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States Push to Collect Online Sales Tax

Zonk posted more than 8 years ago | from the but-i-like-my-bulk-cheerios-on-the-cheap dept.

The Almighty Buck 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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Direct URL to SSTP web site (4, Informative)

xmas2003 (739875) | more than 8 years ago | (#13685482)

Here's a direct link to the StreamLined Sales Tax website [streamlinedsalestax.org] which is confusing as all get out with their last press release being in 2002; makes you wonder how "legit" these guys are. BTW, should this be filed under "The Mighty Buck" instead of Politics?!? ;-)

BTW, there's been a noteable increase in Wall Street Journal stories on Slashdot - certainly has improved the quality - kudo's to the editors and Carl Bialik from the WSJ [carlbialik.com]

halloween webcam is coming [komar.org]

Re:Direct URL to SSTP web site (4, Informative)

hsmith (818216) | more than 8 years ago | (#13685532)

If i recall correctly, this is actually a company that is trying to sell their taxing product to the several states and they have a good few states lined up. The guy in charge was on a talk show i listen to a few months ago. Basically, they wrote the software to do all the taxing and now they are going and getting the clients (individual states). So once they have enough states they are "in business" so to speak.

California charges it (2, Informative)

JoeCommodore (567479) | more than 8 years ago | (#13685490)

They call it a "Use Tax" on thier tax form, been doing it for two years now. :/

Re:California charges it (2, Insightful)

Flamesplash (469287) | more than 8 years ago | (#13685533)

They aren't alone, I think a LOT of states do it, but there's 0 enforcement. Just like the MA optional higher tax rate, who's seriously going to volunteer to give more money to their state gov?

Re:California charges it (1)

networkBoy (774728) | more than 8 years ago | (#13685543)

Use tax == sales tax
The term Use Tax refers to when you, as a retailer, buy something as if you were to re-sale it, but later consume it yourself. It is not specific to on-line sales. I do use it for such though and to make my on-line business easier I do as follows:
Flat price for everyone. If the end buyer is (delivery is taken) in CA then I simply pay the "use tax" on the item. The customer never sees a sales tax entry. While this lowers my profit on CA purchases, the bulk of my business comes from other states, where I don't have to charge tax because I don't have a brick and mortar anything there.
Makes the on-line shop software dead easy too.
-nB

Re:California charges it (3, Informative)

HTTP Error 403 403.9 (628865) | more than 8 years ago | (#13685907)

If the end buyer is (delivery is taken) in CA then I simply pay the "use tax" on the item. The customer never sees a sales tax entry.

Use tax =/= sales tax.

Use tax is assessed on any item purchased by the end user. There are many exemptions but the primary one is the end user is exempt from paying use tax if the end user has already paid sales tax.

If you are paying the "use tax" for the customer and not showing taxes paid on the receipt then CA may go after the customer for use tax. The customer can't prove sales tax was paid on his/her purchase.

Re:California charges it (0, Flamebait)

networkBoy (774728) | more than 8 years ago | (#13685928)

Not according to my paperwork from the SBA and FTB.
I'm not required to collect sales tax on purchases, nor am I required to make the customer pay them. If the item sold is subject to use tax I have to not that on the reciept, not the other way around.
-nB

It is only a matter of time (2, Interesting)

hsmith (818216) | more than 8 years ago | (#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.

Re:It is only a matter of time (0)

Anonymous Coward | more than 8 years ago | (#13685526)

A dream tax?

Re:It is only a matter of time (4, Interesting)

morgan_greywolf (835522) | more than 8 years ago | (#13685594)

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?

Re:It is only a matter of time (5, Interesting)

EmagGeek (574360) | more than 8 years ago | (#13685608)

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.

Re:It is only a matter of time (2, Insightful)

lucabrasi999 (585141) | more than 8 years ago | (#13685835)

I imagine that, when you are thinking of regulation interstate commerce, you are thinking of Justice Marshall's ruling in Gibbons v. Ogden [wikipedia.org]. That talks about the power of states to limit navigation of commerce between their borders. That ruling did not adress the legaility of a sales tax (a tax on consumption).

Re:It is only a matter of time (5, Interesting)

zippthorne (748122) | more than 8 years ago | (#13685926)

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.

Buying from abroad (2, Interesting)

grahamsz (150076) | more than 8 years ago | (#13685762)

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.

Re:Buying from abroad (1)

jandrese (485) | more than 8 years ago | (#13685945)

One thing I'd like to say about the VAT: Holy crap!

I just got back from Ireland (17.5%) and I have to say that people around here complaining about the 5.5% sales tax have nothing on those guys. I couldn't believe how awful the sales tax was, it's no wonder the poor need so much assistance over there with a regressive tax that massive.

Re:It is only a matter of time (2, Insightful)

superpulpsicle (533373) | more than 8 years ago | (#13685795)

Actually this is not a calculating issue as the taxes would probably only be off by a small percentage. It's more of a political issue. No president wants the interest rates to fly upwards on their watch. No president wants to add internet tax on their watch either.

If they matched internet tax with sales tax, then I can see a mega boom for online stores in Alaska, Delaware, Montana, New Hampshire and Oregon.

Re:It is only a matter of time (1)

advocate_one (662832) | more than 8 years ago | (#13685815)

question... what is the existing taxation system for mail-order purchases??? or items ordered via telephone on things advertised on the television???

Sales over the internet should be treated exactly the same.

Re:It is only a matter of time (1)

Grayputer (618389) | more than 8 years ago | (#13685940)

Yup, that's exactly what they want. Technically if you live in Maine and tele-order from Ca you are SUPPOSED to declare it and pay a Maine Use tax (many/most other states are same-same). That is, tax is paid where you live/product is shipped to. Now most people do not comply and tele-order USED to be a small percentage of all traffic in a given state so non compliance had little real tax impact. Along comes the Internet and amazon.com, ebay, and a host of other large tele-order business. Suddenly a few percent of all tele-business is a big number. Non compliance is now seen as a big number. State's new attitide, 'cough up'.

Re:It is only a matter of time (1)

RicktheBrick (588466) | more than 8 years ago | (#13685851)

If one lives in Alaska and orders a gift for some one in Michigan do they have to pay Michigan's sales tax. I do not see why it would be different from buying it a a local store and than shipping it to them. So why couldn't they just set up a business in Alaska where they would accept orders from people in high sales tax states and than order the products in the no sales tax state. I would think that if they charged 1 or 2 per cent they could make millions.

Great (0)

Anonymous Coward | more than 8 years ago | (#13685502)

Yet another attempt to distribute my hard earned wealth among those too lazy or incompetent to work work themselves. Just what I wanted!

Re:Great (0)

Anonymous Coward | more than 8 years ago | (#13685620)

But they are 'victims'!!

Victims of their own stupidity... but still.

Re:Great (1, Insightful)

no reason to be here (218628) | more than 8 years ago | (#13685661)

Yet another attempt to distribute my hard earned wealth among those too lazy or incompetent to work work themselves. Just what I wanted!

Yeah! just like those lazy aerospace engineers at NASA, and all those lazy-ass soldiers and sailors in Iraq. Damn gubmint comin' in and sealin' all mah money!

Re:Great (0)

Anonymous Coward | more than 8 years ago | (#13685740)

The irony of your statement is that if they didn't give it to those too lazy to work, then their would be plenty of money for NASA and the soldiers. Then I wouldn't have had to buy my brother a kevlar vest before he went to Iraq (the government could have given him the equipment he needed to do his job).

Re:Great (1)

BattleTroll (561035) | more than 8 years ago | (#13685778)

My North Carolina taxes don't pay for NASA, nor do they pay for the war in Iraq. The state was running a deficit so this is just a cheap way to raise taxes without actually changing the tax rate or, heaven forbid, moderate spending. The state continues to add additional 'fees' which serve the same purpose. It's shady politics but people around here seem to simply accept it.

I'm not sure how this is legal if they're exempting mail-order companies at the same time but it seems they're bound and determined to do so.

Re:Great (1)

ZiakII (829432) | more than 8 years ago | (#13685881)

Yeah! just like those lazy aerospace engineers at NASA, and all those lazy-ass soldiers and sailors in Iraq. Damn gubmint comin' in and sealin' all mah money!

I think your confusing federal tax and state tax there two different things, now if you said all those lazy bums on the side of the road pretending that there doing construction then yes you would have a valid point, but then again they get money from the federal government for their roads.... and then states (more in the north) who do tolls when we all know that those roads are paid for by now and they just use it a type of income. Now school systems are paid somewhat from the state so by buying that DVD on Amazon and not paying tax on it your robbing some poor child his education..... WILL SOMEONE PLEASE THINK OF THE CHILDREN!?!?!?!

Is it just me... (2, Insightful)

TJ_Phazerhacki (520002) | more than 8 years ago | (#13685507)

Or are the only states on that list that don't appear to be blatent Tax-Farmers Texas, Nevada, and Washington? Why is it that none of the other states appear to contribute significantly to e-commerce, yet they think they need to tax for the products or services rendered elsewhere?

Thank God you can still lie to servers about your location (sheesh...)

Re:Is it just me... (1)

paranode (671698) | more than 8 years ago | (#13685648)

Thank God you can still lie to servers about your location (sheesh...)

Do you lie on the address form too? You can use my address if you want.

Re:Is it just me... (2, Insightful)

killmenow (184444) | more than 8 years ago | (#13685728)

Thank God you can still lie to servers about your location (sheesh...)
Yeah, but...if it bases the tax calculation off of shipping location, how do you lie to it and still get your purchase delivered to where you are? Are you gonna ship to a drop location in the Cayman Islands and re-ship it to your true location? You'll end up paying a lot more in shipping than sales tax for most cases.

Re:Is it just me... (4, Interesting)

BlewScreen (159261) | more than 8 years ago | (#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

It's bad already (3, Interesting)

Rorschach1 (174480) | more than 8 years ago | (#13685511)

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...

Plug and Pay (1)

dereference (875531) | more than 8 years ago | (#13685722)

So I'm a little skeptical about just how 'easy' they consider a reasonable system to be...

Well, did you happen to see this part of TFA:

Architects of the Streamlined Sales Tax Project are devising a computer program that tracks the tax rates of the 18 states and their localities and automatically adds that rate to the bill of every online purchase.
(emphasis added)

Apparently, they're going to just give us all a nice "computer program" to handle everything for us. Yeah, right, that's the ticket...

So I guess we all just trust them enough to run their nifty (closed source?) utility on our servers. No, better still, this will probably be offered as a web service, where we'll just happily POST each of our sale details (presumably zip code and sale amount, although it wouldn't surprise me if they needed street addresses as well) and hope their server can handle the burden.

I'm in complete support of simplifying the state sales tax rules, but this effort seems to be a particularly impractical approach.

Re:It's bad already (1)

Chosen Reject (842143) | more than 8 years ago | (#13685791)

You have a point there. Taxes are so crazy for each state/county/parish/city/country/etc. But if I were to travel to CA and buy your product directly from you, then the city/county/state/country where your store is would get those taxes. So it is an easy fix. Where ever your internet-based store is, is where the tax money goes. This would get all the companies to to put their stores in those places with the lowest tax rates. Then those states will actually be "enticing" the companies by offering lower tax rates(which is not what they are doing now, that is called a threat).

Just like Company A can entice me from Company B by offering a lower price, State C can entice Company B from State D by offering lower tax rates. Now Company B has a lower total price after taxes than Company A and they have won me back.

If that fails I suggest a Boston Tea Party type revolt. We intercept the internet and dump it in the bay so that the motherland gets nothing from their internet tax!

Re:It's bad already (1)

SuperIceBoy (787273) | more than 8 years ago | (#13685876)

But technically they aren't supposed to charge California sales tax if you are not a California resident.

For example. I live in Oregon, near Washington. Oregon has no sales tax but Washington does. If I go to a store in Washington I can show them my Oregon drivers license and they will not charge sales tax.

Re:It's bad already (1)

sfjoe (470510) | more than 8 years ago | (#13685906)

So it is an easy fix. Where ever your internet-based store is, is where the tax money goes.

I think your definition of "easy" is different from mine. How do you determine where an internet-based store is located? Where the servers are located? Where the administrative offices are? Where the goods are shipped from? All of these can be in multiple locations.

If this goes through.. (1)

borawjm (747876) | more than 8 years ago | (#13685520)

If this goes through, then perhaps some e-tailers will cover the cost of the sales tax as they do with shipping? One more reason to purchase from one particular e-tailer over another.

Wait just a darned minute (5, Interesting)

$RANDOMLUSER (804576) | more than 8 years ago | (#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?

Not quite (4, Informative)

dreamchaser (49529) | more than 8 years ago | (#13685621)

Prior to online sales, the rule was that if the seller had what is called a 'nexus' (meaning a busines presence basically) in a given state, then sales tax applied. The buyer and seller did NOT have to be in the same state if nexus could be established.

While I disagree with this arguement, it *could* be argued that the Internet creates a presence in every state, far beyond the old days of mail order catalogs.

What it really boils down to is politicians on both sides of the aisle hate seeing money being exchanged that they can't get their greedy hands on.

Re:Not quite (3, Insightful)

swillden (191260) | more than 8 years ago | (#13685712)

While I disagree with this arguement, it *could* be argued that the Internet creates a presence in every state, far beyond the old days of mail order catalogs.

Seems like a pretty shaky argument. Because the buyer and seller can swap IP packets the seller has a local nexus? Exchanging messages over the Internet seems precisely analogous to exchanging bits of paper (catalogs and order forms) via the postal service.

Re:Not quite (1)

killmenow (184444) | more than 8 years ago | (#13685764)

Or:

Exchanging messages over the Internet seems precisely analogous to exchanging bits of encoded voice audio signals via the telephone.

Re:Wait just a darned minute (0)

Anonymous Coward | more than 8 years ago | (#13685623)

... maybe because the loss of tax income from retailers is too large to take lying down?

That varies from state to state (3, Informative)

brokeninside (34168) | more than 8 years ago | (#13685632)

Many states, Ohio being one, tax all purchases that are made out of state and shipped to an Ohio address. There is even a special line on the Ohio income tax form especially for reporting the amount of goods you've purchased online, through mail order, over the phone, etc.

Of course no one I know of that lives in Ohio has ever put any amount there other than a 0. Nonetheless, it isn't accurate to say that interstate transactions are not subject to and have never been subject to sales tax.

Re:That varies from state to state (1)

operagost (62405) | more than 8 years ago | (#13685760)

Regardless, it's unconstitutional.

Exactly how is it unconstitutional? (1)

brokeninside (34168) | more than 8 years ago | (#13685820)

It doesn't (a) interfere with interstate commerce, (b) unduly disadvantage out of state firms, or (c) apply to transactions that take place wholly outside the state.

Now, if the tax applied to all goods that happen to be shipped through the state rather than items shipped to the state, I might agree with you.

Re:That varies from state to state (1)

jandrese (485) | more than 8 years ago | (#13685889)

I think every state has that. The first few years I did my taxes I dutifully went through my recipts for the year and filled in the line. It actually got rather expensive in a hurry. Then the whole issue got more muddled with stuff like iTunes (are they out of state?) and whatnot. Now I just estimate. It's a fairly painful tax though, I'm not surprised some people ignore it.

Re:Wait just a darned minute (1)

Flamesplash (469287) | more than 8 years ago | (#13685644)

It's a pervasiveness issue, exactly the same reason no one cares people illegally copy casette tapes, but a lot of peope care that people illegally copy CDs. There's a LOT more of it going on, so a LOT more tax money is in issue.

But remember, them not taxing mail orders doesn't mean they didn't have every legal reason not to, just that they didn't, it was a gift ( according to sales tax law) not a right.

Same thing applies here. While no one may like it, being taxed on online purchases is no different to the consumer once the issues of where the money go are sorted out.

Re:Wait just a darned minute (1, Informative)

Snar Bloot (324250) | more than 8 years ago | (#13685656)

Untrue. Mail order items are subject to sales tax, only you have to voluntarily claim them and remit the tax to your state department of revenue. The problem is, it's widely ignored and pretty much unenforceable. So...now...we have some states (like mine) which gather the vast majority of their revenue via sales tax (no personal or corporate income tax). As more and more of comsumer sales shifts to the internet, less and less revenue is generated. Essentially, the tax base shrinks. This puts more of a tax burden on other taxes (like, for instance, property taxes). Eventually, these other taxes are bearing an unfair proportion of the burden.

One other point: It puts local mom-and-pop operations at a disadvantage. Why should I purchase locally, even if it's the same price, when I can just "buy it over the internet, tax free". It puts all the retailers on the same level.

Re:Wait just a darned minute (1)

Dutchmaan (442553) | more than 8 years ago | (#13685806)

"It puts all the retailers on the same level."

While at the same time, striking yet another blow to consumer demand. Something that isn't the wisest of moves in a struggling economy IMHO.

Re:Wait just a darned minute (1)

NFNNMIDATA (449069) | more than 8 years ago | (#13685817)

Shipping is a tax unto itself...

Re:Wait just a darned minute (0, Redundant)

Snar Bloot (324250) | more than 8 years ago | (#13685899)

No, shipping is an expense, paid by the consumer to the shipper. Sales tax is a revenue for governments (hate'em or not) that is required to provide certain basic services to the citizenry. If you remove or reduce that revenue stream, either be prepared to have other taxes raised(perhaps not as fairly based on consumption or spread across the populace). The only other alternative is the reduction of basic services. I'm here to tell you, we're facing it right now in my state. I work in the state budget office, and we can clearly see the shift in revenues as internet purchasing grows.

Re:Wait just a darned minute (1)

lucabrasi999 (585141) | more than 8 years ago | (#13685912)

Shipping is a tax unto itself...

No. Shipping is not a tax. It is a cost that some businesses charge for and others do not. For example, I can get free shipping from some internet retailers while I have to pay for shipping from other internet retailers. A sales tax is levied the same rate across all goods of similar nature in a government jurisdiction. As it stands today, the lack of sales tax on internet goods is unfair to your local retailer.

Re:Wait just a darned minute (2, Interesting)

killmenow (184444) | more than 8 years ago | (#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:Wait just a darned minute (1)

truckaxle (883149) | more than 8 years ago | (#13685862)

It puts local mom-and-pop operations at a disadvantage. Why should I purchase locally, even if it's the same price, when I can just "buy it over the internet, tax free". It puts all the retailers on the same level.

What about mom-and-pop operations on the internet. I much overhead do you think it would take to track and collect taxes for 50 states and remit payment to each?

As far as same price goes the the shipping cost equalizing things out.

My wife owns a small mom internet operation selling hot sauce [sammcgees.com]. Her gross is around 100k per year. For her to install software, collect, and follow the regs for each state would put her out of business. However what States don't take into account is that she pays payroll taxes, property taxes, inventory taxes, income taxes the UPS truck that pickups her orders and deliver inventory pay taxes, she pays taxes on her IT infrastructure, etc. In this case the state of Idaho does indeed benefit...

Good News for No-Tax States (3, Interesting)

smose (877816) | more than 8 years ago | (#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.

Re:Wait just a darned minute (2, Interesting)

JasonKChapman (842766) | more than 8 years ago | (#13685959)

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."

Entice. (5, Funny)

Tackhead (54550) | more than 8 years ago | (#13685546)

> The states will also entice online retailers to collect state and local sales taxes by offering amnesty on taxes the retailers haven't collected in the years since the Internet retail boom began.

A guy named Guido broke my leg last week. He said that if I paid this year's protection money, he wouldn't break it three more times for the last three years I've been in business. In other words, rather than threatening or extorting, Guido enticed me into paying my protection money.

Entice. They keep using that word. I do not think that word means what they think it means.

Re:Entice. (1)

kevin_conaway (585204) | more than 8 years ago | (#13685587)

He said that if I paid this year's protection money, he wouldn't break it three more times for the last three years I've been in business.

Sounds like a threat to me. If you don't do X, I'll do Y.

Re:Entice. (1)

Peyna (14792) | more than 8 years ago | (#13685686)

Except that even if you do X, they could still do Y. In this case, they're saying that if you do X, we'll give up our right to do Y to you.

Some of them it's understandable (2, Funny)

HangingChad (677530) | more than 8 years ago | (#13685548)

Washington, TN and Texas don't have a state income tax. It's understandable why they need the sales tax revenue.

But you guys in Nebraska. You already have high property taxes, a state income tax and now they're trying to add this. Plus really crapass weather in the winter. Just doesn't seem fair.

Re:Some of them it's understandable (1)

Flamesplash (469287) | more than 8 years ago | (#13685672)

TX's sales tax rate, after state, local, regional, whatever, additional rates are still pretty low given that. I paid more in MA which has a state tax.

Re:Some of them it's understandable (1)

lucabrasi999 (585141) | more than 8 years ago | (#13685951)

TX's sales tax rate, after state, local, regional, whatever, additional rates are still pretty low given that. I paid more in MA which has a state tax.

The rate in Texas may be partially dependent upon the type of goods that are taxable. For example, I seem to recall that Texas charges sales tax on all clothing purchases. Does Massachusettes do the same? If MA does not, then you would probably have some explanation as to why MA has a higher sales tax--it taxes fewer goods.

Goodbye free lunch (5, Insightful)

tnk1 (899206) | more than 8 years ago | (#13685565)

Well, it sucks that they are getting around to figuring out how to tax online purchases. However, I can't really fault them for doing it. As more and more sales go online, there is a real issue with decreasing tax revenues. It probably won't be a critical issue for decades, but the fact is that governments need taxes to operate and I've always tended to prefer sales taxes over income taxes.

Re:Goodbye free lunch (3, Interesting)

CrazedWalrus (901897) | more than 8 years ago | (#13685830)

...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.

Awesome! (3, Funny)

soulsteal (104635) | more than 8 years ago | (#13685569)

Here's to being from Mississippi, where they aren't smart enough to know to tax this here Inter-Net. ;)

unconsitutional (0)

Anonymous Coward | more than 8 years ago | (#13685573)

I thought that only the federal government could tax interstate commerce?

Re:unconsitutional (1)

paranode (671698) | more than 8 years ago | (#13685706)

What, that old document written hundreds of years ago? It's just a guideline, remember?

Kind of like how growing weed in your own backyard for medicinal purposes with a legal prescription from a doctor in your state is 'interstate commerce'.

Taxes and Death (0)

under_score (65824) | more than 8 years ago | (#13685602)

It seems that there is a grim inevitability about taxes. I think what is going on is probably the best possible scenario... and should actually be extended outside of just the United States. The recent article about the UN wanting to control the ICANN stuff is actually related to this. There are basically two possible end states for the Internet: either global administration and governance or complete anarchy. I'm not personally sure which would be better, but I think I lean slightly to the side of global administration. If taxes are to be levied on Internet sales, then to me it seems like a single point of administration for _all_ global internet sales would be the simplest: it would allow small businesses to rely on a single point of contact for tax administration. On the other hand, a hugely diverse tax system where every region may tax internet sales on different criteria and based on different rates would only benefit the largest corporations with the resources to deal with that sort of complexity.

Re:Taxes and Death (0)

Anonymous Coward | more than 8 years ago | (#13685757)

There are basically two possible end states for the Internet: either global administration and governance or complete anarchy.

Isn't that a bit like saying "there are two possible end states for government: libertarian and socialist-fascist"? There are in betweens in the world.

How do you define a conservative? (3, Funny)

Anonymous Coward | more than 8 years ago | (#13685887)

Of life's two inevitabilities, they would prefer death to taxes.

North of the Border (2, Interesting)

TheSpoom (715771) | more than 8 years ago | (#13685671)

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.

Re:North of the Border (1)

P3NIS_CLEAVER (860022) | more than 8 years ago | (#13685751)

The trick is to use shipping by the USPS. No additional fees. I have sent ebay items to canada in this manner.

Well at least its not Florida (1)

Morgalyn (605015) | more than 8 years ago | (#13685707)

We have enough sales tax to pay here as it is, but no state income tax, so I guess it evens out. Since catalog sales don't require sales tax to be paid (unless in the same state, since catalog sales are interstate commerce and fall under different jurisdiction), I don't understand why or how internet sales are different. I think most ecommerce sites map more closely to a catalog than a brick and mortar store.

But who knows. I'm still mystified as to why I can't buy extended hardware warranties for laptops in Florida. Even the ones that come standard (no extra fee) often don't apply. Drop your laptop in Florida? sorry. not our problem.

Well, at least they thought about it (1)

LexNaturalis (895838) | more than 8 years ago | (#13685710)

I read the article and noticed that the reason behind this plan actually seems to be well-reasoned. The Supreme Court stated that it'd be too difficult to force online retailers to calculate all the different types of tax so they shouldn't be forced to do so. This new plan prevent the difficulty, so there's no more reason to argue from a standpoint of difficulty. I'm still not convinced that I should be paying local/state taxes on goods purchased over the internet, but at least this plan addresses the "main" (or at least the loudest) argument against online taxes.

I think a stronger argument against online taxes would be that Congress regulates interstate commerce, not the states.

Do states not care? (1)

jokach (462761) | more than 8 years ago | (#13685732)

It makes you wonder if that for the states that don't want any involvement in the SST Project, whether they care that they are losing tax money for purchases in their state (regardless of how its collected). I would think that the money that states collect via the standard sales tax, goes quite a long way for the benefit of the state, and when you consider the fact that the number of people purchasing online is growing with each year, thats money being lost (or not collected I should say) ... what does it take?

I'm certainly not complaining about not paying the tax, but you would think the states would CARE about losing that money ..

A most welcome development (4, Insightful)

csoto (220540) | more than 8 years ago | (#13685736)

For years, there was a myth that online sales were "cheaper" because you didn't pay sales tax. Rather, the truth is that states, counties and municipalities were being cheated out of collecting legal sales and use taxes.

If you don't like sales tax, then fight your local/state sales and use taxes on principal. But as long as 7-11 down the street has to charge it, why should a company that's in another state be exempt?

This sounds like... (1)

five40kix (853950) | more than 8 years ago | (#13685742)

a great advertisement to move to Delaware.

Re:This sounds like... (0)

Anonymous Coward | more than 8 years ago | (#13685804)

Delaware Points of Interest:

Wilmington Screen Door Factory

Re:This sounds like... (0)

Anonymous Coward | more than 8 years ago | (#13685904)

More Delaware Points of Interest: The State Line

While here in Rhode Island (1)

kilodelta (843627) | more than 8 years ago | (#13685777)

We don't have a push to do this.

It's because we have this assinine 'use tax'. If you buy something at a lower tax rate or with no tax, you're on the hook to remit the 7% to the state when you file your yearly taxes.

The problem I have with this is that it violates interstate commerce rules. But RI sidesteps that by saying they are not taxing the purchase of the item, but the use of said item.

But then this is Rhode Island. They used to call Massachusetts by the name Taxachussets but RI has since taken the title.

Charging tax is truly hellish technically (4, Insightful)

br00tus (528477) | more than 8 years ago | (#13685779)

I have been running "e-commerce" sites since 1997 when I set up a site that used Broadvision (and Taxware on the backend). Right now I run a site using osCommerce.

The article mentions how some states consider candy different than other food as an example of the many little differences in tax code. Another one is different counties charge different taxes - in New York state, Queens county and Nassau county have slightly different tax rates. And then these tax rates change every time a new law is passed. So you have to update your tax tables whenever that happens. Most people who are truly concerned about this pay thousands to get regular Taxware updates. Luckily, right now I only have to worry about one state.

Now in general terms, I would not mind if some flat, national tax were charged on items going from me to a consumer. I could just say "add x.y%" to every sale, just like everyone else would be doing. But the way this is being done is ridiculous. What has happened in the US is that federal taxes have remained the same, I suppose to pay for the increased military spending for the war in Iraq and whatnot, while money the federal government used to give to the states was cut. So now the states are all scrambling to get money, and since the politicians don't want to go after locals, they are fighting to gouge out of state people for taxes. So we have this mess. And it doesn't effect Amazon.com who can afford to pay for Taxware updates and whatnot, it hurts the small businessman like me, who now has a lot more work to do and may have to buy expensive Taxware updates to be in compliance with this. If one steps back and looks at the whole country, this is a ridiculous way to do things. It's not even that I have to pay the tax, if everyone else had to, it's that now I have to be concerned about not just the tax laws of each state, but the tax laws of each county in each state. It's ridiculous. So much for "state's rights".

Re:Charging tax is truly hellish technically (1)

prgrmr (568806) | more than 8 years ago | (#13685941)

Another one is different counties charge different taxes - in New York state, Queens county and Nassau county have slightly different tax rates

I used to live in Ohio, where they have 88 counties and potentially 88 different tax rates. Now I live in New Hampshire. No sales tax. No income tax. 8% "rooms and meals" tax applied at restaraunts and hotels and that's it. Of course they just eliminated the highway tokens for half-price tolls in favor of SpeedPass, but at least they didn't put the gates back up at the toll booths, so it still doesn't look like New Jersey.

Calculating tax in real-life sites (1)

Arpie (414285) | more than 8 years ago | (#13685789)

When you calculate tax you use the shipping address, not billing address. The tax is not paid based on where the money is coming from, which always seemed very weird to me.

"it would be too onerous for e-tailers to calculate all the permutations of differing state and local tax rates"

Very much true. The way it is now it's already tricky. I you have nexus (presence, be it a store, storage or even servers co-located) somewhere you aleady need to charge tax for shipping there. Then you need to consider that some places have state tax, county tax and/ or city tax. You can't just use the zip code to break up state/county and city since some zip codes span more than one area.

Plus, legislation and tax rates fluctuate and you have to keep databases in sync with laws. C'mon!

Some vendors like Cybersource [cybersource.com] offer tax calculation services. That may be the only practical solution, but then not only you have to interface with their APIs but also you get yet another cut in your profit.

More of our Constitution erodes (4, Insightful)

Anita Coney (648748) | more than 8 years ago | (#13685803)

Article. I, Section. 10., Clause 2 specifically forbids states from collecting intrastate tariffs. But, for some strange reason if they call it a "use" tax it's ok. I'm also guessing that if the south reinstituted slavery under the term "Happy Fun Work" it'd be legal.

Surely if I got to California and buy something, take it back to my state, I'm not obligated to pay a sales tax back here. And if I asked my brother to buy me something and bring it back from California, I wouldn't have to pay my state's sales tax. But for some reason, could it be greed?!, if I pay FedEx to bring it to me, suddenly I have to pay.

I have NO problem paying sales tax. I think that if I buy something shipped from California, for example, California's sales tax should be added to the order. But I see no reason to flush the Constitution merely because states are greedy.

Supreme Court ruling being ignored? (0)

Anonymous Coward | more than 8 years ago | (#13685846)

The US Supreme Court had ruled against online sales tax. Isn't the Supreme Court the highest authority regarding this matter? Something is wrong here.

Long Row to Hoe (1)

Chasqui (601659) | more than 8 years ago | (#13685847)

This battle will not be over anytime soon. There was a reason it was found to be to onerous on retailers to calculate taxes. That said, there is a huge incentive for states to want to collect tax on internet transactions. This will be a political as well as technical battle. As one the article stated, one big fight will be over which state collects the tax - the state where the buyer is located, or the state where the goods are shipped from? Or is it the state where the seller is headquartered? OR where the servers are located? This is going to get messy. Different tax rates for different states is one thing. Different rates for different goods, from different locations? Forget that they have not even considered micropayments... don't hold your breath for this one to be 'streamlined' any time soon.

Why do they charge the tax in purchaser state? (1)

IceSabre (602857) | more than 8 years ago | (#13685866)

What I don't understand is why they are trying to charge taxes in the purchaser's state and not in the seller's state? If I drive to another state and buy something at a gas station, they don't check my license and compute my state sales tax?
Wouldn't it be a lot simpler if we just paid the tax that is in effect where the seller is?
I'm sure I am oversimplifying this.... but please point out my obvious mistake.

There are opportunities here... (1)

mhollis (727905) | more than 8 years ago | (#13685873)

Were these e-tailers to move their internet operations to New Hampshire, a State with no sales tax (and no justification for ever participating in such a scheme) they'd be able to avoid this matter all together.

Were lawyers to think this through, they'd initiate a class-action lawsuit to protect people from illegally-collected sales tax, as the sale did not occur within the offended State. Were these State legislatures to actually do some creative thinking, they'd redefine the tax as a usage tax instead of a sales tax.

Usage tax would evade the constitutionality issues entirely. This would also place the burden of payment on the consumer. New York City [talkleft.com] went after the purchasers on cigarette tax evasion and their prosecution will probably be upheld on the basis of cigarette tax being a usage tax, not a sales tax.

would still be unreasonable for small businesses (1)

bcrowell (177657) | more than 8 years ago | (#13685875)

I run a small online book publishing business based in California. This year I had about $9,000 in gross sales, but almost all of that was wholesale or out of state --- i.e., almost none of it was subject to sales tax --- and this year I paid $45.96 in local business taxes and $17.00 in sales taxes. My understanding is that if I make a retail sale out of state, the customer is theoretically responsible for filing a tax return in his state and paying "use tax" at his state's rate. I assume they don't actually do that (although I have read newspaper stories about people being prosecuted for not paying in egregious cases, e.g., where an art deal in New York drives to New Jersey to make a sale of a million-dollar painting to a New York customer).

Are these people seriously proposing to make me file 50 different state sales tax returns every year? Might not be a big deal for amazon.com, but it would be completely impossible for me.

It is not going to work. (1)

suman28 (558822) | more than 8 years ago | (#13685884)

Well, passing the law is one thing...enforcing it is a whole other thing. How are they going to monitor all these transactions that happen? And as someone else mentioned, which state is going to be the one to collect this tax. And all this at a time when a new tax system proposal is gaining prominence? Good luck.

Finally! (1)

Thunderstruck (210399) | more than 8 years ago | (#13685911)

States need to get funding from somewhere...and taxes are inevitable, so consider the following:

If your tax dollars go to Washington D.C., you have roughly one vote in 250 million to direct how it gets spent. If your tax dollars go to your State government, you vote is between One in 34 million (California) and one in 600 thousand (North Dakota.)* How much influence would you like to have? What do you want to fund today? A War? Stem Cell Research? Highways?

*Disclaimer, I live in North Dakota.

Government Morons (1)

Blitzenn (554788) | more than 8 years ago | (#13685914)

What the morons in those state governments seem to not take into consideration is that they are going to put e-tailers out of business by doing that. Why? Because it is only slightly cheaper in most cases to purchase something over the web, (once you add in shipping). If tax is added back in, it becomes more expensive and most people will buy it off the store shelf instead. Sure they will collect more in sales tax that way, but at what cost to the economy?

Americans are very good at collecting taxes (1)

ravee (201020) | more than 8 years ago | (#13685931)

My cousin has emigrated to USA (houston to be exact) and he is making a whooping 200k a year. But he is paying a good percentage as taxes. I was really amazed when he told me that even if a person is a bachelor having no dependents, one has to pay education tax. And the amount of tax one pays depends on the locality one is living in. He is paying $6000/year as education tax . Ofcourse there is a long list of other taxes he has to pay.

I some times wonder if these Americans are not stretching it a bit when they do everything on a grand scale - big earnings and even bigger spendings (which includes paying taxes too).
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