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http://www.weeklystandard.com/blogs/white-house-endorses-internet-sales-tax_718208.html

In the past efforts to implement sales taxes on internet purchases have repeatedly been defeated but this time Harry Reid is using Senate rules to bring it to the floor without committee debate, thus fast-tracking it.

Currently an internet vendor only has to collect sales tax if they have a B&M "footprint" in the state that the buyer resides in. This bill would require the internet vendor to collect sales taxes no matter where the buyer lives. This means that the vendor would also have to submit collected taxes to all jurisdictions which it collects taxes for, even if they don't have a license to operate in that State. Aside from the negative impact this will have on internet sales, this will be a logistical nightmare for smaller internet vendors like the type we generally buy from.

Amazon.com would weather this better but then they have the infrastructure in place already. In fact, Amazon and Wallmart are both lobbying for this bill, assumedly with the intent of eliminating competition from smaller companies. Many State and local governments are also lobbying for this bill. Things that are up in the air are things like eBay auctions and craigslist purchases. Also unknown is how compliance by foreign companies is going to be implemented under this law.

IIRC there are some places that charge you sales tax for things ordered online already... I have seen several times something to the effect of "if you live in CT, etc etc., you will be charged local sales tax rates, blah blah blah, unless you don't live there"

and those businesses were ones that I KNOW were not located in CT (though they may have been in some of the other states that were listed.. i only remember CT atm)

The reason why some sites will charge you taxes based on what state you live on when ordering online, is because they have a warehouse to ship your order in that state.

Most online retailers only operate from a single location, and the majority of those being small business can not possibly spend the amount of time and effort required to collect taxes based on 48 of the states sales tax laws, and send out the checks to those states on a regular basis.

Filing business taxes and forms for one state, county, city is difficult enough. The administration on the small online business I work with is a couple hours a day. If it also had to deal with these forms and collections from 48 other states, it would be a full time job it and of itsself. Basically nothing else would be able to get done, and the business would die.

Basically this a complete nightmare and disaster for small online businesses, home businesses, those of you thinking to start one etc. Starting a business is difficult enough, this would provide a further barrier to anyone thinking to make more money working for themselves.

I hate to say this, but I'd agree that a sales tax on internet purchases is probably fair. It was one thing in 1999 when the web was a nascent technology, but in 2013 it amounts to Amazon, Newegg, etc having an enormous,unbalanced advantage to equivalent B&M establishments.

There should be some threshold for this, though, as far as employees, net revenue, number of locations, something, so it's not super onerous on small businesses. At least, not more onerous than taxation policy already is on small establishments.

Wow... this makes CISPA look friendly and nice.

 Ouze wrote:
I hate to say this, but I'd agree that a sales tax on internet purchases is probably fair. It was one thing in 1999 when the web was a nascent technology, but in 2013 it amounts to Amazon, Newegg, etc having an enormous,unbalanced advantage to equivalent B&M establishments.

Actually, Amazon and Wallmart are in favor of this precisely because they can handle the accounting involved and they know that much of their competition cannot. So the "big guys" won't really be affected while smaller companies will wind up closing. Also, Amazon sells a tax service that a small business can subscribe to so that they can do all this tax work. This steers money from the small guy into Amazon's pockets while also making the small guy dependent on Amazon and subject to their terms of service and pricing structure.

 Ouze wrote:
There should be some threshold for this, though, as far as employees, net revenue, number of locations, something, so it's not super onerous on small businesses. At least, not more onerous than taxation policy already is on small establishments.

This will invariably limit growth. I'd like to point out that Amazon was able to go from a small business in Washington State to a national and later international company without the penalties that this new legislation would put on new, upcoming companies.

Also, afaik, nothing here affects mail-order which is still exempt from "out of state" sales taxes.

I think that an internet sales tax is reasonable, as long as it is equivalent to your states sales tax. IE, Florida residents don't have to pay one.

But the issue gets sticky when you get down to states like Illinois that allows counties to add to the sales tax. The county I live in has a differant rate then say Cook County. Will the internet sales tax take that into account.

Furthermore, what will happen to folks like US Military who are stationed overseas. We order a lot of stuff off of Amazon and Ebay, simply because it's the only way we can get it. Will we have to start paying some arbitrary tax just to have something similar to the standard of living that we have here in the states?

Way to many questions to be answered yet.

 Ouze wrote:
I hate to say this, but I'd agree that a sales tax on internet purchases is probably fair. It was one thing in 1999 when the web was a nascent technology, but in 2013 it amounts to Amazon, Newegg, etc having an enormous,unbalanced advantage to equivalent B&M establishments.

There should be some threshold for this, though, as far as employees, net revenue, number of locations, something, so it's not super onerous on small businesses. At least, not more onerous than taxation policy already is on small establishments.

Eh... is it a Federal Tax? If so... hell no.

If it's to allow the states to implement their tax... sure.

 Breotan wrote:
This will invariably limit growth. I'd like to point out that Amazon was able to go from a small business in Washington State to a national and later international company without the penalties that this new legislation would put on new, upcoming companies.

Of course it limits growth - so does every other tax. But what makes Amazon so special? Why do they have the right to this enormous advantage that Target, or Walmart, or Toys are Us cannot have? They essentially are able to offer customers 8 percent off on everything due to no state taxation.

To put it different, up until 20 years ago, every other large corporation in the country was able to get to where they were despite having to collect sales tax.

Our economic system is suppose to provide a fair and open marketplace for people to compete, but by freeing online companies of tax responsibilities, we're essentially picking winners.

 whembly wrote:
If it's to allow the states to implement their tax... sure.

That is I think essentially unworkable.

I don't think this will pass the House.

Hang on, let me get this straight. If you purchase products from another state you pay no tax on that purchase?

The retailer having presumably paid their tax?

Are you supposed to fess up on your tax return or is it a non issue?

 notprop wrote:
Hang on, let me get this straight. If you purchase products from another state you pay no tax on that purchase?

The retailer having presumably paid their tax?

Are you supposed to fess up on your tax return or is it a non issue?

Non-issue.

I don't know if the law is requiring state sales tax or a new tax.

To the codemonkeys out there, is this an issue for a smaller retailer to include such in the bill?

Do you mean is it difficult for small outfits to write a web site back end that will support the new tax requirements?

Undoubtedly it would be harder than for Amazon, however there are off the shelf web store systems that could be used, and these would naturally be updated by their developers when needed.

To put it differently, coding an internet retail system is not the core competency of a small, niche online seller and they shouldn't be trying to do it.

 Kilkrazy wrote:
Do you mean is it difficult for small outfits to write a web site back end that will support the new tax requirements?

Undoubtedly it would be harder than for Amazon, however there are off the shelf web store systems that could be used, and these would naturally be updated by their developers when needed.

To put it differently, coding an internet retail system is not the core competency of a small, niche online seller and they shouldn't be trying to do it.

Ayah. There are two arguments here: 1) implementing a program change is too onerous (looks like thats easily overcome per your email); 2) handling the accounting is too onerous.

I think #1 is garbage. I think #2 might be a realistic problem. I don't have enough information to posit an opinion.
I do know that I shop at at least one online retailer that requires payment of sales tax. They are small one warehouse operation.

I have seen it on sites that I reckon were small outfits.

As regards the accounting, I presume you mean if the requirement included sending the collected tax to the state in which it was theoretically incurred.

I could see that being a problem if you don't have a lot of online sales, and it would be just as much as a problem for the receiving state.

 Ouze wrote:

 whembly wrote:
If it's to allow the states to implement their tax... sure.

That is I think essentially unworkable.

Honestly... what makes you say that?

Mail -order companies prior to the internet had to deal with that... right?

So, what's the difference?

 whembly wrote:

Eh... is it a Federal Tax? If so... hell no.

If it's to allow the states to implement their tax... sure.

What's the difference, you still pay tax, why would the source of the tax be pertinent?

 MeanGreenStompa wrote:

 whembly wrote:

Eh... is it a Federal Tax? If so... hell no.

If it's to allow the states to implement their tax... sure.

What's the difference, you still pay tax, why would the source of the tax be pertinent?

Wait think about that for a minute MGS. Its not the same.

One is a local sales tax that an internet purchase avoids. Fairness arguments come into play here, and I am ok with that.

The other is a completely new tax on all purchases at the federal level, effectively the imposition of an additional and completely new tax. Sales taxes are stil required.

 whembly wrote:
Honestly... what makes you say that?

Mail -order companies prior to the internet had to deal with that... right?

So, what's the difference?

I don't know how it works in other states, really, but in Iowa it's a total mess. For example, chocolate bar? Taxable. Twix bar? Not taxable - as it has flour in it, and is so considered food, not candy. I mean, just tons of stuff like that. I can't imagine the coding it would take to cover all 50 state's ridiculous regulations. My suggestion would be for online purchases to average out the state sales tax for all 50 states and then charge that, nothing more.

Alternately, we can lift the sales tax from B&M stores. I think that's not going to fly - but the way it's set up now is incredibly unjust.




Automatically Appended Next Post:

 notprop wrote:
Hang on, let me get this straight. If you purchase products from another state you pay no tax on that purchase?

The retailer having presumably paid their tax?

Are you supposed to fess up on your tax return or is it a non issue?

There are 2 scenarios:

A.) Some e-tailers collect sales tax is they have a physical presence in the state. IE, you're in Iowa, the website is in IA, they collect 7.75%. This is largely dependant upon the state demanding it, i.e. NY. If the website is in IA but you life in Florida, they collect nothing.

or

B.) Some e-tailers do not collect sales tax at all, regardless of the location of the purchaser, as the state hasn't required it.

However, in EITHER example, if you did not pay sales tax on purchases, you are required to do so on your state tax return; something which I don't believe a single person actually does. This precedes the internet: As I recall in the late 80's New York would send Department of Revenue cars to New Jersey department stores to look for NY license plates. Something like that, I don't remember the details - it was a long time ago.

Makes our VAT system look simples... 20% across the board and across all Euro countries.

 Ouze wrote:

 whembly wrote:
Honestly... what makes you say that?

Mail -order companies prior to the internet had to deal with that... right?

So, what's the difference?

I don't know how it works in other states, really, but in Iowa it's a total mess. For example, chocolate bar? Taxable. Twix bar? Not taxable - as it has flour in it, and is so considered food, not candy. I mean, just tons of stuff like that. I can't imagine the coding it would take to cover all 50 state's ridiculous regulations. My suggestion would be for online purchases to average out the state sales tax for all 50 states and then charge that, nothing more.

...
...

You should hear about the UK's "Pastygate" tax affair last year.

Yes the big deal part of the problem is the accounting. Sure you can set a website to auto detect what state the IP address is from and add in the tax. Or when they choose a state to bill the credit card.

I am thinking of loopholes around all this right

The problem really is in the paperwork. One thing I have realized over the years, Governments want paperwork, more than they want the money.

If you give them money with no paperwork, they say thank you, but later slap you with a huge fine and the money has disappeared. Because there is nothing linking it to you paperwork wise, ya know expect your name on the check.

Lots of replies follow:

 djones520 wrote:
But the issue gets sticky when you get down to states like Illinois that allows counties to add to the sales tax. The county I live in has a different rate then say Cook County. Will the internet sales tax take that into account?

The law will require all State and local taxes be applied. This is based on where the BUYER is located not where the seller is. The state the seller lives in doesn't get to collect any tax. Given all the jurisdictions and differing tax laws involved, it's easy to see why this is a nightmare for a small business.

 djones520 wrote:
Furthermore, what will happen to folks like US Military who are stationed overseas. We order a lot of stuff off of Amazon and eBay, simply because it's the only way we can get it. Will we have to start paying some arbitrary tax just to have something similar to the standard of living that we have here in the states?

The taxes are set by the State/territory you are currently residing in. If you're in a foreign country, there will be no change for you. If you're on a military base in California, you'll have to pay all California sales tax no matter where the store you're buying from is located.

 Ouze wrote:
Of course it limits growth - so does every other tax. But what makes Amazon so special? Why do they have the right to this enormous advantage that Target, or Walmart, or Toys are Us cannot have? They essentially are able to offer customers 8 percent off on everything due to no state taxation.

Just the opposite. Both Amazon and Wallmart have a physical footprint in nearly every state already. This means that they must collect sales taxes for every jurisdiction anyway. The law affects people with limited physical locations who ship nationally, Paulson Games for example. As for the "why are they special" argument, mail-order is handled exactly this way and will continue to be so after this law is passed. Internet orders are currently the same thing as mail-order except that you order via a web site instead of the Sears & Robuck catalogue with an envelope and a stamp.

 notprop wrote:
Hang on, let me get this straight. If you purchase products from another state you pay no tax on that purchase? The retailer having presumably paid their tax? Are you supposed to fess up on your tax return or is it a non issue?

Retailers only collect taxes if they have a physical footprint (storefront, warehouse, office, etc.) in the state the buyer is making the purchase from. If the buyer and seller both operate out of Michigan then the seller must add Michigan tax to any purchases. If the buyer lives in Colorado, the seller does not collect any taxes and therefore doesn't file any tax returns with Colorado.

 Frazzled wrote:
I don't know if the law is requiring state sales tax or a new tax.

Existing State & local taxes.

 Frazzled wrote:
To the codemonkeys out there, is this an issue for a smaller retailer to include such in the bill?

It actually is. The concept may be relatively easy but the database of taxes must be constantly updated as States and local taxes are changed. This may not be a big issue in a single state but take it to 50 States, five U.S. territories, and whatever else is out there, and suddenly it becomes a LOT more complicated. If there is an error in the tax program, the tax FILER (the Seller in this situation) is responsible for errors, not the programmer. As I said earlier, Amazon already provides this as a paid service which is one of they reasons they stand to benefit from the law - more income generated.

 Frazzled wrote:
I do know that I shop at least one online retailer that requires payment of sales tax. They are small one warehouse operation.

All of them do, Frazzled, where the seller and the buyer are in the same State. At least they're supposed to.

 whembly wrote:

 Ouze wrote:

 whembly wrote:
If it's to allow the states to implement their tax... sure.

That is I think essentially unworkable.

Honestly... what makes you say that? Mail -order companies prior to the internet had to deal with that... right? So, what's the difference?

Mail-order companies did not have to deal with it differently than internet companies do now. After this law passes, mail-order companies will still be doing business the old way (collecting taxes from buyers in the same State only) while internet businesses will have to manage taxes from all jurisdictions.

 MeanGreenStompa wrote:
What's the difference, you still pay tax, why would the source of the tax be pertinent?

We currently don't have a Federal sales tax. Any implementation of one will be the camel's nose under the tent. Before you know it the rest of the camel quickly follows.

 Wolfstan wrote:
Makes our VAT system look simples... 20% across the board and across all Euro countries.

It is. But most States that tax sales do so at a rate of 7%-10%. Any VAT implementation like you describe would have to be done at the Federal level and people would absolutely revolt over that.

 Shadowseer_Kim wrote:
Yes the big deal part of the problem is the accounting. Sure you can set a website to auto detect what state the IP address is from and add in the tax. Or when they choose a state to bill the credit card. I am thinking of loopholes around all this right

You forgot the address to which a product is shipped to. And what about digital products that have no actual shipping address? Someone could avoid taxes by spoofing an IP in Oregon

 Sasori wrote:
I don't think this will pass the House.

We can only hope.

VAT isn't actually as simple as it might seem. Firstly, it isn't a flat 20% in all countries. Secondly, there are varying rates on different goods in different countries.

 Frazzled wrote:

 MeanGreenStompa wrote:

 whembly wrote:

Eh... is it a Federal Tax? If so... hell no.

If it's to allow the states to implement their tax... sure.

What's the difference, you still pay tax, why would the source of the tax be pertinent?

Wait think about that for a minute MGS. Its not the same.

One is a local sales tax that an internet purchase avoids. Fairness arguments come into play here, and I am ok with that.

The other is a completely new tax on all purchases at the federal level, effectively the imposition of an additional and completely new tax. Sales taxes are stil required.

Yup... thanks Frazz... that's where I was going.

All of them do, Frazzled, where the seller and the buyer are in the same State. At least they're supposed to.

This is interstate. I buy items from a manufacturer out west. They charge me sales tax. I think other sporting goods companies do as well.


Automatically Appended Next Post:

It actually is. The concept may be relatively easy but the database of taxes must be constantly updated as States and local taxes are changed. This may not be a big issue in a single state but take it to 50 States, five U.S. territories, and whatever else is out there, and suddenly it becomes a LOT more complicated. If there is an error in the tax program, the tax FILER (the Seller in this situation) is responsible for errors, not the programmer. As I said earlier, Amazon already provides this as a paid service which is one of they reasons they stand to benefit from the law - more income generated

Indeed as part fo the law it would be easy for the Feds to require states submit just such a database for sales taxes. but I warrant otherwise, its a problem.

 Breotan wrote:
You forgot the address to which a product is shipped to. And what about digital products that have no actual shipping address? Someone could avoid taxes by spoofing an IP in Oregon.

Sure, they could, but that would be pretty much textbook tax evasion, so lets not come at this from a premise of "well, we shouldn't pass a law because people might break it".

I'd prefer the "we shouldn't pass it because it's a bad idea" arguments instead, which do have merit.

Well a law that is widely unenforcible is a bad idea because it breeds disrespect for the law and the Justice System as a whole.

KK I just realized - you noted there arew programs for this. Do these programs keep up to date updates like a road program or such? If so then this is no big deal. If not, then we need to get some programmers and start a business like, now...

Government Mandate = PROFIT!