The Inevitable Internet Sales Tax? 256
shankwound asks: "My company is going through a Pennsylvania State tax audit. The auditor claims that we owe sales/use tax on all of our Internet purchases. I thought that there was some kind of federal moratorium on Internet taxes. Apparently I was wrong. Our friendly auditor has worked up quite a bill with tax and penalties. Paying this bill off won't be fun. Although computer related services are exempt under PA law, online purchases of tangible personal property are not. On the federal level, U.S. Rep. Christopher Cox seems to be leading the battle against "new" Internet taxes, but that doesn't stop any already existing state sales/use taxes from being applied. The federal law has specific exemptions that don't cover existing taxes. I bet the general consensus is that you don't owe tax on Internet purchases of any kind. I'm wondering what Slashdot readers think about issue and if anyone has had a similar experience with their state auditors. Don't be caught off guard. Check your state's Internet tax rules before you're audited." For those of you running e-Commerce sites, now might be a good time to check those local tax laws.
Re:North Carolina (Score:1)
There's a similar blank for use taxes on the Indiana tax forms. Of course, Indiana also expects you to pay IN state taxes on cars, boats, and farm equipment that you bought in another state even if you already paid sales tax in that state. If it weren't for basketball and not having to change your clocks twice a year, there wouldn't be anything good about living in Indiana. Sigh... I miss it.
Illinois has a write-in blank for use tax but doesn't list the Internet yet. They do list buying over the phone, so maybe if you had an analog modem you're still liable, but not cable modem subscribers. Of course, none of the directions in the state tax forms tell you to fill out that page and/or add it to your total (the use tax page is at the back, away from the other tax forms) so I'm not sure if you're really required to fill it out or not.
Which Sales Tax? (Score:2)
Now wait a second.
Sales Tax is levied against the state of sale, not the state of purchase. If your company has legal presence in Pennsylvania, and purchases something in Pennsylvania, you're obviously liable for Sales Tax.
However, if your company has legal presence in Pennsylvania, and you're purchasing something from Illinois, then the right to apply Sales Tax to that purchase falls to Illinois, not Pennsylvania. (Of course, if you've got legal presence in Illinois as well, they're going to make you pay.)
If Pennsylvania is attempting to tax a sale that did not occur within their jurisdiction, they're likely violating interstate commerce laws. At minimum, you might be able to argue away the penalties on the basis that you couldn't reasonably have been expected to interpret the tax code in the same way as the auditor. Most likely, you should retain a genuine taxation attorney and ask his or her advice. It's likely to be less than the cost of your painful tax bill.
Yours Truly,
Dan Kaminsky
DoxPara Research
http://www.doxpara.com
Re:And I don't think you realize.. (Score:2)
Re:Lawyer: Nothing new here (Score:2)
Anyway, the tax isn't on the business, but the consumer. It's just that for in-store sales, the business is required to collect it.
The taxes on sales to refurbish a particular area
are a particularly dumb idea, even for governments--they actually discourage people from buying in that area . . .
I dunno about sin taxes--I like taxing other people's vices. So better beer (Sam Adams is my lower limit), single malt whiskey (not just scotch; the best single malt in my collection is actually Irish [Bushmill, I think; no, not their regular whiskey]), and heavy red california wine should not be taxed. Swill-grade beer (coors, bud, miller and down [*shudder*]), french and eastern wine, vodka, marijauna, and prostitution should have a tax rate that maximizes revenue
hawk
Re:America doesn't realize taxes are good for it. (Score:5)
If you poll most Americans (or read existing polls which have been done on this subject), you'll find that most Americans are willing to pay taxes if they know the money will be spent on worthwile public projects. That is, they're willing to pay more in taxes if they know the money is going to fund schools or libraries or whatever. Recently, in Fresno (for example), the voters overwhelmingly voted themselves a tax increase in the form of the "Arts to Zoo" proposal which would increase funding for libraries, museums, the local Fresno Zoo, and other similar projects--and pay for them in an increase in the local sales tax levy.
The problem that most Americans have with taxes is that they appear to believe that the majority of taxes is being "wasted" on "pork-barrel" projects and on paying bureaucrats who are "out of touch" or are "unresponsive" or "do not care." To support this assertion, we are constantly bombarded with reports of a $3000 toilet seat or an 8-lane highway built in the middle of nowhere.
The other problem that most Americans have with taxes is the belief that taxes are being assessed "unfairly"--that is, they believe that the rich are somehow not being forced to share their fair load, and that the middle class is having it socked to them. And in a sense, if you count Social Security (where 15% of your income up to around $70K or so goes to social security, but each dollar you make above that cut-off is only taxed at 2%), then there is a middle-class "vortex" where the combined income and social security taxes take a greater percentage of your income than those who are rich and paying the top income bracket.
If we could somehow eliminate these two problems, then Americans wouldn't see taxes as a four-letter word.
Oh, and in Los Angeles, traffic is worse than it is in Seattle: yesterday, my drive at 6:00 in the morning (when traffic is supposed to be "light") to the LAX area from Glendale (about 30 miles) took me about an hour and three-quarters. The reason for this, though, is that the city of Los Angeles and the State of California, instead of spending money to widen the freeways, spent several tens billion dollars on a subway and light-rail project which only has a maximum capacity of a hundred-thousand or so per day, and has a fixed commute pattern (from the outerlying communities to downtown Los Angeles) which runs counter to the decentralized commute patterns that are normally used by Angelinos.
This is a perfect example of why Americans have problems with paying taxes: because no effort was made to increase the capacity of the freeways here, average traffic speeds during rush-hour traffic is now down below 17MPH (yes, seventeen miles per hour), yet even if the entire LA metropolitan area could rearrange itself to maximize use of our new multi-billion dollar subway system, we'd perhaps reduce traffic by a couple of percentage points.
I'd rather have taken the money used to pay for the art installations around the Hollywood subway stop and used it to help support the LA county museum of art. But no-one asked me...
Re:Double taxing (Score:2)
If anything people will have more disposible income due to a) lowered tax rates for most people and b) lack of withholding from your paycheck will give you a great deal more "take home pay"
More disposable income, yes. But they'll be disposing of it a hell of a lot faster.
- StaticLimit
Re:GST/VAT (Score:2)
Tangible goods ordered on-line are not. If the goods get physically shipped, good old Canada Customs will make sure that you pay the GST on them[2].
England's VAT is kinda weird though. I ordered some software from England last year and I still had to pay their VAT on it. Seems strange as I live "across the pond" as it were. Got away with not having to pay GST as the declared price on the package was in Pounds. Mr.Customs agent did not do the conversion 1 Pound == 2+ CDN. So the package was under the GST limit.
[1] The government might have different opinion. I'm sure I'm not going to tell them about this loophole.
[2] Only if the goods are above a certain value $20-$30 CDN AFAIK/IIRC.
Bzzzzt! Wrong! (Score:2)
Bzzzzzt! Wrong! In fact, calculating the appropriate sales tax to collect is still practically impossible. A lawyer might deem this a trivial task (a "lookup table by zip code...") but in fact any quick survey of states where local sales taxes are permissible will instantly reveal the fact that zip codes and municipal boundaries frequently do not coincide.
Consider California: the state has a sales tax, each county can assess a sales tax, plus each city can assess a sales tax. In addition there are several special sales tax districts such as the Bay Area Rapid Transit District that can assess a sales tax. Zip codes in California do not necessarily map to county or even city boundaries. (You can view California sales tax rates, by county, here [ca.gov].)
This is an excellent example of a looming problem in government: Hawk, the writer of this post, is a legal scholar who "gets it." He was an authority cited by SlashDot when Judge Jackson's findings of fact in the Microsoft case were issued. He's the kind of lawyer that other lawyers will ask for guidance on public policy issues like assessing sales taxes. And, in fact, (on this specific issue) he's flat wrong. Calculating local sales taxes is anything but trivial, and you can't use zip codes to do it. Am I dumping on Hawk? Not really--I'm using this as an example of the serious problem we as a people face as our elected representatives try to come to grips with the Internet and the digital age. It's easy for a congressman or a judge to hear a Penn State professor say, "it's trivial" and blithely charge ahead--or write a decision--with that in mind. And having heard once that something like this is trivial, they aren't going to be dissuaded by anything less than an overwhelming amount of data. He's a professor, after all.
Moral: Do not ask a database programmer to write an appellate brief for you. And do not ask a lawyer to explain computer technology.
Jurisdiction (Score:2)
It's called the US CONSTITUTION (Score:2)
"No tax or duty shall be laid on articles exported from any state."
End of story. Unless Congress passes an amendment to the Consititution (and it is ratified by the requisite number of states), sales tax is only applicable if the product does not cross borders.
Re:Incentives for new buisnesses (Score:2)
The Cure of the ills of Democracy is more Democracy.
All I can say is Thank God for Oregon (Score:2)
Sales taxes are fundamentally flawed. The greater burden of taxation does not fall on the greater income or wealth level. Indeed, it is quite often the opposite. For one example, a newlywed couple buying furniture for a home, or buying the seemingly endless supply of clothes and food for a young child, will always carry a larger tax burden than a corporate manager who purchases relatively little, yet makes twice as much money as the newlywed couple. Does anyone seriously suggest this is fair?
America doesn't realize taxes are good for it. (Score:4)
Taxes have one major benefit for the people: They fund public projects. Public projects are good, they are things like roads, schools, libraries, busses etc. Without taxes you don't get these things.
In Washington, the state vehicle registration tax was recently reduced to a flat $30 fee. This cut millions of dollars from bus and road funding, forcing Seattle Metro to scale back some bus routes. Various other agencies are also wondering where they are going to come up with the missing cash, all because people are too greedy.
The bit that gets me the most out of this is the horrible traffic situation in the Seattle area. A 40 mile commute takes me an hour and a half, an average speed of 26 mph. With funding for busses (I no longer drive, but ride the bus) and light rail this traffic dissipates, but if you have no money, how do you start?
--
Eric is chisled like a Greek Godess
party of the personally irresponsible. (Score:2)
Widows are a special case, and none of this argument is directed at them.
Yes divorce happens, but it shouldn't have to, and the government and taxpayers shouldn't be forced to pay for the mother's mistake. If she can't provide for her children by herself, she shouldn't have concieved them. If she needs help, that's what family and neighbors are for. That, or she should go live in a country which explicitly believes that people should be dependent of the government.
Yes it's extreeme, but shit, there should be limits to both sides, and the welfare system should not be expanded any more than it already is. A saftey net should not be a way to provide capabale people with a reason not to work or to find another means of support.
My head is out of my ass. If you want communism, move to Cuba.
Re:Correct me if I am wrong here (Score:2)
It was not simply 'because of taxes'.
It was because England was taxing the colonies, but the colonies viewed this as one way. They were essentially self-sufficient.. why should they pay taxes to the motherland?
This is far different than us paying taxes to collectively build schools, roads, and an army...
Seems to me ... (Score:2)
Ridiculous. (Score:2)
The internet is simply an alternative means of communication in this context. Imagine if an extra tax had been invented when phones of even fax machines were introduced, in order to protect high street stores from these new fangled mail order companies.
In any case, the main advantage IMO that internet companies have is tha ability for the customer to browse an up to date list of all the stock in detail from their own home. If a new tax is introduced, all that will happen is ppl will use the web pages to select the items they want, and then phone to place the order. Tax avoided and nothing the govt can do about it. All they have achieved then is extra time wastage and administration for everyone involved.
Definitions (Score:2)
(think.. intravenous injection... international.....)...
Uhh.. correct me if I'm wrong.. but if you
a) live in PA
b) buy jewelry in PA
but
c) have it shipped elsewhere so the store doesn't charge you tax...
isn't that what they call the federal crime of 'tax evasion', and isn't it punishible by prison time?
Re:you neoconservative twit (Score:2)
When is an worker not an asset or an investment? They are not one in a economic system that focuses on equality above skill and self-motivation. Have you heard of communism?
And don't give me bull about unskilled, untrained labor. This is the land of opritunity, and if you've got what it takes, go for it. If you don't, then get the fsck out.
If a four-eyed college dropout can create the most valuable company in the world, than you are capable of doing anything if you put your mind to it. Microsoft would not have succeeded in any country but this one, and computer technology as a whole would be in the gutter if not for the US's unique, and mostly-effective economic system.
Public transportation and horror vacui (Score:2)
Anyway, the local govmt. keeps our taxes busy building infrastructures. Preparing to be a 21st-century metropolis and all that.
But htey have found that, with the recent economic prosperity, people can buy cars and take them to the road faster that they can build roads. And newer roads are more expensive (tunnels, splitting hills, landfilling).
As a result, whenever an accident or a protest blocks a bit of a road, it's kilometers of traffic jam.
They are building public transportation systems and people use them but not quick enough.
Anyway given the recent upsurge in em
__
Re:Double taxing (Score:2)
a) Consumption taxes are also a more stable revenue stream than income taxes. My personal preference is for a single-stage, single-rate tax that makes the cost of government explict and the government more accountable to the citizens. Hidden taxes are just a way for the government to take in more money than you'd normally allow.
b) Absolutely. I'd fight any sales tax from the feds unless they eliminate the income tax at the same time. The 23% rate bill [HR 2525](that also includes SSA/Medicare taxes and ends all payroll taxes) I know for a fact defunds the IRS and makes federal income taxes illegal. I'm pretty sure the other bill [HR 2001] also does the same thing, but I'm not as familiar with it.
c) I've tried to answer the regressivity claim. The fact is, because of the hidden taxes already in the costs of goods and services, this shouldn't be much different than the current system in terms of burden of taxes, just more explicit.
d) I didn't bring it up so as to not worry our non-US friends. A survey of multinational companies showed that a move from the income tax to a sales tax would also mean a massive relocation of production facilities and (to a lesser extent) corporate headquarters to the US.
--
GST/VAT (Score:2)
Re:Double taxing (Score:2)
The European VAT system does not work like this since companies can deduct the amount of VAT they paid for products they bought from the amount of VAT they collected from products they sold. Balancing these out against each other means that in effect only the consumer pays a fixed percentage of the price as tax.
--
Always, AFAIK (Score:4)
Why should the Internet be different?
Re:Double taxing (Score:2)
But the problem IS the regressiveness of it. And the only way to fix the regressiveness is to offer refunds based on income level (Do you see where this is going?). That means an agency to replace the IRS that refunds tax money based on income and numerous other factors that Congress would add on to alleviate tax burden. So the burocracy argument for national sales tax is short-sighted because in practice, the paperwork will end up being the same.
Refunding money to the poor at the end of the year is pointless of course because the poor need to buy food (pay rent, utilities, buy clothes, etc...) TODAY, not when they get their refund. The point that's missed by the great thinkers is that giving them the money up front won't help either! Why? The poor don't have any experience at all in saving money. They've never had the chance too! Some people will save the refund money because they have the vision to know that they'll need to spend it slowly for 12 months. It's likely that most won't. They'll spend it quickly, and probably to buy things that the middle class takes for granted, but nonetheless, they'll be hurting until refund time again.
Another great argument against it is that it will slow down consumption, which drives the economy. A fact touched on quite well in other posts.
And refunding to the poor still doesn't change the fact that the rich get off ridiculously easy. Progressive taxation IS a good idea. The government has long been in the business of protecting the interests (and therefore wealth) of the rich (including corporations) and I see absolutely no justification for the rich not paying far far more than the middle class folks who truly drive the economy. And don't give me that trickle-down crap either. Trickle-down is just that. A trickle. It doesn't work, it didn't work under Reagan, and human nature will prevent it from ever working.
George Carlin summed it up best: "The rich have all of the money, do none of the work, pay none of the taxes. The middle-class does all of the work, pays all of the taxes. The poor are just there to scare the shit out of the middle-class".
- StaticLimit
A lot of companies have dealt with this (Score:2)
Re:America doesn't realize taxes are good for it. (Score:2)
This is a gross oversimplification. I live in Washington, and I voted for the citizen's initiative that reformed vehicle tabs to $30 per annum. You neglect three essential points.
1) the real motivation of the bill was to constrain future state tax increases without a majority vote from the state populace
2) the initiative was overturned in the state supreme court, and the subsequent reduction in car tabs was performed by the legislature instead
3) most of us continue to pay substantially more than $30 yearly, due to "other fees assessed". My car tab fee was $130 in bellevue.
America doesn't realize taxes are good for it.
Absolutely people understand that taxes can benefit them. However, we desire discretion over when and to what extent they are assessed. The distinction between taxation without representation and taxation by unresponsive beauracracy seems mighty small sometimes.
-konstant
Yes! We are all individuals! I'm not!
Internet sales tax (Score:2)
Re:U.S. Constitution forbids this tax? (Score:2)
Second, that's why all eyes are on Congress to pass a nation-wide uniform Internet tax, and all eyes are on Congress to give the states consent to levy additional Internet taxes.
Pretty much par... (Score:2)
So I go to Georgia, buy a... big peanut... or whatever they sell in Georgia... Pay a sales tax in Georgia and then another one in Florida. That's real good, guys.
From what I gather, many (possibly most) states have similar laws. Which by and large get ignored most of the time.
Re:Internet taxes DO make sense (Score:2)
Err, no you don't. When you order something over the phone from a company which has no presence in your state you pay no sales tax (theoretically you still owe use tax to your state).
In fact, internet retailers are currently operating under exactly the same rules as "phone" mail-order businesses. There is no difference at all.
Kaa
Lawyer: Nothing new here (Score:5)
There's nothing new here; you've generally been liable under use taxes for new property purchased from out of state. Mail order purchase have never been tax free, either; it's just that most people dodge the tax.
Mail order vendors do not collect taxes for other states not because it isn't owed, but because, at the time it was litigated, it would have been horrendously complicated for a firm to fill out forms for 50 states on a regular basis, not to mention the political subdivisions (states, counties) with their own taxes. At the time, the Supreme Court did not rule that it was illegal, but that if the taxes were to be directly collected on such interstate transaction, it was up to Congress to find a way to do it.
Today it would be close to trivial to implement such a system--the lookup table by zip code for the tax to be collected would be easy. Extensions to existing software would be minor.
I'm puzzled by the very notion that buying on the internet should somehow circumvent existing tax laws. Your owns state has sales and use taxes to pay for the services provided in your area. As a sidenote, as an economist I'd rather replace all income taxes with consumption taxes anyway [*replace*, not supplement. No VAT without income tax repeal!]. The local government's claim to tax the purchase is exactly the same as their claim to tax whatever you buy at the local store; it's a way to allocate taxes, charging more to those who purchase more.
As a side not, the federal government does *not* have the power to stop states from imposing taxes on their own citizens (not that this will stop Congress; the last limits of the Consititution have not been restored since FDR trampled upon them). There is *some* ability to regulate what happens when the goods are shipped interstate, but if the state taxes the good, rather than the sale, it's a stretch for the feds to be involved at all.
hawk, esq., and professor of economics
Are you mad? (Score:2)
Re:Bzzzzt! Wrong! (Score:2)
I'll get real fierce about a solution that places any greater burden on merchants than this one, as it will hinder commerce. However, there is the reality ahead that either the playing field needs to be level (same tax for remote/local purchases), or the sales tax it self needs to go (which might be the right solution, but see below (above?) for why I prefer consumption taxes to the other possibilities.
But if you dig deep enough into my background, you find software development and QA. Finding my invention of a new branch of dynamic programming isn't too hard, either (my dissertation can be downloaaded). Finding the hardware design in my background would be tougher (I don't know of any online evidence
Nonetheless, you have a good point about rushing to listen to experts in general. I have an, uhh, unusally broad breadth of training and experience, but one little detail (being wrong about zipcode/political maps) could throw a monkey wrench--but I'll still call it trivial by placing the burden on those that want to receive the revenue
hawk of many hats
Re:Double taxing (Score:2)
Put another way, the consumer pays the full amount, fixed percentage, and all companies "in between" are responsible for collecting a part of it.
So no, VAT is not a cascading tax.
--
Re:Double taxing (Score:2)
b) The NRST is framed as an exise tax, not a direct tax. Therefore it is not a Constitutional amendment and the defunding of the IRS is a stauatory matter. The bill also includes a resolution calling for the repeal of the 16th Amendment, but that will still require legislative action separately, however, in the interim, they make federal income taxes illegal from a stauatory level.
d) I've got some friends helping me search, but I've found a reference to one of these surveys in an article [pei-intl.com] from the Princeton Economic Institute [pei-intl.com] -- the part of interest is:
The PEI proposal is not exactly the same as the NRST (it seems to be more of a hybrid approach) but the principle is the same -- get rid of the corporate income tax and businesses will flock to the US.
I'm still looking for an online transcript, but the following quote comes from comments made by Rep. Archer (Chairman, House Ways and Means Committee) in 1996:
The unnamed survey or surveys he mentions has results very similar to the PEI research above, so it may have come from a more complete report from them.
--
Well (Score:2)
Re:Double taxing (Score:2)
a) to elaborate further: I've come to oppose payroll witholding for the same reason. There's a *huge* difference in effect between a $1000 pay level which turns into a $750 check, and a $1000 pay, $1000 check, and $250 bill for taxes . . . Even though I'd known what the levels were on an intellectual level, I was stunned when I actually started writing the checks. [And then I gave up my practice to go back to school, and began living on a monthly net check only a few dollars off of my old monthly check to the IRS, but I digress
b) I'd need to look closer at the bill. It will take an constitutional amendment to impose the tax, as Congress is explicitly forbidden from imposing direct taxes unless in proportion to the populations of the states. The amendment could easily repeal the income tax and ban other payroll-type taxes, but defunding the IRS would be a strange thing to put in an amendment--we've never been *that* detailed before, and I'm leery of the precedent.
c) I'm really not worried much about it, partly for the reasons you give, and partly because the middle class has most of teh wealth, anyway
d) awwwwe. Maybe we could carefully bait the brits, french, and german, and make them blame one another somehow?
more seriously, can you give a pointer to the studies. That's exactly what I'd expect as an economist, but data is always nice. And I'd expect a good portion of those to come from EU countries that complain about Ireland's "predatory low taxes" [their words, not mine].
e) hmm. Now I forget. oh, well; I had another bit of this to bring up . . .
Re:Double taxing (Score:2)
Been there, done that, bought the t-shirt.
The fundamental problem with all of these sites and other proponents of replacing income tax with a VAT or a national sales tax (NST) is that they assume that consumption is a constant against income. That is, for such a tax to be properly progressive, they assume that consumption is a fixed percentage of the income someone makes, (say) around 90%.
But in the real world, the "rich" are able to save more than the middle class, and thus would be able to enjoy a larger percentage of their income "tax free."
Because of this, if the NST was 23%, and a typical middle class family spends 70% of it's income on taxable consumables, while a rich family spends more like 50% on taxable consumables (I'm assuming things like rent are not taxed), then the middle class family is actually paying 16.1%, while the rich family is actually paying 11.5% of overall income.
One way of thinking of an NST is to think of it as allowing savings and certain forms of spending (such as paying rent) as tax-deductable activities. That is, we could gauge the effect of an NST by making it rougly equivalent of the existing income tax system by beefing up the schedule A deductions to include all activities which are not consumption-oriented: that is, allow people to deduct savings (or rather, by treating all savings as an IRA without an early withdrawl penalty), and to allow them to deduct those services which are not taxed, such as paying rent or morgage.
If we do this, we realize that as an NST has a much smaller percentage of one's overall income being taxed, in order to make up for the lost tax income (as we both know that any change in the tax code will be revenue neutral), we will have to crank the NST to be much higher than the 16-25% rate that is often quoted by NST advocates. (The only reason why a VAT of around 23-25% would work is because a VAT tax is added every time goods exchange hands, even companies paying for raw materials pay a VAT tax. Thus, goods wind up getting taxed several times through the production cycle. This double, triple, or quadruple taxation makes the overall amount collected by the government greater than the VAT rate suggests.)
Is it any wonder, given the fact that rich people are able to save more than middle class people, that some of the biggest supporters of a NST are the wealthy? Personally, having made it out of the middle class vortex, a NST would save me thousands in taxes. However, there is no such thing as a free lunch--for every dime I don't pay in taxes, someone else has to make that dime up.
And guess who that will be? The guy paying 16.1% of his overall income? Or the guy paying 11.5%?
Re:Double taxing (Score:2)
Incorrect, VAT in European countries is charged to the end consumer only - resellers claim back 100% on goods bought for resale.
As you state, European VAT rates are high - 17.5% in the UK. However, many goods are tax-exempt - for example in the UK there is no tax at all on food, drugs, children's clothing, books and many other products.
Nick
Re:Double taxing (Score:2)
"Encourage savings" or "repress consumption", the effect is the same: people buy less stuff. And when people buy less stuff, there is less demand for stuff.
When there is less demand for stuff, companies make less so they don't have to warehouse stuff no-one wants. They then lay people off. Prices also drop in order to clear out the stuff that is just sitting around.
And what do economists call a cycle where there is both a productivity slowdown and falling prices in a sector? A depressionary cycle.
Likewise, if there is more money available for investments, that'd be good, right? But if companies are in a depressionary cycle, they won't need as much money from investments to pay for production of goods no-one wants. Given that there would be grater investment money and less demand for that money, that means the amount someone would be willing to pay for investment money would go down. (Supply and demand, right?)
That means the amount of returns you would get on your investment dollar would go down.
Overall, the whole thing would work itself out, but with a smaller economic engine than we have now. That is, it would depress our overall GDP by a small amount.
Furthermore, given the fact that the middle class would wind up sharing the greater part of the tax burden (because any new national sales tax would have to be revenue neutral, and the middle class consume more as a percentage of their income than the rich, and so would pay more of their overall income in sales tax than the rich), the overall effect of this would be that the middle class would be worse off both in terms of the rate of return on their investments and on what they are able to purchase with their dollar.
sidenote: consumption vs. income taxes (Score:2)
One positive aspect of consumption vs. income taxes is that they encourage people to save their money more. However they are also regressive, that is, poor people end up spending a greater percentage of their income on taxes than rich people. Leaving aside arguments why regressive taxes aren't so bad (I don't want to hear it right now), how might consumption taxes be designed so that they weren't regressive? There are already so-called luxury taxes on some things (yachts, furs, etc.) but I don't think those could really address the disparity, just add some top-heaviness to it.
Re:America doesn't realize taxes are good for it. (Score:2)
Our little family is precisely what the initiative was intended to target: small, not economically well-to-do, and unable to handle a $400/year fee for the privilege to sit in traffic.
Don't assume you know what you're talking about, or to whom you're talking.
-konstant
Yes! We are all individuals! I'm not!
Re:Double taxing (Score:2)
--
Sales Tax made difficult (Score:5)
Currently, for the purpose of taxation, internet is the same as mail-order.
Where a company sells in a state, that state may require the company to collect a sales or use tax, assuming nexus is established. Whether a company is liable for a tax depends on whether the company has nexus in the state. It also depends on the tangible or intangible nature of the product or service sold.
Nexus for sales and use tax is different from nexus for income tax. A company may have nexus for one and not the other.
Sales tax is a tax based on the gross sales price of property. It is collected by the seller of the property. The consumer of the property may be an individual buying the product from a local retailer, or a business buying a product which is "consumed" in the process of making other products.
There are a handful of exemptions from sales tax. The most common exemption is the purchase of an item for resale. The exemption that we are concerned with here is the exemption for a sale to an out-of-state buyer.
When a company sells to an out-of-state buyer, the sale is usually exempt from sales tax in the seller's state of residence. For instance, a retailer preparing a California sales and use tax return would find that "sales in interstate or foreign commerce" are exempt from sales tax. The instructions to the California form indicate that exempt sales are "those involving shipments or deliveries from California to points outside this State which are exempt from tax as interstate or foreign commerce. In order to be exempt, property must be shipped to a point outside this State, pursuant to the contract of sale, and delivered by the retailer to such point by means of facilities operated by the retailer, delivery by the retailer to a carrier for shipment to a consignee at such a point, or delivery by the retailer to a customs broker or forwarding agent for shipment outside this State." California's rules are fairly typical of the way out-of-state sales are treated.
A retailer making an out-of-state sale is usually not liable for sales tax in the retailer's home state. Neither is the retailer liable for sales tax in the state where the customer is located, unless the retailer has nexus in that state. It is possible, then, for out-of-state sales to be completely free of sales tax.
Use tax: A sale that is not subject to sales tax in the states of either the buyer or seller is a serious problem. States have attempted to remedy this problem with a use tax. A use tax is exactly the same as the sales tax, except that it is charged to the buyer of property by the state in which the property is used. For example, a mail-order computer company may not be required to collect a sales tax. The buyer, however, is required to compute a use tax and pay it to the state in which the computer is used. Use tax, for all practical purposes, is the same as sales tax, and is meant to pick up sales which are not subject to sales tax.
The use tax is imposed on purchasers, not sellers. Out-of-state sellers with nexus in a state may be required to collect the use tax, but that does not change the fact that it is imposed on the purchasers. If the out-of-state seller does not collect the use tax, the state can come after the purchaser for the tax.
The difficulty with the use tax is that there is almost universal noncompliance. Most buyers do not know that they should pay a use tax. There are a few exceptions, however. For example, automobiles and boats purchased out-of-state must be registered. Use tax is payable at the time of registration.
Because of the difficulties involved in getting purchasers to remit use tax, states have attempted to get out-of-state sellers to collect the tax. The Supreme Court has consistently held against states unless the seller has nexus in the state.
States continue to seek ways to collect the use tax. In 1988, a group of states began developing lists of purchasers from mail-order companies. Each state shared information with other states based on their audits of mail-order companies headquartered in their state. Several years later, certain states began sending out forms to these purchasers. The forms requested the purchasers to verify reported purchases and pay use tax to the state.
Obviously, such efforts are only a drop in a very large bucket. Substantial mail-order business takes place without sales or use tax being charged, and with no chance of the consumer voluntarily paying the tax, or even knowing the tax is due. The states will have no chance of capturing even a small portion of this tax.
---
Here are the facts of life: (Score:2)
If you purchase something from a vendor in a state where your company does not have a nexus, most states will require you to pay a "use tax", which is normally charged at the same rate as the state sales tax. This is simply a way for states to get their sales tax revenue from "mail order" sales.
The fact that a purchase was initiated via an internet connection rather than a phone call or fax makes absolutely ZERO difference to the state tax man.
It sounds like the company in the original post was not filing a use tax return, or was exempting internet purchases from their use tax return. The bean counter should have known better.
Internet Sales Taxes aren't inevitable (Score:2)
There's a standing expectation of a shakeout throughout e-commerce. Nobody knows when it'll happen, but companies are being valued less than the cash they have in the bank. Yeouch.
Any politician who applies the tax before the crash will get blamed for that crash, and will see his career disappear with the stock value. Any politician who applies the tax after the crash will find himself kicking an industry when their down, and blamed if it doesn't get back up again.
The only thing that might work is if an e-commerce tax is used to pay for an Internet Bailout. I actually see that as the most likely exit strategy for alot of institutional investors--Be There For The Bailout.
Could be wrong, though.
Yours Truly,
Dan Kaminsky
DoxPara Research
http://www.doxpara.com
On Taxes... (Score:2)
Understand, as well, I am fairly conservative and I hate the fact that half of my salary goes to the US Government either through the deductions in my paycheck or through the state sales tax or tolls or stamps or property tax... And when you consider that the government can't make money on a simple #'s game like Lotto you have to wonder if they are worthy of 1/4 of my salary.
BUT
It simply is not fair for Johnny Bookstore owner to go head to head with Amazon.com when with everything else Amazon has they also don't charge tax!
Yes, there is the delivery charge, but *oddly* most people don't mind that as long as they aren't paying that 8.25% sales tax. People hate taxesthat much (and rightly so.)
Further, states are losing tons of money to this sort of thing. NJ recently tried to TICKET cars with NJ plates parked in DEL malls b/c NJ felt it was losing tax dollars to DEL sales since DEL doesn't have sales tax. The thought process being, "If they bought their Levi's and Birkenstocks right herre in Jersey we'd be up $18." States won't put up with this forever.
It *seems* unfair b/c we think we're outside of normal society and we've been *getting away with it* for so long, but ultimately this day was going to come.
I realize most of this will be trashed and I will bet that CmdTaco will personally remove my account for my hideous views on taxation but fair is fair. You cannot reasonably expect anyone to compete with an *e* site if the *e* site isn't playing by the same rules as the rest of the resellers.
Re:Why does this have to be so difficult? (Score:2)
After a lot of thought, a national sales tax might not be a bad idea. It's certainly less intrusive than income taxes...
Re:America doesn't realize taxes are good for it. (Score:2)
Actually, America was founded on the principle of revolting against "taxation without representation." That is, America was founded on the principle that the colonists were pissed off because they saw their tax dollars going off into the black-hole of Great Britain, and not a dime was going into stuff that was important back home.
This is identical to the situation Americans grumble about now: they will gladly vote themselves a tax increase if they know where the money is going. They will fight tooth and nail if they think the tax money is being waisted.
Re:Public transportation and horror vacui (Score:2)
Well, the problem with L.A.'s transportation infrastructure is:
a) We are a decentralized metropolitan area of tens of millions of people, with no fixed transportation patterns. This makes mass public transit (light rail, subways) virtually impossible because there is no fixed pattern. And most mass transit systems rely on reliable transportation patterns (such as in Boston, where the system is outbound to downtown in the morning and downtown to outbound in the evening). We also have one of the lowest population densities of any similarly sized metropolitan area, meaning there is a lot more square miles that would have to be brought in range of a subway stop, either via light mass transit (busses) or through "park and drive" systems (putting huge car parking lots next to various subway stops).
b) The Los Angeles area is built on geographically unstable stuff that requires a lot of engineering to tunnel through. That is, most of the ground here is crumbly, in sharp contrast with Manhattan, which is basically one large volcanic rock plug and is much easier to bore through. Further, we are a major earthquake zone: we're just all biding our time until the next 7.5 to 8 earthquake. Making a subway tunnel bored through crumbly rock survive an 8 is a much bigger problem than making a subway tunnel bored through solid volcanic rock survive cars driving overhead.
c) Because of the higher cost of tunneling subways, most of the tens of billions that has been available to the city of Los Angeles has gone into building the subways, and not into expanding the capacity of the freeways. Thus, with the exception of the construction of the Imperial Freeway to replace the Imperial Highway route into LAX, and the construction of the carpool lanes on the Harbor Freeway south of downtown Los Angeles (adding 4 lanes of carpool a hundred feet in the air above the existing 10 lane freeway below), very little expansion or improvements have been made to our freeway system since the 80's, when there were a few million fewer people living here.
d) The subways were built on the theory of "if you build a subway stop here, people will relocate to use the subway." That is, the theory was that by having access to a mass transit stop, people would consider the value of homes within walking distance to that stop, and offices within walking distance, to be more valuable. However, these stops were built along existing trasit corradors (read: freeways), and so the theory was that if there is more noisy infrastructure, people would consider that noisy infrastructure better, and so would pay more to give up privacy, a sense of isolation, and to live in an area with more noise and more (foot/car) traffic.
Yeah, right.
When I first heard about the plan to build a subway system in L.A., I wanted to bitch-slap a few people on the L.A. city council. Or at least force them to relocate to New York for a few years...
Re:Double taxing (Score:2)
The fact is, there is already a 20-40% price increase built into the costs of goods and services due to corporate taxes of all forms, the complaince costs of those taxes, and costs due to higher interest rates. Couple that with having to use after-tax dollars, I'd say the middle class is better off under an NRST.
--
Re:Double taxing (Score:2)
The rebate is based purely on family size, not on income. There goes the need for the IRS or similar agency out the window. No one needs to file a detailed financial statement of themselves to the government. I'd hope the ./ crowd is libertarian enough to appreciate the significance of that.
Everyone gets the rebate. You, me, Bill Gates, the homeless person on the street corner, the single mother working two jobs. Everybody.
The calculation of the rebate is the tax rate times the poverty-level income line for a family of the given size (I believe with a minor adjustment so that married adults receive the same rebate as if they were two single adults). This rebate is paid in advance to any family that registers themselves with the Social Security Administration, which is tasked to handle the rebate. (The registration is not invasive, it's as much, or less, information that you need to provide to register to vote.) The rebate arrives monthly based on 1/12 of the annual amount.
The basic idea is, "$X (the poverty line) is what is required to buy subsistence-level items, therefore the first $X * tax_rate is exempted from the tax. Rather than force people to keep receipts and submit them for the rebate, we'll just assume eveyone spends that and rebate everyone. We'll also pay it in advance so that those who need it the most won't be hard-pressed until it arrives."
As I've pointed out, and AFT has tables to show this, the rebate makes the system progressive, not regressive. Bill Gates' effective rate is a fraction under the nominal rate (no one, unless they choose to not apply for the rebate, will have an effective rate of the full amount) -- a starving grad student has a zero or negative effective rate.
The rich do not get off easy. People generally have three choices with their money: invest it, spend it, or give it away. It's not being stuffed under any mattresses. Investment means an influx of capital into the workforce. (Combine that with the movement of foreign companies to the US [see another sub-thread] and that means more domestic goods available and more and higher-wage jobs.) If they spend it, it's taxed, and their effect rate is virtually the maximum. Or they give it away to someone who will put it to some form of productive use.
The current tax system is far more regressive than you might care to believe. The first $70,000 or so each person (not family, person) makes per year is taxed at a 15.3% rate for SSA/Medicare and 20-40% of the costs of goods are due to income taxes and their related effects on corporations. That puts someone who has to spend most or all of their income just to get by at a minimum of a 35% tax bracket, assuming they pay no personal income taxes!
--
Re:Lawyer: Nothing new here (Score:2)
Wouldn't that have to be a federal tax ala euro VAT?
I'm puzzled by the very notion that buying on the internet should somehow circumvent existing tax laws.
Yeah, but should existing state tax laws circumvent specific federal constitutional prohibition without amendment? I refer specifically to Article I [cornell.edu] Section 9...
As a sidenote, as an economist I'd rather replace all income taxes with consumption taxes anyway
Sales/consumption taxes, though they drive consumers to save, also are extremely regressive in nature, and quite unfair overall. The point is, do we want to be a consumer society or a saver society, and compare ourselves with Japan before you answer
but if the state taxes the good, rather than the sale, it's a stretch for the feds to be involved at all.
Apply goods taxes to the seller, and don't bother with the constitutionally questionable goods/sales taxes to interstate consumers. Simple. Though the tax would then be built-in to the un-sales-taxed interstate consumer transaction, this would spur internet commerce sites to locate in low-tax areas and drive sales taxes lower overall.
Your Working Boy,
Re:Double taxing (Score:2)
--
Re:Well, what do you expect ? (Score:2)
If government were to collect no taxes, (it has happened before), they would instead print more money as they needed it. THEY WOULD. The current US ecomonic system does not function this way, but in other countries, it has happened.
It's called taxation through inflation. So.. instead of collecting what they think they need directly from you, they just devalue what you have and add to their own wealth. It amounts to the same thing, only more sneaky.
So the real answer is not to abolish taxes, but to make it so that we know how and where our money is spent, and not let it get out of control.
Fundamentally flawed concept (Score:2)
Go ahead and run the numbers. See how much the government takes from you *then* ash who is being greedy.
Just to re-iterate for people.. (Score:2)
The moratorium on Internet Taxes does *NOT* mean that any transactions over the internet are free of all taxes.
It simply means that there would be no federal taxes on internet transactions, and they would not be considered until the moratorium had ended. This is to ensure (and it's smart) that the internet can grow and become something without having taxes impede it. WHen it stabilizes, the government(s) will make a decision.
As for state taxes, it would be absolutely correct to assume that everything is as normal, just as if it was phone-in or mail-order, or people coming in in person.
If it is an in-state sale, it doesn't matter if it's over the internet, or snail-mail, or phone, or in person.. you *must* pay sales tax.
And if you thought otherwise, where is your accountant through all this?
Software Industry Issues: Use Tax Information Page (Score:2)
Software Industry Issues: Use Tax Information Page [webcom.com]
Clarification (Score:4)
1. If you're in business, you have to pay Sales Tax on things you purchase for your business. If you buy something from out of state, you pay Use Tax in most states. This only applies to things you purchase for business (software, office supplies, furniture) and not the things you sell.
2. When you sell something, you have to charge sales tax to people who live in the same state as you. Technically, you don't have to charge them sales tax; you can pay it yourself if you want to (to make things less confusing for customers). Lots of craft fair booths and such do this.
For a long time--going back 20 years or more--the idea of collecting sales tax from out of state customers, depending on the state they live in, occasionally comes up and is dismissed. This would be a paperwork nightmare, because small business owners would have to pay taxes to fifty different state governments.
Right now, the internet is handled the same as mail order. So the original poster should have known that he had to pay use tax. The internet has nothing to do with his case; he should have known better.
Re:Double taxing (Score:5)
The European taxes are actually value-added taxes, not sales taxes, and therefore the true costs are higher, but hidden. Additionally, they cascade on each other, so that you have tax on tax.
There are actually two proposals active in the U.S. House to eliminate the federal income tax and replace it with a single-rate, single-stagenational sales tax on first-use retail goods and services only. One plan sets the rate at 15%, the other at 23% and also elminates Social Security and Medicare payroll withholding.
"Holy sh*t!" might be a common reaction to rates that high, but the fact is that corporate income taxes, other hidden taxes, and complaince costs already add 20-40% to the price of everthing we buy -- and buy with after-tax dollars. Of course, it's also a good kick in the pants to Congress to think about trimming down some of that pork-barrel spending so everyone can get a tax cut.
As to regressivity, there are two ways to eliminate that. One can either exempt certain items from the tax, which is a bad idea because it sets a precedent for loopholes and exceptions, and is horrendously complicated to administer. The better way is to provide a rebate to everyone, based on family size instead of income, that refunds the amount of tax paid on subsistence-level spending. The NRST proposals do this latter approach, and even pay the rebate in advance. As such, a family living at the poverty line pays, in effect, no taxes yet still has a 23% tax rate at the register.
For more information on the national retail sales tax proposals, see Americans for Fair Taxation (AFT) [fairtax.org] or Citizens for an Alternative Tax System (CATS) [cats.org].
--
Re:Which Sales Tax? (Score:2)
If you've paid sales tax to another state, you can use it to offset use tax: if you live in Pennsylvania and both Pennsylvania and Illionis have 7.5% sales tax, then paying sales tax to Illinois makes you not owe anything to Pennsylvania. However (AFAIK) if, say, PA has 7.5% sales tax and Illinois has only 5% sales tax, you still owe 2.5% use tax to PA.
Of course, if you paid no sales tax at all, you owe your state full amount of its sal^H^H^Huse tax.
In other words, fucked if you do and fucked if you don't.
Kaa
Re:Double taxing (Score:2)
The problem with this is that if it's coupled with a reduction or elimination of income tax, will solidly nail the middle class. Think about it: the poor will get a rebate, so they will only pay a small percentage of their taxes (or, for the poorest, perhaps even get a "refund" that is greater than what they paid in various VAT or sales taxes). The rich who save more than they consume will pay a small percentage of their income in taxes--as a smaller percentage of their income goes to consumption. Further, as more of their money (perctange-wise) is going into savings and investment instruments, their ability to make even more money through returns on their investments is virtually assured. Those who will pay this tax (and thus, shoulder the majority of the burden, at least percentage-wise) will be the middle class.
Another threat of this tax is that it will repress consumption. While on the one hand that may seem like a good idea (as anything that reduces the amount of consumer goods we consume will help alleviate the pressure on various resources used to make those goods), this will have a "slow-down" affect on our economy, and may push various sectors of the economy into a depressionary cycle.
Any new tax structure (or for that matter, any tinkering we do to the existing tax structure) needs to address the twin problems of alleviating the middle-class "vortex" which causes the middle-class to bear the greatest tax load (percentage-wise), and to make sure that sectors of our economy aren't pushed into a depression.
Unfortunately, most VAT or national sales tax proposals I've seen go by will make both problems substantially worse.
Re:All I can say is Thank God for Oregon (Score:2)
And there should be a Constitutional Amendment guaranteeing that a citizen's total tax burden (state + federal) should never exceed 30% of their income.
Of course, Americans would rather pop the top on a brew, watch "Survivor", and absorb their news from Dan Rather.
PA TAXES (Score:2)
Buying from out of state isn't a way to "LEGALLY" get around sales tax in this state. They are going ot get their 6%(7% if you're in Allegheny county, we have to build two new sports stadiums you know.).
LK
Re:Double taxing (Score:2)
Bzzzzt! Wrong Again! (Score:2)
To quote Ronald Reagan, "there you go again!"
Zip codes are not the province of state or local authorities. They are the province--the sole and exclusive province--of the U.S. Postal Service. And if you think that handling sales taxes on out-of-state purchases is a thorny political issue, just contemplate what would happen if Congress required the Postal Service to redraw all the zip code boundaries to coincide with political subdivisions (county, municipality, etc). (Remember all the screaming when area codes got split? Just a dim rumble comparatively.)
Lots of people have contemplated the problem of identifying and paying local sales taxes. The problem has existed in Texas, California, and New York since (at least) 1987, when I first confronted it. In order to assess sales taxes at the local level every database would have to include a county identifier, a municipality identifier, and at least two special district identifiers (some states assess additional sales taxes within areas served by mass transit; others assess sales taxes by school district; etc.). And yes--you would have to maintain both municipality and county, since there are municipalities (New York City and Bethlehem, Pennsylvania for two) that span counties. Better yet--every database system would have to be able to identify that a consumer was filling in appropriate values. (So, with a zip code of 18091, I don't fill in Centre County in order to avoid a local county sales tax.) Vastly complicated and hugely burdensome are two phrases that spring to mind....
The best solution is Delaware's: don't assess sales taxes. Then your tax-paying businesses have nothing to fear from e-commerce, and you can become a "haven" for e-commerce businesses. Sales taxes are also hideously expensive to collect, audit, and enforce. They are a huge pain to retailers, and the only people who like sales taxes are small biz accountants, since tax audits represent such a nice chunk of business.
Assess taxes on income. Taxes on property get bucks from well-heeled society matrons, but bankrupt senior citizens. Taxes on consumption hike the price of Ferraris, but hit the poor hardest of all.
Re:Double taxing (Score:2)
SuperCorp buys $100 worth of iron, pays $17 in VAT.
SuperCorp then uses that iron and creates widgets that sell for $200. They collect $34 in VAT from the consumer.
By deducting out the BAT that they paid for the iron purchase, SuperCorp ends up paying $17 in VAT, and the consumer $34. SuperCorp is thus paying 17% on the Value Added to the iron (started out worth $100, ended up worth $200 - they added $100 in value).
So yes, VAT is a cascading tax.
Re:Double taxing (Score:2)
b) that's one hell of an excise tax
d) intriguing.
hawk
Sam Adams! (Score:2)
--
Re:Double taxing (Score:2)
My biggest problem with tobacco taxes is how little sense it makes that we subsidize the hell out of tobacco growers, then turn around and tax the product to supposedly discourage consumption. If we just quit subsidizing the production (maybe pay farmers NOT to grow tobacco if we are worried about starving farmers), it would raise the price up on tobacco. What subsidies really do is act as price supports to the big tobacco companies so they can continue to make big bucks. Then the government sues the tobacco companies...
What a tangled, damned mess.
Relating this all back to internet taxes, there has been a big stink lately due to out-of-state companies selling tobacco online (out of states like Virginia with very low state tobacco taxes).
The state I live in considers any tobacco bought by mail/phone/internet that is shipped in from out of state that doesn't have the local state's tax stamp on it to be contraband and anyone receiving such shipments is guilty of smuggling.
Same thing is true of beer/wine/spirits.
Re:Double taxing (Score:2)
I should also mention that because of the rebate, the tax is actually progressive, not regressive. Someone at or below the poverty line pays no taxes and may even receive additional credit (as they do now with the EITC and other credits), while as spending increases, so does the effective tax rate, until it asymptoticly approaches the 23% level.
And to the other issue about the rich not paying taxes because they will invest rather than spend, this is a good thing becuase the investments will help grow business and increase wages (and therefore the tax base, which in turn leads to lower tax rates). Besides, when was the last time a poor person ever gave you a job?
--
Use Tax on Purchases - Most States Have It (Score:2)
Most US states have a "use tax" on buyers that complements the sales tax on sellers - if you buy something out of state, and haven't paid sales tax on it where you bought it. So if you buy that mail-order PC from some other state, the sellers don't pay sales tax on selling it, but your state will want to collect their cut instead; if you drive across the border, buy the PC from the store and pay sales tax on it, your state normally doesn't get a cut, though if the place you bought it has a lower sales tax, many states want the difference. If you're a business, the rules on use tax may be different; many businesses don't have to pay sales tax on purchases because the state gets their cut in different ways, so check with your accountants.
Back when I lived in New Jersey, where lots of people buy stuff in Delaware (no sales tax) or New York (higher taxes, but PC stores will play games like shipping you the power cord by mail and letting you carry the fragile expensive parts yourself), the State Tax Goons would send a mailing with the state income tax form saying "Yes, we know there's absolutely no way we can enforce this, but tell us what you bought anyway and send us the tax payment", which everybody ignored. And New York City (which has an even higher tax than New York State, which was higher than Jersey) would send tax goons to cruise mall parking lots in New Jersey taking down license plate numbers of New York cars and sending them "Better tell us what you bought and pay up" letters.
nothing new (Score:2)
Anyway, what this means is that if you buy (over the 'net or not) from a company is based in, or has a major operation in your state, YOU PAY STATE SALES TAX. On the other hand, if you buy (over the 'net or not) from a company based in another state, that has no operations in your state, YOU PAY NO TAX. If this state tax auditor of yours is trying to tell you that you owe taxes on purchases made from out-of-state firms, then you'd best dial up a constitutional lawyer or something because he's either full of shit or Pennsylvania has some blatantly unconstitutional taxes (only the federal gov't has the power to levy taxes on interstate commerce).
(This may be the only
MoNsTeR
This is nothing new (Score:2)
But in any case, you are liable for the taxes. That's just the way it is.
The fact that goods were purchased by a transaction, in whole or in part, conducted over the Internet has no impact on this whatsoever. If you were advised by a tax counselor or lawyer that you could avoid sales tax to your detriment, sue them for their malpractice, but against the government you have no gripe. If you simpy assumed you could avoid taxes on that basis without the advice of counsel or a tax advisor, then you have no gripe either, but you also have nobody to sue.
Look guys, as much as many of us like to pretend we live in some extra-territorial world here in "cyberspace," that's just a convenient fiction. We live in the real world, with only the two traditional certainties.
To claim surprise for being taxed on use or sales of tangible personal property is, well, just naive.
I gripe about taxes, too. That's one thing. To claim special treatment for e-commerce transactions, well, that's just silly.
How about neither? (Score:2)
At least, that's what the surpreme court has been saying since, like, what, 1800?
If i am wrong, or the totally unsurprising possibility that the U.S. law has changed in the last 200 years has occured, feel free to correct me. Then go to John Marshall's grave, read this slashdot article over it, and listen for a spinning noise just underground.
Re:Which Sales Tax? (Score:2)
Makes sense--means that you can't buy anything cheaper simply from going out of state.
Thanks for the info.
--Dan
Cause or effect? (Score:2)
This is an effect of not having a proper public transportation planning from the start.
The Los Angeles area is built on geographically unstable stuff that requires a lot of engineering to tunnel through.
Actually, I am betting a major earthquake will hit LA anytime soon. It's amazing the (economical, cultural) risks the world is taking about it.
It seems it would be better to bulldoze and start elsewhere, or was it in SimCity?
__
further Net Tax reading materials... (Score:2)
A. Keiper
The Center for the Study of Technology and Society [tecsoc.org]
Washington, D.C.
Re:Bzzzzt! Wrong! (Score:2)
Does that make the playing field level?
We could keep on going back and forth here, but I think you see my point - there is no level playing field. Beyond that, I don't see it as government's job to create a level playing field, if for no other reason than because actually doing so would require an incredibly opressive level of regulation and price controls.
There are certainly good reasons for wanting to apply sales taxes to purchases from remote merchants, so please find a better one than "the playing field needs to be level".
Not an Internet tax...just a sales tax (Score:2)
This isn't an Internet tax however, it's just a sales tax thing that is actually documented, just not understood well.
No federal tax... (Score:4)
NY a few years ago sent unmarked police cars to Reading PA (big outlet town), marked down NY license plates, then sent the owners a friendly reminder that purchases from PA have to pay NY sales tax. There was nothing in the note saying "we know you bought XYZ, so send us money", but more a reminder that they may owe taxes.
Sue the accountant? (Score:2)
If this company used a real accountant, then they should have been told about catalog/internet purchases having state tax liability.
A lawsuit may be a bit over the top, but I would definitely talk to any certification, licencing and professional organizations where the accountant is a member.
But IANAL (Hawk?)
Re:in the same state? (Score:2)
A phone line is a presense and so is a computer internet connection. THUS you are in my state, thus we charge you money.
Sorry, this will fly with the goverment. I think regulating taxes between states was fo taxes and duties to cross state lines. Well, if you sell something in my state, I wont charge you anymore than if you came from my own state -> perfectly legal.
IMHO IANAL all that jazz - WE cannot STOP it, and it is perfectly legal. Bingo, now flame me if you must, but as long as our constitution is written that way, we are going to be subject to the state we live in.
The company we purchased from was IN our state, and thus we are liable for state taxes. The method they are in our state is moot, they are HERE.
THis is not a change or unusual. (Score:3)
This is covered by the Uniform Code I think (not the new UCITA, but the part governing commerce, etc.)
Re:Lawyer: Nothing new here (Score:2)
Nonetheless, requiring the entities sharing any five-digit zip to work out the taxes for that zip is an easy pre-condition that they'll rush to meet in order to collect the taxes
My system would require a table of 5digit=>rate, and the merchants would send a monthly (quarterly, whatever) printout tith total sales per zip and a *single* check (or electronic transfer) to an intermediary who collects such checks and redistributes tehm.
It would be allowed a fee as a percentage of revenue collected (so states get 7.92% rather than 8%, or whatever the rate is. They'll still jump on board . .
Prefereably, there would be multiple intermediearies with which merchants subscribe.
Only the reports/dealings with the intermediatry would be auditable, and only by a single authority (to avoid being audited by 12 states a week . .
I'm really not willing to put any heavier burden on the merchants than this--a single lookup table and a single check). Any state/local that doesn't want to participate can stay with the current system and try to deal with the 90+% non-compliance . . .
hawk, esq.
Re:THis is not a change or unusual. (Score:2)
The most notable cases to hit the news were from several years ago and came out of Florida. It wasn't uncommon for retirees to move to Florida with a side trip to High Point NC and environs. (That area, fyi, is the center of the furniture manufacturing universe.) They would pick out and pay for an entire houseful of new furniture to go with their new lives and pay no tax since the delivery was going to go to their new digs in Florida. The Florida Dept of Revenue eventually got wise and starting stopping delivery trucks coming into the state and checking their contents. When they found a big shipment going to someone, they would bill the Florida resident for the sales tax.
The same thing can happen anywhere. I'm surprised that the state tax auditors from Texas don't call up the state tax auditors from whatever state Gateway is from and make an offer like: "Hey, you guys audit Gateway. We'll audit Dell. Then we'll swap workpapers. That way, we can hit the streets and collect all the sales tax on systems shipped in from out of state."
Look for something like this to happen soon if it hasn't already.
Well Duh.... (Score:2)
Buying from the internet bacisally follows the same laws that buying from mail order would be.
IANAL, however, the proposed laws I see for net taxes usually are the following:
Taxes on internet service: In most states there is no tax on "service" or "labor". Most ISP's aren't charging taxes to their customers. States look at this as an area to collect revenue.
Manditory reporting: Some states want to ensure that they know when a business buys online to verify that use tax is collected.
On the consumer side some states fear that increase in Internet Shopping will pose a threat to sales tax revenue. The premise being that out of state purchases will cut into that tax stream. Just like mail order would, but at a much larger rate.
For the most part these are reasons. California is a good example of sanity when looking at Internet taxes. In CA business are audited on a schedule. This ensures "Use Tax" complience. The largest stream of income to the state is cars and trucks. And the internet doesn't save you paying the DMV. The view is that auditing based on sales tax costs far more then could ever be recapped.
Todays Factiod: In Minnesota, you are required to claim mail order and internet purchases on your taxes if they exceed a certain ammount. Although the law has been on the books forever, the 1999 tax year was the first time the law was highlighted in the general instruction book. At the same time Minnesota runs a multi-billion tax surplus.
Re:This was a long time coming (Score:2)
How can this be a surprise? (Score:2)
If you purchase something outside of Idaho, via mail order, the Internet or however you manage to do it, and have that item delivered to you, you owe some sort of tax on it.
If you paid sales tax based on where you purchased it, your tax obligation has been met. But if you didn't, then you owe a "use tax". It's (technically) not a sales tax, but you still owe it. 5%, in Idaho. And the state income tax form gives you a place to calculate the total of your non-taxed purchases, then pay the appropriate use tax.
Does anybody actually do that? Maybe a few people. Should businesses be aware of it? Of course. The company I work for keeps meticulous records and pays their use tax at the end of the year.
This shouldn't be any surprise. The fact that it is speaks volumes about the quality of your accountants' knowledge.
This business about taxing business on the Internet is a red herring. Business is already taxed. Those who support sales tax collection on the Internet are really just looking for a federal version of existing state laws. Naturally, it's easier to deal with one federal law than 50 state laws, but that's a whole 'nother issue.
=h=
Double taxing (Score:4)
Moratorium is federal only (Score:3)
Additionally, at least some, and I suspect most or all, states require that any items purchased from out of state that have not been taxed are subject to a "use tax" equivalent to the sales tax, that is to be remitted to the state. Of course, this is probably the second-most violated law in the country (after speed limits), because most people don't know about it and the risk of being caught and prosecuted is so low.
--
Re:Double taxing (Score:2)
a) I'd strongly support swapping a well-designed federal VAT for the income tax. Consumption taxes still distort behavior and lower output, but not as much as income taxes.
b) Only if it's a complete switch. Adding a VAT would be a worse mess than now. Also, the constitutional ammendment should have a limit--a 10% limit was proposed for the income tax, and the Senator was laughed off the floor . . .
c) as someone below notes, there is a regressive problem for this type of tax. It's easily solved for the poor, but the middle class will bear a lot of this tax. Sorry folks, but that's reality: in the U.S., tghe middle class has most of the income, and this is becoming more (rather than less) of the case as retirement funds become fully funded and IRA's, 401k's, and the like become more common.
d) The point that is often overlooked is that companies with VAT's have an edge under current rules of international trade. The collected VAT is refunded upon export, while corporate income taxes are not--and trying to give a rebate for that tax becomes a prohibitted export subsidy. A VAT would take away this artificial edge currently enjoyed by some other nations [the corporate tax is a bad idea anyway, but that's a side issue for another day.]
hawk
Re:U.S. Constitution forbids this tax? (Score:2)
I do do not believe that the states have the right to levy such tax on these purchases. Here is article 1, section 10, paragraph 2 of the Constiution of the United States:
Goods transferred from state to state are neither imports nor exports. What this clause did was reserve to the Federal government taxation authority over goods that cross the international border.
Indeed, in early America the vast majority of taxation was by states; the Federal government was severely limited in its powers to tax.
----
Re:in the same state? (Score:2)
What you're looking for in Article I, Section 10:
No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.
http://www.usconstitution.net/cons t.html#A1Sec10 [usconstitution.net]
Re:Double taxing (Score:2)
As to the middle class... let's assume that the poverty line for a family of four is $22,000 and our middle-class family makes $60,000. Because all families, regardless of income get the rebate on the poverty level, the effective taxed income is $38,000, assuming that this family does not save or invest, spend on education (considered an investment), or buy previously-taxed items such as used cars, houses, appliances, etc. Using the (higher) 23% rate, this means their effective tax rate on the $60,000 is 14.6%. But this family is already paying 15.3% in payroll taxes (SSA/Medicare) alone, plus any income taxes.
Prices are actually fairly neutral under an NRST as replacement of the income tax. Competition will compel corporations to lower prices proportionally to costs lest they be undercut by competitors. Assuming an extrememly conservative 20% savings passed through to consumers, this yields an effective price of $1.04 for an item that costs $1.00 now. (Natually, a 23% savings would lead to a $1.00 price on a current $1.00 item.) If the savings passed through went to 30%, that same item would cost $0.91.
Another place that will help everyone, especially the middle-class is interest rates. Interest rates will fall to the tax-free investment levels currently offered, because the lender need not pay income taxes on the interest he earns. Middle-class are more likely to benefit from lower rates on revolving credit-card debt, student loans, mortgages, and auto loans.
--
Internet taxes DO make sense (Score:2)
Here it comes! (Score:3)
"Everyone has to pay their fair share. Taxing Internet sales is good sense. It is not fair to the rest of the world when some rich, corporate, pig can buy $1000 dollars of stuff of Amazon.com and not pay tax on it. The have-nots have to pay his fair share when making purchases at traditional, brick-and-mortar businesses".
And in the right corner!
"Taxing Internet sales is another example of a government spinning out of control towards socialism. It is not right to penalize my success and support of online businesses by paying taxes to support a bunch of lazy, malcontents. You will get my money for taxes when you pry my wallet from my cold, dead fingers!"
And in the center corner!
"I don't trust online buying, some hacker may get my credit card and spend it on porn!"
And in the rear aisles, behind that wicked post!
"I'm John Katz, has anyone seen the Open Source popcorn guy?"
Re:in the same state? (Score:2)
"No tax shall be imposed on any good exported from any state" Or something like that.
The Cure of the ills of Democracy is more Democracy.
No change here... (Score:2)
All that "no internet taxes" means is that internet purchases are treated just like any other transaction (there are no ADDITIONAL internet taxes).
This audit would be the same if you had purchased your goods through mail-order -- most places don't bother to pay the sales and use tax on mail-order goods, but legally you are required to do so and can be caught in an audit because of it. For private citizens this is not a big deal because you're not talking about much in the way of taxes, but a company that buys $100k of goods a month online should have their accountants paying attention to this.
This goes back to the issue of being a professional -- if you're running a business, you should have an accountant advising you on these matters, not the collective "wisdom" of slashdot (g)...