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.

Comments

Re:This is already done in Illinois

[TWX]

That's because Amazon has a business-presence in Illinois. When the selling agent has a presence in the state it's really not possible to justify the purchase as an out-of- state purchase.

Don't be unclear

[gurps_npc]

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.

Re:Don't be unclear

[twotacocombo]

Let's be clear about what is going on here.

1) The laws already require you to pay sales taxes on EVERYTHING you buy.

False. Not everything is taxable. Here in California, they've even created an easy-to-use 45-page document that clearly outlines the exemptions and exclusions for sales and use taxes. Behold:

http://www.boe.ca.gov/pdf/pub6...

So easy, even a caveman can do it! Now imagine having to go through that guide, comparing it to all of your out of state invoices and receipts collected through the year, and calculate your taxes due to the penny. Fuck that shit. When they can get corporations to pay their fair share, and quit pissing away all the tax revenue they do collect, then we can talk about the extra $12 grandma owes because she bought a box of beanie babies off eBay

Terrible description

[jratcliffe]

"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.

Sales Tax, Use Tax, and the Internet

[laie_techie]

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.

Re:This is already done in Illinois

[nmb3000]

But what's the reasoning?

It comes from one of the shortcomings of the Articles of Confederation when the United States was still functionally 13 independent colonies. States issues their own currency, levied tariffs and taxes on interstate commerce, and generally made it difficult to do business between the colonies. Every state wanted to have the upper hand and promote their own industry and products, to the overall detriment of the union.

Under the Articles, Congress had essentially no power to collect taxes or control commerce. The Commerce Clause and various taxation powers in the later Constitution were written largely to address these shortcomings.