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.'"
It is only a matter of time (Score:3, Interesting)
But if you can dream it, they can tax it.
It's bad already (Score:4, Interesting)
So I'm a little skeptical about just how 'easy' they consider a reasonable system to be...
Wait just a darned minute (Score:5, Interesting)
How is ordering over the Internet different?
Re:It is only a matter of time (Score:5, Interesting)
NOW who gets the tax?
Re:It is only a matter of time (Score:5, Interesting)
North of the Border (Score:3, Interesting)
Buying from abroad (Score:3, Interesting)
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.
Re:Goodbye free lunch (Score:3, Interesting)
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.
Good News for No-Tax States (Score:3, Interesting)
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.
Re:Wait just a darned minute (Score:3, Interesting)
Okay, so not that last one so much...
Re:Is it just me... (Score:5, Interesting)
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
Re:It is only a matter of time (Score:5, Interesting)
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.
Re:Wait just a darned minute (Score:2, Interesting)
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)
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.
see, to us non-Americans (Score:3, Interesting)
Re:California charges it (Score:3, Interesting)
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.
Great Another Way To Part Us With Our Money (Score:1, Interesting)
Complete Reform (Score:2, Interesting)
Re:California charges it (Score:3, Interesting)
Re:Goodbye free lunch (Score:3, Interesting)
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
Tax breakdown
Game Cube
Quantity/year = 1.
Tax breakdown
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)
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]
Re:California charges it (Score:3, Interesting)