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Should You Pay Sales Tax on Internet Purchases? South Dakota Law Could Be The Test (pcworld.com)
An anonymous reader shares a PCWorld report: A new South Dakota law may end up determining whether most U.S. residents are required to pay sales taxes on their Internet purchases. The South Dakota law, passed by the Legislature there in March, requires many out-of-state online and catalog retailers to collect the state's sales tax from customers. The law is shaping up to be a legal test case challenging a 25-year-old U.S. Supreme Court ruling that prohibits states from levying sales taxes on remote purchases. Unless courts overturn the South Dakota law, it will embolden other states to pass similar Internet sales tax rules, critics said. The law could "set the course for enormous tax and administrative burdens on businesses across the country," Steve DelBianco, executive director of e-commerce trade group NetChoice, said in a statement. If dozens of states adopt Internet sales taxes, online sellers could face audits and changing tax rules in thousands of taxing jurisdictions nationwide. Even with software that could make tax calculations easier, that would be a burden, NetChoice says. And online shoppers could end up paying up to 10 percent more for many products.
What about all the shit I order directly from China, or Singapore, or South Korea? Do I still get to illegally dodge my use taxes that way? C'mon - throw me a bone here.
Major retailers like Amazon already have to collect sales tax for out-of-state purchases in Illinois. I also live in Chicago, so I have to pay some sort of Cloud tax for Netflix and related services.
Oh noes, you are going to pay taxes that you should have been paying all along!
Signed,
Europeans, Canadians, etc.
repeal all sales taxes
You're already supposed to pay sales tax, it's just not called sales tax and it's impossible to enforce. It's called use tax and some states with financial problems have tried to increase the amount of people who pay it. The issue isn't whether you're supposed to pay sales tax but whether merchants are required to collect it. This is a nightmare for merchants if they have to pay a bill to each jurisdiction, though. And South Dakota has no right to regulate this; it's an interstate commerce issue and should be a federal issue.
This has been in the back of everyone's mind for quite awhile. One of the big arguments made by online retailers was that sales tax regulation varied too wildly from state-to-state....which is why you see quite a few states getting on board with the Streamlined Sales Tax project. You can bet that once South Dakota can prove that it works, other States will follow.
https://en.wikipedia.org/wiki/...
If you post as Anonymous Coward, don't expect a reply.
We're forced to pay both federal and provincial taxes on internet purchases...
Gee, I wonder how that gonna work...
instead of enforcing tax law to reap a trivial amount of tax from middle and lower class americans, how about eliminating tax holidays for major multinational corporations and reforming tax law for conglomerates that often pay no tax in the state through creative chicanery? I mean granted it means your political class is going to suffer underfunded elections, but it would be a refreshing change of pace to have a legislative body that didnt operate to serve the allmighty dollar.
Good people go to bed earlier.
They say that these days, smartphones and computer software can calculate sales tax easily, and that was apparently what was burdensome for a seller to have to calculate for every destination in '92, leading to the decision at the time to for online sellers to not have to bother with collecing sales tax. While obviously smartphones didn't exist at the time, I'm not sure what's change in the realm of computer software that it is somehow allegedly easier now than it used to be.
File under 'M' for 'Manic ranting'
It is, in any case, a considerably easier problem than calculating shipping costs and noone seems to have a problem with that.
And if you look at the amount of money multinational businesses spend to avoid corporate taxes, the cost of handling sales tax is trivial.
You can't have public services without taxation. The internet doesn't change that. In the end, people need schools more than they need the internet and the internet is just going to have to grow up and start contributing rather than constantly expecting pocket money from mummy & daddy citizen.
Let's be clear about what is going on here.
1) The laws already require you to pay sales taxes on EVERYTHING you buy. But the courts said that out of state sellers did not have to collect the sales tax - you were supposed to figure it out and send it to your state yourself.
2) The laws being proposed are not new "internet taxes", but instead simply attempts to force out of state sellers to collect the sales tax you owe for living in your state. If you live in Oregon, your state has zero sales tax (and no local taxes either), so this won't affect you at all.
This is about stopping people from failing to report taxes they owe on out of state purchases, not a new tax.
excitingthingstodo.blogspot.com
which covers any purchase made out of state where sales tax was not paid. No one pays it and it is difficult to enforce, but that doesn't mean that those residents are not liable for that tax.
So every business doing mail order will have to have a relationship with every states tax agency. What a pain for small businesses.
"The law is shaping up to be a legal test case challenging a 25-year-old U.S. Supreme Court ruling that prohibits states from levying sales taxes on remote purchases."
Actually, the law says that states can't require SELLERS to COLLECT sales taxes in states where the seller doesn't have a presence ("nexus"). Virtually all states that have a sales tax also have a use tax which requires people to (in effect) pay sales tax on items they purchase out of state. Few people actually pay this, since enforcement is very difficult, but that doesn't change the obligation.
The question isn't whether you're obliged to pay tax on an out of state purchase - the question is whether the entity you're buying the product from is required to _collect_ that tax from you.
Washington may be eviler than most states when it comes to enforcement of our ~10% sales tax, but I've been forced to pay sales tax on most internet purchases for years.
But why couldn't each state just create a single interstate commerce tax rate for this situation?
That way the complexity businesses complain about is removed (look a table with only 50 -52 entries), then let a state figure out how to divvy up within itself.
Simplifies for business, states get the some/most of the revenue they think/know they are currently denied.
Well, sucks for the consumer - but puts the consumer in right legal standing, fulfilling the use tax laws.
This is already done here. At least for the big guys. Apple (itunes), anything purchased through Google, Amazon (duh it's based here), Newegg, etc all charge sales tax on purchases here. I've even been charged tax from other much smaller retailers not based in WA and I've been not charged tax by yet other retailers. IMO. If the business is not based in the state, they should not be collecting tax. Just because the internet has broken down some distance barriers it should not change how/when tax is collected. An internet transaction, IMO, should be treated just as if I were physically in the store/city/county/state where the business is located.
If I drive to Oregon, no sales tax, and buy some goods there, I don't pay tax on those items. Of course as a good citizen I'm supposed to report this to the state and still pay a tax to WA, but guess what, unless it's something you license, like a vehicle or mobile home, nobody and I mean nobody (not even your penny counting accountants or politicians) report those transactions to pay taxes on.
You can be 100% guaranteed that every WA resident who lives near OR, drives over to OR, purchases liquor, tax free, and drives it back across the border. Same for any and all appliances in their homes. Appliance/electronic and liquor stores in those WA border towns only exists because of convenience and sometimes their sales make it cheaper than saving on the tax. They lose a massive amount of revenue to their neighbor businesses to the south.
I know some people who do an 3rd party distributor tax scam. Where they buy from an out of state distributor but pick up at the in state factory and they don't pay any sales tax.
What about people who cross state lines to get cheaper gas will they have to pay the difference?
This is no where near the first case like this, and although you are not supposed to be taxed for any aspect of Internet use, if you look on your bill you will find you get taxed Local, State and Federal use tax, which is completely illegal and unconstitutional, but nothing you can do about it other than to end your service,
So much for net neutrality.
https://www.youtube.com/watch?v=c7WHoqsRuxU
This is one of those very rare occasions where I would agree with my Libertarian friends that taxation is theft. Taxing something, merely because you have the power to do so, does not justify the tax.
At any rate, a sales tax on online purchases will not affect my buying habits. I usually buy things online because I can't get what I want locally.
Proverbs 21:19
what about distributors that may not even have any buying cost from the factory until they make a sale?
The franchise store that needs to buy stuff from franchise is that taxed and then the state get's to take an other cut when they resell it again?
So here's my take on it:
South Dakota is the fifth least populated state in the country, with roughly 860K people. It would be relatively low financial burden for retailers of any size to refuse services and sales billable to SD addresses.
Let the SD legislators jump on this political grenade so the rest of the country gets to witness the public uproar that results. Should give politicians reason to reconsider.
=Smidge=
gas taxes are not sales taxes, never have been, never will be
Most states (and many counties and cities) have a sales tax for things sold within their borders. Many have a use tax for things to be consumed / used within their borders which were not purchased there. The seller is responsible for collecting sales tax, while the individual is legally obligated to pay the use tax (generally on state income tax return forms).
Why do I believe that online merchants shouldn't collect use tax for buyers of different locales? Taxes are complicated. One needs to know the exact address in many cases (different cities within the same zip code code have different / additional taxes!). This would force most online merchants to use a 3rd party system for calculating taxes. Place of purchase isn't always place of use. Just because I live in Utah doesn't mean I will use the goods in Utah. I may ship the goods to a friend or family member (birthday present?) who lives elsewhere. I may use the good on a road trip to neighboring Nevada which doesn't have sales tax. This may lead to double taxes on the same purchase. I may legally be obligated to pay sales tax in one locale and use tax for another locale for the same purchase! Online merchants are outside the jurisdiction of locales where they don't have a physical presence. New York City can't force Hawaiian Host to collect taxes from New York City residents.
The IRS has a nifty calculator (https://apps.irs.gov/app/stdc/) that will use your residence and income to give you the amount of state and local sales taxes you may deduct on your federal return. Obviously, this is intended as an estimate, viable for federal tax purposes, of the sales taxes you actually paid. Other federal statistics suggest that everyone conducts approximately 8.6% of their commerce electronically. (http://www.census.gov/retail/mrts/www/data/excel/tsnotadjustedsales.xls)
I use those two numbers to calculate a use tax estimate- as if the state missed out on 8.6% of the sales taxes I should have paid. In my case, I sent the state an extra $100 or so this year which, for me, is exactly squat. However, I'm confident that making that payment absolutely insulates me from any finding that I underpaid my taxes, so I consider it a good deal. Shoot, my daughter might run for president someday or something.
I realize most people don't mess with this, but then again they carry an actual risk that it could bite them in the ass. For me, the state would have to identify about $1700 in untaxed purchases I made before they could show I underpaid at all, and unless I made the mistake of not including a large internet or out-of-state purchase in my math, that'd be virtually impossible. I like it that way, and dropping a mere $100 into the state's coffers to accomplish that seems like a bargain.
Tax scam?
All tax is nothing but a scam for those in power to deprive you of the fruits of your labor.
There's a broad category of self-assessment taxes you're supposed to be paying : use tax and their ilk.
State laws almost always indicate that it is the responsibility of the purchaser to account for this. Generally, they require that you pay the taxable difference by percent between the point of purchase and the state of residence.
Example 1: You purchase a good on the internet from out of state. You pay no (sales) tax on it at the time of purchase , but if you were to buy it in your state, you'd be assessed a 10% tax. You now owe your state a 10% tax.
Example 2: You live in one state, but purchase a car in another. Autos are taxed at 10% in your state, and at 5% in the state where you purchased it. The tax for the state of purchase IS collected, but you still owe 5% tax in your state.
The reason this doesn't come up very often is that most of these sums are very very small. Certainly far smaller than the cost of litigation to investigate, find proof, and litigate remuneration of those sums. The states still want that money! They can't afford to spend tens of thousands of dollars to recover two dollars from an individual, but they're willing to spend a hundred thousand if it brings in millions. So they target specific retailers because it IS cost effective for them to force THEM to collect the sales tax as if they were in-state sellers. Thus Amazon now collects per-state tax.
The short version is that the state wants money, and they'll keep creating laws until they can both legally take it, and it's cost effective (and easy) to do so. The same idea drives universal fingerprinting/ID and encryption backdoor initiatives. There are laws that cover the situation, but they're too hard to enforce. So they add more laws simply so it's easier to enforce the other ones.
This is one of those very rare occasions where I would agree with my Libertarian friends that taxation is theft.
You need to sue, because you were sure as hell cheated on they public education of yours.
Most states already require consumers to report purchases on which the vendor doesn't collect sales tax, and to pay the tax directly, but generally the laws are not enforced, because governors as well as legislators are too cowardly to do so. They want the money but they want vendors to do the dirty work of enforcement for them.
Ayn Rand, much?
It is ironic and unfortunate that South Dakota—which got rid of usury laws to attract credit card companies to their state—now complains that out-of-state vendors aren't paying their fair share.
Ayn Rand, much?
The funny thing is she had to go onto government assistance in her later years because she could no longer support herself.
You're messin' with my Zen Thing, man.....
Done via the federal level. Require states to find the average weighted sales tax rate for all things. This includes local. Then take that new rate, and only allow out-of-state businesses to pay it using a special tax code. This way, it's very simple.
Weighted since cities/counties/etc. have different rates.
"all things" since different items might be taxed differently. Although, when the out-of-state business calculates the tax, it first needs to determine if it's a taxable good (some places exempt food for example). Although, it could just charge the tax and leave it to the consumer to get a refund on the taxed item, for simplicity purposes.
And it'd only be for out-of-state businesses.
The revenue would then be divided up in a fair and appropriate manner within the state to its own taxing locales.
Any thoughts on this idea?
When I purchase from the U.S I see an additional "import charge" of varying price. So I just purchase from other countries instead that don't have the fee
This is of course a slippery slope. Who gets the taxes and how much?
With a brick and mortar store the transaction is pretty straight forward as both the store and me are in the same state, but with on line sales things get tricky fast.
For example: I live in California, I buy something in Nevada and have it shipped to a relative in Texas. What amount should I be taxed? Is it just California where I live, is it Nevada where the product is, or Texas where it will eventually wind up? Do I have to pay taxes in each state? Do I pay some crazy fraction dependent upon the number of states involved and the rate in each state?
Then there is the four way case, say I'm on vacation to Florida when I place the order, does Florida now get a cut?
If this becomes this crazy I see a lot of businesses setting up shop in Canada or Mexico and offering no tax purchases.
Government needs funding that I get, but often there is little restraint or control.
At a town meeting the other night, a subcommittee had several tens of thousands of dollars to spend on town amenities. They were proposing things no one had ever asked for, that would mostly go unused, and likely be eye sores. They were like drunks with a wad of cash trying to spend it, didn't much matter on what. Here's a concept, give it back!
you're supposed to VOLUNTARILY report your out of state purchases that would have been taxed if purchased in state and pay that ('use tax') to your local state.. HOW varies by state, but often a separate simple form or a line item on your regular income tax return. for businesses, perhaps as part of your own sales tax collection and reporting.
this ain't working because... people are greedy and won't pay something unless forced to, so states are trying to come up with other ways.. such as making out state merchants collect their taxes -- which will likely go away as 'no jurisdiction' or some such (an in-state presence is needed... e.g. why amazon collects wi tax but not il.. their 'chicago warehouse' is in milwaukee area, not illinois) -- but that still doesn't make your own liability any less -- that use tax you still owe on all those 'tax free' newegg and amazon purchases (unless you happen to live in one of the very few tax jurisdictions without an actual sales tax on those types of purchases, such as new hampshire)
Taxation without representation apply here? Some may say shipping road use but over the road drivers already do pay fuel taxes for states they run through so they cant use that argument IMO.
Jack of all trades,master of none
A long time ago I placed an order with Amazon.com. Being a Washington state resident and Amazon being located
in Washington State my finial payment read I was being charged tax on this item in the event Washington State
began taxing them, in the event there was no tax involved they would just keep the money.
I do all my purchasing at Newegg.com now and since.
The South Dakota law, passed by the Legislature there in March, requires many out-of-state online and catalog retailers to collect the state's sales tax from customers.
Good for them, but I live in Texas and have no business presence in South Dakota.
I'm not subject to the laws of South Dakota, so they are free to pass any law they like and I'm free to ignore it. I'm no more subject to South Dakota's laws than I am to China's laws.
I sell online, I collect sales tax for Texas, no other states. I have no business presence in any other state.
I definitely do agree that figuring out sales tax for local regions and cities would overburden all but the largest businesses. Remember we are not just talking about 50 states here - we are talking cities! And those cities have different taxes depending on whom is being taxed and doing the purchasing. Look at the laws regarding fees on recyclable containers alone. Even with computers the only way to accurately do it all would be to run every purchase though a centralized government computer system; talk about big brother...
But states do need to make an income from their citizens in order to support local government. Therefore the solution is that the federal government should impose a minimum state income tax across the board or possibly alternative tax levels.
How about a 10 percent tax level if you choose to not differentiate between states. At the federal level we limit the categories, exceptions and loop holes such that it is the same across all states. No other fees are collected: such as recycling fees. Then if businesses choose to tax by state then have one state tax dictated by the legislature of that state. The states have to follow the federal category and exception system.
Alternatively businesses can choose to tax all the way down to the city level. The business get to choose which tax to collect on behalf of the customer so long every customer from that location is taxed identically. The 10 percent motivates companies to at least tax by the state level.
With this tax structure businesses would likely tax to the city level for major cities and use a global state tax for everywhere else.
States like the idea that you have to pay sales tax on things purchased from other states, but it is likely they can't actually do that. Section 8 of the US Constitution states:
"[The Congress shall have Power] To regulate Commerce with foreign Nations, and among the several States"
Likewise Section 10 states:
"No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States"
Like almost everything in the Constitution, it is designed to be open to some interpretation but the general idea was that they didn't want states levying taxes on each other to try and pay for their stuff. They could tax things that went on in their state, but not things from other states. So far, court rulings have backed this up. Congress gets to tax things interstate, states only tax intrastate. A sales tax on something sold in another state is a fairly clear violation.
Now what some states try and do is charge a "use tax" on items bought form other states. They say they aren't charging it on the sale, but on the use of the item in the state. Trying to wrangle the definition to get away with it. It is somewhat unclear if this is allowed or not. While most states have a use tax, they don't tend to enforce it, probably precisely because they are worried about losing a court case about it.
However it should be noted this is different from things like taxes on Amazon, Dell, or other large distributors since they often have a presence in a state. If a company has a branch in a state, then the state can charge sales tax no problem.
Really though the situation is fairly silly. Looking at my state budget, it doesn't seem as though the state is "losing" much money. People still buy a lot of things in-state, and many of the online shops are subject to sales tax since they have offices in all 50 states. Really it is generally a silly cash grab by legislatures that want to spend more than they take in, but shot their mouths off about not raising taxes. It is one of those "technically correct" kind of arguments of "Well we didn't REALLY raise taxes, even though you have to pay more taxes!"
They call it "use tax" and claim any time you purchase items over the Internet where you did not pay sales tax you are required to report it as "use tax" on your yearly state income tax return. While you can leave many other fields blank when submitting the return, this field you *cannot* leave blank and you must enter an explicit value. While I'm not sure they can actually enforce this, they essentially bully fearful residents into collecting Internet sales tax for them.
But why couldn't each state just create a single interstate commerce tax rate for this situation?
That way the complexity businesses complain about is removed (look a table with only 50 -52 entries), then let a state figure out how to divvy up within itself.
Simplifies for business, states get the some/most of the revenue they think/know they are currently denied.
Well, sucks for the consumer - but puts the consumer in right legal standing, fulfilling the use tax laws.
Let me put a counterpoint to your argument.
Why can't each state just drop sales tax altogether, and make up the difference by reducing collection costs and raising other taxes?
NH total tax burden, the total amount of all taxes for the average person, is 7.9%. Of the 50 states, we are usually among the 3 lowest by this measure, and occasionally *the* lowest.
New Hampshire has no sales tax and no income tax, and we do just fine with services per-person (state spending per person) higher than California.
South Dakota tax burden is 7.1% (lower than us... this year) which is similar. They could easily dump their sales tax altogether and recover the difference in other taxes.
The reason NH does so well is that we only have property tax(*). It's one and *only* one tax, so the costs of collecting our taxes are very low. And the taxation is on one big item instead of a zillion niggling little things. Compare with California, which has property tax, sales tax, and income tax. The costs of collection and compliance are much higher.
It costs money to collect taxes. For every parking meter that takes quarters or subway system that takes cards, you need an elaborate infrastructure of meter maids, ticket kiosks, maintenance, bank deposits, and accounting.
Sales tax is much the same. It requires more complicated accounting, compliance verification at the state level, special bank accounts, auditing and so on. Getting rid of a single state government auditor will easily save $100,000 in salary and an equal amount in employee benefits.
Simpler is better - just dump the sales tax and get the money elsewhere.
(*) Not strictly true, since there are fees for government services such as drivers' licenses and corporate taxes, but mostly true for people in most cases.
The tribe could install a Post Office next to the Casino and rent out PO boxes to people. Just ship to that sovereign nation and make having to live in South Dakota a tiny bit less shitty. Bonus: You can pick up tax free smokes on your way in or out.
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
The states simply require all vendors to send them a list of products, sales amount and customer addresses for sales to customers in their state.
Then bill their own residents at the appropriate tax rate for the products.
Cheap and simple for vendors to implement. One export format for all data.
And then it puts the heat for use taxes on the states when they send a bill.
This may have technically been a tax but in reality- it was so rarely collected that it will essentially be a new tax. That's going to be really popular.
OTH, new revenue and most the people avoiding use tax can probably afford it.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
You have always been required, as a taxpayer, to pay "use tax" on out of state purchases, that is identical in rate, to sales tax.
I, living in Sweden, pay VAT on all purchases. It doesn't matter if I buy locally, from a Swedish retailer online or from a German online retailer without any "presence" in Sweden. Consistency makes sense and I don't understand why it's even a topic for you in the US. Live in state X = pay sales tax demanded by X.
The state of south dakota has no legal authority/jursdiction over out of state people or businesses. This law is unconstitutional and written by retards. Here is why: if a business exists solely out of south dakota then the laws of south dakota can't be enforced or applied. A south dakota citizen could order something and have it sent by federally protected mail against the wishes of the state. Mail cannot be regulated by the state.
The state is going to get pwn3d.
obamasweapon.com
I am not sure but besides mail the state might be able to somehow stop items from coming into their state but not sure, forcing people to buy locally. That would be the maximum of their power. Can they regulate the mail cooridor though since thats a federal system? No idea.
People just pay 25% sales tax on all goods regardless of how you buy them and it's part of the displayed price, not something that gets charged on top.
Everyone's all "I know how to make this better so the state gets its fair share!"
And I'm over here thinking, what entitles the state to anything whatsoever in this transaction? And furthermore, how have they not already gotten their cut via:
Road use taxes
Federal subsidies
Income tax (of people transporting and buying)
Sales tax (of items needed to transport goods)
And probably a dozen more. Meanwhile, that's yet another sliver out of the piece of pie I'm left with, from the pie I made myself, after paying multiple taxes on my money. All this does is increase cost for everyone, causing inflation and decreasing system efficiency.
Its fucking astounding how many people who work with computers can't see that government works almost exactly like malware - exactly.
~/ssh slashdot.org ssh: connect to host slashdot.org port 22: too many beers
I suspect to most this sounds very simple: Do I want to pay more for things? But If you have any sales tax, it should cover all sales without exception, only graded so that is does not place an unreasonable burden on the poorest - in practical and legal terms, makes it very complicated. If you pay sales tax in your own country on things bought abroad, it amounts to an import tarif, which may not be allowed under whichever international agreements are in power. And it may lead to double taxation - so it would be fairer to tax only those imports that have not already been adequately taxed in their country of origin, but how do you even begin to manage that? And so on. Not to mention tax on sales within a nation or free-trade area; a sales tax should not wipe out competition in the market, for one thing.
From Wikipedia:
Rand underwent surgery for lung cancer in 1974 after decades of heavy smoking.[96] In 1976, she retired from writing her newsletter and, despite her initial objections, allowed Evva Pryor, a social worker from her attorney's office, to enroll her in Social Security and Medicare.
Just another day in Paradise
First, this should be collected by the delivery company. It is the only way to make this happen. Secondly, a single nationwide tax is far far better than having companies figure out what tax levels. Third, to make it easy, charge 10%, give 1% to delivery, 1-2% for feds and rest goes to state sold in and they figure it out.
I prefer the "u" in honour as it seems to be missing these days.
I would rather see sales taxes go away altogether. They are a regressive method of taxation, and one that discourages worthwhile transactions. I see them as the least desirable of the three basic forms of taxation (sales, income, and property) and would prefer a shift to the other two.
Unfortunately, the rest of the world doesn't see things that way and chooses to heavily emphasis sales taxes - typically under the name of value added tax, which in the end amounts to the same thing). For the US to move even further away from sales taxes and toward income and property taxes would just lead to more tax evasion of other kinds like offshoring and corporate inversions.
"The Congress shall have Power... To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;" -The Constitution A state trying to regulate what is fundamentally interstate commerce is not only illegal -- it's unconstitutional. Ordinarily, lawbreakers are punished. I would suggest that many citizens in your states could be outraged to learn that their elected reps are spending their tax dollars trying to break the law, and make life more difficult with a steeply regressive tax. I suspect those citizens would seek to punish those lawbreakers in a variety of ways -- including, when applicable, at the ballot box. And I suspect that many of those outraged citizens would include those who worked online for a living -- a far greater number than you may realize -- who happen to know how to use the Internet for all sorts of things, including rallying ad-hoc campaigns. For example, Utah's state reps and senators found out an unpleasant truth during this last legislative session: Utah has 10,000 "mommy bloggers" who were outraged to learn that their lawmakers were trying to attach taxes to affiliate advertising with companies such as Amazon. And, it turns out, bloggers are easily outraged, unified, politically active, and love nothing more than to blog profusely about things they are upset about, including specific state reps. (The proposed law was scrapped, along with a few legislative careers, I suspect.) Just, you know, an FYI.
Payroll taxes are complicated.
Payroll tax is paid where a business has employees. It does not apply in jurisdictions where it has no employees. A mail order business is likely to have customers in far more local tax jurisdictions than it has employees. Therefore it is more likely to be able to afford to hire tax professionals for each jurisdiction with employees than for each jurisdiction with customers.
Local sales taxes are complicated.
State sales tax is paid where a business has storefronts or warehouses. Under current law, it does not apply in jurisdictions where it has no storefronts or warehouses. A mail order business is likely to have customers in far more local tax jurisdictions than it has storefronts or warehouses. Therefore it is more likely to be able to afford to hire tax professionals for each jurisdiction with storefronts or warehouses than for each jurisdiction with customers.
That means that as a business, you simply pay a service a small fee for taking care of all of this for you. Intuit does it for payroll stuff now
Such a fee would likely be higher for mail order sales tax than for payroll tax solely because of the sheer number of jurisdictions that it must cover.
most companies with sales tax calc requirements just use these services either via API or local software that is kept updated
Vertex quoted me a minimum fee of $350 per month, even for a tiny spare-time business that makes only a few sales per year. So much for being able to go into business for the price of web hosting.
Do you have to prepare and file, or pay someone thousands of dollars per year to prepare and file, a separate income tax return for each tax jurisdiction in which someone orders for you? The income came from people living in those districts of those cities in those counties in those states; you would then deduct expenses related to sales to those districts of those cities in those counties in those states.
If anyone has the right to collect sales taxes it should be the state and city where the company is located. If I make a purchase in a neighboring state this neighboring state collects any sales taxes. The should be the same for Internet purchases. It is unfair for a state to collect sales tax on a retailer who doesn't have any presence in their state. They don't provide any services or infrastructure to this company but get to collect sales taxes as if they did. If online retailers must collect sales taxes based on where you live then brick and mortar stores should also be forced to collect sales taxes based on where the customer lives.
A fee is something paid for a benefit you receive, that you don't pay if you don't receive the benefit, and that only covers the actual cost of the benefit.
Or in economics terms, a "fee" is for a benefit that is excludable; a "tax" is for a benefit that isn't. But in the real world, some benefits are more excludable than others. The least excludable benefits are public goods, such as national defense and clean air, and a resident cannot reasonably remain on the soil without receiving them. Otherwise, a lawmaker could spin any tax as a fee by claiming that continuing to exist without being shot or imprisoned indefinitely is a "benefit".