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End of the Internet's Tax-Free Ride?
Posted by
kdawson
on Tue Apr 15, 2008 07:21 PM
from the pay-me-now-or-pay-me-later dept.
from the pay-me-now-or-pay-me-later dept.
News.com has a piece looking at renewed efforts by both state and federal lawmakers to subject Internet sales to state taxes. "Two bills are pending in Congress that would allow tax collectors to target out-of-state Internet and mail-order retailers, and their supporters are optimistic about their political prospects... Meanwhile, pro-tax states are trying their own ways to circumvent a long-standing rule saying a retailer must have physical presence before it can be forced to collect taxes. One effort came from New York state, where legislators recently approved a measure requiring Amazon and other online retailers (that lack a physical presence in the state) to collect sales tax on New Yorkers' purchases... This is not exactly a new debate... But now, with a Democratic Congress and a potentially Democratic administration next year, the arguments may gain more political traction."
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New York to Implement an 'Amazon Tax' 411 comments
theodp writes "NY Governor David Paterson is expected to sign a bill requiring online retailers to collect sales taxes on purchases shipped to the state, even if they have no operations or employees working there. The so-called 'Amazon tax', which applies to Internet retailers who derive sales through affiliate programs, would end what for many New Yorkers had been tax-free shopping and generate an estimated $50M in revenue this fiscal year. Experts predict that other states could follow suit with similar provisions."
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Your Rights Online: Rhode Island Affiliates Banned From Amazon.com Sales 532 comments
Rand Huck writes "Amazon.com has now added Rhode Island to its blacklist of affiliates in response to its proposed budget changes to enforce a tax on Internet sales, which includes commissions on their affiliate program by content providers based in Rhode Island. The first state to be blacklisted was North Carolina, for the same reason. If you go to a Rhode Island-based or North Carolina-based website that advertises Amazon.com goods as an affiliate, that website will no longer have the goods available because otherwise Amazon.com would be forced to pay sales tax to the State of Rhode Island and Providence Plantations or the State of North Carolina. The state's rationale is, if someone clicks to buy a good from Amazon.com via a site based in Rhode Island, it's equivalent to buying a good from a brick and mortar chain store located in Rhode Island."
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Fantastic (Score:5, Interesting)
I'm surprised they don't just make it federal (Score:5, Insightful)
Of course, they'd never consider REDUCING SPENDING, not so long as there's any citizen's assets left untaxed at a rate lower than 100%
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Tax and spend! (Score:4, Insightful)
Oh of course not! And why should they when they consider it their money in the first place. How else to explain the mind set that calls every tax cut 'a giveaway to the rich', refers to how much a tax cut will 'cost' the government, how much it will 'cost' the government to implement a tax cut, etc. In their evil brains it is ALL theirs and they begrudge each and every cent they are forced to 'spend' when they allow a taxpayer to have a dollar with no strings attached.
And the summary is spot on folks. Since the Internet becane bigtime either Congress of the White House has been outside the control of Democrats so the net was safe. Divided government is usually the best kind. Something the Dem leaning slashdot users might want to keep in mind come November. Congress is almost a statistical certainty to remain in Dem hands so ask yourself, Is Maverick really THAT bad?
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Re:Tax and spend! (Score:5, Insightful)
Pretty much, as a fiscal conservative I understand the need to not spend more money that you make, or can reasonably pay back. I certainly do not understand people paying, for example, half a trillion dollars in a discretionary war with no plans on how repay the debt. It has crossed my mind that these so-called conservative, mostly christian, persons do not feel they have a moral obligation to pay debts that they can paw off to other people, but that, frankly, makes more sense. Any responsible moral person knows the first rule to keep your word and pay off debts.
At the end of the day, taxes pay for things we use and need in this great country. I have no problem paying taxes, because the United States has given me an education, opportunities, and freedom. None of those, especially the last, are free. Why would I want to use things that I don't pay for,a nd perhaps even be charitable. For instance, everyone complains about gas taxes, and they suck. I mostly use about 30-40 miles of road, mostly in crap shape. Outside of town we have a beautiful 6 lane road through cow pasture, built so that developers could make money building and selling houses, and used by by a few commuters who do not even come close to cover the costs of the road. I could complain, but what good does it do. I pay taxes to pay for what we need in America, not for what I need.
OTOH, I do order for amazon, and the lack of taxes is a consideration in my purchase. But it is my states decision to base their income primarily on a sales tax, a tax which is both regressive and extremely difficult and expensive to collect. They could do payroll taxes, or investment taxes, but they don't. Everyone, even those would make barely enough to live on, have to pay the tax. Well, i am sorry. I don't think sales taxes work, and the lesson they should be taking from the internet is and globalization is to create a tax based on ability. Remember, as many conservatives know, a penny from a pauper is worth much more than a dollar from a millionaire.
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Re:Tax and spend! (Score:5, Funny)
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Re:I'm surprised they don't just make it federal (Score:5, Interesting)
This internet tax doesn't use any of that. The fees we pay for shipping and handling cover the road fees required to bring the product to our door.
I already pay tax on my internet service.
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Re:Fantastic (Score:5, Insightful)
Which, if you're a major retailer, is probably the point. With the stroke of a pen, all of your smaller competition can be eliminated.
It doesn't have to be that sinister, of course. It could be as simple as the fact that it's an election year, and what better way to raise money for Congressional campaigns (and make sure that retailers throw a few bucks for ex-Congressmen currently "working" as lobbyists) than to threaten to do something unpleasant between now and the election...
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Re:Fantastic (Score:4, Informative)
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Re:Fantastic (Score:5, Informative)
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Re:Fantastic (Score:4, Insightful)
The only real negative effect for internet businesses is that they've been evading sales tax for years, and now their customers will have to pay more. Which I find personally a little annoying, but I don't really oppose it, it was kind of inevitable -- the only reason this loophole existed in the first place is that online commerce became so big, so fast, that the tax system hadn't yet adjusted to the changing consumer behaviors. Effectively, we've been experiencing a decrease in tax during the past several years while it was easy to purchase anything online tax-free, which was not the case pre-amazon. And decreases are nice for the individual, but the balance had to come out somewhere...
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Re:Fantastic (Score:4, Interesting)
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Re:Fantastic (Score:5, Insightful)
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Re:Fantastic (Score:5, Insightful)
No, they haven't. Tax evasion is what happens when you fail to pay your taxes, or use phony deductions to lower your taxes. Internet businesses haven't been paying sales taxes to other states in the past because the law said that they didn't have to. If this law goes through, that will change until and unless the courts say the law is unconstitutional.
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Re:Fantastic (Score:5, Informative)
The only real negative effect for internet businesses is that they've been evading sales tax for years
That's just not true. Here in AZ at least, our "Sales Tax" (really a use tax) is considered a tax on the business rather than the consumer. What that means is that I already have to pay taxes to AZ on everything I sell no matter where the buyer is so in effect I'd be taxed twice if I had to pay again to the buyer's state as well. If anyone has been evading taxes it's the citizens that havn't been reporting their out of state purchases and paying the relivent taxes to their own state.
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Re:Fantastic (Score:5, Interesting)
In essence, the only way you can be sure you are collecting the proper amount of sales tax is to collect tax on EVERYTHING, regardless of the actual legal resale or charitable tax status of the buyer. And the buyer's statement is not enough proof to show otherwise.
Trust me, I've gone through a WA State DOR "audit" and extortion (pay us $10,000 and we'll just forgive that other $4,500 - never mind that our own directions and documentation we provided at your request 4 years ago caused you to underreport and misclassify your business as a manufacturing, not engineering/design company).
Bottom line for this "Internet Tax" issue: if it doesn't apply to catalog sales, it shouldn't apply to Internet sales. Sales out of state are sales out of state, regardless of the means of delivery of the sale.
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Use Tax (Score:5, Insightful)
Re:I can't believe use tax hasn't been shot down (Score:4, Informative)
It's intent is for mail order items to residence.
So if I am living in Ca, and buy 10.00 widget from acme widget co, located in BFE, mid-west I pay my 7%(whatever) to the state at the end of the year.
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I'm not voting for him, but... (Score:5, Informative)
Bad Summary (Score:5, Insightful)
Double taxation (Score:5, Insightful)
What they are trying to do is shift the burden of collecting tax from themselves to somebody else, the vendors. They have already successfully done this for in-state Vendors via sales tax collection, and also shifted the burden of collecting income tax, Social Security and Medicare to employers. All they really have to do anymore is sit back and get paid.
The problem with requiring Out-of-State vendors to collect sales tax, is that there are approximately a half million tax districts in the United States. As a vendor, I know that there are over 15,000 in my state alone. They change constantly. I get notices in the mail every two to three days of a tax district instituting, increasing, occasionally decreasing or abolishing a sales tax rate. A brick and mortar can just plug in the tax rate for their current community into the desk calculator and they are good to go. A mom and pop internet outfit would have to spend probably 24 man-hours a day updating sales tax rates, or spend extra money to pay an outside outfit to calculate their sales tax for them.
I am sure new York just wants money without having to pursue it themselves, but the assumed unintentional side effect is that they are going to hurt small business on the internet by and large without effect on the large businesses.
THIS IS ASININE! (Score:5, Interesting)
However, as far as I am aware ALL 50 STATES have "use taxes" in place, that are supposed to be paid for out-of-state purchases. In most cases the amount of use tax is identical to what the sales tax would have been if the sale had been local. The difference is that the purchaser, not the seller, is responsible for paying the tax. This is the way it MUST be... neither the individual States nor the Federal government have the Constitutional authority to force a business to collect taxes for the other 49 states. And even if they could, it would be an excessive burden... trying to keep track of tax rates for different kinds of products in 50 individual states is beyond the reasonable capabilities of most small businesses, which even today are still the backbone of our economy. Further, the Federal government also does not have the authority to collect State taxes on their behalf.
The taxes are already there. The laws are already in place. If they don't like the way that works... too bad. They just do not have the Constitutional authority to do this. And there is nothing new here, either... people have been buying by mail-order for at least a couple of centuries now, and this debate has been going on all that time. DO NOT let them try to tell you that eBay is forcing their hands. Hogwash.
Their claim: It's Not Your Money (Score:5, Insightful)
"...money has been unfairly left in taxpayers' pocketbooks. "
"Verenda Smith, government affairs associate for the Federation of Tax Administrators, framed the decision as a moral one of sorts: "Do you want to be a good American, or do you want to be an American who wants to cheat your government deliberately?"
It's not your money. You are cheating the government out of funds to spend on their favorite pork project.
Re:Their claim: It's Not Your Money (Score:5, Interesting)
I want my government reduced to 1890 levels, and armies of government useless eaters forced to find honest work.
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Who's doing this math? (Score:5, Informative)
Is there anything better than sensational bogus statistics? Some politicians claim states would lose half a trillion dollars in tax by 2011? Do they think most Americans didn't make it past 2nd grade math? Let's examine that claim with real math and logic:
Here are the e-commerce retail sales for the last 9 years:
2007 $136B
2006 $108B
2005 $86B
2004 $69B
2003 $57B
2002 $44
2001 $34
2000 $29
1999 $15
Source: http://www.census.gov/eos/www/archives.html [census.gov]
That's a total of $578 billion in revenue for 99-07.
Now, if we assume an average of 7% sales tax, and we assume that ALL items are taxable (which in most states they are not, like food and clothing), you would need $7.14 trillion in revenue to accumulate sales tax of $500 billion (which is the claimed lost tax by 2011).
That would mean that e-commerce would have to magically jump from $136B in revenue to an average of $1.6 trillion each year for 08-11. I mean, seriously, their figures are not even in the same ballpark as reality.
Re:Election year agitprop (Score:5, Insightful)
The Democrats want to spend lots of money on stupid social programs that don't help anything, and make things worse (see welfare in the 70s).
The Republicans want to spend lots of money on foreign wars, and corporate welfare (Halliburton, Blackwater, etc.).
The Democrats want to pay for their ridiculous spending with ridiculous taxes. The Republicans want to pay for their ridiculous spending by borrowing from the Chinese, printing more money, increasing inflation, etc.
With either one of them, the end result is disaster.
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