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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.
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
It's likely that it'll be held to the state-level.
When Dad bought a car from an out-of-state dealer he basically did it as a catalog purchase with will-call pickup. The selling dealership did not collect any taxes, including anything for registration other than the fee for a temporary-use permit so we could drive it home.
He did still have to pay taxes, but those taxes assessed were state-taxes, no county or municipal taxes. Also, normally our state bases the sales-taxes on the MSRP of the vehicle regardless of the deal negotiated (probably in-part to prevent fudging the paperwork by offloading some vehicle costs as untaxed labor for the installation of accessories) but because this was an out-of-state purchase, the sales tax was based on the contract price, not on the MSRP. Even with three people flying in and with a hotel bill, fuel, and food, it was still a lot cheaper to purchase the vehicle this way.
I expect that taxes will be similarly applied to catalog purchases if retailers are forced to collect them on behalf of the resident's state. Counties and municipalities will either not factor-in (as they don't when you buy something in an adjacent city anyway) and the seller will only have to collect on behalf of the state. I furthermore expect some states to attempt to add more taxes to out-of-state catalog purchases (like New Hampshire, no local sales tax, so they could encourage local retail through out-of-state catalog purchase taxes) but that this may be a problem and could be ruled-against.
Do not look into laser with remaining eye.
If only we had some kind of calculating device that could reference a table of tax rates updated on a regular basis...
If that's all it took...
Let's say you are shipping a fluorescent yellow vest from California to Minnesota. In Minnesota, clothing is not taxable, but safety equipment is. Do you collect tax on it? Does their state consider it clothing or safety equipment? Add a pair of reading glasses to their order. Minnesota taxes general merchandise at one rate, while medical devices are taxed at a much lower rate. Which rate do you choose? Or are glasses considered clothing, because you wear them? What about a boxed set of grill accessories that includes a fork, a spatula, an apron, and an oven mitt?
Now ship a swimsuit to Pennsylvania. Clothing is taxable there, but sporting goods are not. Is swimwear taxable there? How does your cart service even know if it's a swimsuit when your online site only knows the product as Item#123456?
Next, ship a bicycle fender to a Houston, Texas, address. The law says you pay a higher tax rate if there is a public bus stop on your block. What tax rate do you charge?
Ship another fender to a Colorado address. They not only have sales taxes, but they have fees on some items, because some politician vowed not to raise taxes, but made no such promises about fees. Do you collect those fees on a fender? Do you charge sales taxes on those fees?
Do you charge tax on the shipping? That depends on whether you are shipping as a service to the customer (services are taxable in some states), or if you're shipping it because you don't stock the product in their state (a business expense.). Do you charge shipping taxes at the rate of the point of origin, or at the rate of the destination? To which state do you send the money?
In all these states, anyone doing business in their borders has to answer these questions because it's their law. Do I have to know every law in every town in America?
The states are a mess of thousands of such stupid and incompatible laws, each passed on behalf of some corrupt politician's crony. Never think it's easy just because it seems like simple math.
John
Supreme court precedent is that states can't do what south dakota just did. The first time SD tries to take an out of state retailer to court for non-payment of taxes they will lose and the law will be invalidated unless the SC is willing to review and undo the previous precedent. The SD legislature can't override the supreme court.
There is a very valid reason that sales tax is too difficult to collect out of state, even with software. Louisiana has over 1000 sales tax districts and every single district has exceptions in place that tax some items and not others often at multiple different rates and just this year they revised the system almost completely by changing around which are taxed and which aren't. That's one state, this behavior isn't limited to that one state.
My state has relatively simple sales tax rules with only half a dozen districts with consistent taxing polices between them only different rates but this isn't the norm. The complication here is immense and if the business doesn't have a presence in the state they shouldn't be taxed unless the hosting state joins these voluntary state efforts or the fed's pass a national sales tax harmonizing law for out of state purchases.
Those are really the only two options IMO.
As if the people who benefit from capital gains actually make anything.
Most Boeing aircraft are actually sold while in flight in international airspace.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
Amazon used to do exactly that. The change to warehouses and distribution centers closer to population centers was a deliberate shift in their strategy so as to make one-day and same-day ordering feasible, as well as to introduce Prime Pantry.
For example: It used to be the case that, in the Bay Area, pretty much anything you'd order from Amazon would come out of their distribution center in Fernley, Nevada. That's about a six-hour drive up I-80, depending on traffic and the weather whilst going over the Sierras. That was fine for standard and two-day Prime shipping. But one-day could be disrupted by fairly minor delays; and same-day was pretty much a non-starter. And, of course, there was no sales tax charged back then which, I'm sure, was part of the reason for the Fernley location in the first place.
Now, they have multiple distribution centers in the Bay Area itself. The big one is out in Tracy (Okay... it's debatable if Tracy still counts as part of the "Bay Area", but whatever.), and there are smaller warehouses scattered throughout. That's in addition to the depots for their Prime Pantry trucks. So, now we pay sales tax on our Amazon stuff. The upshot though is that one-day and same-day shipping is available for the majority of Prime purchases. In many cases, the faster shipping is a free upgrade. And you can order your groceries from Amazon as well.
Imagine all the people...