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The Almighty Buck

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.
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California's Internet Tax Bill Slithers Forward

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  • * The article suggests that it's a clarification.

    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 is a vain attempt by California to get some extra cash to fill their sparse coffers. I am going to guess that they are hoping they can sneak this one through and have it be active at least for a little while and make some cash before the Federal government shuts them down.

    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.
  • I'll add more questions. If you are a US resident, travel to Europe, and buy stuff, which has a value added tax (VAT) already factored into the price, you can at the time of purchase fill out the paperwork to get the VAT refunded to you (later).

    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!
  • 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.

  • Yep. But I don't really want to see uniform taxation either. I think it's only because states are forced to "compete" against one another that these taxes haven't gotten totally out of control.

    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.
  • Where is the flamebait here? I'm a big a fan of ecommerce as anyone, but the poster makes valid points, all of which have been raised before.

    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 /.

  • The Supreme Court has ruled that a state can only require the retailer to collect sales taxes if both the retailer and the seller are physically located in the same state.

    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
  • The shipping costs are far greater than sales tax, so no, this is not true.

    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."?
  • There are many reasons to purchase online:

    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.

  • Not only are Net Citizens avoiding California, Californians are leaving
    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..
  • California has the highest state taxes in the country, for a long time. It also has the most prosperous enconomy in the world.
  • California taxes and wages have almost always been among the highest in the nation. Its never been the cheapest place to set up shop - in fact, quite the opposite.

    If companies have bothered to move after being taxed at the highest state rates in the nation, they won't move for this.

  • ...and they even charged the tax on shipping cost too! Those jerks, that's not even legally collectable...

    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.
  • Or a stupid Democrat who can't spell. Ha!
  • Not taxing purchases made over the Internet is actually a subsidy to the online stores.

    No, it's a tax on the brick'n'mortar stores. Remove the tax, and everything will be fair. :-)


    ---
  • Dunno about California, but in Australia petrol taxes are supposed to pay for maintenence of roads.

    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.
  • California, like all governmental entities, thinks it can't do with one dime less money that it presently gets, even though it's running a multibillion dollar budget surplus. In fact, if you've been paying attention, you've heard them whining that they don't get enough money as-is. They wail that [police|fire|education|health care] will all be jeopardized unless they extract at least 10% more revenue than they presently do. If you don't think politics matters, take a look at how much you're paying in taxation at all levels. A typical family of 4 pays over 50%. That's over half of the money you've busted your butt for. Then if you still manage to accumulate a large enough nest egg, they want over half of that as well. That's money you've already been taxed on. (By the way, for purposes of whether your estate gets taxed at 55%, it's not your home equity, it's your home value at time of death. I.e. it doesn't matter if you have a huge mortgage - it's the raw value of the house that counts. Neat, huh?) If you don't want to continue getting shorn like a sheep, start paying attention, write letters to your representatives (they pay attention, believe me) and vote accordingly. And don't fall for that "we'll have to cut our police and fire if we don't get this money". That's the old Washington Monument ploy (the Park Service always used to threaten to close the popular Washington Monument if its budget got cut.) They always trot out the stuff the public wants, conveniently ignoring the crap that no voter would give a damn about. Start writing.
  • I suspect the flamebait part was saying that Republicans differed from everyone else in thinking that the rich *should* be given tax breaks unavailable to others just because they're rich.
  • The Constitution SPECIFICALLY FORBIDS INTERSTATE SALES TAX LOOK IT UP: What the US Constitution CLEARLY states on this issue: Article 1, Section 9, Clause 5: NO TAX or DUTY shall be laid on Articles exported from ANY STATE. Look I know the Constitution is PASSE these days, despite it supposedly being the bedrock upon which all law rests: http://TeamInfinity.com/~ralph/salestax.html
  • In the UK it is already required for any sales within the UK online have to charge with VAT, the UK eqvilent (sp? - sorry it is Sunday and I can't be bother checkig my spelling) of Sales Tax
  • 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?

    1) Great weather: Whereas Silly Valley's nights are permanent Leather Jacket weather, Atlanta is a little warmer. Shorts and T-shirt weather. One month winters and long beautiful springs and falls.

    2) Low cost of living: You can pay your $100k people $80k, and due to lower taxes and cost of products, they'll live even better lifestyles. Why pay $2000/mo for rent when you could pay $800/mo and get a better place? Gas is about $1.36/gal right now, but has been as low as a $1.00/gal before. All other prices are also much lower than in CA.

    3) Good university system: Georgia Tech, for one. Emory and Georgia state for your marketting and graphic design needs. Agnes Scott and Emory for a supply of high-quality females (women: Tech and GSU have great guys). Tech is #1 in the world in a number of CS fields, and its co-op program means you can hire people while they're still in school for cheap!

    4) Cheap university system: OK, not emory. But GSU and Tech are state schools-- subject to the HOPE scholarship. If your kids/siblings/etc get a 3.0+ GPA, they get tuition from the state. Period. So don't think you aren't getting the same great service you would get in CA.

    5) Less media distraction: This point is often overlooked. Silly Valley was once run by technical people first, others second. However, in the last ten years, it has been overrun by technically ignorant, get-rich-quick managerial types and media 'players' who claim to know technology better than coders and engineers. Bottom line: they are taking over, and to the detriment of most startups. Count the number of customers you have. Then the number of sales/marketting people you have. If the second number is bigger than the first, your company is in trouble.

    I'm not saying that that doesn't start down here in Atlanta, but we're simply not overrun with them the way the bay area is. And there is plenty of venture capital to be had without jumping through the hoops of hiring 'high status' managers who are still living off their high school football successes and fraternity affiliations.

    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.

  • This law would just put the internet in line with all other mail order, in fact the law is superfluous, as internet sales already fall under the same rules as mail order.
  • Bring it on. Tax the internet, then tax everything else. Maybe we can go to a per-minute fee for all internet access, regardless of ISP. Then we can all wear brown uniforms, with red armbands, and walk in unison. And then, we can all let Big Brother decide what is best for each and every one of us.

    Sorry. Slippery slope idea just took right the hell off there didn't it?
  • The poor should bear the greatest proportion of the country's tax burden - it is they who benefit the most from government services, ergo they should pay the most. It is not fair for the rich to be taxed more heavily just because they can pay. Sorry, but that's capitalism for you.
  • That was a FEDERAL moratorium. But the states don't have to follow suit with the federal government.

    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).

  • Instead, the East Coast will fall first. Then the Midwest, then everything but California. See also: the video for "Californication" by rhcp://Red Hot Chili Peppers [redhotchilipeppers.com].
    <O
    ( \
    XGNOME vs. KDE: the game! [8m.com]
  • How will they enforce this? Will everyone have to get some sort of license. It is easy to enforce if you have a brick and morter presence in the state. What if you are a dot.com out of state who sells to someone in state? What if you are a dot.com in an off shore colo facility? This will cost more in logistics and enforcement than it would bring in revenue. Peace
  • what if youre poor but you pay your own way? then it becomes, people get taxed at the end of the year based on how much utilization of government services. the government then becomes a business and since its customers are poor, it goes out of business. youll have to pay to have your local streets paved next year and everytime you call 911.
  • Umm, don't they already do that? When I'm ordering something online and I find two (or more) similar prices, I'll always go with the one that's out of state to avoid paying sales tax.
  • The problem I have with this kind of approach is (at least in the US) the 'gubment does nothing to add to or subtract from the quality of service in internet commerce. The local loop, providing users with their onramp onto the net, is a publicly traded company. The back bone providers are also all publicly traded companies and can be mixed and matched as the consumer sees fit.

    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.

  • This assumes:
    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.
  • 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 post makes a valid point. come on moderators, use your heads.
  • by Metrol ( 147060 ) on Saturday September 02, 2000 @03:18PM (#808809) Homepage
    As I recall from an article I read a long while ago, B&N spun off their web site as a seperate business operating from a single warehouse. They had wanted to set up a system where they could ship directly from their stores, but this would have kicked in the very kinds of taxes that are being proposed now. Since they are in a very tight price competition with other book sellers, most notably Amazon, they opted for the more difficult method of the spin off approach.

    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.
  • (Note that none of this applies here, since California is only trying to tax online sales made within that state.)

    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.
  • >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.

    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.

  • How come, when it's time to be 'fair', we never seem to hear the argument that we ought to cut taxes so those who pay 'unfairly', reduce their taxes to the level of those who are paying less than 'their fair share'? Why are tax adjustments only one-way?

    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.
  • Is it just for goods, or also for services (i.e. ISPs)?
  • I'm a CA resident and when the time comes to sell my rather substantial portfolio, I'll be doing it as a Nevada resident. Nothing like not having to pay 9% to the lefties who run the show in Sacramento to make living in the desert palatable. That plus the 'must-issue' concealed-carry gun law there.
  • 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.

    It's only fair. Why should the government effectively subsidize any E-commerce firm? It simply makes no sense.

    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.

  • Most states have a "use" tax if you buy something from anohter state. Missouri has a box on its state income tax form asking you to put down the value of all out of state purchases that were tax free and then you get taxed on that.

    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 was just filling facts in. I believe he only said he had no retail stores in the 20% in question. Thus I pointed out that, whether or not he knew it, presence expands well beyond just having stores in state. His company may be viewed as having presence in any number of those states, thus it is not necessarily a matter of laziness.

    Their state governments aren't accepting it
    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.

    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.
    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.

    The reason why is because there is no law (fortunately, IMHO) taxing out-of-state internet purchases (except for states which have "use taxes").
    It's not nearly so simple.

    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
    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.
  • Brick-and-mortar stores are shipping large quantities all to the same site, so the per-unit shipping is a tiny fraction of what it is with an online store, and in many cases, the shipping is done through a government-owned agency, so part of the shipping charge IS artificial and going to the same destination as the brick-and-mortar stores' sales taxes. While this is obviously not the case with other shipping methods, it's still significant.
    ---------------------
  • 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

  • or one of the other states that doesn't have a sales tax. This seems like a simplistic approach, especially since Montana and these other states lack the infrastructure to maintain the servers and such for dot-com stores. But I'd say rapid development would alleviate long term tax problems.

    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?

  • The constitution plainly states that the Federal gov't and only the Federal gov't may regulate interstate commerce.
  • by freq ( 15128 )
    The state of California isn't making any money offa the internet Waaaah.

    These online retailers are going to bankrupt our state government. Waaaah.

    Have i heard this somewhere before?
  • I dont see where the problem is with Internet taxation. Not taxing purchases made over the Internet is actually a subsidy to the online stores. And the online stores are used by the wealthiest part of the population. There is no reason to give a tax break to the wealthy, unless your a republican.
  • A subsidy to the online stores? Excuse me? I see it the other way around. Taxing online commerce is taking revenue AWAY from online stores. That revenue does not belong in the fucking government's greedy hands. You, sir, are one of those socialist types. Bleh.
  • There's been a lot of discussion on DVD forums lately about how, with a lot of the crazy bargains disappearing online, there's no compelling reason to shop on the net. If you tack on sales tax to the shipping costs, the price point advantage disappears completely and it becomes an even harder sale.

    Will internet commerce disappear? Hardly, but I think measures like this certainly will slow it down.
  • 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.


  • While most California retailers collect taxes online, some retailers that have created out-of-state subsidiaries for their Internet divisions claim exemption from state tax laws.

    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.
  • This'll bring even MORE californians north of the border :-)
  • 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.

  • "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!
  • 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.

  • Well, if this legislation is going to tax online businesses that also have "brick and mortar" stores in California, then won't most of the superstores still be exempt? I mean, there's neither brick nor mortar in the ugly big-box sub-urban stores from which they do their retailing.
  • So what's wrong with collecting the taxes at the rate that the governments have decreed and giving it to them?

    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.

    It also takes away one complaint that local merchants usually have with internet based businesses.

    If those local merchants want more taxes, they should get them passed by the duly-elected legislature, not added by other 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.

    A bribe, in other words.

    IMHO, I think you are just offended by the chance of having to pay sales tax on something bought via the internet.

    I'm offended by (in no particular order):

    • tax policy which is not set by the legislature (subject to the vote of the citizenry)
    • taxation without representation, where another state attempts to tax my purchases without giving me a vote in the situation
    • governments that feel they have a right to tax the citizenry without considering whether those taxed receive equivalent government services in return
  • It looks to me like they're planning to tax online sales ordered by California residents, where the orders are filled by companies operating in California. So it's not interstate commerce that they're trying to tax.
  • So the law wants to tax companies that have a brick and morter presense *and* an internet outlet for selling their products inside the state of CA. This hardly makes it an "internet tax". Think about it.

    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.

  • In Oregon a sales tax has been voted down again and again, and I am surprised that there are only a couple of other states that don't have one. 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? Hell, even if I order from a catalogue, I don't have to pay sales tax, so why should internet be any different?
  • So, the solution to the theft problem is to make sure that everybody gets robbed, eh?
  • I don't think this is a problem just with the Internet. Why do I have to pay taxes if I mail order from a company within California but not from a company outside California? And why should I pay taxes when I mail-order from Cody's but not from Barnes and Noble?

    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.

  • You have to pay local taxes, if you live in that state, with mail-order and whats "Internet Business" other than a mail order catalog thats updated really really often. Hopefully this loophole will be closed.
  • >>I am surprised that there are only a couple of other states that don't have one

    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 :-) Sure, the sales tax is a little higher than in most states, but it sure makes my life easier on April 15.

    >>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
  • Read the article.

    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.

  • And the independant booksellers do have a point about tax free interstate book sales undercutting them - I mean, the book business (and many others) is hard enough already without the addition of what ammounts to state sanctioned incentives to buy from out of state.

    The shipping costs are far greater than sales tax, so no, this is not true.

    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.

    Mail-order catalogs are tax free. Again, the cost of shipping is greater than that of any tax.

    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 purchasesmade from domestic merchants.

    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.
    ---------------------------
  • >>I just wish they'd secede from the union before they spread

    Perhaps we could make some arrangement with the San Andreas fault to "help" them :-)

    Do not teach Confucius to write Characters
  • You're assuming:
    a) even monarchs don't have their price

    b) the monarch is better armed/funded than the corporation

  • This is interesting. I had always assumed that sales tax applies to wherever you happen to be at the time of purchase - ie, if you buy something while physically at a store in California, you pay sales tax, regardless of where you're from. People visiting from out of the country generally pay sales tax (and are often confused as to why they always have to pay more than the marked price on items), so I always assumed sales tax was a good way to get some revenue from outside into a local area. Especially tourist kinds of places.

    Am I wrong? Is this really true? I'm curious... can someone provide more info?

  • Sales taxes are charged when both the buyer and seller are in the same state.

    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.
  • The Fair Tax [fairtax.org] avoids the problem of the poor picking up a larger percentage of the tax burden by providing a refund to everyone monthly equal to the tax paid on autonomous consumption.
  • It has been done before; you're just looking at the wrong history. The companies that colonized America had just such a setup going. But as those companies found out, governing an entire populace can be a rather risky proposition, and dealing with international affairs is no small matter. It's much easier only to have to worry about producing the goods, and since it's already quite easy to get near-slave wages in countries like Indonesia, there's less incentive than you think. And your "measly 10 or 20 million [dollars]" figure is a far cry from what the average Saddam Hussein makes in a month, so why would he be interested? Countries that are susceptible to this sort of corruption are already dominated by ther own home-brewed 'corporation' (party).
  • The constitution clearly states that the federal government is only allowed to produce interstate taxes and pend them, but this is clearly not an interstate issue. The only state that will be involved in this bill is the state of California. While the connection of the internet spans the entire world, the taxes are only based in California. If this bill passes, other states will take aim at this and decide to put the same bills to work for them.

    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.

  • by ksheff ( 2406 ) on Saturday September 02, 2000 @05:20PM (#808850) Homepage

    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.
  • The problem with moving businesses out of high-tax states is low-tax states suck rocks. Lower life expectancy, higher pollution, few libraries or museums, etc. People flock to high-tax areas because they're really nice places to live.

    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)
  • 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...

  • 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.

  • 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.

  • You're right about the first part, and that's a reason that brick and mortar stores might be more efficient than internet stores (which have their own advantages). They ship in bulk, from distributor to the store, and the internet stores ship from the distributor (optionally to a warehouse) and then to the consumer.

    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.
  • 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).

  • 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.

  • 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.

    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.

    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.

    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

    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.

    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.

    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.

    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.

  • 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
    Of course the rules themselves are in question. It is the existence of the laws that is not in question. You act as if it is binary, you either obey a law or break it. This simply is not the case.

    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.
    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.

    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
    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.
  • 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.

    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...

  • It's corporations who have an actual physical presence in CA. "pure" internet companies, such as amazon, are unaffected. I've heard this story before, and the gist of the defense, in Barnes and Nobles case, was that the web site was entirely separate from the store operations, despite having the same name and the cash going to the same place. It's bullshit. Ironically, this is both fair and required taxation, and it's primary intent is to stop rogue entities from making bogus internet tax exemption claims.
  • 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.

  • 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.

  • I have always wondered why all companies don't move around like this. There are a couple of states with no state taxes like montana and nevada yet there is very little .com industry in montana. Maybe it's not so easy to just pack up and move, maybe there are other reasons like the availability of talent.
    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.

  • Well the government is providing some things.
    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.

  • No tax or duty shall be laid on articles exported from any state.

    atto
  • That won't be sufficient. For a company like Barnes & Noble to claim exception from this tax (which appears to be a clarification of the existing law, rather than a brand spanking new tax), they would have to relocate or close all B&N storefronts as well. That is, they would have to close all their retail outlets that are within the state as well as relocate their offices.
  • by w3woody ( 44457 ) on Saturday September 02, 2000 @11:37AM (#808881) Homepage
    Hrm. CA law isn't clear that in-state purchases should get sales tax?

    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.
  • They(Kalifonia)will be shooting themselves in the foot if this bill pases. If the enviroment gets to hostile for the affected companies they'll just take thier business elsewhere along with any taxes they do generate. Apearently the liberal democrats are just too fucking stuuupid to realize this simple fact of life and will never "get it".

    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.
  • 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.
    What planet are you from? Ok, so in some instances it may cost the online company more to do business. In others it definetly does not. So what? Businesses should have to cope based on how they perform. By this same logic, should an expensive retailer located downtown on a piece of prime property get an ever larger tax break? [i.e., 0% for them, 5% for E-commerce, 10% for others] No, of course not. They're reaping the benefits of their location, and they're paying for it.

    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.

    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.
    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.

    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.
    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
  • All one really needs is a presence in a state to be held liable for taxes, it need not necessarily be a retail front; a salesrep in state, a server, an office building, contracts, and god knows how many other things can taken as such. It makes both good accounting and legal sense to simply apply taxes to everyone.

    It's only fair. Why should the government effectively subsidize any E-commerce firm? It simply makes no sense.
  • Folks like Wal-Mart would love to use their retail locations as a shipping outlet. B&N definitely wanted too, but in both cases you incur both shipping and local sales tax costs. While B&N were in their decision process they found the numbers worked out in favor of not utilizing thier retail stores due to the taxation.

    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.
  • On the one hand this makes a lot of sense... Taxation (however much I may hate it) really is a vital form of revenue for both the State and Federal governments. And the independant booksellers do have a point about tax free interstate book sales undercutting them - I mean, the book business (and many others) is hard enough already without the addition of what ammounts to state sanctioned incentives to buy from out of state. Those sorts of incentives also lead to a greater outflow of money from the state economy (of course the lucky recipient states have a nice influx...). So it's not like Internet taxation is a completely nonsensical, greed based endeavour... there is a least some sense to it.

    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...
    --

  • Whatever happened to that little internet tax moratorium thing? I thought they wern't going to try to tax the net for 5 years or something.

    -- iCEBaLM
  • I've been having a bit of a think about stuff like this lately, and I'm starting to fall on the side of similar options, provided they replace existing consumption or income based taxes.

    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.

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