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The Almighty Buck

Analyzing the Real Impact of Taxing E-Commerce 235

sashae writes: "We've heard a lot over the last couple of months about the gigantic dollar-figure sales the net has been generating, that the US Gov't has missed out on taxing. American Outlook magazine has an article about the true impact of Internet sales on taxes that the states would normally collect. "
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Analyzing the Real Impact of Taxing E-Commerce

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  • by Anonymous Coward

    . . . compared to the interest on the national debt. Which is being paid to holders of Treasury bills. Which come in denominations of $10,000, IIRC. Which is a practical investment for the kind of people G. W. Bush considers friends, but not for most of us (my total investments come to less than $30,000 -- and that only because, through sheer luck, I bought NAVI at 146 :)

    In other words, you are paying taxes to pay interest to rich people. Who wouldn't be grateful even if they ever did bother to waste time thinking about little people like us.

    Everything's fine. The people who actually matter are doing quite well, thank you. By sheer chance some of the rest of us are doing pretty damn well for a change also, but that's not the point.

  • by Anonymous Coward
    Gov't has no incentive to save money. I remember when I worked at the campus library at UC Berkeley. In April or May, just before the fiscal year started, the standing order was "find something to spend the remainder of the budget on". Because if you didn't, the dept. got that much less $$$ next year. And we can't ever let that happen can we? Gov't never gives refunds if taxpayers over pay them. Under pay the gov't though, and they'll come after you and lock you away. Real fair, huh?
  • Commie alert!!!
  • When will you people learn proper math? $8.5trillion dollars times 7.25% sales tax (here at least) equals $616.25 billion, plain and simple. Just as every other industry loses bazillions every time you play an MP3, pirate software, watch a DVD movie in Linux, so too this wonderful country LOSES money each day the Internet is not taxed. That is how much money all you stingy bastards are keeping out of the hands of this nations sweet, innocent youth.

    These kind, caring youths can't build new schools with indoor plumbing now. They can't have that brand new shiny computer hooked up to the Internet any more. Look at little Jimmy here (pull up some kid with dirt smudge on his face), his mother has to work 23 and a half hours a day waiting tables at Hooters just so he can keep the dirt he plays in so much. Do you really want him to not have his dirt?? Hope you and you're books are happy.

    Oh, and remember that nice little planet you live on? Well, it won't be nice for long, not without some money. How do you expect this planet to keep going without money to clean out it's coal and oil, the feces of this world? The world will just get all backed up and it won't be purty then, let me tell you.

    And here is sweet little ol' Mrs. Kravitz. Her husband died last year, and she's been all alone since. She is expecting here Social Security check today. Look at her stand down there by her mailbox, all lonely, waiting for her only friend in the world, Mr. Newman, the postman. You see folks, in these parts, people don't have friends like you and me. No, they are only visited by some kind, generous civil cervants we like to call, postman. But what Mrs. Kravitz doesn't know, is that a bunch of mean lil' 20-year-olds don't want to fund such generosities as the United States Postal Service. Mrs. Kravitz will probably die in a few days of starvation, waiting here for her only friend in this world...

    So, I hope you people are happy. And don't let those evil Republicans convince you that you don't need any more taxes. Look at how wonderful taxes like tobacco and gasoline have made everyone smile. Just imagine what sort of world this would be without taxes...

  • bah.

    Reasonable efficiency in private health insurance is fundamentally unattainable under a free market system. It has perverse incentives built in from moral hazard of the insured, to the Hippocratic oath taken by the doctors, to the quasi-cartelization of health care insurers. I can't guarentee that full state sponsored health care would be more efficient than a laissez faire system, but some level of government intervention is required to maximize social welfare.

    I'll give you "funny", but "informative"- no. This isn't to say that your position is untenable, just that a quick pipe through sed doesn't an argument make. This reminds me of Citizen Cane, where Charles Randolf says, " it on the front page and call anyone who says different an anarchist!".

  • >Personally, I've always felt that this sort of taxation is akin to
    >shooting yourself in the foot. One of the biggest incentives ordinary
    >people have for buying online is the absence of taxes, and taxing this
    >would destroy a very good reason for people to be hooked up. This, in
    >turn, promotes a lack of technological literacy. Not such a great move
    >for a few bucks, eh?

    Buying things online was from the start a farce. It's *NOT* a good reason to go online. The few bucks you *MIGHT* save on sales tax you'll end up losing with the shipping & handling charges.
  • Nice smart-alecy answer, but each of those calculations need to be done (by hand or by machine), should to be checked for accuracy, and takes up space on paper or a disk. Which would take more time (and thus be more inconvenient), more calculations or fewer calculations? The correct answer is "more calculations", which might lead one to think it was less efficient. I hope it leads you there...
  • Sure there is more to it than just the taxes. Economies are way too complex for anything to have a single cause. The Tax regime is however a major factor. The governments habit of planing in 3 month increments ( at best ) is another.

    As for what we produce and earn. Tourism is the biggest earner. They come for sunshine and Reggae music. The Ganja, prostitutes and long cocked gigaloes have nothing to do with it.

    Bauxite ( raw material for aluminum ) is big. Coffee is huge but we don't produce or export nearly enough of it ( Government bloat at work ).

    The single largest source of foreign exchange coming into the country right now is simply classified as "money transfers". I.e. Western Union moves more money than any hotel chain or bauxite mine. This money is mostly from Jamaicans overseas taking care of the family back home. It turns out that the IRS as classed Jamaicans as one of the wealthiest ethnic gropes in the US, right next to the jews and no; for you cynics drug dealers don't pay taxes and are all rated as unemployed and broke by the IRS.

    How many people here have a Jamaican coworker or snack at a Jamaican owned business etc... ? Probably a disproportionately large number, since this is a very small country. At 2.7 Million most of your cities are bigger :)

    In other words our biggest export is skilled labor.

    PS : Other places with huge taxes ( a few european countries come to mind ) guarantee, and deliver near flawless roads, free health care, subsidized public transport an efficient justice system and public education that leaves the wealthy without much reason to use private schools.

  • Trust me. The US dose not do much brain draining from any country. Rather the country has to chase it's people away and in Jamaica's case the US just happens to offer the best deal for a migrant.

    1: Shortest, and hence cheapest journey ( except for Cuba which doesn't need to import labor and most wouldn't want ).

    2: Fast moving economy. Lots of new jobs every day for the aggressive job hunter ( When you land you have to find something before your cash runs out ).

    3: High salaries. If Jamaica offered 1/2 of what the US did most immigrants would never have left. Around here you need a Collage degree to earn $540K per year. In the US that's what you get for flipping burgers. ( 540K J$ per year == U$250 per weak ).

    If any of these things were not available we would be going elsware. Even then the Racism in the US is enough to make many Jamaicans look elsware. I.e. most have never been called "Niger" until landing there and often wind up breaking some skinhead in half shortly after. Like most people we would rather avoid violence.

    Most people will stay home for a hell of a lot less than the travel for. Why would you want to leave comfortable weather ( to you ) and a familiar culture? Simply, put you don't.

    BTW : The US doesn't encourage Jamaican immigrants. Anyone who has ever been to a visa interview here or been searched in Miami airport is left with the distinct impression that they don't even want us to visit.
  • This is just a hunch, but don't you get something for those taxes ? Like say good roads and free ( or subsidized ) basic services. Taxation for it's own sake is bad. That's not what you have.

    BTW : About that 100% - 120% import duty. What figure is it charged on ? What you paid for the car, What the industry catalog ( who's name I can't remember ) values it at or what customes thinks it can sell for ? Here we use the highest of the 3 figures and it's usually the last one by about 3X.

    Also a car doesn't need to be very big to go over the 100% mark. Very few American vehicles don't. A Corolla is about borderline.
  • I reckon taxes are collected in the wrong way at the moment. This includes the UK as well.

    At the moment, the national gvernment grabs about 40% of everything I earn and then grants some back to the local governments (councils). I would much rather see my tax revenue go to the local councils who can use the money for local services and projects which will benefit me and my neighbours. They could then decide what services the national government should be providing and how much they should cost.

  • Shipping and handling are often used to offset the cost of the product. This allows an online store to sell a product for a low price, then charge incredibly high S/H prices to make up for the difference. I was looking for some PC-100 memory a few months back, and found some places that had good prices, but they averaged about $30 for shipping and handling for a single DIMM. Actual shipping shouldn't be more than maybe $3 -- the rest went towards the cost of the memory. All of a sudden, the deals didn't seem so great any more.

  • matter where it comes from.

    Fact is, sales taxes hit the poor and middle class harder than they do the rich, even if you exempt drugs, food, etc. The paper rather overstates it's case regarding how much money there is out there, but the point is well taken that much (if not most) of the revenue would be eaten up in transaction fees. There are simply more efficient and less regressive ways to raise revenue than collecting sales taxes on Internet transactions.

    I grant that the less wealthy out there do not have access to the Internet (so they couldn't take full advantage of this). This is to some extent an intractable problem (a certain percent of the population will never get wired, no matter how cheap or easy it becomes). OTOH, it doesn't take too much resourcefulness to find a friend who is Internet-savvy, so this may not be nearly the problem it seems to be on the surface.
  • On "Through a Loophole, Darkly []: Why the Internet Exemption From Taxes is Not Entirely a Good Thing", Bob Cringely warns of loopholes.
  • wow, now /. should only post what you want, and everyone who actually thinks this should've been posted is unable to understand?

    No, but there are probably more deserving technical articles sitting in the queue (or worse, being bumped so this article could be posted). I wouldn't know, as the queue is not public or moderated by /. readership.

    This article and issue have been covered many times before on /., as well as in many other places. Until something new or seriously different comes along (again, either legislation, judicial decision, or something equally serious) it's just rehashing the same old net-taxation bugaboo.

    While this is not as egregious as some of the other redundant articles on /., it still ends up causing lots of handwaving and bloviating, wasting hundreds of poor kilobytes, on an issue which is pretty much clearly defined. The only interesting discussion of this issue in the foreseeable future would be regarding any specific new actions related to the issue (again, new legislation or judicial decision, or something equally goofy like a consortium of companies attempting to voluntarily collect tax.. tried by many mail-order companies quite recently and failed quite miserably).

    Go ahead and talk about what you like, it just annoys me that another submission had to die for this story. Keep this in mind: for every unworthy and/or redundant submission posted, something more interesting probably had to die.

    I wonder if a new patch for the /. code could allow 'runner up' submissions to appear in place of submissions whose topics were killfiled..

    I wonder if a new Topic for 'internet taxation' should be created... 'Money' seems a little too generic, though I guess I could forgo IPO news for a little sanity... ;) AIIGH! How do I exclude 'Money' stories from my homepage? I've already excluded 'Comdex', 'Internet Explorer' and 'Microsoft', but I don't see 'Money' anywhere...

    .i really source, closed minds, blatant hypocrisy.

    Please tell me where I've been hypocritical? My opinion on the US issue is constant and pretty much unshakeable: net sales taxes are unconstitutional and unlikely (compared to the e-commerce damage they'd inflict as well as understanding that consumers will simply switch to mail/phone order which are protected by precedent as well as the constitution). In addition, I find that rehashing this issue every frickin week (it feels that way) is simply provoking sound and fury, signifying nothing, and it not only wastes space and eyeballs but it contributes in a negative way to the overall S/N ratio of /. in technical and editorial terms. I am just as free to take issue with this as you are to take issue with my opinions. And my mind is _not_ closed, but it is under a constant barrage of information and anything that adds valueless content to that barrage inspires annoyance and frustration.

    Time for coffee..

    Your Working Boy,
  • The fellow is saying that the question of 'should or should not' is irrelevant. It *will* happen, which neatly puts 'should' out of business.
  • Depends on your definition of "pursuit of happiness" :)
    Yeah, I know that's really Declaration of Independence, and not Constituition, though there's always the "more perfect union" clause in the preamble :). At one point there was a constituitional ammendment banning alcohol, so would the ammendment that repealed that ammendment count as a constituitional right to alcohol?
  • Ok so the mechanics and fairness of collecting taxes is not well thought out. Use the FCC Teleopoly model and collect taxes at the Federal level and disburse them back to the States. By any other name the access fees, surcharges, universal fees, etc. are flat amount taxes, levies, whatever you want to call them. One way to do this would be to build in a gaggle of fees to your basic connection. True it would unfairly tax those who don't purchase G&S but so what. You're phone usage is already taxed no matter how much you use it and what you use it for. What about freeISP's and freeEmail you say? Tax them anyway; 0$ service + X$ Internet levy. Or tax the hardware itself. Not fair you say? Maybe you'll never connect to the net and why should you pay a levy? Who cares. I'm taxed to build roads I'll never drive on. I'm taxed to safely treat water I'll never drink. I'm taxed to send satellites to Mars. What's your point?? There are all kinds of imputed taxes you pay where the base rate is already built into the price: taxes on gasoline aren't rung seperately but there they are.
  • Strange, I just got (another) of these just this morning:
    Subject: Congress to allow email charges I thought it important to share this with you since it effects us so much and a good friend shared it with us. Please pass this on to all you know since many of us use e-mail for business and to keep up with friends and family, I thought you'd like to know the following. Please jump on it right away and forward this to others. CNN has reported that Congress is going to vote on allowing telephone companies to CHARGE A TOLL FEE for internet access. Translation: Every time we send long distance e-mail we will receive a long distance charge. This will get costly. Please visit the following web site and file a complaint. Complain to your Congressperson. We can't allow this to pass. The following address will allow you to send an e-mail on this subject DIRECTLY to your Congressperson. " " Pass this on to your friends. It is urgent! I hope all of you will pass this on to all your friends and family. We should ALL have an interest in this one.
    and it goes on like this. And people wonder why congresscritters don't take email seriously ?
  • On the other hand you have California, where property taxes have been politically frozen for 20 years. The only viable source of revenue for local government is sales taxes (which is one reason we have so many strip malls).

    In the Silicon Valley, local sales taxes are even a popular way of funding highway projects. The irony is that can be cheaper to mail order from San Jose than to actually drive there and pick it up.
  • A good point - that taxes are not evil per se.

    Also, people seem to think that taxes get taken by the government and then thrown out the window. Tax dollars started the ARPA net, provide education, and, if you live in a halfway civilized country, free health insurance.

    It's not 'free' though if you pay for it in tax dollars, to start with. Or, in my instance, in tax francs - I happen to live in one of those partially civilized countries that have decent health insurance infrastructures (not too much taken out of my monthly check, and I never worry about illness or accident).

    For all that, do I clamor for my government to levy more taxes ? I don't - I would much prefer it to use what it already takes from me more efficiently. (And I think of myself as leftist, very much so...)

    I like to think that the hubbub over taxing Internet sales is more of a case of the US govt saying 'whatever we can't control should be banned, taxed, or declared bad for your health'. ;)

  • Oh, jeez, let Hemos get a little ahead in the rat race, and before ya know it, he starts pushing these right-wing libertarian rant sites...welcome to the club, Hemos. Isn't funny how this stuff starts to make more sense when you're a self-starter who makes it into the money?

    The essential truth here is the genie is already out of the bottle. The harder the pols and the crats squeeze, the less they will be able to get their greedy fingers onto. You socialists - this is not about having enough taxes to provide for infrastructure and the safety net, this is about power. The State covets it, and they's not gonna get it, furthermore, they may not even be able to deny power from us!

    It's easy for the impressionable to blame the Demon Internet for all sorts of social problems. What's truly amazing, tho, is how impressively easy it is for internet users to really shrug most of this off. See how little impact the country-specific censorship and gambling rules really have, for example. The State will never catch up. And when our guys go over to the Dark Side - weeel fr'instance, who cares about Dorothy Denning now?

    It really does seem to me this will make little difference in a few years. Even the physical nexus will stop being an issue because people will vote with their feet - and sensible jurisdictions will step out of the way, coming or going.
  • It works in Oregon and others. Revenues can be gained from property and income taxes in the state. Think of all the sales tax paperwork that could be prevented.
  • I hate hearing people bitch about sales tax on the internet, it is a stupid idea. Then again, I know from experience. In California we have to pay sales tax for just about everything. I bought a pair of books from B&N and paid sales tax, same as when I buy from anywhere else. My sales tax is 7.75% though. People whining about 5% just make me mad. Shopping on the internet is overratted, at least for me. Because of shipping and sales tax I don't really save any money and you can usually expect 3-6 days for your shipment to arrive. How am I saving through this glorious revolution, now I know what the Russians felt like after the Bolsheviks took over.
  • You're right about the backwardness of my assumption - I got too worked up and didn't realize that it was my state trying to tax me. However, I'm still unhappy with the the revised situation.

    It's not that I don't want my local government to have money, but rather that I don't think I have used any additional services of the local government as a result of the sale, and thus I don't see why they have a right to tax me. I'll admit that I used local phone lines/cable lines to place the order and that UPS used the local streets to deliver the package, but all of those things are already taxed by the state. If UPS makes more trips to my door because I've bought more things online, the taxes that individuals and businesses already pay to keep up the roads should be increased. But we don't need a new tax. There are already taxes which pay for phone lines, roads, law enforcement, etc., and if we need more money for those things it's much better to increase the existing tax rate than to create a new tax with new forms, laws, and general confusion.

  • It's fine with me if states tax businesses which are residents in order to provide the infrastructure that those businesses make use of. I just don't want to be taxed by states of which I am not a resident, because I won't receive any benefit from those tax revenues. If is using resources which could be provided for by a 10% tax, for example, then the 10% tax should be applied to in that state and they can pass the higher costs on to me in the price of their products if they want. The wrong solution is to tax them 5% and tax me the customer (and all the other customers too) 5%.

  • Good point - I hadn't considered that some states may have different and/or less organized revenue models than the ones that I am familiar with. However, giving states the ability to tax nonresidents seems like it could be prone to abuses and would cause more problems than it would solve. At the very least, it would cause e-businesses to move to states with no sales taxes.

    Ultimately, I don't see a significant difference between ecommerce and catalog or mail order purchases. Sure ordering over the web is quicker (usually) than a phone order, but phone ordering is faster than mail-order and we didn't change all of the tax laws for that. This is one case where the Internet would be in better shape if we stayed within the boundaries of existing laws, rather than reinventing how taxation works online.

  • What will those paying the taxes get in return for paying them? Nothing

    So where does the money go? Is someone just stuffing it in a mattress, never to be spent? if so, then the money you have will rise in value by exactly the same amount as what you lost (because there is less money to go around, but the value of the US economy is still the same, no?).

    So you haven't lost anything...
  • I have to admit this is one thing that's been bothering me lately -- the US doing a brain drain on other countries. While obviously it's in our own short-term interest to get all we can in whatever resources are available, I question the long-term feasibility of essentially strip-mining a country's population.

    Fortunately, many people send money back, but as you point out, if the money is wasted it doesn't do much good. The obviousl answer is to invest in education and such, but then you have a new generation of educated students (at local expense) leaving the country to generate income for the US.

    I suppose a national sending money back puts more into the economy than he would if he stayed behind, so in that light it might be a good thing.

    Man, i hate trying to figure this stuff out. No matter how you look at it it seems like everyone's getting screwed (and yet everyone is making money!)...
  • itachi, who is going to stop reading this thread before he has an aneurysm

    Well don't have an aneurysm without good insurance. Cost-cutting measures have reduced the number of beds in publicly-funded hospitals. And medical education has been drastically reduced to save medicare money, so you'll have fewer qualified doctors to work on you. But look at the bright side, you saved $15 on your taxes! (g)...
  • Ack! No german beer purity law?!!!

    Next you'll tell me that America doesn't really want the tired, poor, wretched masses yearning to be free!

    All my delusions, shattered!...
  • income taxes are viewed as punishing people for making money
    If we're going to come up with outrageous analogies, sales taxes punish people for existing, and punish the poor more heavily than those who aren't poor.

    If it makes it less painful, the correct response to "income taxes penalize people for making more money" is "the people who benefit most from our economic system should bear a similarly greater responsibility for maintaining it".

    Unfortunately both points are correct, as is true with most fo these debates. So no matter what we do, we'll continue arguing about it (g)...
  • Everytime somebody here talks about the internet, they make it seem like some sort of foreign entity that nobody here can be a part of. This state has that sort of attitude about a lot of topics so I was wondering whether this was just us or prevalent in other parts of the country/world.

    -!Don't take this as an insult to New Mexico!-

    This is a fairly common attitude in less-developed areas, in my experience. Very common in poorer states as well as poorer countries. What's frustrating in working with these folks is, as you point out, that they believe this is something foreign they can have no part in.

    The single largest obstacle to lifting developing countries (and poor people on an individual level) is convincing them that there is nothing stopping them from getting out of the hole. This is not to say that shooting sunshine up someone's butt is going to make them a millionaire, because it's a long process that takes generations for the attitudes to change. I just get so frustrated with our third-world partners because everything is always "Oh, we're not as smart as you Americans, we can't do that sort of stuff." When of course they're just as smart, and frequently much harder workers -- they just don't accept that it's possible and thus they run in circles of poverty.

    Ugh. ...
  • The difference is that purchasers are being taxed but not receiving any government services in return. All of the pro-taxation arguments which have been made so far are along the lines of "but everybody else is raking it in, why shouldn't we?" without any consideration of what those tax revenues will buy for the people who are being taxed.

    But this assumes that there is a clear-cut division between rveenue/expense sources that doesn't exist. The state's (and country's) income just goes into the budget and is spent -- in many places the sales tax does pick up the cost of education or social services.

    Saying that sales tax ONLY pays for the infrastructure to support the businesses ignores the equal reality that the infrastructure equally benefits the customer.

    There are states without sales tax, where the income/property taxes pick up all expenses; there are other where there are no income taxzes, and thus sales tax picks up a larger burden for the local support of government...
  • No, unfortunately the repeal of prohibition did nothing but say "the amendment is hereby repealed".

    Believe me, I'd be in line to sign up for the guaranteed right to alchohol! Especially if we got some similar laws like germany regulating the purity and freshness. That's some legislating I can work up an appetite for (g)...
  • Liberals are supposed to be against the sales tax because it's regressive. Conservatives are supposed to be against it because it puts a disproportionate burden on small business, and because it is economically inefficient

    Ok, I'm not an economist, though I am an economics major (and a liberal), and I don't understand why conservatives would think excise taxes are economically inefficient? I was always under the impression that they are more efficient at least when compared with income taxes, since since they encourage savings and investment (by discouraging consumption) rather than discouraging income, which isn't a good idea (and lessing the effect of the Laffer Curve with which many coservatives are enamored). Why are they supposed to be inefficient?

    I also don't quite get the bias against small businesses (waving the bloody shirt, perhaps?). Is it just that all businesses must deal with sales taxes, and that will seem larger for small businesses? As I said, I'm not a conservative and fail to see the reasoning behind the opinions you claim they have.
  • I don't doubt they're regressive (you're right); I just don't get the other stuff.
  • I don't mean to flame, but anywhere a business sector can profit, the government HAS to put in its 2-bit laws and squeeze the profit out of the business.

    As a canadian, this is the major cause of the Brain Drain, where everyone who wants to make a decent amout of money moves south to the States, where the tax rates are much lower.

    Private Industry cannot raise prices as it pleases, and it cannot add costs where there are none, but the goverment can add taxes on taxes. What can we do about it, except complain?

  • by Anonymous Coward
    But the BMG example is exactly the same thing as the ecommerce loophole. Close one and you will almost certainly close the other. Businesses are obligated to collect sales taxes for states where they have physical presences. So BMG establishes its physical presence there, and I don't pay tax to B& because they (.com, not the brick and mortar) don't have a presence where I live. If they made a federal law that you have to collect taxes for ALL states, BMG's only choice would be to move out of the country and start paying tariffs (I seriously doubt they would make such a law without taking care of any loopholes NAFTA might provide).

    The Economist had a great article on this recently, which said that some judges have made it clear that if anybody wants to try to sue for back taxes on these corporations which establish separate companies for the purposes of evading taxes (ala spawning off, he'd be more than happy to find in the government's favor (you may just think of that as government corruption, but I believe the judge would be justified in this case).
  • It's a tad more complicated than that. Our government has allowed USWest to totally screw up the data infrastructure in this state. USWest owes NM over $50 million they made illegally over their profit cap. If the state had the guts to get that money, it would do a lot for a lot of small businesses without having to do anything to the tax code. Our phone lines are barely good enough for voice in most parts of the state and getting any kind of good bandwidth has been ridiculously expensive until about the last 3 months. We're also one of 3 states that charge tax on consumer services, as was mentioned in the article. If it were a level playing field here I'd be right there with you but the fact is that it's not. Also, it's not like we'd be the first state to help out online businesses, many other states do it and it's worked wonders.
  • We've had quite a bit of discussion here in New Mexico recently about this very topic. The Mayor of Albuquerque recently gave a speech blaming the internet for a 3% loss in state tax revenue (it turned out that the state tax revenue actually grew by 3% but the projections were 6% so he called that a loss). Since then, many people have been complaining about the net's influence on our state since we're pretty poor overall. I think I'm going to print out and mail this to those people in charge here, just to shine a little truth on the hysteria.

    On a semi-related topic, is it only in New Mexico that people completely neglect the idea of helping businesses get on the net in order to bring money into the area? It seems that tax breaks or some sort of help in getting local businesses on the web would be the best plan, that way the cost of the item comes into your area, not just the tax. Everytime somebody here talks about the internet, they make it seem like some sort of foreign entity that nobody here can be a part of. This state has that sort of attitude about a lot of topics so I was wondering whether this was just us or prevalent in other parts of the country/world.
  • The point that the article (with great validity) makes is that the Internet doesn't introduce a whole lot of new taxable transactions.
    • If you buy that PC from a vendor that has an "operating presence" in your state, then you'll get taxed by virtue of the existing tax law.
    • If you buy the PC from a vendor where you don't get taxed, then this is a situation where mail-order transactions are not being taxed.
    Note that the two situations described above have nothing to do with the Internet.

    What, precisely, do you think you intend to have taxes applied to?

    Be PRECISE. Tax law requires great precision. The practice of tax law involves examining transactions and determining how to determine how those transactions are to be taxed. "Sharp" tax practice involves presenting transactions in such a way that they are taxed less than they otherwise might be.

    If you're proposing that there be some sort of "Internet Sales Tax," applied on top of other taxes, then you'll see a vast exodus of sales activity, as people will decide that if it will cost an extra $50 to put the request in via the Internet, then they'll just submit specs for the PC via the web site, and then phone in the purchase request, which will result in the transaction not being taxable.

  • Ok, I don't like it particularly, but most (all?) of Europe has VAT - Value Added Tax. It's just sales tax on everything with a few exceptions (in the UK at least - books, basic foods, sanitary products, etc). You get charged it on everything you buy from anywhere, and it's a uniform rate for almost all goods (electricity & other utilities an exception at the moment). The UK has VAT at 17.5%.

    If you import stuff from outside Europe, you get charged VAT by customs & excise (as well as import duty). If you buy something from inside Europe but outside your country, you pay VAT at source - ie, where you got the stuff from. Businesses get to claim back their VAT, but it's still charged when (eg) a distributor buys a whole load of PCs from HP.

    The point is - it's uniform. The playing field is fairly level and will get more level as the countries in the EU move their VAT levels into agreement. It's a slight headache for businesses, but hey - if you run a business you have a pile of paperwork to deal with anyway. Noone has to worry about net businesses having an unfair advantage (apart from having virtual premises and often virtual stock) - you can't avoid the VAT.

    If the US took up such an option, each business would have to account for sales to other states (like you have to do when selling to other countries in the EU) and then it all would get balanced up by the federal government.

    Might work. Works here.

  • Not to disagree with the guy (I believe he's right that internet taxation is a futile endeavor - the IRS would have better luck collecting taxes on black-market transactions), but I couldn't help but notice that he moans about how his opponents "say but don't do".. and then he goes on to say what consumers will do if faced with such a quandry. Uh, hello?

    I think he would have done better quoting the Supreme Court as "the power to tax is the power to destroy", a landmark case in which the Supreme Court set limits on how much taxes were reasonable.. and weren't. But, the old wrinkly judges that nobody bothers to listen to aside, did anyone ever consider that the politicians, in a remarkable reversal of all existing laws of physics, might be a step ahead of the rest of us?

    Internet taxation is a jolly big problem, but it's obvious that global capitalism / corporatism is the next big thing. 10 or 20 years down the road the idea of a "local economy" will be a complete and udder joke. It's already getting that way right now. Any major purchase I make - computers, computer parts, person-to-person (used car(s)!), office furniture.. you name it, I buy it via mail order. Read: no taxes. They nip me for a buck here, a buck there, and several hundred bucks when income tax comes due, but that's about it.

    But I digress, my point is that we're moving towards global capitalism / commercialism. Alan Greenspan had more to do with preventing the complete collapse of the Japanese market a few years ago than the Japanese had themselves (don't believe me? Ask an economist; I'll give you a hint: interest rates). In such an era, tax collection on individual goods and services will be extinct as we know it - it's a good 10-20 years away, but it's out there. In the meantime, the government economists and politicians are busily preparing to either find a new tax base.. or new ways to tax the existing one.

    The government will get it's share.. believe me.. it's the ONE thing it's efficient at, if nothing else.

  • Technically, we're taxed on Internet purchases already in Kentucky, USA. Our state has a "use tax" which applies to all goods and services bought for use in Kentucky on which sales tax was not paid. So you order something online and don't pay sales tax, you owe the Kentucky Revenue Cabinet 6% of the purchase price when you file your state income tax. Same thing if you order from a catalog. Technically, if you take a trip to New Hampshire, buy something in New Hampshire and bring it back to your home in KY, you still need to pay the use tax because NH doesn't have a state sales tax. I imagine many other states have such a tax on the books.

    I pay this silly tax when I file my taxes because I don't want to be prosecuted for tax evasion if I'm every audited. You see they can seize your credit card and bank records in an audit, so the numbers won't lie on where you've spent your dough.

    We don't need more taxation in the United States. We need less taxation and less regulation of commerce. Let's face it, if we let politicians continue to tax everything like mad, we'll end up like Europe, with 4 and 5 taxes levied on every purchase, gov't telling business how to operate, reduced individual purchasing power, and double digit unemployment.
  • Keep in mind that the US is a large place (not as large as the world, but it certainly does cover quite a bit of ground :-) What may make sense in one state - heck, even in one county - might not make sense in the next.

    In LA or NY city, for example, subsidising public transportation and having a higher tax on gasoline/car sales makes sense. In the midwest, though, you might want to forgo these taxes (higher gasoline prices raise farming costs, and massive public transportation systems aren't cost effective) and replace them with something else.

    IMHO, the worst part about the problem of taxes is the desire to come up with a "one size fits all" solution, particularly at the federal and state levels, where the "one size" solution is constantly being tailored with new laws, special exceptions and additional specifications in order to try and make something general work in all cases.

  • Tax dollars started the ARPA net, provide education, and, if you live in a halfway civilized country, free health insurance.


    No joke! Christ, I can't believe those fucking socialists wasted our money on that damn ARPAnet.

    We should have just waited for the benevolent and highly efficient AT&T (pre-socialist breakup) to develop an open communications network we could all tap into.

    And to top it off, medicare goes around spending more per funding dollar on healthcare than any private health insurance company. How can they be so goddamn insensitive to the needs of insurers to make money by showing how efficient it could be if they stopped denying coverage? Don't they understand that the free market is perfect and their goddamn government efficiency is screwing up everyone's math?...
  • Well, you have to understand that i'm starting with the assumption the business owner is trying to make money.

    In order to do that, he already keeps books (presumably on the computer) with tallies of sales by date and kind. Presumably this already existing data (scanned in at time of sale!) would be capable of generating exactly the tax numbers you claim are so costly to produce? I can only assume the bank that holds the loans that started his business would demand much more detailed financial logging.

    While i grant you that the accountant may wait an extra .023 milliseconds for the computer to calculate those extra kilobytes of numerical data, I hardly think such a delay would justify scrapping the current tax system?

    And, to pick a nit, yes this is "less efficient" than fewer calculations, but you didn't say it was "less efficient", you said it was "inefficient", which it patently isn't. It also doesn't penalize small businesses "heavily".

    At most, it is simply one more calculation in a series of hundreds of others done on a regular basis with the same figures for many other reasons not involving taxation.

    At best, it is entirely automatic from the moment merchandise arrives in inventory to the moment it is sold, meaning that it is essentially a zero-cost proposition (though obviously there is an incremental cost involved).

    So no, I don't think it's inefficient, any more so than making every American sit down with income tax forms on a yearly basis.
  • You should read a little more constitutional law before making such exaggerated claims.

    In fact, the Supreme Court and the US Govt in general have always recognized that taxation is an inhibition. Maybe that's why churches don't have to pay taxes? You can't be taxed on speech, either.

    taxing alchohol is fine -- there is no right to alcohol in the constitution...
  • Consider a retailer who sells 1000 $0.50 items in a day, (20,000 tax calculations a month!), and then consider an income based tax which is calculated twice per month for each employee.

    If someone is calculating the tax by hand 20,000 times a day, they should probably deserve to go out of business.

    If, OTOH, they are simply printing out the reciepts at the end of the month and having the total sales/total taxes collected printed out with a check to the tax office, i don't see how it's any greater inconvenience than printing out the same salary/taxes paid summary to the tax office for every employee...
  • So the taxes are the reason for unemployment and the bad exchange rate? What goods and services are produced in Jamaica? Obviously tourism is major, but with a bad exchange rate that isn't gonna bring you more money (although it will bring more people!).

    I just question the cause/effect -- if the US economy is doing well and the Jamaican isn't, then the exchange rate will suffer.

    High taxes are fairly common throughout the world, including many countries with currently booming economies...
  • Well in Texas, it's in our state constitution that there will be NO income tax. We could have an interesting state's rights battle if you propose every state simply abolish sales taxes wihtout providing an alternative income source.

    As others have pointed out, while sales taxes are regressive, income taxes are viewed as punishing people for making money...
  • Keep in mind that the huge "surplus" is still several orders of magnitude smaller than the debt we have -- we still owe several trillion dollars.

    This is the same as wondering how to spend that $200 bonus from work when you owe $20,000 in credit card debt...
  • It "doesn't matter" only if we eliminate the programs that have been budgeted for the money that was borrowed.

    Otherwise we've got a big problem when the day comes for baby boomers to start retiring and all the money we had saved up for social security isn't there any more (except on the books!)...
  • Why? Because the tax rate, combined with the cost of shipping will make Internet purchases generally more expensive than traditional retail.

    If the internet stores can't keep up with the brick and mortars when faced with the exact same tax penalty, that means the brick and mortars are more efficient and the internet stores should die. Is there any particular reason that we should favor Internet stores over local ones? Just because we like technology?

    Think of it this way: If they removed all sales taxes, the Internet stores would have to lower their prices to compete, and in many cases they'd go out of business. If they had a choice, I'm sure the brick and mortars would lobby for this, but they know that's not going to happen. They'd like a fair playing field, and if they can only have it this way, they'll take it; is that so wrong?

    \me prepares to run and hide from people on Slashdot who will say removing all taxes is the proper way to do things. Yeah, maybe. Let's see you pass that law (I don't agree with you, so don't ask for my help!)
  • So it doesn't make much of a difference to non-americans but we have always been paying tax on online transactions. For a little while you used to be able to pay less tax by buying something from a different province that charged less tax than your province but pretty much all the online store charge the correct tax now. Oh well, it's still cheaper to buy online than local and if you know what you want it's the same in the end.
  • I always thought that sales taxes were regressive because the poor typically spend a higher proportion of their income and therefore pay a proportionally higher percentage of the tax.
  • There is no moral justification of taxation, period. But rather than open that can of worms (yet again), consider this:

    Many states don't have sales taxes, period. Don't like sales tax? Move to another state.

    If you consider taxation of internet bought products, then you must also consider taxation of mail order products, as well. If you do not do this, all that will happen is that these internet companies will open up 1-800 lines and take phone orders, while using their website as an online catalog.

    Furthermore, I doubt the future of CompUSA and the like is in jeopardy to online sales. I still buy 75% of my stuff from these places, even though I know I could get it less online. Why?
    1) No shipping/waiting times. I go to the store, buy it, take it home and install.
    2) Support. If the thingie breaks, I just take it back to the store. I may have to wait in line, but compare that to the wait times at some online customer service phones, well, it's no big deal. Chances are, I can swap on the spot, don't have to worry about being home when the UPS guy shows up, etc etc.

    I'm sure there are others with the same view.

    Taxation is *never* the answer.

  • If I can buy a new Athlon 1GHZ for $1400 at a local store and play $102.20 in sales tax versus buying it over the internet for the same price but paying $5.00 shipping, then of course I'm not going to buy it from the local store.

    Better get a high-bandwidth Net connection on that Athlon system, to field the flood of inquires asking where they can get that kind of deal on S&H.

    When realistic numbers are used, your argument becomes rather less compelling.

  • There is no moral justification of taxation, period.
    In theory (note that disclaimer!) you are the beneficiary of various services rendered by the state, and taxes are just your bill. So (in theory) there is an ethical justification for taxes.

    In reality, government is inevitable - if it went away tomorrow, one way or another people would just form a new one. Governments inevitablly collect taxes to support themselves. So arguing about the ethics of taxation is rather like arguing about the ethics of continental drift. We can make changes in the specifics, but the general phenomenon of taxation will be with us for a long time to come.

    Many states don't have sales taxes, period.
    Many? There's Deleware and one or two others, I thought. But it all pretty much balances out; states with lower sales taxes tend to have higher property or income taxes.
  • To you or me, 5 billion is a lot, but to the U.S. Federal govt, 5 billion USD is chump change.
    Perspective: $5 billion is about $18.50 per American. $18.50 over a couple years is just not anything to get excited about ("Oooh, look, thanks to the Republician congress I got an extra five bucks in my income tax return. Yee-hah.")
  • My personal preference would be to get taxed for what I buy, only. Push the sales tax to a 5% Federal Sales Tax...
    Problem is that sales taxes are regressive, and it's difficult to have tax deductions for things like charitable contributions or mortgage interest.

    These might not be insurmountable problems, if we taxed the sale of different goods at different rates, kept (or even raised) the capital gains tax when we dropped the taxes on labor income, and issued some sort of tax credit vouchers; but it would be complicated. Of course, so are income taxes.

  • Since we all know that 99.999% of internet sales are PR0N related, that's what we're really talking about here.

    This post is funny. Laugh.
  • How much is taken through taxes is not really relevant. If you took everything I made, and in return the world was a Utopia to live in, I doubt I'd complain. However, the real issue is, our centralized governments are horribly inefficient and corrupt. Ideally, the money would pass straight through the system and on to its intended target. If the system were perfectly efficient, 50% probably wouldn't seem bad, compared to what you received in return. In practice, it gets used up in political battles, pork, national paranoia, and outright stealing. So, why should anyone support higher taxes, and thus greater inefficiency?

    So, I'm agreeing and disagreeing (of course - what else?!). I think, however, that there is the possibility, in this day and age, to run things fairly, lock out corruption and stealing, and get very close to an ideal level of efficiency. However, it involves a drastic separation between policy makers and control of the money, and heavy reliance on computers, which people are generally not comfortable with.
  • Oops. I hate making stupid mistakes like that. Thanks.

    As for the size of monroe county. The numbers I gave are about right. I think I remember them right from about 10 years ago. And Rochester NY is in Monroe County.. Rochester is the world headquarters of Kodak and Bausch&Lomb, and Xerox has a large presence. Its also one of the top 50 (or so) urban areas in the nation. Its not huge, but its not inconsequential either.

  • Well, how about if the state simply raises business taxes, and then the web retailer jacks their prices up an amount that is exactly proportional to the state sales tax? Because if I'm a state govt, and I see my revenue swimming away out of state, I need to do something about it... Sales tax only works when it can be charged, and states need to pay for things like police/fire/EMT services somehow. You are using the resources of the state, in an indirect fashion - the retailer brings truckloads of widgets down the road to their warehouse, thereby putting wear and tear on the road. They are relying on the state to provide fire/police/EMT services. When you buy widgets from the retailer, you've used up a portion of the road, a portion of the emergency services, a portion of the state regulatory agency's time, etc. All because the state has to interact with the retailer. When you look at sales tax, it's really not that big a deal. -begin rant- Seeing people bitch (and I don't mean to single you out, you're just the one I'm replying to) about a few percent like this makes me sick when there are things like homelessness, hunger, and illeteracy that that small bit of sales tax might resolve. Why is everyone so fscking greedy, hmm? Part with your money, go out and live life instead of worrying. Be nice and generous and happy and you'll find that what goes around comes around.

    Ok, I'm looking at my last paycheck, and right here, in two different places, I am being taxed, one is Federal, and one is State. Now, I'm going to go out and buy lunch today with money from my paycheck, and that will get taxed 5% (maryland has a low sales tax), and in about a month the feds are going to be asking for yet another chunk of my paycheck, just in case they missed something. Now, maybe I'll get some money back, and maybe not. But Either way I say get rid of one of those taxes. My personal preference would be to get taxed for what I buy, only. Push the sales tax to a 5% Federal Sales Tax, and then whatever the state sales tax is. Everyone pays the sales tax of their home state when they order something online, and that tax is given to that state. Now get rid of all income taxes. There, everyone will be much happier, and much more prosperous.

  • Problem is that sales taxes are regressive, and it's difficult to have tax deductions for things like charitable contributions or mortgage interest.
    These might not be insurmountable problems, if we taxed the sale of different goods at different rates, kept (or even raised) the capital gains tax when we dropped the taxes on labor income, and issued some sort of tax credit vouchers; but it would be complicated. Of course, so are income taxes.

    How about not taxing staples on a national level? Things like Bread, Milk, Flower, Sugar, basic necessities (sp) would be taxed at a maximum 5% rate on the state level, and have no federal sales tax. While items between 100$ and 15,000$ would get a 5% federal and a 5% state, and Items over 15,000% would get a 10% federal and a 10% state? That way the wealthy would pay a higher percentage, but still probably less than they do now. Though I imagine that would encourage the VERY rich to purchase things overseas.... Hrmm.. Then again, the VERY rich don't pay anything in income taxes either after their tax lawyers and accountants get done with it.

  • Taxation on internet transactions is inevitable. We can argue over whether it's a good thing or not; an interesting contribution to the debate is Paul Krugman's oped piece [] in the NY Times (free registration, blah, blah, blah).

    It seems to me, though, that the reason it isn't already taxed is not this garbage about strangling the new economy but the fact that it's the states that want to collect the taxes, and the Constitution specifically prohibits that. The politicians are just pretending to care about the Internet until they can figure out a way to tax it that's not against the constitution.

  • Most Florida residents don't know it, but Florida citizens are required by law to pay taxes on interstate purchases. If, for example, I buy a PC from Gateway 2000, the state sales tax will already be on the bill, because Gateway 2000 has a store in Tampa so they are required to collect the sales tax. But suppose I buy a PC from Computer Gate in California, which has no offices in Florida. Computer Gate will not collect any Florida state sales tax. But then I am obliged by law to get in contact with the Florida Department of Revenue and send them six percent or whatever it is these days.

    As you can imagine, most individual Floridians don't pay this tax, if for no other reason than that most Floridians don't even know about that aspect of the state's sales tax law. Somewhere I read that the voluntary compliance with this law is less than one percent! But companies like the one I work for definitely do pay the sales tax, as they get audited. I remember how surprised our head of accounting was, a few years back, when we got a notice from the Florida Department of revenue saying that we were apparently in arrears for an interstate purchase of $180 or so; he too had never heard of this law.

    By the way, this article originates from the wholly looney Hudson Institute, originally founded by Herman Kahn, author of that masterpiece of hyper-rational insanity "On Thermonuclear War." (A good commentary on the deranged Herman Kahn worldview is in Philip K. Dick's short story "Null-O".) Right away that should tell you to take whatever they say with a grain of salt - make it a fifty-pound sack, actually.

    The article has several details which seem to me at least doubtful and at worst downright mendacious, such as the supposition that taxing "internet sales" would promptly cause them to diminish by thirty percent. While the price difference is an advantage for internet vendors, I doubt that the major factor inducing people to buy products on the internet is just to save a few percent in sales tax - against which you have to weigh the cost of the shipping, the wait for the product to arrive, and the difficulty of returns or service. The real advantage of internet sales is that, even though you might be in your underwear in your living room at 1:00 AM you can still conveniently order a vast variety of goods.

    For one example, what makes Amazon Books so great isn't a tax advantage, but their enormous catalog, which beats any brick-n-mortar store I ever saw, even the so-called "superstores". (Boycott 'em anyway! - unpaid political advertisement) It's no big deal if you're ordering a best-seller, but if what you're looking for is somewhat obscure, you'll have to "special order" it at a ordinary store - and it's surprising what you can't order at, say, a Barnes and Noble "superstore". One time they told me they couldn't get a book that was published the year before by the Yale University Press! As though they'd have some kind of difficulty finding so obscure publishing house as that. That's why I prefer to buy books from smaller locally-owned bookstores that are run by real bibliophiles, rather than megacorporations, run by stockholders in the grip of their monomania of greed.

    Another advantage to internet sales is that you can get products on the internet that are simply unavailable in any local stores. For example, a couple weeks back I needed a 50-pin internal SCSI terminator in a big hurry to fix my company's network server. The Tampa Bay area isn't exactly the stix, with well over a million residents, but despite making dozens of telephone calls, I couldn't find a terminator anywhere in the area. Of course, I was able to find several vendors on line in about ten minutes, and I ended up ordering it on line and having it shipped FedEx next-day.

    Another dubious asserttion in this Hudson Institute article is that it is somehow unconstitutional to charge Florida taxes to a vendor in California who derives no value from the tax. First, the vendor obviously does get value from those taxes: if there weren't for the Florida state road system, how would his package have ever got delivered? and if the customer couldn't get the package, he wouldn't have ordered from that out-of-state vendor, right? And second, it would seem that the state of Florida interprets its sales taxes as weighing not upon the vendor, but upon the customer instead, and the customer does live in Florida and benefit from the taxes.

    In my opinion, the guys who profit more than anyone else from the tax-free nature of internet sales are delivery companies like UPS and FedEx; I'd bet that the internet sales phenomenon is really boosting their business. To the extent that interstate sales are stimulated by non-taxation, whatever the customer gains by not paying sales tax, he at least in part loses to delivery charges. So you might consider non-taxation of interstate sales as the equivalent to a subsidy by the state governments for these corporations.

    Yours WDK -

  • The key difference between the state tax and Internet tax is where the money goes. In the case of state taxes, an individual company pays that tax in order for the local municipality to maintain roads, bridges, sewer drains, water supply and the rest of local infrastructure that is necessary to keep a brick and mortar business running.

    Local sales tax also is used to attract and maintain businesses in the area keeping the customer base happy and business owners happy.

    This system has served this country very very well in the brick and mortar days, so why not carry it over into the .com days?

    Use the local Internet sales tax to build, improve, and maintain the infrastructure that feeds my .com. Use the local Internet sales tax to pull fiber in the community, make net access more affordable for potential customers, and make the local Internet attractive to new businesses seeking to relocate. Use the local Internet sales tax to make your towns NAP (network access point) larger, more secure, and more reliable. this kind of competition between local communities will lead to happier businesses happier customers and a better Internet for everybody.

    It all comes down to R & B.

    In the old days businesses needed roads and bridges in days businesses need routers and bandwidth.

  • Many states don't have sales taxes, period. Don't like sales tax? Move to another state.

    Really? Out of the 50 states in the United States, how many DON'T have a sales tax? I live in one - Oregon - I believe there was one other (two at the most). I don't believe that falls into the category of "many states". I suspect that many non-US countries are even worse.

    Taxation is *never* the answer.

    Ah...then how do you propose government be funded? Usage fees? Then we can REALLY talk about how money buys government. Donations? Don't make me laugh!

    I, for one, don't particular feel like living in an anarchy - I *like* having a stable society around me (although I don't like it when some members of that society have too much influence over everyone else). The only way to get that funding is through taxation - the only argument is how, how much, from & to who and why.

  • I'm not being argumentative - just curious:

    You said this is supposed to be paid on your state income tax. But I live in a state which has no income tax. Are they gouging me somewhere else that I don't know about? Just wondering. I'm not a tax specialist (although Apr 16 is sneaking up on me...) :)

    - SEAL
  • Most of us don't realize this, but the real reason we don't currently pay tax on items from out of state is because of the age-old complaint of "taxation without representation". Sales taxes go towards supporting the state and local government. If we don't reside in the state of purchase, we are not being represented. Even suggesting an ecommerce-tax begs the question, what representation will we receive for this additional tax? Will I now be able to vote in state elections where I have paid taxes? Will I be able to request help from a state which I don't reside simply because I bought something over the internet before? Or will the government tidy this whole mess up (as usual) by simply stating that the tax will go to the state in which you reside?

    Be alert people, this is one of the REAL issues of ecommerce tax. It's time we start asking these questions before it's too late!
    SL33ZE, MCSD
  • Most T-Bills are owned by bond mutual funds, which are heavily invested in by union pension funds, 401K, IRA accounts....

  • wow, now /. should only post what you want, and everyone who actually thinks this should've been posted is unable to understand?

    boy, i love you /. readers....i really source, closed minds, blatant hypocrisy. We ARE slashdot.
  • Actually, the figure is more along the lines of a little over a trillion dollars. That is over a course of 15 years or so, of course. But that is the federal government - this article was dealing with state taxes. And many a state do not have a budget surplus - many are deep in debt actually and would dearly love to tax the Internet.

    signature smigmature
  • "The power to tax, once conceded, has no limits; it contains until it destroys."

    These words were written by Robert A. Heinlein in his 1965 novel "The Moon is a Harsh Mistress".

    It's interesting to note that very few politicians agree with this. The U.S. "Bill Of Rights", the first ammendments to the Constitution, present several restrictions on what the Government can do to the People. Yet, among those restrictions, there is nothing limiting the right of the Government to impose new taxes.

    Government may not restrict the People's rights to a free press, to religion, to keep and bear arms, etc, but all these may be taxed. Is this coherent? Taxing may be the most effective way of imposing restrictions on the people, anyway. Prohibiting alcohol, for instance, like they did in the 1920s, was rather ineffective, but imposing high taxes on alcohol is a very effective way to limit alcohol use.

    Perhaps we need more Constitutional limits on the Government's power of taxation.

  • Since I am posting using a pseudonym, I feel no arrogance in stating that I will pay seven figures in taxes this, which could have been in Canada.

    Canada needs to reform and decentralize itself badly. Canada represents a vision of the nation state that was relevant in 1945 - geographically large, rigidly cerntralized, and harmonized by high taxes and excessive social programs.

    This model is dead. Canada is nothing more than a democratic Soviet Union.

  • God knows, I wish I shared your confidence. But frankly, the sorts of Constituional limitations you're talking about haven't meant diddley since the New Deal. To quote F.D. Roosevelt, "I hope your committee will not permit doubts as to constitutionality, however reasonable, to block the suggested legislation."

    Let me call your attention the Congressional power granted by Article I, Section VIII, Clause III: "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;"

    Doesn't sound too bad... but it has become so. Since FDR started packing the courts, its interpretation has been expanded to mean, "any activity with an economic effect in more than one state."

    Take the Brady (anti-gun) Bill: "crimes committed with guns, and especially handguns, have created a substantial burden on interstate commerce". The Federal Water Pollution Control Act. The Violence Against Women Act. You name it. Everything affects interstate commerce.

    For 40 years not a single Federal Law was overturned because the power to make it wasn't ennumerated in Article I, Section VIII. Only recently have courts boldly decided that the pipe-bombing of a Pennsylvania car isn't a federal crime, even though there was a bottle of Florida orange juice from in the trunk.

    And you're telling me that Article I, Section IX, Clause V is going to prevent this sort of taxation? IANAL, but I looking at what's gone before, I'd say this is an extremely naive stance. The courts will assuredly side with Washington. Again.

    • Congress could tax imports to, rather than exports from, any state. (Article I, Section VIII, Clause 1)

    • Congress could tax the sale, rather than the export. The sale could be argued to take place just about anywhere, even "cyberspace".

    • Congress could tax the use of the internet for commerce, in proportion to the gross value of sales made thereupon.

    • Congress could give the states consent to lay Imposts or Duties internet sales (bad enough), and then tax the states (worse).

    I'm sure that a creative politician could do much better than what I've been able to come up with off the top of my head.

    And regarding your former post...

    I think Washington DC will get anthraxed or nuked before the more reactionary segments of the US Population will permit a nationwide sales tax..

    You really are the optimist, aren't you? After the personal income tax (which required the 16th amendment!), the death tax, national gas tax, capital gains tax, blah, blah, blah, you think the John Birch Society is crawl out of their hole with an A-bomb now??

    You'll forgive me if I remain skeptical.

  • Whats the point in having more taxes. Not long ago, the US Congress was debating what to do with the $5 billion that will accumulate in extra money over the next few years. $5 BILLION! We don't need more taxes, we need smarter congresspeople.


  • Remeber when Bush passed a excise tax on boats over 100K? Did we collect millons in taxes? Hell no. The US lost almost every ship yard making boats in this price range and spent more collecting this tax than it got in return. Net result, we drove scores of business to bankrupcy, thousands lost jobs and went on the dole, and a whole industry left the US.

    Hmmm. May be we should tax people running for office....

  • NOT GOING TO HAPPEN!!!! At most you'll see what is going on now (and which I have no prob with): tax sales to states in which the seller has a retail point of presence. Fine, I'll just buy from businesses that don't have POPs in my state (Sorry Hateway, Borders, etc..) and screw the taxman just that little bit more.

    Unconstitutional, and I doubt the states will win any appeal. See my previous rant [] for the constitutional details.

    Even if they do, guess what, I'll just use the phone or mail to order my swag, and the government will have succeeded in killing yet another golden goose.. The B&M oldthink shops will still lose business, and life will go on.

    Hemos, /., et al, could you please Please PLEASE not bother posting anything about taxing e-commerce in the US unless it involves an explicit attack on the constitution (that is, legislation or judicial decision)? I don't care about any cockamamie theories, or any "it's inevitable" rantings by spread-the-wealthers. According to the Constitution and precedent set by mail-order, phone, and other interstate business concerns, it is UNCONSTITUTIONAL to charge tariffs on goods exported from one state to another state except for 'controlled' items and substances (like liquor, tobacco, etc). The only way to change this short of a constitutional amendment (or by judicial misconduct in not applying the constitution to any erroneous law that finds its way thru the congress) is by federal VAT. I think Washington DC will get anthraxed or nuked before the more reactionary segments of the US Population will permit a nationwide sales tax..

    How hard is this to understand?

    (but go ahead and post stuff not about the US, as their Constitutions don't necessarily defend the citizenry from the taxman.. :p )

    Your Working Boy,
  • The author believes, and states, that Borders and B&N have to charge most US residents sales taxes, because they have stores in almost every state. Not so: these stores assert that their online operations are separate companies. says it has operations only in Michigan and Tennessee, for example; see their pricing policy []. Barnes and Noble claim to have online operations in only four states. So large companies can locate their online operations only in states with no sales tax.

  • While not really in a position to comment on the US Constitution's position, one should realize that the issue goes beyond just sales taxes.

    Consider a situation where a CEO, say, has most of their salary paid in some offshore tax haven, has most goods delivered from a company incorporated in another tax haven with a wharehouse in Mexico, say, whose government (hypothetically) removes all sales taxes for re-exported goods. I'm not sure of the import duty situation, but with NAFTA I'd imagine they are very low. Our executive ends up paying virtually no tax in the jurisdiction where he/she lives, works, and uses government provided services.

    I suspect that in the not-too-distant future governments will need to come to additional treaty arrangements to ensure people pay a fair amount of tax, and this will probably involve a tax on internet-based transactions be they domestic or international. Is this intrusive and a bugbear? Yes? Is it any more intrusive than the IRS (or its equivalents)? Probably not. Is it necessary? Almost certainly.

  • by Stiletto ( 12066 ) on Monday March 13, 2000 @03:21PM (#1205345)
    Tax dollars started the ARPA net, provide education, and, if you live in a halfway civilized country, free health insurance.


  • by FallLine ( 12211 ) on Monday March 13, 2000 @04:59PM (#1205346)
    His numbers might be off slightly, although not nearly as much as you think.

    He hardly needs a "compelling" argument as to shipping costs, it's essentially irrelevant. What you seem to be implying is, that, because some Dot-Com has to contend with 30 (or ANY other number) dollars of shipping and handling, they should be given a break. Excuse me, but this, in any other context, would be called a subsidy. Under your apparent line of reasoning, a mall operation should be given a tax break over their discounted counterparts, because they inccur higher overhead costs due to their high end retail presence.

    Businesses should operate based on the services (and/or products) and the efficiencies they can create, not because some politician (nor, for that matter, his constituents) think the internet is the best thing since sliced bread. If the internet is appropriate for that specific good or service, it will MORE than make up for whatever it has to cover in shipping and handling, without any artificial tax differentiation (read: where the consumer, in any given state, pays less on that specific good).

    Furthermore, you are neglecting the various costs of traditional brick and mortar stores. In almost every existing field, BMs' overhead costs per item, exceed the shipping costs to domestic customers from Dot-Coms. Remember, that Dot-Coms are free to locate in whatever state they want, since most don't need to have actual operations in the states they're selling to (further reducing potential tax considerations of all sorts).

    Tax rates and costs shouldn't play a significant issue in (Remember, it doesnt need to be absolutely 100% equitable in every single case...there will be some error, but such is life) choosing between buying a product online or at a retail store, should not be swayed significantly by any tax considerations (e.g., both the tax rate they're plied, at the costs associated with gathering, administrating, etc.) Despite the panicked pleas of some, this is not a huge burden on the DotCom, and even if it were, the rate could be adjusted to compensate. While it may be true that there are several thousand possible tax rates within the US alone, any reasonably compotent firm could handle such issues.

    Despite popular opinion, not all mail order firms (e.g., firms that are located in some state and ship all their goods out directly to the customer, with little or no direct customer interaction) are tax exempt (perhaps just "true mail order" firms). I happen to know of a few, and they cope just fine. There are, in fact, services/software with keep track of all the tax rates for you, and they're easily integratable into software/databases. Furthermore, when, and if, DotComs have to pay tax rates like their competition, you can be sure that better services for tracking tax rates/districts will arrive. Also, the federal government could easily compile an official database of tax rates, zones, and methods for which all firms would be held exclusively accountable.

    The "free tax collector" argument is similarly tired. Given the relative ease of collecting taxes (in the vast majority of cases), as demonstrated by other mail order firms, we're talking about mere fractions of a penny per transaction (if intergrated into CGIs and the like), maybe a penny or two to be generous. Few people today are swayed by such small change. But even if they were, it is still fair. Even though the DotCom may be loosing a penny, it's such a small price to pay when you stop and think about it. How do those goods get there? The customer's state's roads. Whose court will disputes likely arise in? The customers state. In the case of fraud or theft, who is going to give the thiefs chase? Most likely the customer's police. And those are just the DIRECT incremental costs involved in maintaining that type of commerce that I can think of.

    You also have to consider the ASSOCIATED costs in maintaining a state with consumers capable of buying your products (e.g., education, courts, police, roads, bridges, airports, telecommunications, etc.). What happens to the tax revenues of truely boondock states where consumers start buying from out of state DotComs in record numbers? Sales tax accounts for roughly 30% of most states' revenues, something has to give, no matter how small some may think it is. But what does the DotCom care? All they're using are their roads, their police, and their courts. Maybe we can shave 5% off the budget of that state's education system, and only pay for roads that DotComs uses... As you can tell, the usage argument is ABSURD. Modern society simply can't operate like that. Like it or not, modern commerce depends on each and every state to facilate not only your particular transaction, but also the economy that allowed for that transaction.

    In closing, my concern is less the "fairness" (for it's own sake), nor the changing revenues of particular states. Rather, economically speaking, there a strong argument against taxing the internet less (read: subsidy). Like all subsidies, it will lead to inefficiencies (these inefficiencies could also hurt the DotCom) in the long run. Anyhow, I've rambled on for long enough. I apologize if I've boxed you in, or put words in your mouth that you disagree with, but I tire of all the myopic statements on slashdot.
  • Also, people seem to think that taxes get taken by the government and then thrown out the window.

    Granted, taxes are generally intended to pay for services that the government provides for citizens, and that's not necessarily a bad thing. However, what's important is that the things that are taxed correspond in some way to the expenditure of the tax dollars. To take your examples,

    • Tax dollars started the ARPA net - mainly revenues of the federal government from individual income taxes and corporate income taxes used to pay for research towards a network which by now is used by many individuals and businesses around the country.
    • provide education - through high school, local tax income (property taxes generally) are used to provide for the education of the local children. Past the secondary level, public education is funded at the state level through general state income taxes, corporate taxes, and so forth.
    • and, if you live in a halfway civilized country, free health insurance - OK, I can't admit to any first-hand experience with that issue, but I assume that national income and business taxes are used to pay for a national system.

    I can't complain about any of these issues - in each case, the people who will receive the benefit from the government expenditures are the people who are being taxed. What's different about this next example:

    • taxing online purchasers of products in the state where the selling business is located

    The difference is that purchasers are being taxed but not receiving any government services in return. All of the pro-taxation arguments which have been made so far are along the lines of "but everybody else is raking it in, why shouldn't we?" without any consideration of what those tax revenues will buy for the people who are being taxed.

    It's fine with me if the states want to tax resident e-businesses at whatever rate they see fit, since those businesses do use the roads, fire departments, police, courts, etc. at their physical location. But as a customer of one of those businesses, I haven't used a dime of the resources of the state of California (for example and because many e-businesses are there), and I resent CA's or any state's attempts to extort money from me on that account. There are some situations in which taxation is good and useful, but this is not one of them.

  • by Black Parrot ( 19622 ) on Monday March 13, 2000 @06:28PM (#1205348)
    > Not long ago, the US Congress was debating what to do with the $5 billion that will accumulate in extra money over the next few years.

    Yes, pre-election debate on whether to use it to shore up Social Security, use it to start new programs, or use it for handouts under the guise of "tax cuts". (You can bank on the last one, since it's an election year. The only thing still up in the air is how much they're going to hand out.)

    There are several problems with the whole thing:
    • The overwhelmingly largest portion of the money is a temporary surplus in Social Security revenues, resulting from a decade of record-setting rates of employment and personal income. The debate over whether to use this money to "save" Social Security is just a front for the real debate, namely whether to steal it from Social Security. The program is going to be in serious trouble in a few decades, but politicians need to buy votes with handouts now. (I view both tax cuts and new programs as "handouts", if you have to raid the Social Security kitty to fund them.)


    • The money isn't in hand yet. It was a projection over something like ten or twelve years. Spending it (whether on tax cuts or new programs) is just another way of borrowing money to pay for something you can't afford.
      • Notice that the projections are based on the assumption that the past eight years' prosperity will continue unabated for another ten or twelve years. I hope it does, but I am extremely doubtful that it will, and I surely don't think it is a safe bet for society to make. (If we get a tax cut now, you can bet they raise 'em back up within a couple of years, to make up for the resulting shortfall.)


      • Notice also that after spending c. nine months talking about the "surplus", and dangling it in front of voters by debating it endlessly in Congress (and even more so in the media!)... after all that, the US ran out of money a month before the fiscal year ran out last year. You should be asking yourself what is wrong with this picture.

    And since I'm already on my soapbox: The government really has the whole thing ass backwards. Traditionally they lower taxes when times are good and raise them when times are bad. If they gave a shit about their constituents (as opposed, say, to their need to get re-elected and their obligations to lobbyists) they would do just the opposite: lower taxes when times are tough, and raise them during boom times, to cover the bill from the last slump.

  • by ecko ( 31736 ) on Monday March 13, 2000 @02:46PM (#1205349) Homepage
    If I wanted to hear the lobbying of the right-wing political equivalent of Mindcraft, I would spend more time in the mainstream media.

    Read some of the other "reports" they publish.

    What did you expect them to say?

    Also, people seem to think that taxes get taken by the government and then thrown out the window.

    Tax dollars started the ARPA net, provide education, and, if you live in a halfway civilized country, free health insurance.

    Maybe /. needs more people researching the backgrounds of some of these stories. Or perhaps I'm expecting too much.

    (Watch the moderation down because of political slant...)
  • by WillAffleck ( 42386 ) on Monday March 13, 2000 @02:46PM (#1205350)
    Oh, get real.

    The reality is that there are many things that the Net is being used for - such as selling diamonds - that are heavily taxed in non-Net sales. And cars. And yachts. And sails for your sailboat. And Palm Pilots.

    The way to measure this is to look at the money drops in local and state collections, compared to total sales. From this we can extrapolate that up to 25% of current non-Net sales are on the Net now.

    The reality is that this will be taxed. Maybe not today. Maybe not tomorrow. Maybe not this century - but when 2001 rolls around, expect those tax collectors to start auditing, and people to start going to prison for avoiding taxation.

    What's next, an article saying that death will be avoided by using the Net?

    As long as there are politicians, someone will be taxed. And most likely based on the higher of the delivery address or billing address tax levels.

  • Disclaimer: I am NOT for internet taxes.

    Looking at his numbers, I find something fishy.. He says that its ONLY 35 billion among 50 states... That's 700 million per state (or so. I don't know about other counties, but in Monroe county (in NY), the yearly budget is about a billion. It also has a 8% sales tax. Of that, 5% (?) goes to the county. But of the billion dollars, only about 200 million is actually discretionary spending. (The state forces them to spend the other 800 million for welfare and other state-required programs.) There are around 40 counties in NY, so Monroe's share of that 700 million would be about $20 million a year. That's a lot of money if you compare it to the discretionary budget. Its an increase of almost 10%. That isn't inconsequential or chump change.

    I don't know about other states or other areas of the country, but at least in monroe county in NY, a lot of the sales tax revenues are given to local governments and to the schools, where they help keep property taxes down.

    I remember this because about 10 years ago there was a big debate on whether the county should lobby the state to increase the sales tax from 7% to 8%.

    I'm ignoring all of his arguments on the problems in collecting taxes on internet goods, but how he blows off 35 billion is fishy.
  • This article was interesting, and made some valid points, but all in all, I don't think it's going to matter. As the author states, figures being thrown around relating to e-commerce are just too large for any government to resist. No matter what is said by "experts", the government will have a tilt at reaping tax revenue, and only after probably throwing large amounts of money at the problem of collecting such tax will it be seen to not be a possible, or even a financially viable proposition.
  • by hypergeek ( 125182 ) on Monday March 13, 2000 @03:41PM (#1205353)
    As other posters have mentioned, there are states which don't even have sales tax.

    In these states, where the main differences between shopping locally and shopping out of state is that the latter also adds a shipping fee, plus the time spent waiting for the order to arrive, shopping locally is obviously the more advantageous deal, and supporting local businesses is a no-brainer.

    With the lack of a sales tax, consumers' purchasing power is increased as well, which means more cash flowing into local businesses.

    And more cash in local businesses means they have more income which means more tax revenues for the state.

    So "e-commerce" (silly term, IMO, but ubiquitous nonetheless) is not harming States' economies. Rather, high sales taxes are harming local businesses, lowering consumers' purchasing power, and overall dampening the local economies which means less revenue for the state and local governments.

    And the perceived shortfall of revenue simply gets used as an excuse to raise sales taxes even further, which aggravates the problem rather than remedying it.

    All this makes consumers even more interested in seeking out-of-state deals which cost less.

    IMO, Tax-free Internet sales are a godsend for the consumer, and maybe to staunch the flow of cash out of state, states will have to make shopping locally a better deal, rather than trying to discourage interstate commerce.

    Impeding or discouraging interstate commerce does not a happy economy make.


  • by FreshView ( 139455 ) on Monday March 13, 2000 @02:42PM (#1205354) Homepage
    Honestly, I think internet sales should be taxed. Perhaps less than Brick and Mortar companies, but some. It simply comes down to not being fair. If I can buy a new Athlon 1GHZ for $1400 at a local store and play $102.20 in sales tax versus buying it over the internet for the same price but paying $5.00 shipping, then of course I'm not going to buy it from the local store. I may want to support local busineses, but a hundred bucks is a hundred bucks.

    The argument that attemped to address this "Catalogs have always been tax exempt" failed, because catalog purchases haven't been as widespread, historically, as eCommerce. I've never bought anything from a catalog, but I have purchased several hundred dollars in computer parts over the Internet. I don't like paying more money than anyone else, but as far as I'm concerned, it's either a) Abolish sales tax, or b) Institute eCommerce/Mail Order tax.

    It's just more fair that way.
  • by Anonymous Coward on Monday March 13, 2000 @02:55PM (#1205355)
    When telephone service and credit cards became common, making it easier and faster to order from mail order companies across state lines, the government didn't decide to tax those sales. now, the internet has made it possible to do EXACTLY the same thing (only easier and more user-friendly), and the government wants to tax it. why should transactions completed online be treated any differently than those completed over the phone? businesses like must have warehouses or NOC's somewhere, so why not tax purchases in those states? if you look closely, ordering online is not fundamentally different from ordering from a catalog by phone, so don't treat it differently!
  • If you are in any doubt as to what that dose to an economy you need look no farther than Jamaica. Right now we carry a heavy tax burden. Our government is still trying to figure out new ways to bleed money from the economy. These include;

    25% income tax

    15% sales tax

    40% import duty on consumer items ( like cloths ).

    20% Duty on trucks

    40% to 280% on cars ( depending on the CC rating. There are around 3 Cadilacs in kingston :)

    1/2 the cost of gasoline and electricity are tax.

    In fact the only sensible thing is that most computer equipment attracts only the 15% sales tax and books and magazines of all types are tax free.

    What dose this do to an economy ?

    17% to 35% unemployment ( depending on which figures you trust )

    Devaluation ( from J$5 to U$1 in 1989 down to J$42 to U$1 now )

    Low tax revenue. The cost of servicing the government debt actually exceeds the total tax revenue. Seriously, the old concept that "the more tax you charge the less you collect is true.

    If you Americans want to follow the same path then go right ahead. Tax everything and tax it heavily. Maybe after a few decades of such abuse you will drop into the same hole as we are.

    BTW : Our government has not figured out how to tax eComerse yet anyway.

  • Businesses are always one step ahead of lawmakers (that's what corporate lawyers are paid the big bucks for). Pick at random a large mail order business , say BMG or one of the other "12 for the price of 1" CD resellers. Look at the package your new Backstreet Boys cd came in . Note that the address is usually from some sparsely populated midwest state (North Dakota, Iowa, etc). Reason? These companies calculate where their business comes from and move their location to areas where they get the least amount of taxable sales. I assume most companies have avoided Alaska simply because of the expensive shipping costs, but if 6% sales taxes were levied in all 48 continental states you can bet there would be a huge jump in land prices in Anchorage. And don't get me started on how the state government would prove that these purchases actually occured. If i ever get a letter from the state of California that starts out "While routinely sniffing your ISP's network, we found a rather large set of encrypted packets which resemble a credit card number", I'll rescind my citizenship and head to the Keys. Of course, Uncle Sam can still tax my income for a few more years, but that's another story...
  • by gimpboy ( 34912 ) <> on Monday March 13, 2000 @03:03PM (#1205358) Homepage
    Also note that any future big dollars in general Internet retailing are likely to come from companies that also have a physical presence in most states, such as WalMart, and will therefore be required to pay sales taxes without any new laws.

    This is true about walmart... at least it was. My roomate works in their internet engineering "team". After walmart online came "online" they realized this about the taxes and sold the online store to another company (that does not have stores in all 50 states). Now they dont have that nasty sales tax problem.

  • by SEAL ( 88488 ) on Monday March 13, 2000 @02:44PM (#1205359)
    (I'll start with the standard IANAL disclaimer...)

    As far as I know, in the U.S., tax can't be charged on transactions across state lines. You'll see the simplest example of this on a mail-order catalog, where you only pay tax if you live in that state.

    Now, for the Internet, the dilemma is that it has become very EASY to purchase goods out of your state. UPS and Fed Ex, and even the good ol' US Mail are getting very good at delivering things quickly. And sometimes, you can even download what you purchased.

    No more 6-week waits to ship. This has made traditional merchants and the federal government fearful of lost revenue. So they say they want to tax the Internet. But the thing is, IT IS ALREADY BEING TAXED. Inside your state. The way it's supposed to be. The same rules mail-order catalogs use.

    So in reality, the government wants to CHANGE the rules on us. So ok... let's say there's some flat tax on Internet transactions. Who ends up paying, really? The merchants (and I expect small business owners will get screwed even more, as usual).

    Why? Because the tax rate, combined with the cost of shipping will make Internet purchases generally more expensive than traditional retail. So in order to maintain customer bases, the Internet merchants will have to either lower their prices (and profit margin), or find ways to make Internet shopping preferable, which is difficult. You are already removed from personal interaction with the customer by the nature of an online business.

    I think tax changes will only benefit the old-school retail businesses. And I'd expect them to be lobbying heavily for it, if they aren't already. Oh yeah, and they'll probably want to vote for Gore too ;)

    Best regards,

  • by nels_tomlinson ( 106413 ) on Monday March 13, 2000 @03:51PM (#1205360) Homepage
    I haven't run any numbers on this myself, but that fellow's arguments look sensible. Wholesale isn't taxed anywhere in the U.S., the value of the transactions which are taxable will certainly fall if a tax is imposed, and so on. I think his basic point is sound: attempts to tax e-commerce will fail, and do far more harm than good in the process.

    Another poster, above, pointed out the obvious: the solution is to eliminate sales taxes on the local merchants,too! That levels the playing field in a sane fashion. This is a solution that both ends of the political spectrum should like. Liberals are supposed to be against the sales tax because it's regressive. Conservatives are supposed to be against it because it puts a disproportionate burden on small business, and because it is economically inefficient. We need to make it clear to all who will listen that this is an opportunity to get rid of sales taxes everywhere. How to replace the revenue? Let each state figure that out for themselves. At least one will probably come up with a good idea.

"Call immediately. Time is running out. We both need to do something monstrous before we die." -- Message from Ralph Steadman to Hunter Thompson