Court: Borders Web Ops Must Remit CA Sales Taxes 360
ScentCone writes "A rather quiet appellate court ruling finds that Borders must start coughing up sales taxes to California. Even though Borders spun off their online business to a separate company (now run by Amazon), has no employees, physical facilities, banking, or other activity in the state, the court found for California. While this is at first alarming (unless you write e-commerce software, in which case this may be the Programmer Permanent Employment Act), the court's reasoning was that despite the separate structures, the Borders brick-and-morter presence in CA, some overlapping board membership, common logos, cross-promotion, etc., meant that the two divisions were too entangled to fend off CA's army of hungry revenuers. Ramifications could include good old print catalog operators, store-less biggies like Amazon that have partnerships with CA companies, and more."
"Act"? (Score:2, Funny)
Jeeze, these are activist judges, passing legislation and everything!
Not surprising (Score:5, Insightful)
Does this mean... (Score:2)
Re:Does this mean... (Score:4, Informative)
Re:Does this mean... (Score:3, Informative)
Will they have to pay past sales tax?
Unless they reached some sort of settlement, yes.
If so, how do they collect it?
They look at Borders records of gross revenues, multiply by the sales tax rate, and send them a bill. Borders neglected to collect the tax from the end-consumer, but they're still liable for it. From now on, Borders will probably start collecting the tax from the consumer, though, along with raising the prices for everyone to pay for the past-taxes due.
Re:Not surprising (Score:3, Funny)
As you can see, we've had our eye on you for some time now, Mr. Borders. It seems you have been living..two lives. In one life, you're Borders Bookstores, a respectable retail company....you have brick and mortar stores, you pay your sales taxes, and you... provide free gift wrap. The other life is lived in computers, where you go by the hacker alias Borders.com, and are guilty of virtually every computer crime we have a law for.
Borders, I understand, but Amazon? (Score:5, Insightful)
I would agree that Borders corporate structure looked suspiciously like it was set up to avoid collecting sales tax by the online division.
Sort of a variant of making your HQ in the Caymans if you are multinational. Except the latter is legal.
Re: (Score:2)
Re:Borders, I understand, but Amazon? (Score:4, Informative)
No, not always. You can't take a company with 100% US presence, 100% US assettes, incorporate in the Caymans, have the 100% US board fly there once a year to hold a board meeting and claim you are a Cayman company. In the eyes of the IRS, you are a US company. I have worked for a billion dollar international corporation with more employees outside the US than in. They were incorporated in the Caymans. They still had to send significant documentation to the IRS and had problems with the board makup when it was too US laden. If it appears that you incorporate out of the US solely to avoid taxes, then the IRS will treat you as a US company.
my expierence from flroida. (Score:2)
I orderd some smokes off the internet (3 cartons of smokes I couldnt find anywhere in florida). I had them delivered to the address I was at, but was not a citizen of florida. basically I was there for a few months working for a company.
The place I ordered from was in Texas.
About 2 days ago I got a letter in the mail from the state of florida saying I owe $10.50 on tax for the cigs.
I still cant figure out why I would have to pay florida tax on these, but just like every other good hearted american, Ill
I for one... (Score:2, Funny)
Amazon and sales taxes (Score:2)
Nexus (Score:2)
There are ways to structure your business to avoid Nexus. Dell is a prime example. Business computers are taxable, but home computers are not.
Evidently, Borders' accounting/tax department messed up.
California's Use Tax (Score:2, Informative)
California taxpayers are supposed to pay Use Tax anyways, which is based on your purchases from out-of-state sellers. Thus, even if you didn't have to sales tax to Amazon.com, you have to pay (almost) the equivalent amount of tax on your CA 540 form.
Interestingly, although this tax has been on the books for a long time, the state government only added a line for it on 540 personal tax forms last year.
This creates a dilemma - if you are a CA taxpayer who made any out-o
Web Ops Must Remit CA Sales Taxes (Score:2)
How Hard 2 Program ... Really? (Score:2)
If the law is gonna be that Borders must pay sales tax to California for items sold into California ... how hard would that be to implement?
I appreciate that, taken to the extreme, this principle could mean that Borders must pay every little sales tax add-on implemented by every town anywhere. For example, parts of Puget Sound has a special tax to pay for a sports stadium ... lucky for Borders this silly tax is on restaurants, not on book sales, but under the same principle, nothing prevents, let us say,
Re:How Hard 2 Program ... Really? (Score:2)
Re:How Hard 2 Program ... Really? (Score:3, Informative)
Flat online tax (Score:2, Interesting)
Results: Each state gets a piece of the action and the online stores can't complain about the costs to implement all of the different tax codes all over the nation.
Re:Flat online tax (Score:2)
This is just so wrong (the comment, not the tax) (Score:3, Insightful)
This is just such a wrong statement I don't know where to begin. There is so much case law in the US about mail order and catalogue sales that this particular case has nothing to do with upsetting. It's gone all the way to the Supreme Court.
When will people get it through their heads, if a business has a presences in a state (as defined by law), they are responsible for remitting sales tax on sales made in that state, whether the sale was at a local store, by phone or on the internet. If they don't have a presence in that state, no tax is due.
It's that simple (of course the lawyers get involved with what exactly a "presence" is, but that's besides the point).
On and offline bookselling (Score:5, Informative)
The majority of books offered for sale (although not necessarily the most prominently placed) on these mega online bookstores are owned, shelved and shipped by small independent booksellers. They collect the money and deposit it into our account minus their commission and we drop-ship the orders. An order can be shipped across town without the big boys ever seeing the book and without depositing a dime into the state's coffers. Our sale is to the ethereal, tax sheltered Amazon not John Doe.
WARNING - RANT It amazes me that perfectly rational geeks will allow themselves to be fleeced by these online Wal-Marts when they can go to a site like http://addall.com/ [addall.com] or http://bookfinder.com/ [bookfinder.com] and pay up to 25% less for the same books often from the same seller. Our websites might not be as fancy but why order from an ethically questionable corporation when you almost as easily get the exact same thing and pay a little less dealing with an independent bookseller. Plus I think it's nice to get a personal email from a human being thanking me for an order.
Re:Why the hell not? (Score:2, Insightful)
Re:Why the hell not? (Score:3, Insightful)
Re:Why the hell not? (Score:2)
Re:Why the hell not? (Score:3, Insightful)
Never mind the increased cost to my customers of just the taxes themselves. While this might not be the death of e-commerce, it would certainly result in a dramatic narrowing of the online marketplace. Not a good result, any way you look at it (unless through the rapacious eyes of
Re:Why the hell not? (Score:2)
The only way it can do so accurately is to get input from the user.
I've noticed that a few busineses ask for the zip code and then, if there is more than one applicable sales tax within the zip code, provide another prompt to ask precisely where you live in order to determine the exact sales tax and to which jurisdiction it is to be paid.
Either that, or be able to determine from the whole address, not just the zip code, which sales tax
Re:Why the hell not? (Score:3, Informative)
And in some cases it's wrong, or incomplete if you wish to deal in politician-like double-speak. It's basically impossible to accurately keep up with all the special districts and conditions and twists across the US. Which is why I once had a Fortune 500 company tack onto an order of mine a sales tax to a jurisdiction which I lived just outside of. I was informed that the software claimed I lived in the city, not the unincorporated county,
Re:Why the hell not? (Score:5, Informative)
In Texas, for example, the sales tax rates in my zip code are 8.25% in the city limits and 6.25% outside the city limits. There are some zip codes that have three different sales tax rates depending on the location within that zip code.
Even if the sales tax is 8.25% in the zip code, the 2% local sales tax may be due to different local taxing authorities depending on the address. For example, you could have a city sales tax and a county sales tax for sales outside the city. So the company would have to be able to determine which taxing jurisdiction in order to properly remit the local sales taxes collected.
Here are, to the best of my knowledge, the Texas sales tax rules:
case 1: If the order is placed to a company in Texas, the sales tax to use is the sales tax where the company is located.
case 2: If the order is taken outside the state by a company who has no business presence in Texas of any kind, they are not required to collect sales taxes. However, if they wish to collect sales taxes, they may, as long as they remit whatever is collected to the state of Texas.
case 3: If the order is taken outside the state by a company who has a single business presence in Texas, the applicable sales tax is that of the location of that business. For example, if they have a store in Dallas and no other presence at all, you pay the 6.25% state sales tax and the 2% local sales tax which goes to Dallas.
case 4: If the order is taken outside the state by a company who has two or more business presences in Texas, the applicable sales tax is that of the destination address. So if the sales tax rate of every store by the company is 8.25% but the destination is in a 6.25% area, the applicable sales tax is 6.25%.
One surprising thing that was explained to me by someone at the Texas Comptroller's Office when I called up to get some clarification of the rules about three years ago is that it is okay if the company charges too much sales tax as long as all the sales tax collected is properly remitted.
Also, in the case of a delivery by UPS or Fed Ex, it goes by the address on the shipping label even if they end up delivering it to another address. Around here, the UPS and Fed Ex drivers rarely deliver anything out to my house. Indeed, most have no idea how to find the place. Instead, they drop it off at my office in town.
I was concerned that the fact that they drop it off at my office instead of my residence would create a problem since anything delivered to my office has a 2% local sales tax rate while anything delivered to my home has no applicable local sales tax. The guy from the Comptroller's Office said that the applicable sales tax was that of the shipping address whether or not it was ultimately delivered elsewhere.
Re:Why the hell not? (Score:2)
Put another way, the easiest sales tax calculator algorithm has only fifty tax rates, and matches by state, not by zip code. Simply use the highest rate for any given state.
Re:Why the hell not? (Score:2)
Given the way that this deals with consumers, it would be a big no-no from the regulators. As far as the states are concerned, it doesn't matter how difficult it is to collect sales taxes(or even to decide what to collect the sales taxes on), it just matters that it is done and that the businesses aren't using those collections to sc
Re:Why the hell not? (Score:3, Interesting)
So those stupid "we pay the sales tax" sales are illegal in Iowa? I have to wonder how hard this screws over concessions vendors, which almost universally charge a fixed price including tax rather than l
Re:Why the hell not? (Score:3, Interesting)
As far as I can tell. Of course, if you do any looking into Iowa sales tax rules, there's an awful lot of grey areas - presumably there so that the department of revenue has something to do.
I can't speak for concessions vendors, but food is generally excluded from sales tax. I think restaurants charge sales tax on food that they prepare, but I'm not sure if a concession stand falls within that?
Re:Why the hell not? (Score:2)
So, if you lived near the border with another state;
And you had a friend on the other side of the border;
And the company had no presence in that other state, thus no requirement to collect taxes for that other state;
And you had your order shipped to his address in your name --
Would you then have to pay texas sales tax?
Re:Why the hell not? (Score:2)
Re:Why the hell not? (Score:4, Informative)
Re:Why the hell not? (Score:3, Insightful)
I'm not trying to justify Borders actions, but what ever happened to the concept of a state cutting its budget deficits by reducing spending? I have no sympathy for CA whatsoever because they put themselves into this hole. It's human behavior that people are more prone to take an illegal action as the stakes rise. It should be no surprise whatsoever that this type of thing is happening. Again, I'm not trying
Re:Why the hell not? (Score:5, Insightful)
You are "magically exempt" from a foreign state's vehicle registration fees as well.
KFG
Re:Why the hell not? (Score:2)
If, however, you purchased it online or over the phone, the sale actually took place in your state. The California company would only owe taxes to your state if they also had a presence (something called Nexus) in your state. A national chain store, like Walmart would. A specialty store may or may not.
However, in most states
Re:Why the hell not? (Score:2, Informative)
If you are in CA, purchasing from a CA store, you are both under the legal jurisdiction of CA. A cop can stand there and make you pay the ta
Re:Why the hell not? (Score:3, Insightful)
Yes, I have owned a brick and mortar retail store where I did all the paperwork myself, as well as having managed a number of others.
It is also the basis the for Supreme Court ruling exempting businesses for collecting sales taxes for customers in other states.
Neither party is privleged in the transaction, as is seen by states typically also applying sales transactions to exchange of goods for goods (based on fair market value.)
In which case both parties are legally buyer
Re:Why the hell not? (Score:2, Interesting)
These are the reasons there were no sales taxes on out of state mail orders. I guess you want both states to charge sales taxes. If that happens, then people living in states with no sales taxes would order from companies that reside in states with no sales taxes, and the number of internet sales would drop to somthing close to zero.
Just my $0.02 worth.
Re:Why the hell not? (Score:2)
Anytime they purchased something from out of state via mail order, there was a local office they would drive the receipt down to and pay the tax on it. It's technically speaking a violation of the law not to do it. They did it because it was literally both their jobs to see that people did this. So out of a sense of
Re:Why the hell not? (Score:2)
In Texas, many companies handle their own sales taxes. That is, no taxes are charged on any purchase by the vendor whether the vendor is in state or out of state.
The company itself determines what all they purchased and remits the proper taxes to the proper local and state taxing jurisdictions.
In a previous job, I used to carry a stack of sales tax exempt forms with me in my car. When I bought something on behalf of the company, I would have to determine whether or not a sales tax was d
Re:Why the hell not? (Score:2)
Re:Why the hell not? (Score:2)
What most people don't realize is that most states also have Use Tax. The main difference to the consumer is that for a Sales Tax, the seller charges it and remits it to the state. For Use Tax, it is the buyers obligation and it is payable for anything that isn't charged a sales tax (so
They're not... (Score:3, Insightful)
Re:They're not... (Score:2)
ICC (Score:2)
Re:ICC (Score:2, Informative)
Re:Why the hell not? (Score:4, Insightful)
Re: (Score:2)
Re:Why the hell not? (Score:4, Informative)
Re:Why the hell not? (Score:2)
Re:Why the hell not? (Score:2)
Wrong.
Very Wrong.
Very, very Wrong.
The sales tax is levied against the customer for his purchase. The store is required to collect the sales tax and pass it on to the state.
In this case, Borders had to remit the taxes they were legally required to have collected, but didn't.
Re:Why the hell not? (Score:3, Informative)
This law only applies to goods sold to CA residents. The very first sentence of the article states this. If this law applies to you, it means you're a Californian and can vote for your state reps.
Re:Why the hell not? (Score:2)
Re:Why the hell not? (Score:2)
Re:Why the hell not? (Score:5, Informative)
This is a tax on transactions occurring in California. The taxes are levied by California's government against California citizens. Last I heard, California still had elections.
It's not like California is asking for taxes to be paid by some lady in New York who's shopping at Borders.com.
Re:Why the hell not? (Score:2)
Re:Why the hell not? (Score:2)
Come to thnk of it, I wonder how the last US election would have gone if all those tax paying H1-Bs could have voted?
Re:Why the hell not? (Score:3, Informative)
that don't live in CA and can't vote in CA. For example, a
professional athlete that plays one game in CA, owes the
state income tax, regardless of where they life or what
country they are a citizen of.
The fact that said professional athlete played one game in CA means that he worked in CA, so why shouldn't he/she pay income taxes?
Income taxes are owed where the work is performed. Sales taxes are owed where the sale takes place.
Why can't people u
Re:Current Taxation Structure is Bizarre (Score:2)
Re:Current Taxation Structure is Bizarre (Score:2)
Re:Current Taxation Structure is Bizarre (Score:2)
Re:Current Taxation Structure is Bizarre (Score:2)
Re:Current Taxation Structure is Bizarre (Score:2)
Roads: being part of a network of roads provides a larger return on investment, the larger the network is.
Local Schools: pre-fab buildings, standardized curriculum both contribute to efficiencies of scale.
Potable Water: manufacture of water filtration systems, science and technology R&D to develop better water systems also are susceptible to efficiencies of scale.
Re:Current Taxation Structure is Bizarre (Score:2)
Pre fab buildings? This is an improvement? Nope. It is cheaper though. A standized curriculm has nothing to do with a global government providing a massive set of efficiencies - which is the crux of your argument. Servi
Re:Current Taxation Structure is Bizarre (Score:2)
A uniform supply system could be more effecnt and thus help out schools and other gov projects. A global system could increase the avalibility of potable water by shiping it accross national borders. By taping
Re:Current Taxation Structure is Bizarre (Score:2)
Re:Current Taxation Structure is Bizarre (Score:5, Insightful)
I recall having this conversation with someone in another country about how the US's tax collection works (local/state/federal), and she didn't understand why everything wasn't federal. People abroad (and a lot of people here) don't realize that the decentralized system is what makes America's economy strong. It encourages competition among the states, and keeps them in check. Don't like the tax policy in one state? Move to another state -- and people and businesses do. It also allows experimentation among states. Apply this same argument to the city level as well.
People are also less apt to rip off the local government, because they see it as directly affecting themselves. Ripping off the federal (or even state) government feels a lot more anonymous.
Unfortunately, the US steadily goes in the direction of more central control. -sigh-
Re:Current Taxation Structure is Bizarre (Score:2)
And who would administer this global tax? (Score:2)
No thank you. The corruption we have on the national level is barely contained, and by contained I mean regulated enough that we can still function. We can barely hold our own elected representatives responsible for anything, so how do you expect u
LOL! (Score:2)
Re:LOL! (Score:2)
Rephrase (Score:3, Informative)
When's the last time you paid a tax that didn't go to your (local/state/federal government.
Britains don't pay taxes to Ireland. Californians don't pay taxes to Utah. French don't pay taxes to the Columbians.
All this does not apply to taxes paid while people are in a different country (I.E., even though I'm from the US I still pay VAT in Europe, and anyone from Europe
Re:Rephrase (Score:2)
You can get re-imbursed. But generally, it is of so little ammount it is not worth it. If you're on a $3,000+ trip to Europe and spend a hundred or so on souvenirs, I don't think you're gonna worry about ~$10. However, that is besides the point in this case. While there, I still pay the tax. That I can get re-imbursed later is a
Re:LOL! (Score:2)
I used to live in a suburb with a Homeowner's Association and had to pay a fee that is really just another tax to that Homeowner's Association.
Re:LOL! (Score:2)
When I paid a tax that went to someone who used public health care, when I paid a tax that went to someone who used a public road, when I paid a tax that went to foreign aid, when I paid a tax that when to a business subsidy...
Perhaps more significantly, when I paid vehicle insurance, when I paid health insurance, when I paid life insurance, when I paid business insurance, I paid a tax that went to a business. Just depends how you define "taxation".
Government is only a mechanism for organizing the flow o
Re:LOL! (Score:2)
Re:LOL! (Score:2)
Re:LOL! (Score:2)
Once is probably all they'd need Tex.
Re:Current Taxation Structure is Bizarre (Score:2)
Re:OT: Alternative to Newegg (Score:2)
I mean, is it really that difficult?
Re:OT: Alternative to Newegg (Score:2)
Re:OT: Alternative to Newegg (Score:2)
http://www.google.com/search?client=safari&rls=en
You know, you are *supposed* to pay anyhow... (Score:2)
When you fill out your CA State income tax, there is a place for you to report stuff that you bought out of state and didn't pay sales tax on.
As a practical matter, I suspect
Re:Odd (Score:3, Informative)
Borders was trying to argue that their online business wasn't connected to their physical presence in California, excempting them from CA state sales tax.
The court rule that the online store was indeed connected to their physical store, and thus wasn't exempt. This, to me, would seem to be the proper interpretation.
Re:Odd (Score:3, Informative)
Re:This Raises A Question... (Score:2)
Re:This Raises A Question... (Score:2)
Michigan recently used this law to subpoena records for those people purchasing tobacco products online, mostly because people are avoiding the high state taxes; Maryland had this go to a state court and was ruled on by a judge there that claimed states had no right to regulate or tax interstate commerce; Indiana,
Re:Good Trend (Score:5, Insightful)
A business with no physical presence in State A doesn't derive any benefit from the government in State A when one of it's citizens orders something and they ship it from State B. The only company that actually uses resources from State A is the shipping company, which does pay local taxes on it's employees, property, vehicles, and gasoline proportional to the proportion of the transaction that did happen in State A.
That, and there's that whole pesky no tarrifs on interstate commerce by the states clause in the constitution.
Good yes, trend no (Score:2)
Please, move from the state (Score:2)
California got in its current mess by wild overspending and waste, not because it's starved for revenue. Rather than feed the legislature's addiction by bending over for more taxes, our response to demands for m
Re:Good Trend (Score:2)
4500 Ways to Tax your Serfs (Score:2)
Re:California is a huge chunk of the market (Score:2)
Re:California is a huge chunk of the market (Score:3, Insightful)
This ruling could not possibly be "enforced" on you
Re:I don't see how Amazon would be affected (Score:2)
Of course, many don't do this but it technically is required.
Re:There is a bit more here (Score:3, Informative)
* Borders was apparantly not paying sales tax (speculation)
* They decided to pay the sales tax
* This might have been encourages by the California Tax
Amnesty program (again, speculation)
* ie, no penalties, but still interest
* Ahhhnolds plan to help balance the budget
* Borders then sues the state to get the money back
* They lost
* Borders