North Carolina Tries to Tax Online Purchases

Anonymous Coward wrote with a link to this News-Observer story. AC says the "...NC State department of revenue has added an additional line to the NC Individual Income tax form requiring consumers to calculate how much they spent for goods online and pay taxes on it." Meanwhile, Parothed sent a link to an article that implies that the (heavily libertarian) Cato Institute's Center for Trade Policy Studies might just find the North Carolina Internet tax plan acceptable.

Comments

So?

[guran]

Theoretically, there should be no difference if I buy something by mail order or online. If it's OK to tax me for the former, it should be OK to tax me for the latter. (and I said *if*)

Like it or not, the net has gone business. Taxes are a part of the meat space business. It is hardly fair against meat space stores if they have to pay taxae, that their online competitors have not.

That said it is not so easy to tax the net (fortunately). I am a swedish citizen. Suppose that while I am in France, I step into an internet cafe (owned by an Israeli) and buy a Chinese product from a australian company, registred in the .com domain, that has its servers in Japan. Which law applies?

Of cource I choose to follow the law most beneficial to me. (That is I say nothing, hoping to slip between the systems).

Of cource, local and national goverments will try to impose taxes. They will fail horribly as long as the net is not own by any country (including the US thank you).

Is this a problem? Yes of course, but it is a problem that "we" can take advantage of. Enjoy your freedom while it lasts.

What right does NC have to this money?

[jburroug]

I'm the slightest bit curious why NC (or any other state trying to tax the 'net) thinks they deserve a share of this money? It is my understanding that the primary justification for a sales tax is because it costs a city/state quite a bit of money every year to maintain a good enviroment for business to function (road work, police coverage other basic services) By this logic taxing transactions at brick and mortar shops makes sense. However it falls apart when applied to internet transactions. The user already pays for the services that make ecommerce possible: 1) phone line to the local utility 2) account with ISP. Now I know the utility is paying a tax on it's profits to the state and so is the ISP, therefor the state is still getting it's money. And if any e-business's are being run out of NC you can be sure that they too are paying income tax. In addition anybody employed by this e-business in NC is paying a sales tax on all the purchases the make locally. With that logic in mind NC should permantly ban the idea of a 'net sales tax, give lots of incentives for high tech and ecommerce companies to set up shop there and make the whole state a haven for e-business. Then they would make up the tax revenue lost to ecommerce, and would annoy the people alot less every tax season.
Trying to tax internet purchases is a step in the wrong direction anyway and is probably supported very strongly the brick and mortar business's in NC, who would rather have the government hamstring their competition rather than rework their strategy to stay competitive. It's not the actual tax amount that is going to cause people worry, it's the fact that now everytime they surf over to Amazon.com or wherever they are not only going to be thinking about price and quality of service, the concept of saving all their 'net receits for a year and figuring up the totals and the taxes due carries a high "pain in the ass" factor that will discourage people from shopping online because in some cases it will become less convienent than driving to the mall. Thus this new tax will seriously undermine one of ecommerce's biggest competitive advantages. On the other hand I suspect most people to ignore the idea, take a wild (low) guess at tax time and ship NC an extra 20 bucks rather than deal with the hassal of actually keeping track of everything they buy online, I know I would.

Once again glad I live in Alaska, where even the government doesn't trust the government ;->

Use Taxes, Speed Limits, and Other Unenforced Laws

[dave_aiello]

Use Taxes are on the books in many states. These are unevenly enforced at best. The cynic in me feels that compliance with Use Tax reporting is like compliance with the posted speed limit on Interstate highways -- anyone who does get busted would logically conclude that they were the victim of highly selective enforcement.

What's next, a quota system for NC State Department of Taxation auditors?

I think the Charlotte News & Observer got it partly right in the article when they said:

The consumer use tax is not new. Most states have one. In fact, it's been on the books in North Carolina for more than 60 years.

It's never been aggressively enforced on individual consumers, Collins said, because it's difficult to chase down who bought what. The Internet has changed that, though, making most purchases as easy to track as scanning a credit card bill. And by adding a mention on the tax form, the state can penalize consumers who refuse to 'fess up.

One really obvious bogus statement in this article is that the Internet has eased the process of determining Use Tax violations in the event of an audit. Anyone who lives in the Northeast where states are geographically small, or shops by mail order or while on vacation has had their lack of compliance documented for years. Why say something so obviously wrong and ruin an otherwise useful article?

A small criticism of the "Slashdot Powers that Be". I realize it's a holiday week and we're all partying, but.... next time, insight should be applied to the analysis of the article before it hits the Slashdot home page. It would have been much more useful to have characterized this step taken by North Carolina as an attempt to increase awareness of their existing Use Tax among consumers who do some shopping on-line or through traditional mail order. That's not nearly as exciting to most people as the headline lead you to believe, but it would have been more accurate.

The big question about these sorts of efforts, in my opinion, is where will the states come up with the money to enforce this law? This is where the analogy to the speed limit really works. You could pull over a lot more speeders if you wanted to put a lot more police in cars with radar and laser speed detection devices. But, then a whole new set of questions will arise.

I expect the states to do little to increase enforcement of Use Tax reporting. Some over-zealous states will probably pick a couple of cases to really screw-over some taxpayers in a public way. This will get press in the newspaper and on TV in a way that will be designed to scare people. This actually serves both the media's and the government's interests.

--

Dave Aiello