transactions. There is a use tax on out of state purchases that you didn't pay sales tax on. I consider this "use tax" to be a transparently obvious evasion of the restriction on states taxing interstate commerce, and therefore invalid. Then I exploit the fact that the states can't force Internet retailers to collect those taxes to avoid getting into a dispute with the state over whether they are actually invalid.
There's no state sales tax on out of state purchases; that would be an unconstitutional tax on interstate transactions.
Actually, it isn't even that... it would be an unconstitutional attempt by one state to tax a transaction that takes place in another state. Not an "interstate" transaction at all. And allowing such taxation would open up a can of worms the size of China.
If one state can tax a transaction in other state -- for ANY reason -- what's next? Wisconsin taxing your grocery purchases in Los Angeles? It's easy to see how absurd that concept is.
BUT... there is also this fact, which is uncomfortable to lawmakers: the ONLY way to effectively have online transactions is to consider the purchase made in the state of the seller. This is very much old hat, as it was hashed out in the courts to a VERY definite conclusion more than 150 years ago, when mail order became common. That's why the company having a "physical presence" in your state makes a difference... only then can the sale be considered to be in your state.
And... internet sales are mail order. The ONLY differences are how the payments are made, and how you view the catalog. You're still getting your product by mail.
When you add all these things up, the inescapable conclusion is that an internet sales tax is unconstitutional, since it is de facto an absurd tax on transactions made in other states. (Except, of course, when the company has a presence in your own state.)
My local brick and mortar store are automatically at a 7% price disadvantage because they have to include sales tax to items purchased where online retails don't.
No, your local brick and mortar store is at a 15-30% disadvantage simply because they charge a lot more for most things.
I just bought a gaming headset at a local B&M because I wasn't sure if it would work for me (comfort, quality, etc.) and wanted an easy return if I had to. For that, I paid 44% more than if I had purchase the item from Amazon. This is not an unusual situation, at least as far as tech is concerned, with Amazon, NewEgg, SuperBiiz, etc., all fighting for my online purchases.
Also, Amazon charges tax in my state, so that part doesn't even enter into the decision to buy online.
The interstate commerce clause specifically forbids a state from charging sales tax on interstate commerce. States that want to tax interstate commerce charge a "use tax". Whether such a tax is legal, I don't know.
The commerce clause (Article 1, Section 8 of the U.S. Constitution) restricts interstate tariffs to those that do not create an "undue burden." Court decisions (e.g., Quill v. North Dakota) have established that placing a collection burden on an out-of-state business that has no physical in-state presence creates such an undue burden; hence the arguments around whether or not Amazon (and others) can be compelled to collect and remit tax for states in which it claims to have no nexus. Requiring customers to remit their own use tax for interstate purchases has not been found to create such an undue burden, and has been in practice since long before the interweb was invented.