California's Internet Tax Bill Slithers Forward 121
jjr writes: "An article over at Cnet talks about how bill on internet tax is going to the Governor's desk next week for signing. This bill will affect alot of companies since California is a hub for a lot of Internet companies. We will see how this one plays out." Note that California (not that it's the only state with such ambitions) seems eager to snare wads of interstate money by snagging it even when people buy goods or services online which the brick-and-mortar versions of the same merchants don't carry.
Strange. (Score:1)
Hrm. CA law isn't clear that in-state purchases should get sales tax? I'm pretty sure that here in PA, purchases in PA from PA pay tax regardless of the method used (online or no) -- and I've had onliners charge me sales tax when they have a presence in this state.
* As for companies moving out of state...
Do they have a Use Tax? IIRC, some states require a Use Tax for many out-of-state purchases... it may be poorly enforced, but it's on the books already.
This won't last Federal Judicial Review (Score:1)
And the Federal Government will shut them down because they are attempting to gain sales tax across state line. This is expressly forbidden by more laws than I can count as well as having a little bit about interstate commerce mentioned in the Constitution which forbids this practice.
I have mentioned on this forum before how much internet commerce is like mail-order commerce and thereby should be governed by the same laws. Those laws state that the consumer must pay the sales tax of his own state and NOT the state the company is in. So the moment that this gets challenged by another state crying foul because California is taking away their tax dollars this law will be striken... or limited to only effect Califonia residents.
Here is hoping that it gets striken down by the courts.
Re:I've never paid sales tax, and I never will (Score:1)
So, I'm wondering, for you residents of Europe who visit the US, do you get a refund for US state taxes? Do you have to pay the equivalent VAT (I think yes)? Thx!
benefits the small stores (Score:1)
Big companies like B&N and Borders are using their major websites to undercut the competition of smaller bookstores, who cannot afford large e-commerce websites and must sell their books primarily through B&M stores, therefore charging tax and not able to offer competetive prices to consumers. One of the sponsors of the bill is the Northern California Bookseller's Assocation.
Slashdot's typically pre-opinionated article posting might indicate that, well there shouldnt be any sales tax period! thats the real solution. But the problem is that the sales tax concept is not going anywhere soon (most likely), and charging it in an unequitable manner is harmful to various portions of a particular industry.
Re:interstate taxation is a mess (Score:2)
The more taxes they collect... the more money they waste. They'd have you think they spend all the money on textbooks for schoolchildren, when in fact they piss it away from the general fund, like all the rest of the money they pick from our pockets.
Let California have their tax. There's no reason all those Internet companies have to be in California. This may help spur new "Silicon Valleys" in other states.
This isn't flamebait - get some balance folks (Score:2)
One more shining example of the tyranny of /. group-thought rearing its ugly head - if you disagree with it, fine, but to denigrate as "flamebait" simply illustrates how collective retardation that has become /.
What is actually happening... (Score:2)
To get around this, many brick-and-mortar stores started up online subsidiaries with their sole offices in one state. They then claimed this subsidiary, since it didn't have locations in (say) California, could not be required to collect sales tax from California residents.
The proposed California legislation would say that this isn't a legal way to get around the requirement.
IANAL, but based on my understanding of the case, the online retailers still could make an argument that the California attempt is unconstitutional, while the state would argue that mere hoop-jumping doesn't make the retailers immune.
I'll bet the result will be that the subsidiaries will simply be transformed into not-quite-wholly-owned organizations, on the premise that the subsidiares will then have a substantive separation from the parent corp, and thus regain tax collection immunity.
Steven E. Ehrbar
Re:Sense & Nonsense (Score:1)
This gives online stores a disadvantage in pricing--they're forced to have HIGHER prices than brick-and-mortar stores, because they have to pay both taxes and shipping expenses.
Shipping is a real cost. Taxes are artificial. This is a very important point that not a lot of people seem to take into account. The cost of a good should be based upon supply in demand. Supply is in turn determined by how much effort and how many materials go into the product (among other things). It costs money to ship you a product, so that product should cost more. Indeed, you pay for the cost of shipping the product to the individual stores (from the distributors) when you buy from a brick and mortar store.
Think of it the other way around. Assume there are no taxes on anything. Would it be fair to the independent bookstores for the government to start charging just them and leave the internet stores alone? Would you say "Internet businesses have to pay shipping; we should charge local businesses so it will all be fair."?
Why people will continue to purchase online (Score:2)
1. Time savings. To most of us, our time is worth more than the $5 shipping charge.
2. Selection. There isn't any single physical store that can match Aamzon's selection. If you want an exhaustive selection, online is the only way to go.
3. Intelligence. No physical store can offer you smart recommendations, reviews, ratings, etc. Once again, I point to Amazon - as a longtime user of their site, I am amazed at how useful their recommendations are. I have purchased at least ten books just on the basis of their recommendations. Can the high school student down at Jimmy's books be this smart about my personal shopping habits? 4. Bulk shopping. As anyone who shops online a lot will tell you, the only way to avoid getting killed on shipping is to aggregate orders. Order ten books at once instead of ten orders of one book.
Re:And avoiding CA net stores is perfectly reasona (Score:1)
the state in droves and moving here to the midwest, where the "Good
Live" can still be found.
Here's why: remember Berkely?
The schools were magnate schools, the community services were above
average, and all races lived side-by-side in upper middle class homes
and worked in high paying, skilled factory jobs or at the university.
Then the Left started agitating and eventually gained control of the town
council.
They first tried to immitate a "Nation-State" by making Berkley a no nukes
zone. Then they tried to tax both ends of a business transaction, even if a
company wasn't in state. They also made the book keeping so onerous as
be impossible, but since they are anti-capitalist that was ok with them. It
came as a suprize that business left, tax revenues declined, city services
could no longer be supported, and Berkely became, instead of a 'Nation-
State", effectively a third world county.
These same wackos are now trying to drive business out of the state. They
will probably succeed, but we are getting a lot of transplanted Californians
here in the midwest who have a newfound respect for the meaning of free
enterprise, taxation without representation, and the 1st and 2nd amendments..
So far, you are completely wrong. (Score:2)
California has NEVER been the cheap business state (Score:2)
If companies have bothered to move after being taxed at the highest state rates in the nation, they won't move for this.
Re:I think that the courts would knock this down.. (Score:2)
If they operate their shipping department as a profit and loss center then they do need to charge taxes for that as well. There's a number of pros and cons involved with deciding how best to handle the accounting aspects of a shipping department, and you obviously ran into one of the cons. I'm no accountant, but I've seen enough tax rules to make my head spin around a few times. It really is nuts.
Re:Taxing the Net is perfectly reasonable (Score:1)
Re:Taxing the Net is perfectly reasonable (Score:1)
No, it's a tax on the brick'n'mortar stores. Remove the tax, and everything will be fair. :-)
---
Does this mean you get a free T1? (Score:1)
So is the state of California going to provide internet connections for the people it taxes, or is this just an extortion racket?
Optus@home just dropped alt.binaries.pictures.erotica.* from their news servers. Three cheers for government meddling in the net.
Just part of a larger phenomenon (Score:2)
Re:This isn't flamebait - or is it? (Score:1)
Article 1 Section 9 Clause 5 FORBIDS interstatetax (Score:2)
UK Value Added Tax and Online Purchases (Score:1)
Might I suggest Atlanta? (Score:2)
Unfortunately, I doubt that California will ever learn. They once tried to create an income tax for ex-citizens of California (a 'fee for people who had the priviledge of once having lived here). Enough is enough-- you ought to start thinking about moving your companies to somewhere better. And might I suggest Atlanta, Georgia?
Well, that's it: five good reasons to move to Atlanta. To be honest, this description fits many other places as well, like Austin, Pittsburgh, etc. The point is this: don't try to change CA, because they will never learn. They are a gold rush economy: if it isn't gold, or booze, or software, it'll be something else. If you are worried that some lean company outside the valley is able to make their VC last longer, and pay their people less to live better lives, and is getting first dibs on the best people, then just do what they're doing: head for the Peach State.
No big deal (Score:1)
Great (Score:1)
Sorry. Slippery slope idea just took right the hell off there didn't it?
The poor SHOULD pay more taxes (Score:1)
Re:Moratorium? (Score:2)
The only thing the Federal Government can do is coerce the states to do what it wants (like the 21 year old drinking age being attached to federal highway money).
California falling into the ocean? Not likely. (Score:1)
<O
( \
XGNOME vs. KDE: the game! [8m.com]
Enforcement? (Score:1)
Re:The poor SHOULD pay more taxes (Score:2)
Re:I think that the courts would knock this down.. (Score:1)
Re:Transaction taxes (Score:2)
If the 'gubment wants to take money from these companies in the form of a tax, what will they do with that money to help the networking comunity? Pull fibre to every home? Help internetworking companies with international peering arangements? Help with computer science and internetworking education in the comunity? Fund Information Technologie Tech schools?
All you hear from 'gubment is "We're taxing you because we can, and you'll shut up and like it."
This is a sure way to scare business from the comunity and insure that your area doesn't atract good paying internet jobs.
buying a monarch (Score:1)
a) the monarch can be bought;
b) the monarch will stay bought;
c) the monarch will stay in power;
d) the monarch will not decide to nationalize the company.
This seems like an awful lot of assumptions to rest the future on. Paying taxes is far less worrisome.
Re:benefits the small stores (Score:1)
Here is the slight flaw in your otherwise seemingly snappy (*cough*karma-whore*CHOKE*) metaphor: if sales tax is really "robbery", then the solution to the problem is to repeal it altogether, which would be for everyone, internet/non-internet, big and small. So, the metaphoric equivalent of "make sure everyone gets robbed", which really means "distribute the policy equitably", while not a "solution", is an interim step to insure that the "immoral" policy at least is not unfairly benefitting large corporations over smaller establishments.
this isn't flamebait! (Score:1)
Are they operating in CA? (Score:3)
What I don't get is if B&N's web site is truly a seperate company operating outside of CA, just where in the hell do they get the right to tax that? Let's not forget what the state sales tax is actually for. It's to have businesses pay back to the state for the infrastructure (roads, police, etc) they benefit from. B&N's web site does not benefit from CA services in any way, thus should not be obligated to taxation. The brick and mortar stores do benefit from local infrastructure, so they do pay.
When it comes right down to it, B&N was playing by the rules all along. It's the state of CA that's looking to inject a loop hole into the mix so they can tax an operation outside the state boundaries. This is like Texas trying to collect taxes from a McDonalds in Oklahoma because McD has a presence in Texas.
When Gray "Never saw a tax I didn't like" Davis signs this garbage into law, you can bet there's going to be a load of cash paid out to trial lawyers that will eventually over turn an obvious constitutional infringement.
Ah, but that's what they'd like you to think (Score:1)
Once upon a time, it was unconstitutional for any state to tax goods imported from other states. The landmark decision Brown v. Maryland (1827) declared that as long as they remained in their original packages, imported goods could not be taxed; only when they became mixed with the general property of the state could the state tax them like domestic goods. To do otherwise was contrary to Article I, section 9 of the constitution ("No Tax or Duty shall be laid on Articles exported from any State").
This state of affairs changed, however, when the supreme court handed down Woodruff v. Parham (1869, which held that only discriminatory taxes violated that clause. If the state uniformly taxes all sales in the same manner without regard to whether they're interstate sales or domestic ones, everything's kosher. It would seem to violate the words of that article, but it would also seem to be better in the spirit of Federalism that as long as states aren't discriminating against each other, ther's no controversy.
Re:Sense & Nonsense (Score:1)
I used to work for a mail-order store in Pennsylvania. We charged the PA 6% tax for Pennsylvania residents, and for anyone who picked up the products at our warehouse. Everyone else got off tax free. If you are having an internet tax, I don't see how it could be any other way than this.
Why is 'fair' always *more* taxes? (Score:2)
Naturally, this is a rhetorical question. Just like when people talk about 'equal pay for equal work' it's never to lower the wages of the higher-paying job to that of the lower. Anyone living in the Tax Hell of California as I do knows just what a crock this whole argument is. Our income tax rate is 9% on the last dollar. Our sales tax gets as high as 8%,depending on the county. We pay property tax, plus the state has enacted fines as great as $271 for traffic violations. Not to mention that CA has attempted in the past to tax even out-of-state residents on portions of their pension income if any of the vesting happened while the person was a CA resident. If a football player plays two games out of 12 in the state, CA wants income tax on 2/12 of their income for that year. This state is so money-hungry it will stop at literally nothing to upend people and shake the last cent out of their pockets. This while running a multibillion dollar budget surplus that it just can't wait to spend. The state budget just passed is up 38%(1) over last year's. Every time some CA politician bitches about how they need more tax revenue I just want to puke.
Re:read the article (Score:1)
Re:And avoiding CA net stores is perfectly reasona (Score:3)
Re:Doesn't anyone read the article? (Score:2)
But you said you had no presence in 20% of the states, so where does the money collected from those residents go? Their state governments aren't accepting it. It may make things simpler from an accounting perspective, but it is definitely not legal to tax residents of another state in such a matter. It's not up to a company to decide whether taxes should apply to everyone; in the U.S. that decision is left up to government.
The reason why is because there is no law (fortunately, IMHO) taxing out-of-state internet purchases (except for states which have "use taxes"). Whether it is a subsidy is beside the point - taxes are up to the government (and thus ultimately the citizenry) to decide, not some random corporation. If they don't go under for business reasons (I wouldn't buy something from such a site), I sure hope the FTC goes after them.
There is another way... (Score:1)
The solution is for a bunch of states to get to gether and build an online system to track these sorts of things. Then when you order somethign out of state, the details go to the database and that gets reported to your state just like income so it can't be hidden.
The side effect of this is the goverments can sell the marketing data for even more profit.
I'm not the original poster.. (Score:2)
Huh? Where did you get that from? It's not like the government is a single omniscient entity. The state's department of revenue may not necessarily know if they have a presence or not. Even if they did not think his company had a presence, they'd hardly be inclined to send the money back.
Uh, no. It is largely left up to the individual companies. Only when whatever government decides that the company has erred, does the government start telling them what to do.
It's not nearly so simple.
No, you're missing my first point. There are a set of laws out there, not all of them clearly have the companies name written all over them. It is a function of the accountants and lawyers to decide which.
My second point is that this is not some moral injustice; I believe that paying the tax is more equitable than not paying it. As to whether the company should be compelled to pay that tax for moral reasons is entirely academic. However, the consumer can still decide to shop elsewhere if he chooses; companies are entitled to charge whatever they damn well please. No harm done if the consumer doesn't agree to it.
Re:Sense & Nonsense (Score:1)
---------------------
Florida "accepts it." (Score:2)
But you said you had no presence in 20% of the states, so where does the money collected from those residents go? Their state governments aren't accepting it.
I don't know about other states, but the law in Florida is, any Florida resident must pay sales tax on anything he buys which would be taxable if he bought it in a store in Florida. Florida law levies the sales tax against the buyer, not the seller. If you buy something in a bricks-n-mortar store here, of course the store collects the sales tax and forwards it to the state Dept. of Revenue. If you buy something via the mail, telephone or the internet from a company which has a physical presence in Florida, and that can be as little as one tech support guy in state, then the seller is required to collect the sales tax just as though it were selling its products over the counter here.
But suppose I buy something from a company in California, with no offices or employees here in Florida? The state of Florida has no hook by which it can force the vendor to collect the sales tax I owe them. But that doesn't mean that that purchase is non-taxable. No, in that case it is my obligation as a Florida resident to keep a record of my untaxed out-of-state purchases and send that record along with a check for the appropriate sales tax to the state Dept. of Revenue. If I fail to do that then I am in violation of state law.
Needless to say, not only do ninety-nine-plus percent of private Florida residents neglect to follow through on this, but also probably ninety-nine percent of Floridians aren't even aware that such a law exists. But the accounting departments of businesses are generally aware of this law, they often get audited, and so they make it a point to pay the sales tax and stay out of trouble. This has the advantage, for Floridian businesses, that they do not suffer a disadvantage when competing with out-of-state firms to sell to customers in-state, where the cost of the sales tax might well be more than the cost of interstate shipping.
So where you say that states "aren't accepting" sales tax from out-of-state firms, I suspect you are probably wrong in Florida. Our Dept. of Revenue is eager to collect all the sales tax it can get, surprise, surprise!
Yours WDK - WKiernan@concentric.net
Go to Montana (Score:2)
Okay, there is the physical location aspect to overcome. But don't stores already pay property tax on their physical locations? What about the payroll taxes from the employees of these companies? How much tax from the consumer do these god damned governments need?
I think that the courts would knock this down... (Score:1)
Reason? (Score:1)
These online retailers are going to bankrupt our state government. Waaaah.
Have i heard this somewhere before?
Taxing the Net is perfectly reasonable (Score:1)
Re:Taxing the Net is perfectly reasonable (Score:1)
Why buy online? (Score:1)
Will internet commerce disappear? Hardly, but I think measures like this certainly will slow it down.
Re:Doesn't anyone read the article? (Score:2)
Do you really think that any governmental body is going to reject a business that's giving them the sales taxes that they've collected? Hell no! You are correct that it's up to the government and its citizens to decide taxes. So what's wrong with collecting the taxes at the rate that the governments have decreed and giving it to them? They are probably accustomed to companies try to not charge the appropriate sales tax and skirting around the law. It also takes away one complaint that local merchants usually have with internet based businesses. It's also good PR for the govt bodies in the states they're not in for the future when they do get a physical presence. The only reason the FTC or anyone else would go after them is if they were collecting taxes and not paying them.
IMHO, I think you are just offended by the chance of having to pay sales tax on something bought via the internet.
Moving out of California (Score:1)
Well I guess there are going to be alot of companies moving out of California. If I were Barnes & Noble, Borders or Sam Good I would just reincorporate my non-internet divisions in Nevada.
Oh, crap. (Score:1)
Re:Doesn't anyone read the article? (Score:2)
Huh? Is that even legal? Why is your company charging sales tax to people in the 20% of states where you don't have brick and mortar operations? Simplifying your accounting can't be the justification...
Probably because they are in the process of moving into the other 20% at some point in the future anyway. And whether anyone likes it or not, I'm sure that laws similar to the one passed in CA are going to be more common. Local & state govts are going to realize how much revenue they are not getting, coupled with local merchants complaining how unfair it is that they have to charge taxes, but the e-businesses don't have to. I'm sure any state welcomes sales tax revenue, whether it's from a real or virutal store. It's not like they are charging everyone the same rate. Besides, with the scheme presented above, if a state really protested in receiving the collected taxes, they could just set the tax rates for those zip codes to zero. I don't see why it wouldn't be legal as long as the prescribed methods are followed when collecting and submitting the taxes. Again, I don't know why, just that's what it appears to be doing. Who knows maybe the other states actually do have 'use tax' laws like UT or MO and it's legally required.
Re:I think that the courts would knock this down.. (Score:1)
"The constitution plainly states that the Federal gov't and only the Federal gov't may regulate interstate commerce."
They are not talking about interstate commerce there but rather internet companies in California who don't charge sales taxes for residents in California. In particular, they were talking about companies like Barnes and Noble.
Personally, while I live in California, I think that the taxation should be fair. If the brick and moaters need to collect sales tax then the click and moaters should also. People say that the internet commerce is just in its infancy but it has been around for 5-10 years and in internet time, that is 20-40 years!
Re:Florida "accepts it." (Score:1)
In my state, that is called a "use tax", and follows generally the same rules, which I referred to originally. While I have reservations about that too, I specifically excepted use taxes in my previous post. If there is no law requiring a company to collect taxes for a particular state, it is a definite misrepresentation and possibly illegal for a business to charge a tax on behalf of that state, whether the state gets the money or not.
bricks and mortar only (Score:1)
Re:Doesn't anyone read the article? (Score:1)
The situation which we are discussing concerns a company charging customers sales tax for purchases even when there is no law authorizing them to collect such a tax. If no applicable government has enacted such a tax, then the company is collecting money under false auspices, and it might as well be going into a black hole as going back to whichever state they say they send it to. Since that state doesn't have such a tax, they aren't going to audit such a company to make sure that they don't tax too much or too little. As a result, the consumer can easily be screwed.
If those local merchants want more taxes, they should get them passed by the duly-elected legislature, not added by other businesses.
A bribe, in other words.
I'm offended by (in no particular order):
Re:I think that the courts would knock this down.. (Score:2)
Whack A Mole! Whack A Mole! (Score:1)
Lets say "Big Johns amazing leather and bondage" sells stuff to people that walk in the door and the business pays taxes on that. Setup a computer near the checkout and let people buy the same products over the internet and the business dosn't have to pay taxes? hmm what's wrong with this picture. It's in state comerce and should be taxable regardless of the tools used to foster that transaction.
This law makes sence, but all it does is give companies an insentive to move one or both of their business outlets (B&M or Inet) out of state to avoid the tax. Like a game of Whacka mole. . as soon as the 'gubment tries to whack a business down, it popes up somewhere else.
If Gov Davis knows what's good for him in an election year, he'll veto this little jem.
I've never paid sales tax, and I never will (Score:1)
Re:benefits the small stores (Score:1)
interstate taxation is a mess (Score:2)
I think the only way to achieve fairness would be either to have a nationwide, uniform sales tax that would be collected by the federal government and then apportioned to the states, or to abolish the sales tax altogether. Of course, hell will freeze over before some states would agree to either of those.
With the current non-uniform method, states without a sales tax, as well as mail order stores, are freeloading: both companies and residents end up using resources (roads, airports, etc.) that others pay for. Imagine, for example, how New Hampshire would do if the people in NH couldn't come to work in MA or if MA shoppers couldn't drive up to NH.
As for the "Internet Tax" bill, if it applies uniformly to any kind of mail order, that's fine with me. If it applies only to orders placed through the Internet, that seems stupid.
eCommerce is a fancy name for mail-order (Score:2)
Re:I've never paid sales tax, and I never will (Score:1)
Actually, I kind of like the arrangement we have in Texas. The sales tax is the only state tax we pay (well, minus the gullability tax they call the "lottery", but I don't pay that tax
>>If I go to California, all I have to do is to prove my Oregon residency to avoid sales tax (actually its pretty hard since most merchants don't want to screw with the paperwork). Does anyone know if this provision is being made?
From what I understand, you have to be a California resident purchasing from an online retailer with a physical california presence in the state for the tax to apply, so you would probably still be safe.
Do not teach Confucius to write Characters
Re:This won't last Federal Judicial Review (Score:1)
The law is seeking a tax on Brick and Morter companies that have a retail presence *and* and internet outlet in the state of California. In other words, the case involves CA B&M companies that also sell to CA customers in the state of CA. All well within the state legislatures juristiction.
Re:Sense & Nonsense (Score:2)
The shipping costs are far greater than sales tax, so no, this is not true.
Mail-order catalogs are tax free. Again, the cost of shipping is greater than that of any tax.
This gives online stores a disadvantage in pricing--they're forced to have HIGHER prices than brick-and-mortar stores, because they have to pay both taxes and shipping expenses.
A state tax on internet transactions, such as this one, would be a disaster to implement. If it is based on the location of the seller, all the sellers would leave that state. If it is based on the location of the buyer, it creates the problem of having to deal with different taxes in different states, which is bad for the little guys having to hire extra lawyers to keep track of what the tax laws are. If it is based on both the buyer and seller's location, then it has both problems.
A federal tax would be more reasonable, but it would discourage the online economy and stifle its growth, which is why a moratorium was passed a while ago.
---------------------------
Re:Californiaitis (Score:1)
Perhaps we could make some arrangement with the San Andreas fault to "help" them
Do not teach Confucius to write Characters
Re:buying a monarch (Score:1)
Re:I've never paid sales tax, and I never will (Score:1)
Am I wrong? Is this really true? I'm curious... can someone provide more info?
Re:I think that the courts would knock this down.. (Score:1)
California can't charge sales tax when the buyer is out of state and the seller is in state. They presently have no real method of enforcing sales tax when the seller is out of state and the buyer is in state - they claim that right but presently without search rights they can't prove you owe them a dime. It might turn up in an audit.
Creative Labs is the first purely out of state company to charge my state sales tax on my internet transactions, and they even charged the tax on shipping cost too! Those jerks, that's not even legally collectable, but I can't convince them and it's not worth the 50 cents to argue with them, I'll just buy elsewhere.
Re:Taxing the Net is perfectly reasonable (Score:1)
It's already been done (Score:1)
The Government vs. The Internet (Score:1)
I don't agree with internet taxation and do not understand why the government should try to limit such an amazing technology. The development of the internet will soon be the main source for government profit, overriding exports, even the stock market. The upward trend of new ISP development, hosting companies, operating systems derived from the internet, and much more, is good enough cause that the internet will produce more income than any other median ever.
The government is simply trying to gain more money than neccessary from internet. In my opinion, the internet is a very fragile place.. susceptible to any mode of taxation, but that's still not grounds for the government to attempt to capitalize even further. The Californian state government will see this as one big screw-up if this bill passes. People will slowly drop their ISP's and NetZero will gain even more users. No taxation that causes for even small sums of money will go without spoken word from the population. Look for this one to get out of hand folks... because it probably will.
Doesn't anyone read the article? (Score:4)
Before people get their underwear in a bunch about whether this violates the interstate commerce clause or whether the internet should be taxed, etc., please read the article.
The sales tax would only be charged if a CA resident is buying a product from an internet site of a company that has a physical presence in CA. If the company has no physical presence in California, the residents do not have to pay any sales tax. Residents of other states do not have to pay CA sales tax either. If it was a California mail order firm, they would have to charge you sales tax too. If one looks at the order form for a catalog, there is usually a place near the shipping and handling field where it says something like 'Illinois residents add x% sales tax'. IMHO, shopping via the internet is just like shopping from mail order catalogs. But you can spend your money faster because it's interactive. (Since this was instigated by local bookstores against BN & Borders, there are book price comparison sites that will include sales tax in the final cost if it is required.)
I would not be surprised that more states start beefing up their existing mail order catalog tax laws for the internet. Some states require you to pay sales tax on anything bought via mail order, no matter where it's from and have a section for that on their state income tax forms. As far as they are concerned, the internet isn't any different.
The retail company that I work for recently opened an e-store. Since we have brick-n-mortar operation in about 80% of the states, someone must have saw laws like this coming, because we charge sales tax for everybody. Even residents of states we don't have any presence in at all. While I didn't work on the project, I'm guessing it goes something like this:
- The company keeps a sales tax table for all zip codes in the US. We have to do it for the retail stores, so it's no big deal for the internet store.
- Take the customer's shipping zip code and use that to retrieve their sales tax rate.
- The total merchandise cost is multiplied by this rate to get the total sales tax paid. This is charged to the customer, and is stored in a data warehouse along with any warranty informaiton.
- Periodically, a report is run to show the total amount of merchandise bought and sales tax paid by zip code. This is broken down by state and sent along with any other legal paperwork to each state tax commission with a check (this may be totally electronic or involve real paperwork depending on the state)
There are probably software vendors that sell packages that do this or provide the service of handling the paperwork for each state. If there aren't that do this now, if many states follow CA's lead, I'm sure there will be companies offering such services to smaller internet businesses. It's probably simpler than all what's required by each state & the federal govt for COBRA, employment insurance, and all the other insurance/human resource related crap. Good grief, it seems like just about every town/city/county in PA alone has a different income tax, payroll tax, or some odd requirement that's slightly different from anyone else.Re:Moving out of California (Score:1)
If you move a business to some backwater, you not only have to live there yourself, you have to somehow come up with a bunch of employees who want to take a huge cut in standard of living.
(he says, looking out the window at the beautiful coastline of Santa Cruz)
That explains all the construction in south Reno (Score:1)
For about a year now, there has been an explosion in south Reno of new building, including some huge warehouses right along the US 395 artery. The airport has been gearing up to handle more freight flights, especially as passenger traffic through Reno/Tahoe Airport is trending downward during the last year of the millenium.
Physical plant isn't the only thing growing. There has been a number of technology committees that have sprung up in Reno and Carson City to address infrastructure issues for business, including attracting more bandwidth into the Reno/Carson City nexus.
Bottom line: new work may be coming here. Good news for me...
Re:interstate taxation is a mess (Score:2)
From what I read in the article, this would only apply to CA residents. If WA wants to require any e-business to collect sales tax for them, they will probably follow CA's lead. What do you mean about 'every state the transaction hits will get a cut'? Every state the TCP/IP packet went through to get from the server to the browser and every state the package had to get through from warehouse to your door? I've read that senario being brought up when people start talking internet taxes, and that sounds loopy to me. There's no way anyone can realistically determine that. The easiest way is to just charge the sales tax for the zip code of the shipping address.
Re:Are they operating in CA? (Score:2)
I'm surprised Wal-Mart or some other big retail firm hasn't done something like you suggested: order a product from the web site and a delivery van from the local store drops it off at your door that day. It would be great for people who can't or don't like to leave the house. AutoZone [autozone.com] lets you buy parts via the internet for pick up at a local store or will ship them to your house depending if the part is available in the store. They will charge you your local sales tax in either case.
Re:Sense & Nonsense (Score:1)
But the USPS is only sort of a government agency; it is not subsidized, except perhaps in the real estate it owns (this is a really, really small part of its operating expenses). So the second part of your argument doesn't really make sense. Using the USPS is nothing at all like paying taxes.
Re:Sense & Nonsense (Score:2)
Mail-order catalogs are tax free. Again, the cost of shipping is greater than that of any tax.
No they're not. Look at the order form. There is a field for entering the sales tax if you are a resident of a particular state. Other states require you to pay local sales tax on mail order items no matter where the company is from (WA, UT, MO, amoung others).
Re:benefits the small stores (Score:2)
I prefer sales or VAT taxes to income taxes any day. I don't have to keep any documents or fill out any forms at the end of the year or have some bureaucrat snooping through my finances. People who aren't residents also pay and so do those who work on a cash-only basis. When I was in Europe, I also liked it that it was automatically included in the price of the item being bought. I know people who structure their entire life around trying to get a tax deduction for any little thing they do. And in doing that, they end up paying a CPA $200+ so they can get maybe $400 more back than they would otherwise get. IMHO, it's not work the hassle.
Re:I'm not the original poster.. (Score:1)
No, first the government passes the law which tells companies what the rules are, then the companies follow the rules (or don't, and risk getting caught). The decision of whether to follow the rules or not is up to each individual or corporation, but the rules themselves are not in question.
True, the company has to decide based on the applicable law whether they fall within the legal prerequisites for the law to apply to them. However, it is just as illegal to assume that one state's laws apply to their operations in all states as it is to assume that no laws apply to them. Determining the appropriate tax under various state laws is what the lawyers and accountants are for. Collecting a tax in the name of a state which has not enacted such a tax is at best a gross misrepresentation and hopefully illegal.
You're free to give any money that you want to any states that you want, whether or not they have a law requiring you to do so. However, I don't want a company charging me on the behalf of a government which has not authorized that company to tax me. I don't think taxation without legislative authorization is equitable at all, and I want each tax pinned on a specific body of elected officials so that I can vote them out (or at least try) if I don't agree with the tax.
I'm not some sort of anti-tax freak; I just believe that the laws that apply to me should be made by my elected representatives. I give some organizations money because I feel that they deserve it, and I pay money to the state and country because it is the law; I don't usually equate the governments of states that I've never visited such credit.
Re:I'm not the original poster.. (Score:2)
Closer to what I was driving at, but not quite there. The "prerequisites" themselves can be in question. This case is a perfect example of them. If the prerequisite for charging sales tax in a given state is having a presence in that state, then the question of whether or not you do have presence is not just academic. The qualifications are likely not laid out nearly so clear as you would imagine. More than likely, there are a series of precedents as to what qualifies as presence, none of which are spelled out for the corporation. One may even decide to not pay in a grey area, come under the wrathe of the state's department of revenue, and, ultimately, be vindicated by the courts.
Again, you're not understanding the problem. Most every state has sales taxes on intrastate sales. If the company has a presence in a given state, that state may decide to treat that sale as if it occurred entirely within the state, and then view the transaction as taxable. In such a situation, since the company cannot forsee the state's stance on the matter with 100% accuracy, the company may be better advised to just pay. The legal costs, penalties, accounting, and other related costs of disputing such a claim can easily exceed whatever benefit they're providing the customer by not paying.
Re:Doesn't anyone read the article? (Score:1)
Huh? Is that even legal? Why is your company charging sales tax to people in the 20% of states where you don't have brick and mortar operations? Simplifying your accounting can't be the justification...
Look at who is bypassing taxes (Score:1)
Re:Doesn't anyone read the article? (Score:2)
Don't you mean a law requiring them to collect the tax? To be authorized to collect the taxes, I'm sure a company just has to get a tax id and file all the appropriate paperwork with the department of revenue. It's not another tax. Most states have a requirement that all retail sales within their borders are taxed at a documented rate for specific groups of merchandise. Some states also have laws requiring that all mail order purchases (which the internet is an extension of) are to be taxed at the local sales tax rate. All they are doing is following the local laws. Unless there is a state law that prohibits this sort of activity, there's nothing wrong as long as all local laws are followed. And no, it's not a bribe. It would be something similar to: 'we want to be a good corporate citizen, therefore we will follow your local laws without having to be prodded by a lawsuit'. This is funny. People on Slashdot are usually bitching about how corps ignore local laws and want to be a government unto themselves, and here's a case where a corp wants to follow local laws even when it doesn't have to and people are still bitching about it. I agree with point #3, but for the first two, I think you're missing my point. Another state isn't attempting to tax your purchases. The taxes are your state's not anyone elses, following the rates & requirements set forth by the legislature. If by chance, the dept of revenue doesn't want the taxes, they will inform the company that a physical presence is required and until then the rates can be set to zero. Again, I'm not sure what the reasoning behind this was, but IMHO, it's probably safer to err on the side of paying taxes than not. For all I know, the remaining states may have mail-order use taxes, in which case, it would be required to collect the taxes.
Now as far as the fraud aspects go, that can be the case with any business. In my home state, they legislature passed a law requiring businesses on the indian reservations to collect sales taxes from all customers, not just non-indians. Of course this caused the tribes to claim this violated their 'soverign nation' status (which I think is total BS. How can you be a soverign nation when practically 100% of your funding, infrastructure, etc is provided by another entity?). The reason behind the law was that several businesses were claiming that most of their sales went to tribal members, when the opposite was true and they were defrauding the state govt of sales taxes. A friend of mine said that it went into effect, but I don't know if the tribes ever got it repealed.
Re:benefits the small stores (Score:2)
I you want to go through all the hassles and the govt wants to let you write it off, then that's fine with me. I for one, do not like to put up with the additional paperwork and contort my life in order to get a tax break (which is why I'm in favor of a flat income tax and a national sales tax). Now of course, if there it's for something that I would normally do (ie. paying for college expenses) then I'll take it. A friend of mine tries to get any little tax break or deduction that he can, often doing things that totally illogical just for a tax break. For example, my family and I met him at a science museum one year. He bought a membership because he would get a tax break. It didn't matter that he wouldn't ever go there again for at least another year, it's normally free except for special exhibits and parking (which we split). IMHO, he could probably save more money by not trying to get some of these deductible expenses than he does in the amount of tax reduction that he receives. That doesn't include all the time he spends keeping records and tracking down other things that are tax deductible. Everyone should have a hobby, I guess his is tax avoidance.
Re:Moving out of California (Score:2)
In fact since most of these large companies make ungodly amounts of money why don't they just buy a country and locate there. I am sure that if BN and ebay got together they could easaly buy a small country in africa or asia. I don't mean buy it literally I mean buy it by bribing the king just like they do here. In a monarchy you only have to bribe one guy and maybe a couple of underlings not hundreds of politicians. As a bonus they may be able get a whole slew of employees at slave wages or even as literal slaves. As an alternative they could throw enough money at a future Pol Pot or Idi Amin and just literally enslave a country with their puppet as a king. Voila for a measly 10 or 20 million you have a country of slaves working to make cheaper sneakers and returning maximum value to shareholders.
I am sure this will happen one day I am just surprised it hasn't happened yet.
A Dick and a Bush .. You know somebody's gonna get screwed.
Re:Transaction taxes (Score:2)
A court system which enforces the corporations intellectual property claims.
An investigative and police force to aprehend and prosecute the thieves which will inevitably show up.
Negotiating treaties with foreign govenments to make sure all transactions are honored and enforced by local police forces.
Providing a legal framework to make sure all states agree to the same level of service.
I honestly don't think that corporations want to do this stuff themselves. I don't think MS wants to hire it's own international police force to aprehend, jail or otherwise coerce you to pay for your copy of windows.
A Dick and a Bush .. You know somebody's gonna get screwed.
From the Constitution (Score:2)
atto
Re:Moving out of California (Score:2)
Re:Strange. (Score:3)
I believe that the situation is this: when a business has a presence in the state of California, and an order is made with that business, the business must collect sales tax even if fufillment of that product comes from out of state. That is, if I go to my local B&N bookstore and order a book to be shipped to my home, they collect sales tax even if the book was shipped from a warehouse in Nevada.
The law is not quite so clear when dealing with a subsidiary who does not have a presence in California, but who is owned by a company with a presence in California. In particular, B&N the web site is a subsidiary of B&N the bookstore chain, and so it is not as clear if the subsidiary should be required to collect California sales tax.
Some web presences of brick and mortar operations have been collecting sales tax, even though the wholely owned subsidiary providing that web presence is located out of the state of California. Some have not. The law clarifies this.
Of course this is AFAIK, IANAL, YMMV, etc.
taxes are anitbusiness (Score:2)
Here in St. Louis where I live most businesses are in St. Louis county or Franklin County. Only a few remain inside the city boundaries. But a lot of these businesses use "St louis" in thier address to identify themselves as bieng from this geographical area. The reasons these businesses have left the city are legion, but most come from city hall. one of the main reasons is the "head tax" what his means is that for each employee a buisiness has it must pay a certain percenage(of gross revenue i think)and each person who works in the city has to pay a city income tax whether they live in the city or not!
Recently a "Living wage" proposition was passed by the voters to raise the minimum wage a person can work for to around $9.00hr(note that this is local, not state or federal). Imagine what will happen in the city in two years! The law goes into effect in january and I imagine that the businesses that are left will try to deal with it for about a year, and then make plans to move after that if they are not doing so already.
Hello, I come from planet earth. (Score:2)
The same goes for E-commerce. They want to be online? Fine. Certain goods and services are better bought online. But they're going to pay it in shipping. Intentionally giving anyone an artificial advantage is just plain bad economics. You would effectively incentivize inefficiency, and it would only get worse. What's more, where shipping costs are higher, there is almost always an increased ENVIROMENTAL impact (nearly 1 to 1). E-commerce pays more in shipping because it is less efficient to deliver goods to individuals than massive loads to a central place.
Though this is the only remotely viable argument (i.e., the act of taxing online creates excessive costs), it really holds no water. There are many mail-order businesses that have to pay taxes, believe it or not. These busineses, like those in this law, have a presense in the state(s) in question, albeit nominal (i.e., sales people in that region). They do fine, I happen to work for such a company. The costs associated with taxing are negligible. If an E-commerce firm can ship, they can certainly afford the penny it costs these mail-orders. These busineses pay not just state taxes, they pay county and city taxes many times too. I know systems can be put in place at these dot-coms to handle it for even less.
FYI, It is not as if these companies run around the country finding out the latest tax rates. There are services and products (i.e., cd-roms) that you can buy complete with the latest tax codes and the like. If a company makes a reasonable effort to keep up to date, it is not an issue.
If an equally plied tax hurts E-commerce, it just means they can't provide a good alternative for the customer without artificial distinction. I say, make taxes as equal as possible, and let the cards fall where they may.
As for why Congress passed a moratorium....can you say Moooo? Like everyone for the past few years, they're afraid to speak their minds about the sacred cow that is the internet. These days, you're no more likely to find a politician "against" the internet than you are to find one "against" children.
Oh yeah, and in case you didn't know it, sales taxes comprise roughly 30% of most states revenue. If the internet is nearly as big as you think it's going to be, something has to be cut...The axe will eventually have to fall on E-commerce, and then they'll be in real trouble...as if they aren't already.... hehehe
Re:Doesn't anyone read the article? (Score:2)
It's only fair. Why should the government effectively subsidize any E-commerce firm? It simply makes no sense.
Re:Are they operating in CA? (Score:2)
The difference with AutoZone is that they aren't in a nasty market war with a heavily discounted competitor. You have to remember that B&N is competing with a company that figured on a multi-year loss rate to take the market over, namely Amazon. They had to do everything possible to keep the prices as low as possible, cutting into all kinds margins. AutoZone on the other hand has a little more flexibility with this in that if they have to charge sales tax that isn't going to throw the door wide open to a loss competitor like an Amazon.
You also have to figure to that in CA the lowest sales tax rate is 7.25%, going up to over 8%. Each hike in the rate had a wonderful reason attached. My favorite was the hike to pay for the San Fran earthquake. That nasty was paid for a LONG time ago, yet there that tax still remains.
In a perfect Metrol world, any tax rise must require an automatic expiration date, lasting for no more than 2 years. I'm sick to death of every tax these folks coming up with becoming a permanent part of our lives for the "community's" needs. All the while we've got school board members pulling in 6 figure paychecks and city board members travelling to Europe to study other cities.
Sense & Nonsense (Score:2)
On the other hand, it's complete BS. As I believe another poster already mentioned, interstate commerce can only be regulated by the Federal government, not by the states. Now I'm not exactly sure where in the scheme of "regulation" taxation falls, but I'm betting it's not the most clear cut issue in the world.
Likewise, the actual implementation of Internet taxation seems prone to overcomplication and beaurocratic bloat. When interstate commerce occours which state's taxes are applied? The state where the merchant is located? Or the state where the purchaser is located? Perhaps both (because it starts out one way and then the other state feels screwed over... I mean, if a large percentage of online stores are in, say, Texas, they would love to get their hands on all that tax money, at their local sales tax rate. But if most of those purchases are happening in California then I'm sure that California will want to get in on the action.
Perhaps someone more conversant in interstate commerce than I can enlighten us as to how this works with mailorder catalogs right now? That would seem to be the closest guidline that I can think of.
As for taxation on the internet, my bet for a final tax scheme is this: some sort of federal tax, with the same rate everywhere, on all purchases made from domestic merchants. Maybe, if they are lucky, the states will get cuts of this, but I doubt it.
But that's just my guess...
--
Moratorium? (Score:2)
-- iCEBaLM
Transaction taxes (Score:2)
A transaction tax would essentially be a government providing a guarantee (by providing a stable economy, police, legal and military protection) that your money will safely move from A to B. In return for this service (yes, a protection racket, more or less) the government takes a small slice of the transaction.. some micropayment type percentage.
Each small chunk would be trivial compared to the size of standard transactions, but the total amount of money being moved around would add up to a lot.. which could be arranged to easily cover what is raised currently through more traditional methods.
It would be fair, because those who have less money (and hence move it around less) will pay less in tax, just the same percentage. If you have a lot of money or move a lot around, then you will get taxed more.. but again, the same percentage per transaction.
This could easily be extended internationally, since you will be transferring money from your account in one country to an account somewhere else. Each country takes a small slice. If you insist on moving money through 15 different countries/banks/money laundering operations/whatever then you will pay for the priviledge of ensuring that whatever money is left arrives safely at the destination.
There are probably numerous issues with this concept which require clarification, but it would certainly make tax evasion more difficult (which only the mega rich can currently afford to do properly) and get the money grubbing governments off everyone's backs. Simple tax laws means they can't cheat you out of your hard earned dollars either.