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United States

North Carolina Tries to Tax Online Purchases 281

Anonymous Coward wrote with a link to this News-Observer story. AC says the "...NC State department of revenue has added an additional line to the NC Individual Income tax form requiring consumers to calculate how much they spent for goods online and pay taxes on it." Meanwhile, Parothed sent a link to an article that implies that the (heavily libertarian) Cato Institute's Center for Trade Policy Studies might just find the North Carolina Internet tax plan acceptable.
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North Carolina Tries to Tax Online Purchases

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  • Just an interesting "what if"....
    What if Cato were to support state taxation as opposed to federal taxation of ecommerce (given that the 'no taxation' option isn't available) in the hopes of having it struck down under the Interstate Commerce Clause. It would create a rather nifty constitutional precedent and perhaps put some restraints back on the proper scope of the commerce clause...(Another case for the Institute for Justice [ij.org]perhaps....)
  • Yes, thanks to the lottery, we've replaced the necessary evil of a tax on everyone (but especially the wealthy) with a tax on everyone uneducated enough to spend money on the lottery (but especially the poor). I suppose you believe that having a lower class is a necessary evil, then?
  • The worst part of this is that if you read the article carefully, you'll note that it says on items over $1000, you have to pay an ADDITIONAL 6% tax (or 12% total), so on a $2000 computer, you'd have to pay $240 to the state!

  • Maybe you're onto something here.... Perhaps one of the states will be smart enough to stay out of this. Create a tax-free internet zone (sortof like vegas where everything illegal is legal). Then they can attract all of the e-business and rake in the money... Nevada? are you listening to this?? Or else everyone will just go offshore to some internet friendly country where they can bury their money anyway.

  • The taxed levied on the consumer are peanuts compared to the taxes on businesses. Businesses don't get it in the SALES tax dept, but they take it up the a** in the corperate INCOME tax arena.

    Not even to mention the dissappearance of high-paying jobs from the local economy, property tax on the campus (high value by necessity, think of the bandwidth necessary for e-commerce), dissappearance of the high-tech infrastructure (don't kid yourself, high-bandwidth backbones are built first for BUSINESSES, second for colleges, and LAST for home DSL).

    Don't have any illusions. If the geeks left for greener and less despotic pastures, NC'd lose far more than they gain by taxing the geeks into oblivion.


    john
  • I'm serious, do you "tax me please" folk really think the government will do better things with your money than you would?

    No, I think the government will do different things with the money. Am I better off spending $1000 on books and computers and have public schools suck? Or buy rollerblades but have the parks filled with trash? There are things that government can provide much more effectively than anybody else.

    The ONLY way in which an online store costs the local government any money is by the usage roads by delivery companies (UPS, etc).

    Online stores still have physical addresses. Somewhere, the police have to protect a warehouse, an office, etc. and somewhere the trash needs to be taken away. If you have a problem with where the tax is implemented because it's different police protecting a store somewhere far away, don't turn that into all taxes are bad.
  • It seems that the federal/state/local governments have conveniently forgotten one very important thing:

    It's not their money! It's our money!

    They are all operating under the assumption that they have a right to some percentage of our money that we supposedly would have spent at a local retailer had we not bought online. I often will look for something online, and if I do not find a good price or if it is not available then I won't buy it at all. These guys will jump at any chance to get their hands in our wallets.

  • This sounds very similar to what has been hush-hushed over in MI - a tax on internet purchases. However, I don't think this is considered a use tax here, but more of a sales tax. Supposedly, it's been in place for several years too. Yeeesh.
  • Just hope you don't get audited. In CT they can subpoena your credit card records. Anything they find that was bought on-line or mailorder will be taxed. CT has had a Use-Tax for a while now.
  • North Carolina is not the only one trying to get in the the Intertet Tax thing (disguising it as something else). Check out this article from the November 30th edition of the Detroit News ( http://detnews.com/1999/metro/9911/30/11300078.htm ). I don't know how the heck they're going to enforce this thing...
  • I've never reported anything of the sort, and I don't intend to. I did 99% of my xmas shopping online this year, you think I'm gonna tally up the totals and write checks to the gov't? They eat my paycheck enough as it is!

    This is a slippery issue...I'm very interested but not too worried. It will be a while before there is any real progress made towards a global solution for this mess. And it WILL have to be a global solution.

    The Divine Creatrix in a Mortal Shell that stays Crunchy in Milk
  • I guess you'd rather fix the potholes in your street yourself too, huh?

    No, but I would rather some private company be contracted to do it (and do it cheaper, faster and better) than have to pay another 1/2% sales tax.

    What's orange and sleeps six?
    A Department of Transportation truck.

    And how many of you have heard the phrase "Good enough for government work"?

    "God does not play dice with the universe." -Albert Einstein

  • In absolute terms, yes, but that's not the point of "regressive" versus "progressive"; the point is the relative percentage of income spent. A poor person is likely to spend close to 100% of income on necessities of life, hence to be sales-taxed on close to 100% of income (so an 8% sales tax would represent close to 8% of the poor person's income). A rich person might spend 50% of income on necessities and luxuries, hence be sales-taxed only on 50% of income (so the sales tax on the rich person is 4% of their income).

    I hear this argument a lot. To me, it appears that this ignores the fact that the 50% of income not spent is pretty much useless. Oh sure, you can invest it and it may make more money (potentially generating more taxes you have to pay), but even if you save that 50% of your income and eventually have millions in investments it still seems to have no practical value unless you spend it on something (and then end up paying the sales taxes).

    At least, that's how I see it. I'm not an accountant or an economist. What am I missing?
  • A "use" tax doesn't count as a tax on exports from other states if the rate is the same as the sales tax rate for the same item purchased in-state. If the rates are different, then the tax is screwing out-of-state merchants relative to in-state merchants, and violates the Constitution. If the rates match, the merchants are treated the same, and it is only the in-state consumers getting screwed, and the Supreme Court says that is not against the Constitution.
  • by alhaz ( 11039 ) on Monday December 20, 1999 @04:15AM (#1460243) Homepage
    Chances are, you are already required to pay "Use Tax" on any purchase you failed to pay sales tax on. Most states already require this.

    Sure, for Joe Sixpack, the issue may never come up. If you get audited, it could look bad, but that's about it.

    For a business on the other hand, it could get very ugly.

    Of course, I live in Utah, where the tax comission motto is "Tax anything that moves, and levy a fine on inanimate objects". We've got it all. 6.25% sales tax, state income tax, the whole deal.

    These jokers once pressed for a 1/4 cent email tax, before a local ISP explained to the state legislature that they handle close to a million individual email messages a day, and would go out of business in about 16 hours if asked to pay that tax.
  • I remember hearing a story about ten years ago about SC ALE (alcohol law enforcement) agents were staking out hotels just across the NC border in Charlotte, looking for folks loading up on cases of wine to bring back to SC (for their own personal consumption, I presume).

    Dunno if anyone got arrested but it would've been poetic justice.

    The state wine/liquor distribution racket is a topic for another day, though...

  • Maybe you think they're good things to spend money on, but to say that governments are the best providers of education and health care, that's just insane. Also, I'm not a Republican, although I've voted for some -- I'm not sure why you think that Republicans are the only ones who are sick of being overtaxed.

    As for another person who replied to me, I purposely left out roads because that one (as opposed to education and health care) is actually debatable. I would expect that private companies would do better than the government, but we haven't seen the hard proof either way like we have in education and health care.

    Actually, a friend told me a few years back that the U.S. government mixes in cheap rubber when paving the roads, so that it'll wear out more quickly, needing to be repaired sooner, and thus keep all those road workers employed. Anyone ever heard this before -- I never really made up my mind whether or not to believe him.

    Cheers,
    ZicoKnows@hotmail.com

  • Nice idea, but sadly the people who pay for government tend not to be the people who receive benefits from the money spent.

    If the people who had to foot the bill actually got to decide what the goverment spent money on, the only result would be a much smaller government.

    Having said that, I think it would be awesome to be able to say "I don't want to pay my share of this program. In exchange, I agree to never, ever make use of the services provided by this program". Hell, between welfare, employment insurance and goverment pension plan I could get >20% of my paycheck back overnight.

    Sigh.
  • as a resident of North Carolina, I'm used to getting screwed at every turn by our fine legislators... however, most of our residents will simply leave that line blank.
    as to me? im not concerned. i wouldn't buy something online if you held a gun to my head, so i can put "$0.00" on that line without guilt. guess thats a bit of the ex-hacker speaking out.

    ~spot
  • You've never been audited, have you?

    OK, neither have i, I'm just being a jerk.

    The *One* way this tax could be overturned tho is that is unfairly burdens only one mode of purchase. That would depend on existing state laws, but it sure is a clumsy way of finding new revenue.

    Of course, you could demand that the state prove that you ordered the items online, insisting that you selected the items online and then called the vendor on the telephone, thus avoiding a taxable online purchase.

  • Connecticut experiemented with something called "Connecticut use tax". It's very similar, in principle, to any net tax, and is about as effective as this will be, and was despised for the same reasons.

    It seems lots of people would buy stuff from Massachusetts or upstate New York (buy catalog or by driving up there) and get it tax free. *GASP* Tax free? So those geniuses in Hartford say "Hey, let's ask people to total up all the out-of-state purchases they make, and tax them because they're USING it in Connecticut!"

    Needless to say, it didn't work to well. And I expect any net tax to work even LESS well.

    "God does not play dice with the universe." -Albert Einstein

  • ...such as pay taxes in seller's country

    Beep! First problem. Politicians will tax the buyer in some nations/states and the seller in others.

    Now the companies are much more mobile than the customers (=us). So the companies will find a low(zero) tax country.

    If I understood the original article right NC wanted to tax its own habitants, not its companies. Now if you want to tax the web, that is probably the only way. A little cooperation from the banks or "e-payment" will do it.
    "So Mr J Random Person. You paid $3000 with your Visa this year. Prove that those money was spent on non-taxed stuff or cough up!"

  • You pay tax when you buy in a regular store, shouldn't you then have to pay a similar tax when buying from an online store? If not, why?

  • What's that?
    I remember something about "grandfathering"
    don't you all? Shouldn't they have been told
    last year that this was going to be the case
    this year.
    I'd like to see someone take this to the supreme
    court.
  • I live in Oregon, and there's no sales tax here. I absolutely love it. I grew up in Texas, where there is a sales tax, and it was nasty. I hated it. It pissed me off. But now I like that fact that I can go into a store, look at the price on a shelf, and then expect to pay exactly that for the item I want, instead of having to figure out how much the stupid tax is going to be.

    Besides, what reason is there for a sales tax? Why should I pay the government in order to obtain something I want? I already pay them taxes as it is. The internet is one of the last tax-free realms in the world, and I really, really, REALLY want it to stay that way. Really

    --

  • Oh yea, THIS'LL be enforcable.

    *PLEASE record how much money you spent online, despite the fact these conditions may apply:

    A) You MAY have already been taxed for it.
    B) You bought it from a web site in South Africa.
    C) We have no right to tax things coming into our state simply becouse you bought it online

    Also note, that soon we will be charging a tax on all merchandise bought in other states, that is imported into our state. Please also include those numbers.

    We will also be implementing a plan to pull over all carbo laden trucks on our highways, and taxing the companies based on the total value of the merchandise on these trucks..

  • I don't think that I wrote that. I was just citing when Sales Tax came into existence, as well as the reason given in the linked document.

    There was an America without sales tax and income tax. As far as property tax is concerned, I cannot say. Do your own research.
  • by w3woody ( 44457 ) on Sunday December 19, 1999 @09:56PM (#1460260) Homepage
    The rules that govern the Internet is the same that has governed mail-order catalogs. The upshot is that the Supremes ruled a while ago that it is burdensom for a mail-order catalog who doesn't do business in a particular state to have to keep track of every state, county and municipal tax that is owned throughout the nation. They basically said that this undue burden is contrary to interstate commerce, which is one of the cornerstones of the US Constitution.

    When a store does business in a particular state, however, the US Constitution's interstate commerce clause doesn't apply, and the store is on it's own--at least within the confines of that state.

    The reason why the states have all decided they want to tax the Internet is because of all the predictions made by pundants that on-line commerce will represent about 3000000000% of our GDP within the next 15 minutes. (Or something like that--I can never keep track of the exagerations^H^H^H^H^H^Hpredictions.) And the states are upset because they think all that tax revenue that would have otherwise been spent at the local store is being spent on-line instead.

    So as far as the states are concerned, interstate commerce be damned! they want their tax money.

    I forsee a constitutional battle in the next 10 years. Ought to be interesting.
  • So, how do I as a citizen of Ohio get NC to cough up the portion of that tax that reduces my company's marketability?
    Hmm. A tough question, if we take it seriously. How do Ohio companies that for years have been selling their products in North Carolina stores get this NC to cough the state taxes that we're already paying on Ohio (and everybody else's) products? I don't believe they do. But don't worry about it, because, assuming that I keep all my receipts and everything, as a North Carolina resident, I'm expected to pay the sales tax on everything I buy no matter where I buy it. So Ohio merchandise is now 106% of the list price. So is Michigan and New York and California merchandise.

    Now that (except in the many localities that have additional sales taxes) in-state and out-of-state purchases have similar sales tax penalties, does this mean I would buy more stuff locally? Probably not. I buy stuff on-line that I might not be able to get here. Such as when I have a hankering for a book with, say line drawing of an animal on the cover and the only remotely related literature around here are a couple of shelves of Idiot's guides to Z. I imagine the real bookstores in this state are all located in areas that have additional local sales taxes anyway, and for me the convenience of placing a quickly shipped order at any non-Amazon on-line bookstore even if I'm assessed the NC state sales tax definitely wins out over having to spend a day on the highway myself. So if you're in Ohio and would like me to buy your stuff, don't worry. Life for me sucks a little bit more because of this, but the suckiness is evenly distributed.

    If there is EVER going to be an internet sales tax it will have to be at the federal level and,revenue raised will have to be dispursed to specific projects with a wide support base.

    The practical (the moral/ethical/philosophical ones somebody else is dealing with, I'm sure) problem of sales taxes on the internet is collection. From the state's perspective (any state that employs sales taxes to generate income), it's just about getting a piece of each transaction. This is easy when the seller and the buyer are in the same place. I'm so conditioned to paying a sales tax that I think it's just something that the store does because the cash register automatically adds the tax. Tax-exempt sales are a pain because you have to fill out a piece of paper and/or tell the register to no calculate the tax (I forget exactly what the procedure is). But that thing is that it's a tax I pay. The store just collects it, which i s an administrative burden imposed on the store by the state, but I'm the one paying it. This is more apparent on mail-order forms that have that note at the bottom directing us to calculate our local sales tax -- the amount I pay in taxes has nothing to do with the state where the company I'm dealing with is located, even if it's in the same state.

    The glaring inconsistency is, of course, that whether or not the tax is collected at all (but not how much is collected) depends on whether stores are operated in this state. But inconsistency is the hobgoblin in collecting state sales tax (which, in North Carolina, at least, is more a tax on buying rather than a tax on selling) in an international market. And a federal tax on buying would have the same types of problems, and we wouldn't really need the internet to see them. Internet or no internet, domestic purchases could be taxed by having the sellers automatically tack on the federal sales tax, but how does Uncle Sam get his cut on stuff that we buy in Canada? Canada's got enough to do without collecting sales taxes for us.

    But let's pretend that there's a federal sales tax that includes internet commerce. Would the legislators in North Carolina look at it any differently? Probably not. They don't mean to penalize internet commerce, they just want all of us North Carolinians to be taxed on all the transactions we make, because they really do view every non-taxed purchase as loss to the general fund. So now I'd have to pay the federal sales tax on top of the state sales tax. It sucks to be us. And guess what: the revenue raised by either state or federal sales taxes would get dispersed to whatever projects the respective legistlatures feel like. Sure, they'd campaign for the federal sales tax to raise money for schools or more cops on the street or whatever looks best in the polls that year, but after the tax is established it won't be long before it just goes into general funds.

    I've rambled and nobody reads this far down, but on the assumption that a state sales tax is a fair thing to do (it seems it could reward saving, especially if there is no state income tax (which there is here), but penalize the poor, so I'm not going to suggest that it is a fair thing to do), I have to say that the North Carolina plan tries to implement it fairly:

    • It's a tax to collect money supposedly to be used for the good of the citizens of the collecting state. It wouldn't make sense, for example, to charge the North Carolina sales tax on every copy of RedHat that Bob Young sells to people in Ohio because the people in Ohio don't benefit from North Carolina services.
    • It doesn't impose collection burdens on out-of-state retailers. Which would be truly nightmarish if those retailers (and for that matter, retailers here) were required to keep up with collections for every state that imposes sales taxes.
    Of course, the sales tax has some pretty major problems, too.
    • Why are the many wonderful visitors from Ohio forced to pay North Carlina sales taxes? Of course there are some state expenditures that they benefit from while they are here, such as law enforcement and street maintenance and fire protection, but they don't attend our schools and I doubt that Ohioans who can afford out-of-state vacations are going to be much of a burden on our welfare system.
    • If the state needs this money so badly, why hasn't it been collecting from mail-order and telephone-order companies that don't operate stores in North Carolina? If my friend in Chicago hooks me up with a really talented yet unknown artist and after a couple of telephone conversations and a couple of polaroids sent through the mail, I end up investing $1,000 in a sculpture, why should I not be paying sales tax on that but pay %6 on some paperback book I get from Barnes&Noble?
    There is apparently a provision in the law for those of us who fail to keep up with our on-line purchases. From the article:
    The state suggests that a resident with $46,000 of taxable income pay $28 in use tax on items costing less than $1000. A resident with only $10,000 taxable income would be expected to pay only $6.
    Calculated this way, it's more of an income tax than a sales tax. How long before it just becomes an internet sales tax that you pay based on your income regardless of whether you have a computer, or have internet access, or use that access to make purchases?

    And finally, compare and contrast:

    If I were a North Carolinian you could bet the outer banks that I would deny any internet purchases I may have made. "I made those purchases over the phone to a toll-free number and, that company does not have facilities in NC so you can't touch me."
    But if they lie and they're audited, Collins said, the proof will be in their credit card statements because, for the most part, Internet and catalog purchases are made with plastic. And they're easy to track.
    So, it seems there is a (probably small) non-zero chance that avoiding the tax will fail. But I hear Vegas is fun, too.
  • The "Schaumburg Commerce District" (that strip on Golf Road with all the malls) also imposes a hefty tax on all purchases made there. Welcome to Illinois, where every piss-ant governmental body can tax you. (There are even Forest Preserve taxation districts!)

    And let's not forget the Illinois Use Tax, which says that if you bought something (anything!) out-of-state but use it in-state, you must pony up the Illinois sales tax on it anyway. No one pays this of course, but I know someone who got nailed on it. He bought a camcorder on a trip to Hong Kong, but failed to pay Illinois their cut. He got a nasty letter from the state demanding money. Apparently the U.S. Customs department (he'd declared the camcorder on re-entry to the country) ratted him out to the state.

    Too bad I can't convince my wife to move.
  • The big problem is the issue of geographical boundaries. A brick and mortar business operates and does business primarily within the community in which it exists, and is subject to the tax laws of that location. In most cases, if you personally visit a business, you'll pay the taxes appropriate to that location, while if you mail order, often there are no taxes unless you live in that location.

    On the internet, commerce has the mail order dynamics, multiplied. The big question is, who are the taxes paid to? The state that contains the business, or the state that the purchaser lives in?

    This NC issue is essentially saying that you pay them for any purchase made over the net, regardless of the location of the business. This is not done with mail order, and probably shouldn't be done over the net. If internet commerce must be taxed, it should probably use the tax system that is used for mail order, since the business mechanisms are similar.

  • Ok, what I'm seeing here is that this is a use tax, one that goes towards maintaining the infrastructure. If they implement something like this in Texas, then will they actually improve the infrastructure? I seriously doubt it. I would have no problem paying a tax on online purchases if it actually went to where it was intended to go. If I pay a tax on internet purchases then I expect an improvement of the infrastructure, I want them to run the fiber so everyone can have a cable modem, I don't want to pay for Mr. Bureaucrat 's new car. Alas, usually that is where this money will go. So much for a government that is _for the people_.
  • Some taxes are necessary, but I'm surprised the liberals/leftists are so concerned with preserving sales taxes. My semi-orthodox understanding always was that sales taxes were regressive in effect (neutral in theory, but regressive in effect) because the lower economic classes spent more of their income on goods than the upper classes.

    After all, that's why a lot of places (including my state, which people used to like to call Taxachusetts) don't have sales tax on necessities like food and clothing.

    In Europe the stakes are much higher. Some items have an value-added tax over 20%. And some are "sin taxes" (like an alcohol) with a social mission. The debates start to get complicated. But one could argue, "just increase the income tax (especially on higher-income people) and eliminate all sales taxes anyhow."

  • Of course, UPS on a per-package basis takes a much lower toll on the road than an individual shopper - they'd be nearby anyway.
  • yeah, i'm sure this will work really well...
    Titled "Consumer Use Tax," it will require consumers to calculate how much they spent for goods online and pay taxes on it.

    C'mon, if they can't come up with some methode of figuring out how much someone has spent online, then this simply isn't going to work.
  • by cfulmer ( 3166 ) on Monday December 20, 1999 @04:35AM (#1460271) Homepage Journal
    So, a few things to ponder:

    Article 1, Section 9, Clause 5 of the US Constitution:

    "No Tax or Duty shall be laid on Articles exported from any State."

    The Internet Tax Freedom Act, sect 1101(a):

    "No State or poilitical subdivison thereof shall impose any of the following taxes during the period beginning on October 1, 1998 and ending 3 years after the date of the anactment of this Act --
    [..] (2) multiple or discriminatory taxes on electronic commerce"

    Internet Tax Freedom Act, section 1104 ("Definitions"), section 2:

    Discriminatory tax -- The term "Discriminatory tax" means --

    (A) Any tax imposed by a State or political subdivision thereof on electronic commerce that --

    (i) is not generally imposed and legally collectible by [...] on transactions [...] accomplished through other means;

    [...]

    (iii) imposed an obligation to collect or pay the tax on a different person or tentity than in the case of transactions [...] accomplished through other means."

    There are other problems: Purchasing items sent as gifts to people in other states, purchasing items that are not subject to state sales tax.
  • I'm hardly a financial genius, but here's one thought: When you walk into a store in your local strip mall/parking lot growth laboratory, and purchase the latest Pokemon or acceptable substitute, You probably pay sales tax (dependant upon the policies of each individual state. Oregon, for example, has no point of sale tax). This money then goes to the state to make life better and brighter not only for nice suit wearing "I'm honest, honest" politicios, but, so the idea goes, for "You", the Consumer, and "They", the Businessmen who sold you Pokemon rev. 2.4.01. So. the distinction here is that when you buy from an online retailer, There is already a tax markup for the state in which they are incorporated. For example, Amazon.com pays taxes to Delaware, even if it is primarily in my home state, Washington.
    So now, let us count the ways in which you are getting screwed by North Carolina. Once again, excuse my ignorance of actual North Carolinan tax policies. You might very well pay income tax to NC as well as to the federal goverment. This is the "getting screwed coming" part. So now you buy this hot, must-have, 20% markdown fad item from Amazon.com, and in doing so pay sales tax to the magnificent state of Delaware, which you've probably only thought about 3 times in your entire life. This accounts for the "getting screwed going" section of murphy's tax law. Now, as if that wasn't enough, North Carolina slaps it's own happy little version of an intra-state customs tax on your hot little gift item. The net result? You get to examine your deep, innermost feelings about being screwed coming and going, and then being screwed coming back again!

    Congratulations, North Carolina. Did you know that Kewpiemons are at a 20% markdown right now? Buy immediately!
  • This is not at all surprising...

    1 - They're politicians :: "If you can be screwed, then you will be screwed."
    2 - This from a state that taxes your tax refund. (look real close at the funky math based on your 1040.)

    It gets worse... they worked out some "scale" for accounting for your tax burden based on income (how much of my tax money was wasted on that.) But then they want you to pay your 6% tax on purchases over 1000$ -- basically you've been taxed twice (or more.)

    And sadly, NC will certainly waste billions of dollars enforcing this via audits and exact rediculous fines. Of course we're all gonna put zero in that blank even tho' 99% of us can tally the charges down to the penny -- most online stores keep user accessable records. The loop-hole: it's a "Sales and Use Tax"... while the "use" part applies, the "sales" part generally doesn't.

    Basically, NC is turning private citizens into companies. Companies don't pay sales taxes on their purchases as they pay them directly to the state(s). That's whole reason for "Federal Tax ID Numbers".

    So, what are the politicians going to waste this tax money on???
  • I live in Oregon as well, and my opinion (and I suspect, the opinion of most of the populace) is that there is no way in hell a sales tax is even going to be taken seriously in this state w/o BIG cuts (or even elimination) of the income/property taxes.

    Unfortunately, the legislators keep hoping they can add a sales tax w/o reducing anything else. How many sales tax ballot issues have Oregon voters shot down over the past few decades? 9? And with some pretty convincing margins, no matter how much money was spent on the public relations campaigns...(even when they pulled out their dirty tricks like "you WANT your kids to have good schooling right?").

    You'd think they'd get the message after a while, but I suspect they won't unless somebody uses a clue-stick the size of the Grand Canyon upside their collective heads...
  • Because it's not a tax on the internet. It's a tax on me (a North Carlina resident) puchasing something, just as if I purchased it at Crabtree Valley Mall in Raleigh. I don't like it, but it's no different from having to pay taxes on a car I might buy at a dealership down the road.

    The very real question of whether this collection method has any chance of working aside, the application of this just means that if I decide to buy something on line because:

    • I have a wider selection to choose from.
    • What I want is actually in stock.
    • I don't have to put up with mind boggling ignorant salesdroids.
    I will have to pay 106% of the list price just like I would if I chose to buy something that was almost, but not quite, what I was looking for because the local store carries it and it was in stock and I restrained myself from a lethal improvement to my state's aggragate IQ.

    E-retailers might be hurt by this because the effective cost to me would be a little bit higher, but if your price was already with 6 percent of what I could get the same thing for locally, why in the world would I pay the shipping and handling? And why would I order from Alaska? Nothing wrong with Alaska, but I find that I can usually get quicker delivery (and lower delivery prices?) if I limit my shopping to places east of the Mississippi.

    As for why does the state feel that it has a right to this money, well, why does it feel it has a right to any money it collects? Don't forget, at least this method (which I have a hard time imagining will be effective) doesn't impose event the hardship of collecting the tax on any non North Carolina company. The expense is on the North Carolina buyer and the justification is that the money collected will be used by the state of North Carlina for the good of North Carolinians. And to be honest, I do feel that some of the tax collected by this state is used wisely. A lot isn't, but some is.

    I can't say whether the brick and mortar businesses here (like Redhat?) supported this law. I don't know. But I suspect that having been hamstrung by the requirement that they collect sales taxes on things NC residents buy, they're happy to see the playing field leveled on that axis. And arguments that shipping charges balance no taxes on internet transactions just don't wash. The retailers in the malls and on main street here had to pay to have the stuff they stock shipped here, and the only way they can pay that cost is to pass it on to me in the price of the merchandise. And that's even if it's a huge company that has its own shipping service rather than relying on UPS or some other handler.

    So will this tax (and let's pretend that this is 100% enforceable and they'll chop off fingers or something similar if I don't keep accurate records and pay up) change my on-line buying habits? Will I stop buying from retailers in other states? Other than keeping my receipts (to avoid the digit-removal process), I'd have to say no.

    A more interesting question is why does North Carolina have both a sales tax and an income tax? Why do we get it coming and going? If there is a set of essential public services that should be supported by taxes, what is the fairest way to impose those taxes? Income tax so everybody pays regardless of what they do with rest of their money? Or sales tax that favors thrift? Does it matter if your poor so that you lose a chunk before you get your paycheck, or lose 6 percent of your paycheck because there isn't enough to save any of it?

  • My understanding of Ohio sales tax law is that it applies to Ohio residents, requiring Ohio businesses to collect sales tax from them, and requiring them to pay sales tax on purchases made out of state. This hasn't stopped decades of driving to PA to buy clothing (sales-tax free) or mail-order by catalog. It's not legal, but it's commonly recognized as unenforceable. Since non-Ohio residents get charged sales tax while in Ohio, I consider my purchases in other states and on-line to be a balancing factor.

    From what I've seen, most on-line merchants based in the US collect sales tax for the residents of their state (unless they're lucky like Oregon) and wal-mart.com collects state and county sales tax. (For some reason they know the tax rate in all those counties ;-)
  • by mOdQuArK! ( 87332 ) on Monday December 20, 1999 @09:00AM (#1460277)
    I'm not sure you can classify all consumption as "economically destructive" - perhaps environmentally destructive, but in a society with a high population density & a finite money source, you NEED consumption so that everyone can earn a living by providing goods & services to each other.

    If you encourage TOO much savings (socking the money away in a mattress, for instance), then the money which is accumulating doesn't really do anybody much good (including the person doing the savings!) except as a warm, fuzzy "secure" feeling.

    This bad situation holds true for any situation where large amounts of money are "trapped" - for instance, when a small number of rich people in the economy hold most of the money, and the "poor" people don't really have much left over to buy anything.

    Heh...if you want to keep income churn going, then you could do a tax based on ASSETS rather than income or consumption, probably with something like the first $200,000 exempt). That'd kind of take the shine off of accumulating large amounts of paper wealth, eh?

    Of course, you'd have to make sure that money gets back into the economy at the bottom level so that it does the general populace some good. (No, Virginia, I do *NOT* believe in supply-side economics - except as a way for rich people to get first crack at the money!)
  • Article 1, Section 9, Clause 5 of the US Constitution does not seem to be a problem regarding, for example, state sales taxes on cars produced in Michigan and sold in North Carolina or Wyoming.

    The snippet of the Internet Tax Freedom Act seems to answer the argument you try to make. The 6 percent sales tax is "generally imposed and legally collectible [...] on transactions [...] accomplished through other means" including local retail stores. And the people being taxed are still the North Carolina residents who would have to pay the same tax in local stores, so it doesn't "impose an obligation to collect or pay the tax on a different person or entity than in the case of transactions [...] accomplished through other means."

    As for the other problems, if I buy something I intend to give as a gift, I still have to pay taxes on it. I bought something this weekend that I need to get wrapped soon. I got a 20 percent discount, but I paid $1 in sales tax (OK, I'm cheap). I could have ordered this on line, and if I had, then by this law I would be obligated to pay the 6 percent sales tax. Of course, I probably wouldn't have qualified for a 20 percent discount (it was a special situation I lucked into), but generally I probably would have found a lower list price.

    I do wonder about people paying on items that are not subject to state sales taxes. I bet a lot of the people who pay any tax on their internet transactions will pay the tax on exempt stuff.

  • You speak as if there has always been sales tax, or tax of any sort.
    Mississippi was the first state to enact a general sales and use tax. It did so in 1932 as a depression-era response to
    declining revenue from other sources, especially property taxes


    So a property tax isn't a tax?
  • by Anonymous Coward
    In theory, the state of Taxxachusetts (MA) has been doing this for a long, long, time. If you buy anything out of state (no matter how) you are supposed to file a form and pay a tax equivalent with the sales tax when you bring it into the state. Needless to say, there are very, very few filers. This sort of thing does little to raise revenue and a lot to piss folks off. Somehow, you would think that these folks would have learned by now.

    On another front, it also appears that the State of North Carolina may require sellers on online auctions (e.g. ebay) to posses a auctioneers license (2 weeks and $2,000)if they sell on anything but the most casual basis. The state of North Carolina just doesn't get it. These things don't work. On a scale of 1 to 10, I rank this move by NC up there at about 8 in wishful thinking right next to the Canadian CD levy.

  • It's not that these types of taxes are new. For years people who order items via mail order are required to pay tax on those items. Even if they came from out of state.

    However, no one actually pays the tax. In fact most people don't know they have to.

    I, like many of you, have watched some of the hearings on e-com. I think the head auditor for CA made the best point. One) Big tax items like cars are never missed since they have to be registered. Two) The biggest offenders are in the USE TAX area. CA's solution is to have regular audits. Three) The average user is not the target. The money that would have to be spent to audit e-com for the average taxpayer is more than the ammount of money that would be collected.
  • Instead of taking the attitude that online business are getting a free ride by not having to apply taxes, try looking at it from the perspective that the local stores are getting screwed by having to tax their customers. Why would you want to be taxed in either situation, much less both?

    Cheers,
    ZicoKnows@hotmail.com

    P.S. Trekkie?

  • ..we also do need to tax people fairly.. and more importently we need to tax them in a way that they see, i.e. if the people do not see the tax then the gov. is committing fraud. I believe our current system of hidden taxation (by making the employer pay it for the consumer) should be illegal, but the fact remains that it is actually unrealistic to expect the Joe Moron to save enough money to pay his taxes.. the only compramize as I see it is to move totally to sales tax and do away with things like income tax and social security. Plus, it really is not that much harder to make a computer system handle the tax part. Now, perhaps we should use the interstand commerce clause to unifomize the state sales tax wthin the U.S., i.e. make city sales tax illegal so that sales tax can always be determined by zip code or state or soemthing. That would be a nice justifiable application of the interstate commerce clause that would solve the problem you discribe. Jeff
  • I live in NC, sell software all over the world using a credit card processing company located in Georgia.

    List the taxes that must be paid, who pays and whop recevies, for each of the following purchasers :

    • A Texan buys something from me
    • A Texan buys something from me using a PC in NM
    • A Korean national buys something from me
    • A Korean national buys something from me using a PC in Texas


    Remember, when these people get their credit card bills, it doesn't say "Smaller Animals Software, Inc.", the name of my business. It says "RegSoft" the name of my credit card processor.

    ?? My accountant didn't know either.
  • I used to work for a company that handled incoming calls for people ordering from catalogs. When they placed their order they were only charged tax on the item if they happened to live in a state that also had a corporate office or local store for that company located in their state. They were charged what ever that sales tax was for that state.

    So any state could technically use this same taxing scheme for buying over the internet as it is really not that different from mail order catalog purchases. So if North Carolina wants to charge internet sales tax they technically should only charge taxes on North Carolina residents purchasing from companies whose offices are located within the State of North Carolina.

    Now even if the server was located in another state (as was the company I worked for) it would not allow that state to tax purchases also placed through that company as the hosting company is just a third party service provider for whatever company.

    So if I order something online from the store down the street I should have to pay state sales tax, but if I purchase something from a company in another state that doesn't have an office within my state I should not be charged sales tax. I don't have any specific law references or anything, just passing along how I understood things to work regarding mail order purchases.
    ----------------
  • and I *love* not having income tax. I get to keep so much more of my money! And any big ticket items I purchase (computers, etc) will be either from Oregon or over the Internet.

    SCREW YOU MONEY SPENDING LIBERALS! BWAHAHAHAHAHA!!!
  • Don't forget the estate taxes.

    You do have something there, 'tho. While the top marginal rate for a married couple filing jointly was 39.6% (sum over $250,000)...

    ...those filing with total personal income exceeding $100,000 in '96-'97 (5,260,500 such returns), the average tax and penalty per return was $29,005.

    Between $25 and $50K? Average of $15,861.

    For those filing a 1040A with TPI under $25K, the average T-and-P was $16,794; with a non-1040A, $9,544.

    Figures according to the _NYT Almanac_, p. 179.
  • I'll call Brookings "heavily left-wing" at some point if/when I write about them. And the Cato piece specifically decried *federal* or *internationally* mandated or collected sales taxes, and stated that such collections should be left up to individual states.

    Last I looked, North Carolina was a state (AFAIK Red Hat hasn't acquired it yet), so the Cato crowd can't scream too loudly about NC's attempt to tax *its own residents* on purchases made out-of-state, according to my reading of the very brief policy statement referenced above.

    Please realize that we're not talking about any ethical justification for taxes here, or the moral implications of having government at all, just the mechanics of tax collection in today's world.

    - Robin

  • Perhaps tell them you bought some things online... like a couple books or something... but conviniently ignore the VA Linux system you buy. :-)
  • "Good enough for government work?"

    My favorite quote to describe government work is:

    Measure it with a micrometer,
    Mark it with a grease pencil,
    Cut it with an axe.
  • No offense to you personally, Zico, it just seems like more and more peopel want something for nothing these days.
  • "Well .. Streets for the Stuff you *can't* just transfer over the 'net (ever tried to get a sixpack trough a telephone line?), then there is the police, that at last *tries* to prevent bad boys to just take the nice goods you bought over the 'net." We've had streets and police since our country was founded. I don't see how the net changes that. We don't need any more streets (well, /perhaps/ the heavier post office trucks weighted with ecommorce packages would wear out the streets more) or police (actually, I'd guess we'd need less police because there would be less stores to steal from). Anyway, the USPS is having a field day because they are getting so much more new business. That's at least one place where the government is already getting compensated.

    Jazilla.org - the Java Mozilla [sourceforge.net]
  • "The government can most certainly tax the citizens for anythign they want. The founding fathers abhorred the ideas of taxation without representation, not just taxation." I remember hearing or reading somewhere that they were against /arbitrary/ taxation too. The government shouldn't tax you without a reason. Taxes only exist to fund resources that the population actually uses. "Besides the fact that the US government basically created the internet, and the Feds or the states have been taxing interstate commerce for decades..." Well, after a certain point it was mostly education (non-profit usually) institutions and then private companies which developed the internet (BSD? SCO? CISCO?) For interstate commerce, the federal government has to repave and build new highways, etc. I don't see what the US government does to sustain the internet. It's not like they are out there putting in wire or running routers or something.

    Jazilla.org - the Java Mozilla [sourceforge.net]
  • Or even simpler, do as in the EU, where they have Value-Added Tax instead of sales tax, and the tax is payable according to the where the company is, not where the buyer is...

    It still is not that simple. VAT should not charged when the product/service is exported. So if I had a business in London. If I sell over the net then I should only be charging VAT to people who live in the EU. Though I am sure a lot of the time it is still being charged.

  • There are numerous types of goods/services you can buy online that do not have to be delivered to your door.

    Software
    Music
    Stamps
    Information
    etc...

    In these cases, if the internet tax is to be used for road upkeep (as per the original posters comments), then the buyer is being taxed for a service they do not need.


  • Why? Governments today typically feel entitled to your money. For instance, it's called the *government's* budget surplus, not the people's...

    Anything that threatens to reduce that income is considered wrong; this includes the burgeoning e-commerce business, which they see as denying them what they believe is their fair share of what otherwise might go to local businesses.

    It's not that they can justify an instrinsic right to the transaction; it's that they believe they have a right to your money, be it through property taxes, lottery and liquor monopolies, or whatever.

  • Even if I agreed with this in principle, there are some serious practical problems with compliance. I didn't save any of the receipts, etc. much more than a month after I received whatever it was I ordered. I didn't know they were going to do this until now. I don't even remember all the stuff I bought online this year. This whole thing has the look and feel of some half baked scheme hatched by liquored up lawmakers. It wasn't thought out. If they were going to require us to provide this sort of info for 1999, the time to put out the word was at the beginning of 1999, not at the end.
  • About states which receive more than they send? Sure, it happens. I believe I saw the same article, which noted that Southern and Western states with relatively sparse populations typically got more than they sent (although it might have just been income taxes, instead of total; I don't remember); while the more populated Northeast and Mid-Atlantic states basically got screwed over -- especially Conn.
  • ...into thinking that taxes are a good thing? I see so many people that actually WANT more taxes and I don't understand why that is.

    Maybe it's because it's a sales tax and not income or property tax?

    I'm serious, do you "tax me please" folk really think the government will do better things with your money than you would?

    Now this "you have to pay taxes at a real store, so why not online" argument is ridiculous. Buying online IS NOT like buying at a regular store.

    You don't need to drive your gas guzzling car to shop online (causing environmental hazards, potential auto accident injuries)

    You don't need to heat up (or cool down) a big building so online shoppers are comfortable. (uses lots of fuel-more environmental problems)

    You don't need police and security personel to patrol an online web site. (to protect against thievery, shoplifters, crazed lunatics with guns)

    You can't eat fast food online (gastro-intestinal hazards)

    Overall, online transactions pretty much don't pose the same cost-issues. For local and regional governments.

    The ONLY way in which an online store costs the local government any money is by the usage roads by delivery companies (UPS, etc). These companies already pay taxes (on gas, profits, who knows what else), and possibly tolls, or whatever else.

    They are getting their money, don't worry. It sounds as if you think Almighty Government will come crashing down if it doesn't take more and more money away from it's citizens.

  • The common argument against sales taxes are that they are regressive. Take the example of two families, one which has an income of $25,000/yr and one with an income of $100,000/yr. The family with the $25,000 income would pay little or nothing in income tax, but they would have a very hefty tax burdon, as the vast majority of there income would be consumed and therefore subject to sales taxation. In the case of the family with the $100,000 income, presumably, some of this would be saved, and thus not subject to this addition taxation. Because higher income earners have the ability to save a higher portion of their income, they have the ability to escape this taxation. The most interesting, and IMHO, the fariest taxation scheme would be a progressive consumption based tax. The way it works: do away with sales tax and income tax, and instead tax people on a sliding scale based on their level of consumption. The argument is basically that consumption, as the name implies, is the real descrutive force in an economy...not earning income, which is what our current tax system is principally geared towards taking a slice of. Take for example those same two families.... Under this system, the $25,000/yr family would be taxed on their consumption (which is admittedly a large percantage of their income) but they would be charged a low (perhaps even 0%) rate, because their income is so low. On the other hand, the $100,000/yr family would be charged at a higher rate (you pick the actual scale, its pretty much irrelevent for this example) but only on the portion of their income that they consume. So if they only spend $10,000 and save or invest $90,000, they pay less taxes than if they go out and buy lots of stuff. This is the only system which punishes economically destructive activities and still protects those who need tax protection because of their low level of income. It also rewards those who work hard and don't piss all that money away.
  • by guran ( 98325 ) on Sunday December 19, 1999 @10:07PM (#1460333)
    Theoretically, there should be no difference if I buy something by mail order or online. If it's OK to tax me for the former, it should be OK to tax me for the latter. (and I said *if*)

    Like it or not, the net has gone business. Taxes are a part of the meat space business. It is hardly fair against meat space stores if they have to pay taxae, that their online competitors have not.

    That said it is not so easy to tax the net (fortunately). I am a swedish citizen. Suppose that while I am in France, I step into an internet cafe (owned by an Israeli) and buy a Chinese product from a australian company, registred in the .com domain, that has its servers in Japan. Which law applies?

    Of cource I choose to follow the law most beneficial to me. (That is I say nothing, hoping to slip between the systems).

    Of cource, local and national goverments will try to impose taxes. They will fail horribly as long as the net is not own by any country (including the US thank you).

    Is this a problem? Yes of course, but it is a problem that "we" can take advantage of. Enjoy your freedom while it lasts.

  • Simple answer there. In Oregon, where there is no sales tax, you instead get screwed by having to deal with not only a federal but a STATE income tax. In Washington, there's a ridiculously high sales tax, but no state income tax at all. What does this mean? It means that Washington punishes heavy-duty consumers (hear hear! Clap clap clap!), whereas Oregon punishes everyone equally. How American! Love it! Oh, and it also means that between Thanksgiving and Christmas hordes of Washingtonians make that commute to Portland and gleefully spend their non-state taxable income on non sales-taxable goods. What a deal!
  • May I quote the Constitution of the United States, Article I, Section 9, Paragraph 5:

    "No tax or duty shall be laid on articles exported from any state. No preference shall be given by any regulation of commerce or revenue to the ports of one state over those of another: nor shall vessels bound to, or from, one state, be obliged to enter, clear, or pay duties in another."

    Litigation in support of said provision of the US Constitution was executed and ajudicated by the US District Court of the Eastern District of California on July 8, 1991. See: CIVS-88-1067 MLS.

    In his ruling, the Honorable Milton L. Schwartz, said that not only was California's attempt to collect sales tax on interstate commerce was unenforcable, but California's attempt to collect the so-called "use tax", in an attempt to circumvent the express intent of the United States Constitution, was also unenforcable.

    May I suggest to various legislative bodies and taxing authorities that they go fuck themselves until such time that they can amend the Constitution.

    I love my country. I fear my government.

  • by Zico ( 14255 ) on Sunday December 19, 1999 @10:24PM (#1460342)

    You should be looking at it as, "I don't pay tax on my online shopping, shouldn't I then be free from sales tax when I buy in a regular store? If not, why?"

    No offense to you personally, Tyrell, it just seems like more and more people accept constant taxation in their lives these days. We should really take a hard look at the situation and wonder just why we're spending so much.

    Cheers,
    ZicoKnows@hotmail.com

  • But the point is, a lot of states, including NC, require you to declare and pay taxes on the items which you purchase from a catalog or over the phone already. The internet provision is just meant to suppliment this existing tax. Now whether people pay the existing tax is another question altogther...
  • Why pay any tax? Simple. You pay tax to fund those essential services that governments best provide (education, roads, health - despite what Americans seem to think, etc). All of these things cost money, and taxes are the only sensible way to pay for them.

    So, if you agree that some tax must be paid (and sometimes I wonder whether that concept is understood by some Slashdotters), the question is "What is the best way for that tax to be collected?" The answer to this question involves such criteria as:

    • Cost of collection
    • Fairness of collection(and what is "fair" is an endless question)
    • Stability of revenue collected.
    • Extent to which it encourages good behaviour (the idea behind very heavy cigarette and fuel taxes).
    • etc. . .

    So, in theory, if it's cheaper, fairer and more socially desirable for governments to collect taxes through Internet sales taxes rather than income taxes, import duties, or other levies, I have no complaints. The only problem is that, in practice, Internet sales taxes will have to be organised through international agreement with all the stupidies that usually entails. For that reason, I believe that the cost of collecting Internet taxes (borne by online merchants) make this far too onerous, certainly for the moment.

    If you want to complain about the overall level of tax you pay, fine. If you think a tax is too onerous to manage, or impacts you unfairly, fine. But don't expect a sympathetic hearing if you expect to pay no tax at all, or don't like observing the fact that you pay tax.

  • I hate to follow-up my own post. I believe that I found that the US Supreme Court affirmed the case I cited in my prior post by refusing to hear an appeal of the case. See: 111 S.Ct. 1683 IANAL.
  • It's ideas like this that make me wince at the outright stupidity of most governments around the world.

    It's a pretty universal economic law that if you impose a cost on a certain kind of activity, the amount of that activity undertaken will tend to decrease.

    Now costs include the cost/inconvenience of making a transaction. Although ivory tower economists tend to assume this cost out of existence most of the time, it is seriously important in the real world. Reducing transaction costs is one of the big determinants of economic organisation, e.g. the economies of scale of large firms.

    Still with me?

    OK, now consider a government that imposes a system whereby every *transaction* is taxed. The actual rate of tax is irrelevant, since it is vastly outweighed by the huge incovenience of recording transactions and beaurocratic monstrosties to administer and police the whole scheme. Companies will be faced with burdensome legislation and will probably have to shell out vast sums for new automated systems. Worst of all, the cost of making transactions will be a discourage trade in general and the economy will slow down.

    I for one would be very disappointed if the potential of the internet is squandered by a bunch of clueless politicians who don't understand basic economics and are utterly clueless with regards to technology.

    But let's not give them the chance, eh?
  • Ok there Mr. NC tax collector, let's take a look at what I bought this online year:

    Guns & Ammo subscription
    7 pounds, nitro glycerine
    3000 rounds, armour piercing 50 mm rounds
    2 kilos, weapons grade plutonium

    Thats about it, so did you want me to send in the cheque, or are you going to send some nice people around to collect it? Yeah, ok I thought you might be sending someone...

    Hotnutz.com [hotnutz.com]
  • Back on November 11, I submitted a story about certain U.S. state governors' plan to band together to adopt a so-called "voluntary" internet sales tax [lasvegassun.com]. ("Voluntary" on the states' part, naturally, not the consumers.) The Washington Times [washtimes.com] originally broke the then-secret plan, about a week before the article to which I made a link above. Unfortunately, it doesn't seem like the Wash Times's article is available on their web page anymore. (If you have a Northern Light account, you can get the entire Wash Times article.) Oh well, guess Slashdot had more important things to report*! ;-P

    Cheers,
    ZicoKnows@hotmail.com

    [*] Most likely a story where "someone somewhere said that they weren't a fan of Linux" ;-)

  • I'm the slightest bit curious why NC (or any other state trying to tax the 'net) thinks they deserve a share of this money? It is my understanding that the primary justification for a sales tax is because it costs a city/state quite a bit of money every year to maintain a good enviroment for business to function (road work, police coverage other basic services) By this logic taxing transactions at brick and mortar shops makes sense. However it falls apart when applied to internet transactions. The user already pays for the services that make ecommerce possible: 1) phone line to the local utility 2) account with ISP. Now I know the utility is paying a tax on it's profits to the state and so is the ISP, therefor the state is still getting it's money. And if any e-business's are being run out of NC you can be sure that they too are paying income tax. In addition anybody employed by this e-business in NC is paying a sales tax on all the purchases the make locally. With that logic in mind NC should permantly ban the idea of a 'net sales tax, give lots of incentives for high tech and ecommerce companies to set up shop there and make the whole state a haven for e-business. Then they would make up the tax revenue lost to ecommerce, and would annoy the people alot less every tax season.
    Trying to tax internet purchases is a step in the wrong direction anyway and is probably supported very strongly the brick and mortar business's in NC, who would rather have the government hamstring their competition rather than rework their strategy to stay competitive. It's not the actual tax amount that is going to cause people worry, it's the fact that now everytime they surf over to Amazon.com or wherever they are not only going to be thinking about price and quality of service, the concept of saving all their 'net receits for a year and figuring up the totals and the taxes due carries a high "pain in the ass" factor that will discourage people from shopping online because in some cases it will become less convienent than driving to the mall. Thus this new tax will seriously undermine one of ecommerce's biggest competitive advantages. On the other hand I suspect most people to ignore the idea, take a wild (low) guess at tax time and ship NC an extra 20 bucks rather than deal with the hassal of actually keeping track of everything they buy online, I know I would.

    Once again glad I live in Alaska, where even the government doesn't trust the government ;->


  • by Greyfox ( 87712 ) on Sunday December 19, 1999 @11:13PM (#1460383) Homepage Journal
    IIRC, if you're a resident of Florida, you're supposed to pay sales taxes, even on goods purchased out of state and brought back into the state. They had some obnoxious commercial about it once when I was down there. I remember watching it and thinking "That's gotta be the single most ignored tax law in the history of history." It's amazing what the assorted governments will try to get away with if you let them. Another story goes that when IBM opened their Boca Raton plant, some lawmakers in Florida got the big idea that they could tax IBM on its entire revenue worldwide because they had a plant in Florida. IBM promptly threatened to pull out of the state completely and move somewhere more commerce friendly and the plan was subsequently dropped.

    Anyway, as taxes goes, this one has quite a few benefits. First of all, it's highly visible to the taxpayer. Unlike almost all other taxes, which are collected for you for about 90% of the tax paying public, John Q Public will be seeing exactly how much money is going to the state. Maybe he'll start demanding more justification as to how that money's spent. Second, it's easily ignored or avoided. This might even prompt the faster development of the anonymous E-Cash that is an inevitable development of the net. Finally, it doesn't try to force the vendor to support every tax juristiction on the planet.

    The various governments trying to tax net transactions (And everything else) is most obnoxious. But we all know it's inevitable -- they all have to have their greedy little fingers in every pie they can get their hands on. While we can slow the progress by fighting tooth and nail against net taxes, more progress would be made (IMHO) by demanding more accountability for the use of those funds once they've got them. Demanding justification for every penny they spend and every pay raise they vote themselves would be a much more effective deterrent against future taxes than anything else we could do.

  • I work in the UK, and I for one hate the fact that a very large chunk of my salary goes to income tax - then what's left seems to get divided between Council Tax (residential), Road Tax, Value Added Tax, Fuel Tax and so on. Then when I die, they take between 40 and 60% of what is left in inheritance tax, depending on which country I happen to be a resident in at the time. So on a gut level, seeing that so much of the money I earn actually goes to the government, I have a very allergic reaction to taxes in general.

    I agree that a "long hard look" at taxes and spending would be a good thing - but I wouldn't go into the discussion from an individualist point of view, saying that taxes need to be cut - I'd go in from an economists point of view, looking for the ideal amount of spending on those things that add the most value to the economy and the people. If in the end that means taxing less, so much the better, if not, then the money will be spent on something more worthwhile (and hopefully more efficiently).

    On the other hand, I'm not as cynical about what that tax is spent on as many of the people on Slashdot seem to be. Whilst I enjoy a good consipracy theory as much as the next man, I can't say that I really think the government exists to exploit me (possibly with the help of LGM). I look around me here in the UK or in my native country in Europe, and I see a lot of good things being done with the money earned from taxes. I find that your point of view is expressed a little too strongly... I don't pay tax on my online shopping, shouldn't I then be free from sales tax when I buy in a regular store? If not, why?

    Taxes are collected at the point of sale because as far as the budget for the state is concerned, that money is needed. If they stop taxing there, they have to either tax elsewhere or cease spending somewhere, and since they're never going to get agreement on what they ought to cut/tax, it's not a realistic option for them. That previous sentence can be debated forever as we could go through all the different taxes and areas of government spending and debate them all - the point I'm making isn't what's right or what's wrong, but that agreement will never be reached, so from a politician's point of view, it's not a can of worms they really want to open as it's not worth their while.

    That having been said, how can it be considered fair to continue taxing non-internet shoppers whilst not taxing those who shop online. It would create a price disparity between online and physical stores and the owners of bricks-and-mortar businesses would have a very real complaint in terms of who is getting a favourable treatment - it's a hidden subsidy to online stores.

    In the end of course, as in all things related to taxes, businesses will simply relocate to those areas which have favourable tax legislation in place, or shoppers will buy out-of-state so that they avoid in-state taxes. The problem will seem to go away, or it'll get accepted as the status quo, even if the government or states do nothing to solve it. It's another example of how the internet is making us re-think previously well-established rules.

  • by Greg Merchan ( 64308 ) on Sunday December 19, 1999 @11:58PM (#1460401)

    This is the real reason the government doesn't want strong public encyption. It threatens their ability to tax. If all transactions are encrypted and privacy exists (i.e., - companies don't distribute 'marketing data'), then there is no way for them to prosecute or collect.

    What we need is a government that only protects individual rights. No more and certainly no less. Health care, education, roads, et al. are not rights. Life, liberty, property, and privacy are rights and they are not-so-slowly being cut away.

    This is especially important because we live in a service economy. That's where the money is. (Look at Red Hat.) If the government continues its monopoly on services, there will come a day when the people say no more and then the government will hand off that monopoly to some corporation (like Microsoft, for education!) and then we'll really be screwed.

    This is civilization. The progress to a private society. It used to be that the government controlled everything. Then century after century they controlled less and less. Some societies survived the transistions well (Ancient Greece). Others didn't (the Pharohs). And in some places people became slaves of monopolies granted by the government (Rome/Feudal Society).

    The US survived the industrial revolution because of the ideas of Aristotle and Locke. It almost didn't (The War Between the States).

    We are faced with a new revolution. Call it what you will, define it as you like, but be reasonable. Some call it the 'Digital Revolution', some call it the 'Internet Revolution' and I'm sure there's a million other names that focus on different long-term changes that we barely notice because our lives are so short (and that's changing too).

    The fact remains that we are thinking animals. We survive by our good ideas and die by our bad ones. Human evolution is intellectual. Since we became human we have changed our environment to fit our needs, but we often neglect to change our ideas to fit the environment we create.

    "My privilege to write these sanguinary sentences in soft security was bought for me by rivers of blood poured upon many fields, in many lands, but I possess not one single little paltry right or privilege that come to me as a result of persuasion, agitation for reform, or any kindred method of procedure." -- Mark Twain

    Can we change?

  • As for Income vs. Sales? Well, Income is called a "progressive" tax, in that it taxes the rich proportionally more than the poor.

    But you're talking about a flat sales tax. Sales taxes need not be flat, necessarily. You can have a Sales Tax where poor people get quarterly (or whatever) rebates, which makes a sales tax more progressive (I think this is how most of the national sales tax proposals work). Consider that in some states (including California) food items (non-prepared) are non-taxable.

    And we haven't even brought up property taxes. I live in Oregon, and our property taxes are pretty high. Of course, if they were to add a sales tax, do you suppose they would cut the property and/or income taxes.

    Not likely... :-/

  • Actually, Charter Schools snd voucher programs (to give indivudual students money to spend on private schools) have been established to help with the problems with govnerment-run schools. Sure, they require taxes still, but tend to have a lower cost per student (at least in the US) while at the same time being more effective.

    As for the other social programs, I think private charites (red cross anyone?) are a nicer solution than government-run ones, which tend to be quite lossy (eg,. 60-70% administrative costs), and lack any sort of common sense or conscience due to bureaucracy.

  • I guess you'd rather fix the potholes in your street yourself too, huh?

    Sure, we could all show what rugged individualists we are by doing everything ourselves and not have to pay taxes. It has even been tried: they call it the mesolithic lifestyle.

    Of course, they didn't have an internet... but with no taxes to complain about, whatever would you need an internet for?

    --
    It's October 6th. Where's W2K? Over the horizon again, eh?
  • Not entirely a simple answer. In NC (the state in question, mind you...) there is a 6% sales tax on all goods. In Wake Co. (Raleigh's county) there is a further 1% tax on all prepared foods. Additionally, there is a flat state income tax as well (don't have the number on hand... 7% maybe?). I for one don't plan on telling The Man (TM) about all those on-line purchases I made this year... oops, I've said too much. This posting will self-destruct in 5 seconds...4...3...2...1... *pffft*!

    Eric
  • North Carolina has one of the most rapidly growing economies of any state. Did you forget Red Hat lives here? Also, ten of the past twelve computer purchases I have made in the last year have been located in North Carolina, and that was a complete accident. Now, I already have to pay sales tax on products I buy over the Internet from companies located in North Carolina. What they are trying to tax is purchasess made by North Carolinians outside of the state, which is a bummer.
  • "Yep. Lottery tickets, cigarattes and Budweiser really add up. "

    Interesting that you should list the three state-approved addictions. Maybe you should think about that a little more in the context of why the poor remain poor and who might want it that way.

  • There's no law requiring the affluent to spend there money--just a lot of corporate consumer propoganda. My car is ten years old, and I live in a one-room apartment, but if you saw my paycheck, or my brokerage account statement, I don't think you'd call me poor.
  • I wonder if it is because they have brick and mortar stores in the state?

    Exactly correct.


    ...phil

  • Yes, it is true that Texas has a State (and often city) sales tax, but you also have to account that Texas does not have a state-wide income tax. With thanks to the Lotto and Lottery they've kept the 'need' for that 'necessary evil' at bay for a few more years. With Thanks,
    TENEMENT
    --
  • Michigan has had a line on their tax form asking you to fill in the sales tax you were supposed to pay on mail-order stuff for as long as I can remember. I'm pretty sure it's close to universally ignored.


    ...phil
  • The North Carolina tax is a "use tax." It applies to net and non-net transactions, and so it is sort of fair. (There is always someone whose ox is disproportionately gored by any particular tax.) I think that every state that has a sales tax has a use tax. The idea is to prevent shopping based on the sales tax alone.

    Consider a state with no sales tax next to a state with a sales tax. Everyone would go over the state line to buy their cars if not for the use tax. The use tax means you pay the sales tax in the state you live in, even if the state you bought in doesn't charge sales tax.

    Since you have to register cars, that is one item that such taxes are collected on. Some states also allow counties and cities to track the cars, so that big city buyers can't just go to the suburbs to skip city and county sales taxes.

    Apart from big things that you have to tell the government about, use taxes are pretty much a failure. They should apply not only to net purchases, but mail order (phone order) buying too. And yes, in theory, people are supposed to fink on themselves to pay it! North Carolina seems to be taking the big step of putting a line on a form for it. Nobody does it. Actually, most states don't make any effort to collect it.

    Sort of reminds me of a story about James Franck (famous physicist). He moved to Chicago, and in accordance with the law, reported all his luxury goods to pay tax. The astounded city employee he went to asked him: "And do you think you are the only man in Chicago with a watch, Mr. Franck?" And the functionary sent him along without charging any tax.

  • So Fred Smith in NC buys $1000 of products over the net in 1999. The state of NC claims 6% (or $60) sales tax on that commerce. However, Fred is a little wierd and makes *all* of his net-based purchases from a company that has *all* of it's facilities in say, Ohio.

    So, how do I as a citizen of Ohio get NC to cough up the portion of that tax that reduces my company's marketability?

    If there is EVER going to be an internet sales tax it will have to be at the federal level and, revenue raised will have to be dispursed to specific projects with a wide support base.

    If I were a North Carolinian you could bet the outer banks that I would deny any internet purchases I may have made. "I made those purchases over the phone to a toll-free number and, that company does not have facilities in NC so you can't touch me."
    --
    Una piccola canzone, un piccolo ballo, poco seltzer giù i vostri pantaloni.

  • But who would buy the shares?

    Regarding the fellow posting the first message on this thread, I doubt they can legally make this retroactive.

    D

    ----
  • I read the article that allegedly implied that Cato might support North Carolina's efforts to collect sales tax.

    I could see no such implication - to me the article supported the status quo, where mail order businesses do not wind up paying tax on sales outside of their state.

    Needless to say, I'd be extremely shocked if Cato actually supported any such proposal.

    My personal feeling is that bricks and mortar stores aren't going away any time soon. Online purchases are perfect for some things (obscure or expensive books) and lousy for others (books you buy on impulse). And I don't see us moving towards buying groceries or eating at restaurants in a way we can avoid sales tax.

    Sales tax is here to stay, more's the pity. I just don't see this kind of rule as being necessary, and I doubt that it's enforcable - the data processing overhead is just too high.

    D

    ----
  • They lack common sense and conscience because people keep pressuring their legislators to pass "reform laws" which take away the power of choice from the individual workers to apply common sense. It's the same with almost every bureaucracy.
  • In Illinois we get it both coming and going - we have both a 3% income tax and a 7% or so sales tax. In Chicago it is even worse -- the city adds a percent or two, so that our net sales tax is something on the order of 8%.

    Of course, we know the money is being well spent. They just tore up another perfectly good peice of road and are resurfacing it yet again, for the third time in as many years ...
  • by Hard_Code ( 49548 ) on Monday December 20, 1999 @02:53AM (#1460480)
    I have watched a bit of CSPAN over this. It seems that local governments claim that they should be compensated for the money the lose to ecommerce.

    But didn't the "founding fathers" explicitly abhor arbitrary taxation? I mean that was what the revolutionary war was supposedly about. Governments can tax citizens, but /for services rendered/. Governments cannot extract arbitrary taxes because they want to. For a brick-and-mortor storefront, the government provides the land, the streets, the legislatural and financial infrastructure to support businesses, etc. But /what/ does the government provide for ecommerce? Not much really. You could make the case that the /federal/ government helped ecommerce, because, of course, they started ARPANET, and provide funds to institutions and companies that support the backbone. So indirectly, by supporting the internet, they support ecommerce and should be paid a small tax by corporations and individuals using ecommerce. But this certainly wouldn't be a /local/ government issue. I mean, any one state shouldn't be able to dictate a different tax than another. But still that's a tenuous argument. The federal government, as it should, hasn't been innovating or supporting the internet directly for decades.

    I think there is really very little to justify an internet tax.

    Jazilla.org - the Java Mozilla [sourceforge.net]
  • Sales taxes are often routed to both state government and to county governments. Here in NY State, roughly half the sales tax is kept by the state capital, and the rest is forwarded to the county of record.

    While I like the idea of a tax-free mode of shopping (be it mail-order or online), others on here have raised several good points: first, that even mail order firms are starting to collect taxes, at least in states where they have branch offices or facilities; second, that giving middle- and upper-class consumers access to circumvent state and county taxes is as regressive as the county/state sales tax in the first place, since the monies not collected by the jurisdiction will have to be made up for by those without the access (or the credit) to shop online. This is even less fair than the sales tax itself.

    I happen to like Oregon's approach, myself: no sales tax, higher state income tax brackets and a stiff gasoline tax, the latter paying for roads. Sales taxes hurt the poor most, and if the last several decades in the US are any evidence, they don't encourage savings, either.

    Conclusion: I'm resigned to net-shopping being taxed, eventually. I think asking taxpayers to estimate their purchases is pretty ludicrous, but eventually the e-merchants will play ball, with the help of some inter-state agreements or federal legislation. Whether you think governments should be taxing all this money in the first place is really a separate question.
  • As a new North Carolina resident in the high tech industry, I can say from experience that the taxes here are ALREADY outrageous. My wife is a teacher, and lemme tell you, the income is most certainly not going to pay public servents. North Carolina Teachers have one of the worst pay rates in the counrtry, she took a $10k pay cut to come here. I understand that the Police and fire services will not be retiring early to Tahiti either. The sad part of the situation is the annoying tendency for we the people to do nothing as long as we still get Wheel of Fortune at 7. This policy and law have truly offended me, especially in light of the reasons given, which are ambiguous at best. If they taxed e-commerce to provide better phone or network services, perhaps I could see the process with more understanding, however I have no intention to fund someone's pet project with my family's income. Wasn't there just rioting in Seattle about this? E-commerce is flamboyant and obnoxious at its worst, but at its best it can equalize the playing field in business for the world. It's simply too important to let trends such as this pass unprotested.
  • Use Taxes are on the books in many states. These are unevenly enforced at best. The cynic in me feels that compliance with Use Tax reporting is like compliance with the posted speed limit on Interstate highways -- anyone who does get busted would logically conclude that they were the victim of highly selective enforcement.

    What's next, a quota system for NC State Department of Taxation auditors?

    I think the Charlotte News & Observer got it partly right in the article [news-observer.com] when they said:

    The consumer use tax is not new. Most states have one. In fact, it's been on the books in North Carolina for more than 60 years.

    It's never been aggressively enforced on individual consumers, Collins said, because it's difficult to chase down who bought what. The Internet has changed that, though, making most purchases as easy to track as scanning a credit card bill. And by adding a mention on the tax form, the state can penalize consumers who refuse to 'fess up.

    One really obvious bogus statement in this article is that the Internet has eased the process of determining Use Tax violations in the event of an audit. Anyone who lives in the Northeast where states are geographically small, or shops by mail order or while on vacation has had their lack of compliance documented for years. Why say something so obviously wrong and ruin an otherwise useful article?

    A small criticism of the "Slashdot Powers that Be". I realize it's a holiday week and we're all partying, but.... next time, insight should be applied to the analysis of the article before it hits the Slashdot home page. It would have been much more useful to have characterized this step taken by North Carolina as an attempt to increase awareness of their existing Use Tax among consumers who do some shopping on-line or through traditional mail order. That's not nearly as exciting to most people as the headline lead you to believe, but it would have been more accurate.

    The big question about these sorts of efforts, in my opinion, is where will the states come up with the money to enforce this law? This is where the analogy to the speed limit really works. You could pull over a lot more speeders if you wanted to put a lot more police in cars with radar and laser speed detection devices. But, then a whole new set of questions will arise.

    I expect the states to do little to increase enforcement of Use Tax reporting. Some over-zealous states will probably pick a couple of cases to really screw-over some taxpayers in a public way. This will get press in the newspaper and on TV in a way that will be designed to scare people. This actually serves both the media's and the government's interests.

    --

    Dave Aiello

  • At best taxing internet/mail order transactions subsidizes local brick and mortar stores that do need state services in order to do business, at worst it slows the growth of internet commerce and takes away the competitive advantage of online businesses.

    There you've hit the nail on the head. The lack of sales taxes gives the Internet business a competitive advantage over businesses that reside in the state.

    Not that this is new. Most states try to get people to pay sales tax on mail order sales. I've seen such forms in the Income Tax packages of 2 of the 3 states that I've lived in. (The third, Delaware, dosn't have a sales tax)

    The only difference is that now they're explicitly listing online businesses with other mail order operations.

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