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Tech Giants Urge Congress To 'Protect Entrepreneurs' From Supreme Court Ruling (theverge.com)
U.S. states can now require online retailers to collect local sales taxes, according to a recent Supreme Court ruling that could affect thousands of third-party sellers on top tech sites. An anonymous reader quotes The Verge:
In fact, Amazon, which last year started collecting sales tax in all 45 states that require it by law, may have a substantial amount of work to do to help its Amazon Marketplace sellers stay compliant. Yet we don't know if that burden will fall primarily on Amazon or if it will be the responsibility of the sellers. More than 50 percent of all sales on the site are conducted via third-party sellers, some of which use Amazon for fulfillment but otherwise operate independent small- to medium-sized businesses... Etsy, eBay, and others are in similar boats. According to the US Government Accountability Office, as much as $13 billion in annual sales tax revenue is at stake....
Etsy is concerned about what it sees as "significant complexities in the thousands of state and local sales tax laws" and that by overruling the Quill decision, the Supreme Court has put the ball in Congress' court. "We believe there is now a call to action for Congress to create a simple, fair federal solution for micro-businesses," Silverman added.
The Verge writes that "the case may be litigated for years to come to figure out how to account for the over 10,000 state jurisdictions that govern sales tax across the country. That is, unless congressional legislation supersedes the state court decisions... Even groups that were in favor of the ruling, like the nonpartisan research institute the Information Technology and Innovation Foundation, are imploring Congress to act."
eBay has already mass-emailed many of their users urging them to sign an online petition "to protect entrepreneurs, artisans and small businesses from potentially devastating Internet sales tax legislation." The petition presses state governors, U.S. lawmakers, and president Trump to "support the millions of small businesses and consumers across the country."
Keep reading to see what eBay is urging legislators to do...
Etsy is concerned about what it sees as "significant complexities in the thousands of state and local sales tax laws" and that by overruling the Quill decision, the Supreme Court has put the ball in Congress' court. "We believe there is now a call to action for Congress to create a simple, fair federal solution for micro-businesses," Silverman added.
The Verge writes that "the case may be litigated for years to come to figure out how to account for the over 10,000 state jurisdictions that govern sales tax across the country. That is, unless congressional legislation supersedes the state court decisions... Even groups that were in favor of the ruling, like the nonpartisan research institute the Information Technology and Innovation Foundation, are imploring Congress to act."
eBay has already mass-emailed many of their users urging them to sign an online petition "to protect entrepreneurs, artisans and small businesses from potentially devastating Internet sales tax legislation." The petition presses state governors, U.S. lawmakers, and president Trump to "support the millions of small businesses and consumers across the country."
Keep reading to see what eBay is urging legislators to do...
- Keep the Internet as free from government taxation and regulation as possible.
- Protect entrepreneurs, small businesses and artisans from new taxes, audits or collection burdens because they can least afford the added costs.
- Continue to prohibit states and localities from applying and enforcing sales and use tax laws on small, remote local businesses who have no political or voting connection to the taxing state.
- Reject tax policies that raise prices on consumers who shop online with small businesses for artisan, craft, religious, vintage or other niche products because they should not be paying more taxes.
Do you agree with the Supreme Court -- or with the tech companies who want a new federal solution?
Leave your thoughts in the comments...
These are state sales taxes being applied to interstate commerce. It's the reason why sales taxes have never been applied to out-of-state catalog sales. Your inflammatory rhetoric is just that.
Is it me or does this sound like buzzwords intended hide tax avoidance.
It sounds to me that some want the benefits and access to society without making any contributions.
If it's not OK for online stores to collect sales tax when doing business in a jurisdiction why is it OK for brick and mortar? Local shops are at a disadvantage since they have to contribute to the infrastructure that makes online commerce feasible while the online merchants consider it "unfair" to make any contributions.
DRM? No thanks, I'll just get it somewhere else...
and I don't buy a lot that isn't food, shelter, healthcare or my kid's education. Now, we still manage to add sales tax on a lot of that (hooray for regressive taxation) but it's usually less and tax deductible on my federal return.
What I'm saying is, go for it. Tax me. It'd be nice if I wasn't looking to a third rate pizza joint to fix pot holes. But while you're at it how about some new _Progressive_ taxes? Our country's best years (economic growth wise) were when marginal rates were in the 90% for income over $22/mil/year (inflation adjusted). How about if I'm gonna pay my dues the uber rich do too. They benefit more than me anyway.
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If anything, it is generated from the seller's side. Move everything to Nevada, problem solved.
...
No, a sales tax isn't on the person selling the item. A sales tax is the state forcing the seller to be a tax collecting agent on behalf of the state (or county, or city, or all of the above). The seller just collects it, reports on it, and passes it along. Of course the seller does have to bear the expense of doing all of that. But it's the BUYER who is actually paying the tax. But only in states where the state decides to generate some of their operating revenue that way, instead of, say, increasing vehicle fees or raising property taxes, or doing something else to raise funds.
Don't disappoint your bird dog. Go to the range.
That's between eBay and the "seller". I don't know or care how they work it out. Ebay is a massive company with billions in assets. I'm sure they can figure it out. I work for a small brick-and-mortar and ecommerce business and we worked it out pretty easily.
I don't respond to AC's.
From what I've been reading, being liable to pay sales tax is even worse than you think. It's not just a matter of keeping track of the 10,000 or so different jurisdictions. It's much worse than that. Here's a quick overview of the issues as I understand them:
- Every jurisdiction has different rates (a combination of state, country, city, and possible other taxes).
- Different jurisdictions categorize products differently. Pre-prepped food? Food containing flour? Cloths? Work clothes? Every jurisdiction has an accumulation of exceptions and special considerations, and they are all different. So it's not only the tax rates by jurisdiction, it's the cross-product of the tax rates and the categorization of the particular products that you sell.
- You can't just send off a random check, and expect it to get cashed. If you are paying sales tax somewhere, you need to register so that they know who is paying them, and why. Of course, once you are registered, you have to file summary reports of how much you paid, for what sales, etc.. This report is typically due monthly, maybe quarterly in some places - and once you are registered, you have to file every period, even if you had no sales in that area. The specific reporting requirements also vary by jurisdiction.
- Finally, as a registered entity, you may be subject to other taxes and fees in addition to sales tax.
The court decision will have no immediate effect, but it will eventually lead to a completely untenable situation for all but the largest of businesses. This is a situation that only Congress can resolve: it is precisely interstate commerce, and precisely their responsibility to devise a fair and simple interstate solution. For example: set state-level average sales taxes, with zero variation and zero special categories, and require reporting only for periods where products are actually sold. Let the states distribute the taxes internally, however they see fit. Of course, that won't happen, because Congress is incapable of actually doing its job ("Go do nothing somewhere else"). Watch the lobbying dollars flow...
Enjoy life! This is not a dress rehearsal.
Even more so if you start needing to account for how different states and municipalities apply taxes differently. One state might apply sales tax to clothing, but not food items and another the exact opposite. Some cities may levy additional sales taxes in general or on specific products to fund the local government or some particular project. Throw in occasional tax moratoriums that crop up from time to time and it's an absolute mess.
If we're going to start asking for out of state businesses to collect taxes, the government needs to construct a system to help facilitate this as the burden it places on any business, even large ones is unnecessarily prohibitive. It's impractical, or perhaps even impossible, for someone like Amazon to get it right. At present the onus to report and pay this tax (assuming the state has a use tax, which most do in some form or another) is on the individuals who are making out of state purchases, but this is as much of a pain and half of the reason someone likely purchased online was lower cost, in part due to taxes.
Imagine a service available for free to any U.S. retailer where they simply feed the shipping address into the service along with a description of the product and it produces a total tax amount, an itemized description of all taxes being applied that can be given to the customer, and information regarding where the collected taxes should be sent. There may be some privacy concerns, but I see no reason why this service couldn't be run locally on a merchant's system and periodically pull updates from a central location.
I understand that this is not small undertaking and that there are plenty of details wherein devils may lie, but I think it might correct a certain amount of dysfunction in local governments. People who have the ability to do much of their shopping online at out of state locations won't feel as badly as voting to raise local sales taxes that aren't going to affect them as much as it does poorer people who aren't shopping online at the same rate. When the ability to avoid those taxes is removed, I suspect that they'll be more careful in their choices to enact new taxes.
Income tax is much fairer - the rich pay a higher rate.
The only sales that should be taxed are tobacco and other smokes, and motor fuels (to pay for roads and bridges etc)
It's impractical, or perhaps even impossible, for someone like Amazon to get it right
Why do you say this? You think that the largest retailer on the planet can sell (tens of? hundreds of ?) millions of different items, but can't keep track of a few thousand tax codes? That doesn't seem to make any sense.
I don't respond to AC's.
Large firms also suffer from labor shortages
I disagree. A lot of people go into this sort of self-employment because several employers in a row have "gone with another candidate."
Use taxes are calculated and paid by the buyer. Sales taxes are calculated by the seller, paid by the buyer, collected by the seller and remitted to the state. The problem is that brick and mortar companies only need to know the sales tax rules in the community their building is in. An online business now potentially needs to know tax rules for thousands of jurisdictions.
It is onerous.
Imagine a service available for free to any U.S. retailer where they simply feed the shipping address into the service along with a description of the product and it produces a total tax amount, an itemized description of all taxes being applied that can be given to the customer, and information regarding where the collected taxes should be sent. There may be some privacy concerns, but I see no reason why this service couldn't be run locally on a merchant's system and periodically pull updates from a central location.
I've felt for a long time that the various sales taxing authorities should do something like this. Get together and create a nationwide online sales tax clearinghouse where you feed it the necessary information and it calculates the taxes owed. Then the vendor collects the tax and forwards it to the clearinghouse which takes care of distributing it to the various taxing districts. It would be paid for by using a small percentage of the taxes paid to run the system. That makes it simple for the vendor and the taxing districts are responsible for keeping the clearinghouse updated with their changes. The current system is an unfair competitive advantage to online vendors.
At the moment, I agree, it is impossible. All those items they track are forced to comply with a very strict, standardized API to interact with the Amazon Marketplace. The "tax code" across the US is nothing like this. Each town can have a sales tax. Each county can have a sales tax. Each state has a sales tax. Many publish their tax rates in PDF format, and they all vary widely in how they present data inside those PDFs. Those PDFs are on various websites, and a corporation can't just go to any non-official site and grab an excel file or PDF...it HAS to come from some official government force to comply with their fiduciary responsibility.
Amazon accomplished this, but not for everything on their site. How does one enforce a seller who is black-label drop shipment seller out of China? Normally, it is the responsibility of whomever holds the sales tax license for the company; but those are usually only issued for companies with a physical presence. Are Amazon, Ebay, Etsy, etc required to keep track of these 10,000 different tax areas, add whatever is needed to each auction, and then remit those taxes in another companies name? Is that even legal, to submit collected sales tax in another companies name? Is it legal in every city, county, and state nation-wide? The Federal government cannot impose any rules, requirements, or regulations involving local taxes on local jurisdictions; a claim could be made via the Interstate Commerce Act but this is REALLY stretching it and might result in 10,000 lawsuits on Constitutional grounds.
This is going to be a huge mess, and I suspect the end result will be that online retailers will just "blacklist" various addresses because their local tax information isn't being reported via some industry-accepted API. Even that might be challenged by small towns..."You can go to our localtown.state website and download our latest home brewed PDF where we hand-wrote our tax percentages!" If states want this tax, it's up to the states to provide a common API for companies to be able to access. No published API, no non-nexus taxes.
I fully expect this to end up in the WTO courts, since it involves various other countries and is a huge burden and a radical shift in tax code without proper, formal notice per various international treaties. Libertarians and isolationist are going to freak out, or should be.
It's not just a matter of 6% state sales tax + 2% municipal, but all manner of strange rules and regulations regarding which products are taxable and which are exempt from taxes as well as trying to keep abreast of changes, additions, and eliminations of these rules. Joe's corner store can do it, because Joe's corner store is only located in Exampleville U.S. is only subject to tax laws for one particular state, county, and city. Amazon would need to know them all.
Amazon not only needs to know what all of those tax laws are, but how they map onto the different products that they sell. What might be considered a food item exempt from sales tax in one state may not qualify as a food item exempt from tax in another state, or may be a specific type item with a tax based on quantity instead of price. And it's not just Amazon that needs to figure all of this out, but every retailer. At least until someone can figure out how to offer a service to handle this for retailers so that they're all not duplicating massive amounts of work.
I'm not opposed to instate tax collection on interstate commerce for the reasons I mentioned before, but if we're going to go down that road, we need to have a system in place (and in place before we go down this road) that makes it easy for businesses to deal with it that doesn't unfairly punish small businesses or make it disproportionately difficult for them to engage in business. Doing so effectively eliminates the ability for many entrepreneurial endeavors and consigns people to working for someone else.
Eh. Yeah, the government could make it easier. But, in the meantime, what we have is what we have, and if a company wants to benefit of being able to sell to people outside of their immediate area, they should pay whatever the cost is of doing business. We do it. We're a tiny company. It's not a big deal [shrug].
I don't respond to AC's.
The reality after this ruling is that shipping domestically to another U.S. state has become almost as overly complicated as shipping internationally. Thus, if it was too complicated to ship internationally before this ruling, it is likely to have become too complicated to ship interstate after this ruling, and for analogous reasons.
What this will do is put independent sellers and entrepreneurs out of business. The largest companies, like Amazon and Wal-Mart, with the infrastructure to cope, won't miss a beat. Everyone else... won't be able to comply. eBay will fall farther behind, if not collapse entirely, because they don't sell anything themselves and aren't configured to be in the business of selling anything themselves.
This is bad for consumers and bad for the economy. And it will lead to large firms with regulatory capture dominating e-commerce. It's one more step in the centralization of the 'net as a deeply controlled profit source for a handful of megacorporations.
STOP . AMERICA . NOW
You clearly don't understand the start up cost of a business. No small startup can't afford tens of thousands of separate tax filings, much less the categorization and rate maintenance that go into determining those filings. What you're saying is screw the small businesses, Walmart and Amazon will handle the rest of the economy.
My God, it's Full of Source!
OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
From the linked answer: "Type a series of alphanumeric characters via your physical or digital keyboard"
So let me rephrase: What keywords in Google Search led you, and would lead others in a similar situation, to TaxCloud? (Reminder: These search terms have to be written from the starting point of not knowing that TaxCloud exists.) I read the top 20 Google Search results for the query interstate sales tax calculation, and none of them led to TaxCloud. In addition, none of the top 20 results appear to have been updated to reflect this Supreme Court ruling.
Maybe a small business can't handle it, or they need to hire a couple of people to assist. This is no different than any other mail order company, and we've definitely had many small businesses that handle interstate deliveries and were able to comply by the rules. Being on the "internet" should not create special exemptions.
We've had over a century to figure this out and yet it hasn't happened yet. Why should it change now?
Because it would massively ease the burden on small businesses, allowing them to operate in more jurisdictions, encouraging competition and entrepreneurship, thereby benefiting consumers and the economy.
Do brick & mortar vendors near state lines need to start checking IDs so they can charge the right sales tax to each customer based on their home address? That's where they are "delivering" the items to, right?
In some places, there are very different tax rates on things like cigarettes, such that smokers have a strong incentive to drive across the state line to purchase cigarettes at a lower rate. States have gone after these smokers for violating their home states' tax laws by not paying the higher tax. With this ruling, will they go after the vendor instead?
Another example: I've often seen in tourist locations vendors offering to ship (especially large) items their customers buy so they don't have to try to pack it in their luggage. Will those vendors have to collect and remit sales taxes to tourists' home states?
In the real world, the tax that applies is always where the vendor is, not where the item will eventually end up. But for some reason, in the virtual Internet world, everyone thinks the opposite should be true. That is what doesn't make sense.
But I look forward to going into Walmarts in other states and demanding that they calculate tax based on my home state (and remit it there, too).
"Save the whales, feed the hungry, free the mallocs" -- author unknown
I work for a small business (40 employees) ... and we have a full time accountant and occasially and assistant just to deal with this stuff.... previously this person also handled purchasing of all our materials as well and was just doing the accounting part time it is only getting worse as time goes on.
It's quite onerous for us to sell into other states as we have to get all sorts of tax information setup with each individual state. It wouldn't be nearly so bad if the state's had flat rates for taxes etc.. but there are laws you have to read up on for each state and even in some cases municipalities.