Taxing Internet Sales

[dgs49]

This is a measure whose time has come.

There is no disputing that these sales are (for the most part) subject to sales taxes, or that the purchasers have an obligation to pay the sales tax. There is no disputing that most internet purchasers do not pay the tax although they are required to do so. There is no disputing that internet merchants seek to flog this "advantage" as much as possible, some of them even try to ensure that the shipping costs are equal to or less than what the sales tax would be.

Many states, like Pennsylvania, make it rather cumbersome to pay sales taxes on these transactions, even while forcing you to swear on your Mother's grave that you have paid them when filling out your state income tax forms. Everybody lies.

The classic offender in this regard is the tire retailer, The Tire Rack. They sell mountains of tires from two or three locations around the country, and essentially no one pays the taxes on those tires. The sales consultants have occasionally pointed out to me that the shipping is virtually free because it is approximately the same as the sales tax I would pay if I were buying the tires locally.

Parenthetically I will say that The Tire Rack is a great retailer. They provide an excyclopedia of information about the tires and wheels that came on your car, as well as any others that might be fitted for whatever purpose you might want. They provide DOT ratings on the tires and explain what they mean, consumer ratings for the tires, and sell their tires and wheels at great prices. But this thread is not about tires.

There is no good reason NOT to facilitate the easy and efficient collection of state sales taxes on interstate taxable transactions and the Feds are best-positioned to provide this assurance. The states are losing billions in sales tax revenues, for no reason other than that it is easy to cheat.

Some of the excuses given by some Republicans in response to this initiative are positively embarrassing.

[Long Run]

It was understandable in the early years to exempt sales on the internet from sales tax, to encourage the growth of this avenue. However, the internet is well-established as the successor to historical mail-order, which is and has been subject to sales tax. With technological capabilities (e.g., start to insert an address on a website retailer and they will complete it to Postal preferred format), it should be no problem to have the appropriate tax added when the order is placed. Works out well for us here since there is no sales tax!

[Big RR]

I'm not sure what the feds could do; sales taxes are collected by the states for sales occurring in their jurisdictions--otherwise, their domiciliaries are required to pay use (not sales tax, although the rates are usually the same) tax for out of state purchases brought into the state. Right now the states have no way to force the internet marketers to collect local sales taxes because they have no jurisdiction over them (as they are not located in the state). Just because I may sell products which will be shipped into another does not make me subject to the laws of that state, and I doubt there is much the feds could do to change that. Perhaps they could force the internet companies to report the names and addresses of persons getting goods shipped into each state, but I would think the burden of collecting the taxes would fall upon the state, not the distant seller.

alternatively, they could impose a national sales tax which they would then share (or give) to the individual states, but that could be difficult to get through Congress.

edited to add: BTW, I do know a bill has been pending before Congress to permit the states to require out of state internet sellers to collect sales tax (not sure where it stands), but it seems problematic to me. For example, can the federal government give the state courts jurisdiction over someone who does not have a presence in the state? And what happens if the person ignores the court saying it has no jurisdiction; are we setting up a conflict of laws problem if the home state refuses to recognize the judgment of the foreign state's court due to a lack of jurisdiction (much as we saw with Reno divorces in the 50s)? I think enforcement would be a nightmare.

[Jarlaxle]

Call that bill what it is: the "Amazon-Walmart protection act". That is precisely what it is. It will drive small sellers out of business, which it is intended to do.

[Lord Jim]

With GDP and job growth as anemic as a hemophiliac, it's amazing to me that anyone could be proposing anything that would give both consumers and small businesses yet another kick in the balls....

This proposal is almost as idiotic as imposing higher fuel taxes would be....

[dales]

Tax internet sales it's the right thing to do.

Why should brick and mortar operations be left at a disadvantage (although I agree, with the sh-tty Obama economy now is not a great time).

And you and I both know that gas is too dammed cheap in the USA. If the price were doubled or even tripled, conservation would take on a new meaningmass-starvation but who cares.

[oldr_n_wsr]

I forget where I saw/read, but an internet retailer was saying that for him to collect sales taxes for any/every state in the Americas will add incredible overhead to his operation. He not only has to do each individual states sales tax, but whatever county and possibly city tax also.
I'm sure there will be some kind of computer program which will step in to help them though.

[Lord Jim]

Why should brick and mortar operations be left at a disadvantage

I don't know how it works in other states Dale, but in California, on-line businesses that are based in the state are required to charge sales tax to California customers, so local brick and mortar stores aren't at a disadvantage.

[oldr_n_wsr]

Here in NY it's only those that also have a B&M store in the state.
I buy stuff (mostly replacement parts) from sears all the time that is not in the B&M stores and they always bag me for sales taxes (along with shipping, which sometimes costs a lot).

[Crackpot]

I think it is a good idea. Far better then the other proposed methods of taxing Internet sales I've been privy to. I used to be against such taxes until I saw how people were avoiding buying things at brick and mortar stores (even they still use them to window shop). Largely just to avoid sales tax. Such practice is counterproductive to creating and maintaining jobs

[Big RR]

But as far as I can see it, we would just be shifting the disadvantage from the brick and mortar to the internet business. Making an internet business responsible for collecting sales tax and filing nearly 50 state sales tax returns (as well as numerous local ones) is a big burden--one not shared by the brick and mortar businesses who would not have to do the same for their sales--even if they wind up out of state. And since many internet retailers (like those doing business on ebay) are true "mom and pop" businesses that do not have access to a lot of the services necessary to accomplish this, you might well put many out of business. Personally, such a requirement could be disastrous.

Now I do agree that the taxes should be paid, but I think putting the burden on the internet businesses is the wrong approach. I think we could set the federal government up to collect a single sales tax on all internet sales and distribute it to the states, but this would be fairly difficult to get through Congress (and it would be just as difficult to get the federal government to keep its hands off the revenue raised).

[Lord Jim]

Here are a couple of ideas:

How about applying the tax collection requirements only to businesses with a large amount of gross sales? (This would affect large companies like the Amazons and the Walmarts, but not impact smaller businesses.)

Or how about giving new and small businesses a grace period, (five years, ten years) before they have to start collecting taxes?

Another thing to remember is the division between "brick and mortar" and "on-line" has largely disappeared....

Nowadays, even very small local traditional brick and mortar businesses have an on-line sales component that they benefit from.

[dgs49]

Last time I checked, it was necessary for any merchant engaged in Internet sales to be, you know, "computer literate." Tracking all sales to a particular state (with Zip Codes), and accumulating the sales would be child's play. The Feds could either act as a distributor of the revenues through a centralized account, or distribute the payment instructions for,each taxing body. I understand,that more than 50 would be involved, what with territories, Indian tribes, and whatnot.

Jim, do you dispute that these taxes are payable? Or that most people don't pat tHem? If the taxes are too high, or the states are inefficient,that's another matter.

[Rick]

But as far as I can see it, we would just be shifting the disadvantage from the brick and mortar to the internet business. Making an internet business responsible for collecting sales tax and filing nearly 50 state sales tax returns (as well as numerous local ones) is a big burden--one not shared by the brick and mortar businesses who would not have to do the same for their sales--even if they wind up out of state. And since many internet retailers (like those doing business on ebay) are true "mom and pop" businesses that do not have access to a lot of the services necessary to accomplish this, you might well put many out of business. Personally, such a requirement could be disastrous.

Now I do agree that the taxes should be paid, but I think putting the burden on the internet businesses is the wrong approach. I think we could set the federal government up to collect a single sales tax on all internet sales and distribute it to the states, but this would be fairly difficult to get through Congress (and it would be just as difficult to get the federal government to keep its hands off the revenue raised).

Compliance officers would still have to be hired.

I think the arguement over accountants and Lawyers is over rated. Any smart buisness owner that is above the threshold will already have these on retainer if not on staff.

It's not just about brick and morter, amazon would love to see some of the competition "dry up".

So rexamine the $1 mil annual threshold and raise it to relevel the "playing field"?

[Big RR]

OK, but what do we do to ensure brick and mortar businesses collect sales tax for items leaving the state? Is it fair only to impose this burden on internet sellers?

[Rick]

OK, but what do we do to ensure brick and mortar businesses collect sales tax for items leaving the state? Is it fair only to impose this burden on internet sellers?

Why would you think this act would NOT affect B&M internet sales?

Now if yer talking about someone crossing the border of one state to purchase an item to deliberately avoid sales tax in their state I don't know unless that state sets up border check points.

I do figger A sales tax has probably been paid, not so with internet sales...

[Big RR]

I haven't read the specifics, but it has been discussed as aimed at internet sales, so I am not certain a B&M company that ships a purchase to a customer who visits the store to buy it (currently avoiding the collection of sales tax at either end (absent a presence in the destination state)) would require the collection of tax for the out of state shipment. Do you know if it would?

[Rick]

If it targets internet sales why wouldn't it?

An internet sale is an internet sale.

I have a Cabela's visa, Cabela's has B&M stores (they even have one in Arkansas now) they don't have B&M stores in every state but they will sell to anyone holding a card (not just theirs) even overseas.

I just called Cabela's, since they now own a store in Arkansas they will from this point forward be charging me sales tax on all my purchases. The rep said they charge sales tax on all purchases that originate from a state with a store located within it's borders.

Prior to this I didn't...

[Big RR]

No, what I'm talking about is a bit different. I live in NJ--if I go to NY and enter a B&M store, I can make a purchase there and have it shipped back to me; because it is being shipped out of NY, I will not owe a sales tax there--would the internet sales tax bill require them to collect sales tax for the foreign state and pay it to that state? I don't think sales of this sort are addressed. Ditto for calling up a store and ordering something to be shipped.

[Rick]

I already mentioned this above, but, If you cross a border to physically buy a product you will pay a sales tax. It will be paid at the location of purchase yes but one will be paid (why you would prefer to pay for shipping after that is beyond me but many things are). This has actually been going on for a very long time as part of commerce I suppose.

Vehicles and large ticket items are handled different though, I believe.

Internet sales on the other hand charge no such tax either for the state of origin or the state of destination, unless of course like the Cabelas example there is actually a store in that state.