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Senators Vow To Renew Bid For State Taxes On Remote Internet Sales 268

jfruh writes "A bipartisan group of U.S. Senators are working hard to make it legal for U.S. states to collect sales tax on any sales made to their residents, even if the sellers live elsewhere. They tried to add an amendment making the change to an unrelated defense appropriations bill, but the attempt was defeated. They have vowed to try again."
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Senators Vow To Renew Bid For State Taxes On Remote Internet Sales

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  • Um... (Score:5, Insightful)

    by jasper160 ( 2642717 ) on Tuesday December 04, 2012 @09:47AM (#42178383)
    We don't have a revenue problem, we have a spending problem.
    • by alen ( 225700 )

      is that like in california where the people are always voting in new spending via ballot initiatives but then vote on laws to limit property tax increases?

    • I don't really understand this argument. Spending does not match revenue, that is the only problem we have. "We the People" can raise and lower taxes and spending at will. There is no "right" answer, so I'm not sure where you are going with this argument.

      There are very good arguments to reduce the size of government, but there are also good arguments to boost revenue. I propose a compromise:

      1. Raise taxes (rates, loopholes, whatever - it really only matters to partisans) to cover our debt service.
      2. Freeze

      • by medcalf ( 68293 )
        And if raising tax rates reduces revenue, as it generally does on the right side of the Laffer curve? And if raising tax rates reduces economic growth, as it generally does once taxes go beyond a certain point far below ours? I agree we need to freeze or, better yet, dramatically cut spending. But there is no way short of an economic collapse that it's going to happen.
    • Re:Um... (Score:5, Insightful)

      by ducomputergeek ( 595742 ) on Tuesday December 04, 2012 @11:18AM (#42179337)

      I keep looking at all these projections of if we increase taxes on the wealthy how it will generate at most 20% of the revenue we need to close the fiscal gap. That tells me we aren't taxing our way out of this mess and while the increased taxes may help some, it's not going to be nearly enough. Spending needs an across the board massive cut on everything from defense to social spending. That's the ugly truth nobody wants to discuss.

      If I didn't know better I'd think both sides wants this fiscal cliff to happen. It's the only way I think they can actually enact the needed cuts and tax increases while both sides blame each other...

      • Increase by how much?

        Certainly they should be much higher, given that we immediately put ten+ years of two wars and the bailouts of failed companies on the public debt. And here we have Goldman Sachs' CEO demanding that the average person "expect less" of their retirement. While he, undoubtedly, will live the high life daily.

    • We don't have a revenue problem, we have a spending problem.

      Even taking this article of faith seriously, that's not argument against replacing more-expensive-to-collect use taxes with less-expensive-to-collect sales taxes on internet retail transactions.

  • Go after them. Here in MI we have a "Use Tax" on our State Income Tax forms for reporting your internet purchases for tax calculation. Usually cheaper to use the "based on your income" option to to add it all up and apply 6%...
    • by cdrudge ( 68377 )

      Usually cheaper to use the "based on your income" option to to add it all up and apply 6%...

      So you just pay an additional 6% of your income because it's "cheaper"? Doesn't that mean you are paying the tax twice for all of your in-state purchases or paying a tax on your mortgage, non-taxable purchases, etc?

      • It's not 6% of his income, it's 6% of an amount based on his income, which is between $4-70 or 0.08% of gross income if you make more than 100k/year.

        Details can be found on the actual tax form [michigan.gov] on page 3.

        If you bought more stuff from out of state that cost less than $1000 each purchase than the number in the table says, yes, it actually is cheaper.

  • should be illegal (Score:5, Insightful)

    by wbr1 ( 2538558 ) on Tuesday December 04, 2012 @09:50AM (#42178399)
    Unrelated riders on politically hot button bills and earmarks on important budget issues are how the most heinous of legislation is often passed. Should be illegal, but it will never be.
  • by CloneRanger ( 122623 ) on Tuesday December 04, 2012 @09:57AM (#42178465)

    By forcing web sites to collect sales tax for all 50 states and the territories will create an accounting nightmare. The only companies that can afford to hire the people to do it would be the dominant players like Amazon. So, all the small start ups would be stifled right out of the gate. The end result will be a near monopoly and very few start ups bringing new ideas to market.

    • by paiute ( 550198 )

      By forcing web sites to collect sales tax for all 50 states and the territories will create an accounting nightmare. The only companies that can afford to hire the people to do it would be the dominant players like Amazon. So, all the small start ups would be stifled right out of the gate. The end result will be a near monopoly and very few start ups bringing new ideas to market.

      OK, independent of the question of good or evil, wouldn't that be an opportunity for a startup which offered that service to other startups?

      • Re: (Score:2, Informative)

        by Anonymous Coward

        these companies exist but are very expensive. Probably because it's a nightmare to figure out what to charge for which address at what time for which product.

        The rules are beyond insane in one state alone for one company and one product, let alone trying to figure this out for a huge range of products. Also note that these tax zones are not split on zip code boundaries! Getting it wrong means huge liabilities...

        Source: I take care of sales taxes for two states.

        • "these companies exist but are very expensive. Probably because it's a nightmare to figure out what to charge for which address at what time for which product."

          No, they're very expensive because it's a nightmare to create it yourself from scratch. Once it's done once, it costs nothing to reproduce the tables/software. But because they know it would take $x to create from scratch, charging 0.25 x $x is a reasonable value proposition.

          The only possible positive outcome is that by requiring everyone to do it, i

          • No, they're very expensive because it's a nightmare to create it yourself from scratch. Once it's done once, it costs nothing to reproduce the tables/software. But because they know it would take $x to create from scratch, charging 0.25 x $x is a reasonable value proposition.

            But that's utterly, naively, massively ignorantly beside the point. "Reasonable value proposition" is lying dead under the wheels of the huge bus "What the market will bear" is driving.

            The "nightmare" of creating accurate, legally via

        • by cob666 ( 656740 ) on Tuesday December 04, 2012 @11:13AM (#42179279)
          It's not JUST calculating the tax. Every business would have to have a Sales Tax ID for every state that collects sales tax, those aren't free and some states require you to pay a yearly renewal for said privilege. Also, many states require you to file quarterly, but not calendar quarterly, quarterly based on the state's fiscal year.
      • by Attila Dimedici ( 1036002 ) on Tuesday December 04, 2012 @10:18AM (#42178637)
        So, in place of the many thousands of startups that will not get started because one more regulatory and financial hurdle has been put in their path, you are proposing that we settle for a single startup and call it a win?
      • by bondsbw ( 888959 )

        OK, independent of the question of good or evil, wouldn't that be an opportunity for a startup which offered that service to other startups?

        It would. Many regulations are opportunities for somebody.

        The net effect is that the government receives tax it once didn't receive, and the service provider receives money it didn't once receive. Don't forget that the service itself is taxed by sales tax, income tax, etc. So the government receives a relatively tiny sum more.

        All this extra cost is passed on to the buyer, so the buyer has less money to spend on other things he may need or want. This isn't quite the same as the broken window fallacy [wikipedia.org], as

    • By forcing web sites to collect sales tax for all 50 states

      45 States. What benefit do the residents of Alaska, Delaware, Montana, New Hampshire, and Oregon gain from expending Federal resources on enforcing particular States' tax policies? None, so this should not qualify as a Federal issue. Remember, retailers don't charge sales tax, they collect it. The taxes on delivered goods are 'owed' by the Residents of the States themselves - what the States have on their hands is a massive tax protest problem (

    • by xelah ( 176252 )
      Except, of course, for the 'calculate US sales taxes for your online shop as an outsourced web service' startups, which will do quite nicely. Well, until Amazon invents the new AWS Sale Tax Calculator service.
      • It's not the calculation that's the problem. There are already several services that offer sales tax tables for the US. I know, we used one in a point of sale application at the last company I worked for and it cost us about $12,500 a year for a license (IIRC). The problem for a small business is the accounting nightmare of having to keep your books straight an ensuring each state gets paid its due. After I sold that last company I started buying vintage and antique furniture from estate sales and opene

    • Alternatively, 3rd party accounting firms will spring up which specialize in solving the issue. So that many, many small business effectively pool their resources to solve the problem. On the one hand, no one wants to pay sales tax on the things they buy online. On the other, it's completely unfair to local businesses that do have to pay taxes, especially when there are players with the size and influence of Amazon that don't.

      • by stdarg ( 456557 )

        On the other, it's completely unfair to local businesses that do have to pay taxes

        Why is it unfair? The local business in Rhode Island is using local government resources -- fire, police, etc. The guy operating out of his garage in Utah selling to people in Rhode Island isn't using Rhode Island's fire, police, etc. And really, don't the local businesses in Rhode Island have the same opportunity to sell to people in Utah as the guy in Utah? So they can take advantage of the tax situation as well.

        If states are looking at shortfalls because of inter-state commerce, they should use other rev

    • by jythie ( 914043 )
      Eh, I suspect that if this became law we would see a whole crop of inexpensive middleware or other accounting apps that would automate the process, probably integrating right into Quicken or whatever. It would actually be the big players with their legacy home grown systems that would take a hit.
    • As part of the bill, require any state that wants to participate to publish a public API that takes a dollar amount, a zip code (or address) and a product type and returns how much tax is owed. Done.

      It's absurd to call this a "nightmare". It's trivially solvable.

      • As if states were the only problem.

        Municipalities, counties, and any number of subordinate jurisdictions will howl--very effectively--if they're left off the gravy train. And that increases the complexity of the tax calculation problem by orders of magnitude. And you know for damn sure no state will buy into a system that makes work for them. Lobbying is cheaper and more effective.

        Maybe the invisible hand will provide that API, since that's already an established semi-competitive market, but that just means

    • The legislation in question requires states to create a simple sales tax compact. This means all the merchant needs to know is the state to ship to. They don't have to worry about city, county, special tax zones and all the other stuff that brick and mortar operations have to comply with.

      Second, the legislation only applies to companies with large sales volumes online. It's not going to apply to some guy selling stuff on ebay.

      Finally, I don't see the accounting nightmare. Most shopping carts are designe

    • > sales tax for all 50 states and the territories will
      > create an accounting nightmare

      Oh, it's a whole lot worse than you realize. Cities, counties, multi-county "transportation districts", multi-city infrastructure districts, and like can all levy sales taxes too. Any and all of these, including the state, may chose to levy the tax only on certain goods, but not on others. They may have sales tax "holidays" certain times of the year; maybe for all goods maybe for just a few. For example, "back to

    • By forcing web sites to collect sales tax for all 50 states and the territories will create an accounting nightmare.

      Wrong. Accounting and bookkeeping is done on computers. Tax payments are automatically calculated and paid, in most cases. This kind of functionality comes with every commercial accounting/bookeeping/ecommerce package available today.
    • By forcing web sites to collect sales tax for all 50 states and the territories will create an accounting nightmare.

      Online retailers can easily choose to only do sell to places they are set up to collect and pay taxes for.

  • Having heard, with my own ears, Democrat Senators and Congressperson tell the whole country that they would never support a tax on the Internet, I am surprised that they would so quickly change their highly proclaimed position.

    Of course, they promised me that I could retire with full Social Security benefits and have changed that also--now that they have raised the retirement age.
    They promised that Medicare would provide for senior health-care needs and the Democrat President is set to take $1,116,000,000,0

    • It's not a tax on the internet, it's a tax on goods bought from an out of state seller. In other words, it's a tax that, from a purely legal standpoint, you're already supposed to be paying yourself every year when you file your taxes.

      • Much better would be to just establish a national tax rate for cross-border sales. Distribute the tax as you see fit. Requiring out of state sellers to know the tax laws of all 50 states is not fair, IMHO.

    • Re: (Score:2, Flamebait)

      by Sponge Bath ( 413667 )

      FTA: "Senators Dick Durbin, an Illinois Democrat, Mike Enzi, a Wyoming Republican, and Lamar Alexander, a Tennessee Republican"

      Two Republican senators and one Democratic senator.

      Having heard, with my own ears, Democrat Senators and Congressperson tell the whole country that they would never support a tax on the Internet...

      Was that Democrat you heard with your own ears Dick Durbin? No? Then your comment makes no sense. You did not mention 2/3 of this group are Republican which makes even less sense.

      I guess the cost of "Obama Phones" is more than expected.

      Ahhh. Obama Derangement Syndrome. Now it makes sense.

  • by artfulshrapnel ( 1893096 ) on Tuesday December 04, 2012 @10:02AM (#42178495)

    Seems to me that the states shouldn't be trying to deal with the taxes on this, and instead congress should be doing it under the mantle of "Regulating Interstate Commerce". Pass a law that says all sellers must collect and report both federal and state income tax on sales as if the sale were occurring at the buyer's physical location, or the location to which the product is delivered. (Whichever is easier to make into an enforceable law).

    Simple, clean, unambiguous, very few loopholes, and understandable to customers.

    • by howardd21 ( 1001567 ) on Tuesday December 04, 2012 @10:15AM (#42178617) Homepage

      Seems to me that the states shouldn't be trying to deal with the taxes on this, and instead congress should be doing it under the mantle of "Regulating Interstate Commerce". Pass a law that says all sellers must collect and report both federal and state income tax on sales as if the sale were occurring at the buyer's physical location, or the location to which the product is delivered. (Whichever is easier to make into an enforceable law).

      Simple, clean, unambiguous, very few loopholes, and understandable to customers.

      It is anything BUT clean - it is a complete mess for businesses to try and figure out what tax to charge and who it gets sent to. It is not just 50 states, it is as you suggested the buyer's physical location, so every other tax on top also must be calculated, collected, and paid to the local parish, county, city, district, etc. And add in some audits by each of these taxing authorities. Paying local taxes is is easy when Mom and Pop hardware is selling to it's walk in customers, they pay the city, county, state and federal govt. And it is almost workable for a large corporation that pays for a top tier ERP system and adds a tool like vertex (expensive and must be maintained by a team). But your proposal just cut off any small - medium business that wants to sell beyond the physical locations they occupy. I hep you like Walmart, because they and others sized like them will be your online provider of products.

      • by RattFink ( 93631 )

        There are plenty of solutions on the market that don't require a full blown ERP or accounting packages for tax calculation and remittance. Off the top of my head I can think of Avatax but I know there are plenty of others. It really isn't THAT big of a deal.

    • And a boatload of work for small startup companies. You seem to be unaware that many states do not have a single sales tax rate. Instead some states have a rate that varies according to what municipality you are in at the time of the sale. This is not something that can be determined by zip code as zip codes are not divided by local municipality boundaries but are instead determined by what post office the USPS delivers mail to that address from.
      • Here in Arizona we have multiple taxes, at state, county, and municipal level.

        But calling that a 'state' tax issue is misleading. It's the localities that really hose things up. And Phoenix goes one further, and taxes food at a different rate than merchandise. Yes, they tax food. And how they did it is even more disturbing than the fact that they do, but tha;'s the topic of several pages of posts, and not for this thread.

    • SCOTUS (especially the CJSCOTUS) seems to be willing to interpret the commerce clause fairly liberally. I have little hope of a solution there.

      We are in a tax-it-all era. Expect your overall tax burden to grow linearly for the next decade unless some course change occurs.

    • We have a model for this, one that has existed for well over 100 years dealing with catalog companies. After all really what is the difference between a catalog company and an online retailer other than dead tree vs. electronic. The law states you only have to collect taxes in the states in which you have a physical presence in. I live in Missouri and if I have an online store, incorporated in Missouri, and have all my operations in Missouri I have to collect sales tax on Missouri purchases. If I sell to

  • Can't the Pentagon buy stuff from discounttankoutlet.com?
  • If the states really wanted to collect all that sales tax, all they would have to do is enforce current law (requiring residents to pay the tax themselves) and increase the penalties for evasion. Random audits would reveal massive infraction - supposedly less than 1% of taxpayers in states requiring it report any internet or other purchases where the vendor did not charge tax. But they won't do this, they're too scared of the backlash from voters. In short, they want somebody else to do the dirty work f
  • What about the interstate commerce clause in the constitution?

    Anyway this sort of thing will cost jobs in this country - since companies can set up offshore and sell stuff without having to collect US state taxes - especially for non physical goods (mu7sic, videos, software, subscriptions etc.

    If the States need more money, they can increase sate income tax, of have a state lottery (a tax on the mathematically challenged)

    • You are correct that it would cost jobs, but offshoring would not get around it. It would be trivial for Congress to pass a law collecting from businesses that sell to consumers from outside of the country and equally trivial to enforce it against any large enough to be a shell for a company that is actually located in the U.S.. The problem is that this law would make it harder for a small business to get started. Existing regulations have made it difficult to start a brick and mortar retail business as a s
    • Why wouldn't states seek additiknal revenuw from nonresidents, whenever possible? Stop thinking benevolently, and think like a bureaucrat.

  • They need to impose an interstate commerce tax. This tax will be made up of three components. One is 33.3% of the tax rate of the ship to state, and the other is 33.3% of the tax rate of the shipped from state and the third is the federal tax, which is set at 3%. All states will have a single number (none of these city extra sales taxes). This interstate tax will mean each state gets tax coming and going. Sales within the state are taxed in the normal state way. The feds will collect this tax and remit each

    • No, congress needs to specify that, for items where the transaction is not placed in person but originates in the US, the sale is defined as occurring in the state where the corporation is registered. (That would make for some interesting corporate jockeying, because though Delaware doesn't have a sales tax, they do have a gross receipts tax)

      • by aurizon ( 122550 )

        That would lead to a game of musical chairs with continuances.
        No the simple tax as I state is both fair and unavoidable.

  • In the European Union VAT is different in each state. If you're buying as a personal customer, ie. you don't have or don't use the VAT ID, you pay the VAT and other taxes valid on the seller's country, except for alcool and tobacco. If you're buying as a professional customer, using the VAT id, the regulations are different due the compensations but the same basic rule applies most of the times except on some cases.
  • I like anyone else hate taxes on levied upon me, but I also understand taxes are necessary. The United States is a very large country with many governments: local, state, and federal. While I'm sick to death of our tax dollars being wasted by our leadership, I also believe that if our tax dollars weren't wasted people tax rates would be much smaller and this would be a non-issue.

    If I pick up the phone and call a company and purchase a product from that business in another state other than the one I live i

  • This could be a very simple process - the business would charge whatever the sales tax rate is for where it is headquartered (i.e., Walmart online customers would pay Bentonville, AR sales tax). This would work, for the most part, and be fairly easy for the vast majority of online retailers to implement.

    Of course, this is the "lowest approval rating ever" Congress we're talking about. The same guys who claim to be able to fix the current fiscal mess (they created), but can't give us any details.

    Expect
    • by Teese ( 89081 )

      This could be a very simple process - the business would charge whatever the sales tax rate is for where it is headquartered

      This would just get every online business "headquarted" (with a PO box and an accountant) in Delaware, Montana, New Hampshire or Oregon. The states with no sales tax.

      • While I can see that being an issue in some cases, I treat generalized statements like yours with a fair amount of disdain, as they are based purely on subjective speculation and not reality or facts.

        Not to mention, since some random Slashdot reader thought of it, don't you think our venerable lawmakers would as well (man, that one almost hurt to say)?
  • So let me get this straight...

    If I was a financier trading millions and billions, and under the current de-regulated playfield that is Wall Street, I wouldn't have to pay one red cent to trade worldwide all those mortgages, hedge funds, CIDS, etc., but should some mook in a garage try to sell his old junk ONLINE well FRELL HIM.

    Capitalism my arse.

  • If live in Colorado and order an item from Illinois, where has the sale been made, Colorado or Illinois? I'm sure each state will argue their state is the location of the sale.

    What about hosted sales sites? Let's say, I live in Idaho and order an item from a company registered in Maine, but all their internet presence is hosted in Texas. Now which state gets the taxes?

    First I'm against an "internet sales tax." The only way I can see this working is for the federal government to create a single "internet s

  • but tax breaks that actually help US Citizens? Nope, must crush those under the government boot, because those people have families and don't spend enough on lobbyists.
  • The cultural hostility towards this move puzzles me. Here, in Canada, if I make a purchase from Amazon.ca I pay provincial and federal sales taxes. It's always been that way and no one bats an eye because it seems, well, reasonable. If I don't want to pay tax I can buy the item used or stolen (or both) for cash on Craigslist.

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