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The Almighty Buck The Internet Government Politics

States Push to Collect Online Sales Tax 395

Carl Bialik from the WSJ writes "On Saturday, 18 states will implement the Streamlined Sales Tax Project, which will make it easier to collect local and state sales taxes on purchases made over the Internet while offering amnesty on uncollected taxes. In their longstanding opposition to collect sales tax, many online retailers 'have cited a 1992 Supreme Court ruling that said that it would be too onerous for e-tailers to calculate all the permutations of differing state and local tax rates,' the Wall Street Journal reports. 'One goal of the project was to remove the ruling as a key defense for online merchants.' Is your state involved? 'The states that have signed on are Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, New Jersey, North Carolina, North Dakota, Oklahoma, South Dakota and West Virginia. Five more -- Arkansas, Ohio, Tennessee, Utah and Wyoming -- are in the process of finalizing the requirements needed to join, while Washington, Texas and Nevada are in earlier stages.'"
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States Push to Collect Online Sales Tax

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  • by hsmith ( 818216 ) on Friday September 30, 2005 @11:59AM (#13685500)
    I think the fed hasn't implemented some sort of online tax as of yet because they haven't figure out how to. They tax everything they possibly can, internet sales are the next logical step. I think the biggest issues are, if you live in TX and order something from MD, where do you pay sales tax? What if you order something abroad? It is insane to think you would have to pay sales tax for the state you reside and the state you are purchasing from.

    But if you can dream it, they can tax it.
  • It's bad already (Score:4, Interesting)

    by Rorschach1 ( 174480 ) on Friday September 30, 2005 @12:00PM (#13685511) Homepage
    Couldn't be any worse than what California already puts me through. They want you to report sales for each individual tax district in the state. Most of my sales are out of the state, and probably half are out of the country, so I've got very little to report there - I wind up paying 6 cents to one county, 12 cents to another, and so on. Or at least, that's how I'm supposed to do it. In reality I just go nuts and grossly over-pay them all - 50 cents for everyone!

    So I'm a little skeptical about just how 'easy' they consider a reasonable system to be...
  • by $RANDOMLUSER ( 804576 ) on Friday September 30, 2005 @12:02PM (#13685535)
    Mail order (catalog or phone) items which cross state lines have never been subject to sales tax; only if the shipper and reveiver were in the same state was sales tax charged.

    How is ordering over the Internet different?

  • by morgan_greywolf ( 835522 ) on Friday September 30, 2005 @12:07PM (#13685594) Homepage Journal
    Oh, it gets worse than that. For instance, what if you're a college student and you live in, say California, so your billing address is there. You use, say, Amazon.com to order a gift for someone's wish list who lives in MD, but you go to school in Texas, so that's where the transaction took place.

    NOW who gets the tax?
  • by EmagGeek ( 574360 ) on Friday September 30, 2005 @12:08PM (#13685608) Journal
    I don't see how any of this gets around the fact that no State has the right to tax interstate commerce. Call it whatever kind of tax you want to; Sales, Use, Excise, whatever, it is still a tax on interstate commerce and a State has no right to collect it.
  • North of the Border (Score:3, Interesting)

    by TheSpoom ( 715771 ) * <{ten.00mrebu} {ta} {todhsals}> on Friday September 30, 2005 @12:14PM (#13685671) Homepage Journal
    The unfortunate thing with living in Canada is that 90% of the stuff you order online will come from the states, which means the Canadian government can tax the living hell out of it as soon as it crosses the border. UPS and Fedex do the same thing, adding on nice brokerage fees for no apparent reason. It was quite a shock a few years ago when my laptop arrived with an apparent COD charge of over $400.
  • Buying from abroad (Score:3, Interesting)

    by grahamsz ( 150076 ) on Friday September 30, 2005 @12:22PM (#13685762) Homepage Journal
    Typically import duty and associated collection charge will dwarf sales tax.

    In the European Union you pay the sales tax of the country which the product was purcahsed in. If i'm in the UK and buy something from Finland over the net, then i'll pay 22% finnish sales tax and nothing to the british government. Even though the british rate is only 17.5%.

    This works in europe since it's an EU wide practise.

    If this is implemented on a state-by-state basis, then it'll generate revenue for the states who implement it first at the expense of eroding their online businesses. It'll have the effect of forcing a large chunk of e-commerce into the states with no sales tax. This already happens in Europe.

    As such, it's much more desirable for states to collect tax revenue on products which are shipped TO their state, but this greatly complicates the merchants end.
  • by CrazedWalrus ( 901897 ) on Friday September 30, 2005 @12:27PM (#13685830) Journal

    ...I've always tended to prefer sales taxes over income taxes.

    I agree wholeheartedly. Trash the income tax and just tax what people buy! Simpler, less expensive overall (bye bye, IRS...), and allows the average citizen to see very directly just *how much* tax they're paying (25% sales tax?! WTF?! Write the Congress(wo)man!).

    Problem is, that whole "trash the income tax" thing just doesn't seem to be pursued very agressively. This is just one more tax -- another liability and barrier to entry for small online business, and an added complication. I don't care how "simple" it is.

    Additionally, how will this work for auction sites (E-bay and the like)? How do you determine whether an item should be taxed? Or do we just double-tax all used items sold on E-bay? Seems like a huge pain to enforce otherwise.

  • by smose ( 877816 ) on Friday September 30, 2005 @12:27PM (#13685832)
    Mail order [across] state lines have never been subject to sales tax...How is ordering over the Internet different?

    It's not, which should have mail-order retailers worried about this move, because it would almost certainly end up affecting them.

    One way to apply this is to charge it based on the state of origination. It is a sales tax, not a purchase tax, even though the purchaser pays that tax for the seller. The seller would pay the tax on all sales to their home state, no matter where the product is shipped.

    This would be good news for no-sales-tax states like New Hampshire, because it would encourage e-tailers to set up shop there. I'm sure that some creative loophole-hunter could work up a way to sell from one state, ship from a warehouse in a second state, to a destination in a third state.

  • by killmenow ( 184444 ) on Friday September 30, 2005 @12:29PM (#13685852)
    Why should I purchase locally, even if it's the same price, when I can just "buy it over the internet, tax free".
    Well, to be fair, many times shipping & handling is >= sales tax. Plus, for many items, it is highly preferable to buy something locally, even though the same thing is available online (so long as the price is similar). There are a number of reasons for this. Among them are:
    1. you can physically inspect/try out the item before purchase
    2. local presence for returns, repairs, etc.
    3. philosophical reasons (I like to support local small business owners, as I am one myself, etc.)
    4. fear, surprise, and a fanatical devotion to the pope

    Okay, so not that last one so much...
  • Re:Is it just me... (Score:5, Interesting)

    by BlewScreen ( 159261 ) on Friday September 30, 2005 @12:34PM (#13685902)
    Or you could ship to Alaska, Delaware, Montana, New Hampshire or Oregon.

    No state sales tax there.

    If you don't already live in one of these states, you may live close enough to set up a mail drop. If not, maybe you should consider moving - this was the intent of allowing states to set up their own laws - anyone that wants can "vote with their feet".

    Yes, I realize this is considered impractical to most, but at what point should we finally say "enough"?

    -bs

  • by zippthorne ( 748122 ) on Friday September 30, 2005 @12:37PM (#13685926) Journal
    Yet, many states have already been doing exactly this. My home state of RI argues that sales tax is a tax on its citizens (and visitors i guess). therefore, they have a right to tax (last I was there 7%) your purchases regardless of where you bought them.

    Since the state is so small, anyone in the state could (and often did) drive an hour and a half to Massachusetts and buy things like cars, appliances, etc. for only 5% sales tax. (ah the boon of living in small state country) You're supposed to declare what you've purchased and pay the difference to RI. Of course, nobody did, so the clever legislature monkeys (who had recently voted themselves a salary increase from $300 to $10k) made "deals" with large-ticket businesses just across the border to report you even if you don't.

    This has been challenged many times and upheld on the grounds that the tax is applied equally to both in-state and out-of-state purchases. and so isn't an interstate tax at all.

    Tricky lawyering no doubt, but then if they can argue about the definition of the word 'is' they can argue pretty much anything.
  • by JasonKChapman ( 842766 ) on Friday September 30, 2005 @12:40PM (#13685959) Homepage

    Mail order (catalog or phone) items which cross state lines have never been subject to sales tax; only if the shipper and reveiver were in the same state was sales tax charged.

    How is ordering over the Internet different?

    It isn't. The constitution prevents one state from taxing activities in another state, with interstate commerce being deemed the domain of the federal government. This should cover all sales across state lines regardless of the medium by which the order takes place. Prior to e-commerce, though, the volume was much smaller and much harder to track. Now that it's adding up to real money, and there are already electronic records of everything, state governments are drooling.

    The truly disturbing aspect of this trend is this: Sales taxes have always purportedly been a tax on consumers, with merchants being drafted into service as tax collectors. As such, it's a relatively sane method of taxation that is directly, at least in theory, tied to use-of-services.

    Clearly, the states are now dispensing with any pretense that sales tax is a tax on consumers, since the consumers involved are citizens of some other state. They just see it as another tax on local businesses, which the businesses will, in turn, pass on to out-of-state, and non-voting consumers. If you, the consumer, think the tax is too high, who do you vote out of office to get it changed? What incentive is there for anyone in that other state to change things? They're benefitting from your money. It is, essentially, the codification of "taxation without representation."

  • No sales tax (Score:3, Interesting)

    by lar3ry ( 10905 ) on Friday September 30, 2005 @12:58PM (#13686177)
    Living in NH (Live, Freeze, and Die) has its benefits, among them no state sales tax. I cannot see how any e-tailer can possibly levy any such tax on me, since there is no sales tax in my jurisdiction that would apply... unless the "tourist tax" (hotels and restaurants) applies.

    I'm interested in this only in an academic sense. I think sales taxes in general are regressive and hurt the poor hardest. Income taxes with varying rates based on income are more fair, but could be taken to extremes, such as how Britain used to require 95% withholding on the richest people. Property taxes, luxury taxes, estate taxes (let's not go into that stupid term "Death Tax") and every other tax you can think of each have their own share of problems.

    We'll need to face it, there isn't any way that governments can make money that somebody isn't going to consider unfair. The days when the government could survive simply by collecting customs duties (NO TAXES!) are long gone.
  • by Anonymous Cowpat ( 788193 ) on Friday September 30, 2005 @12:58PM (#13686178) Journal
    (or this one at least) that seems like an utterly crazy system of taxation, wouldn't it be easier to set it at (say) 5% for everyone which goes to a central pot and is then distributed to the individual states based on population or estimated online sales or who-needs-it-the-most (or whatever)?
  • by IthnkImParanoid ( 410494 ) * on Friday September 30, 2005 @02:06PM (#13686974)
    The entitlement attitude is a direct result of this country being incredibly wealthy and incredibly powerful. I don't care if you cancel every social program tomorrow, we'll still have multinational corporations launching billion dollar marketing campaigns designed to make us feel we "need" and "deserve" their products, and we'll still be stomping (politically, economically, and militarily) around the world like we owned the place.

    By the way, there are quite a few countries with nationalized health care and extensive unemployment programs, and the citizens of those countries don't seem to be self-righteous whiners. I'm not advocating those programs, just trying to cast doubt on possible causal relationships they have with creating entitlement attitudes.
  • by Anonymous Coward on Friday September 30, 2005 @02:07PM (#13686984)
    Actually I have no problem with taxes, but having to pay taxes on top of taxed items is just insane. Want a sales tax proposal that makes since... http://www.fairtax.org/ [fairtax.org] Consumption taxes means that Bill Gates pays taxes on what he purchases not on what he makes, it means that I pay taxes on what I purchase.
  • Complete Reform (Score:2, Interesting)

    by confusedwiseman ( 917951 ) on Friday September 30, 2005 @02:34PM (#13687275)
    In order to create taxes that treat everyone fairly there are several things that need to happen. The first is that the government needs to be run like a business. Profitibility ought to be important. A yearly loss SHOULD be a bad thing. Second if income taxes were removed and a sales tax was put on all items that was equal across the country those that buy the most goods pay the most taxes. This also means that those who are at the poverty level can buy less expensive necessities and pay less taxes. The people who need a Bentley will in turn be taxed approprately (at the same rate as everyone else) but because it is a more expensive item, more gross taxes are paid. This would remove challenge, and inconsistancy in taxes. Simplification will never prevail. Todays mighty oak is just yesterdays nut that held its ground.
  • by IthnkImParanoid ( 410494 ) * on Friday September 30, 2005 @02:47PM (#13687412)
    A SHITTY house here costs 600k ... Figure out what you need to make to finance that, and you'll figure out im prolly not living high on the hog, nor is anyone else in my position.
    I'm normally not this blunt, but your rant about the people in San Bernadino makes me feel less bad about saying this: If a shitty house costs 600K, Why The Fuck are you people buying them?! Last I heard over half the houses for sale in my area were owned by investors, and about 1 out of 6 homeowners could afford to buy their houses back. Every heavily populated state has housing bubbles, and this is ours.
  • by bleckywelcky ( 518520 ) on Friday September 30, 2005 @04:43PM (#13688519)
    That's actually very easy to get around. And that is the most common argument against a single sale tax. The solution is to just tax items based on their value (or use).

    Examples:
    Food, usage = eating, so tax will be 0%.
    Ferrari, usage = extreme luxury, so tax will be 25%

    Ok, but that presents problems on how to classify items. Is a caviar luncheon considered food or luxury? Well, we can also introduce a per cost system.
    Cost is less than $5 per item, probably means it is some sort of daily necessity, so tax will be 0%.
    Cost is more than $10,000 per item, probably means it is a luxury, so tax will be 25%

    Ok, but what if a company is buying 10,000 microchips at $10/microchip? That's not a daily necessity, that's not a luxury, but that seems like a reasonable item to be taxed? Well, there are a couple options for this. First, you could still apply an income tax to companies, just get rid of income tax for individuals. Or, living in the spirit of no income tax whatsoever, you could complete the purpose and cost equation by adding in another variable: units bought. So you end up with situations like this ...

    Yogurt Cup ... Purpose = daily food. Price = $0.50. Quantity/year = 150.
    Tax breakdown ... Purpose = 0%. Price = 0%. Quantity/year = 0%. Total = 0%.

    Game Cube ... Purpose = luxury. Price = $100.00.
    Quantity/year = 1.
    Tax breakdown ... Purpose = 10% Price = 1%. Quantity/year = 0% Total = 11%.

    This is just an example. But, there could be all sorts of schemes and If-Then conditions for purpose, price, and quantity. And you could have a board that does taxing reviews of items all year long. Even with all this, it would be a million times less complicated than our current system. And it would be a million times more fair as well. People who use society more, take up more resources, pollute more, will ultimately end up spending more and will pay more taxes. The basic necessities would not be taxed much, so poor people would be fine. And if a middle income family wants to purchase a $2000 HDTV, then they have to pay the same taxes as the big boys who make millions a year. I see no problem with that. Sure, it's a larger % of their income, but it's a luxury, so quit whining. The only thing people have a right to whine about is basic necessities. Rent, food, water.
  • Re:social programs (Score:3, Interesting)

    by EastCoastSurfer ( 310758 ) on Friday September 30, 2005 @06:31PM (#13689541)
    Not Yours To Give is a good read. It is similar to what others thought like the quote below. I highlighted the part which I think has the most significance.

    I find no warrant for such an appropriation in the Constitution, and I do not believe that the power and the duty of the General Government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit. A prevailing tendency to disregard the limited mission of this power and duty should, I think, be steadfastly resisted, to the end that the lesson should be constantly enforced that though the people support the Government the Government should not support the people.

    The friendliness and charity of our countrymen can always be relied upon to relieve their fellow-citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such cases encourages the expectation of paternal care on the part of the Government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood.
    -- President Grover Cleveland, upon vetoing a bill appropriating money to aid drought-stricken farmers in Texas [February 16, 1887]


  • by gumbi west ( 610122 ) on Friday September 30, 2005 @11:20PM (#13691355) Journal
    I'm not sure that I understand how you come to the conclusion that opportunity is everyone's for the taking. Have you read nickel and dimed? It is true that when you are rich, things are easy and getting ahead is easy. Just look at the President, every business he owned crashed and burned, and yet people gave him more money. The only business that he did right by was a baseball team that he got government subsidys for.

So you think that money is the root of all evil. Have you ever asked what is the root of money? -- Ayn Rand

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