Do we support the Internet Sales Tax?

[AndyDufresne]

Computers make these calculations easy.

So? This bill still doesn't treat e-commerce the same as in-person commerce. If they want to be treated the same, then I should be charged my local sales tax no matter where I shop in the US, whether it be online or in a store. As it stands currently, I have to pay their sales tax if I go shop in a store anywhere outside my home area while if I shop online, I may my home sales tax. That's not equal tax treatment as this bill claims to enact.

Night Strike is right. I, like NS, are also for a national ID that also tracks information about our unique sales tax area (among other things). Thus, when I am outside of my home district (a la that one Timberlake movie about buying time and moving from poor districts to wealth districts), we can be sufficiently tracked and make sure we are paying only our home sales tax quota.


--Andy

[thegreekdog]

Ironically (to Night Strike mostly), this supposedly levels the playing field for small businesses. If a mom-and-pop book store is required to collect sales tax, how can it compete with Amazon, which does not have to charge sales tax?

The problem with this thinking is that (1) the mom-and-pop book store is not paying sales tax, it's collecting sales tax, so there should be no great burdern and (2) the purchaser, if he or she does not pay sales tax, should be remitting use tax to the state anyway. The issue that states struggle with is that they have no desire to audit someone like Night Strike to get $5,000 of unpaid use tax when they can audit Amazon, make a completely unconstitutional argument that Amazon should be collecting sales tax in the state, and then make a deal with Amazon.

Essentially, this law is about getting online retailers to collect sales tax (unconstitutionally) so that the states don't have to audit individual taxpayers or try to (unconstitutionally) get the online retailers to collect sales tax on their own.

Did I mention this is unconstitutional?

You may be right.

There are lots of things that are unconstitutional.

If I have a residence in Mass. and a vacation home in New Hampshire I have to pay taxes to both states, but can only vote in one.

I am therefore being taxed without representation. This is unconstitutional too... no?

Well, there is no constitutional provision indicating that you are required to be able to vote in order to be taxed, so no.

You're also probably taxed on your New Hampshire source revenue (i.e. revenue from your vacation home), which is fairly apportioned (according to the Constitution).

[BigBallinStalin]

Just in case anyone didn't know, I am a tax attorney specializing in state taxes. I know what I'm talking about. Here's what you need to know:

(0) The sales tax is a state and/or local tax that applies to the sale of enumerated taxable products and services. It is a tax PAID BY THE CONSUMER and merely collected by the seller. The seller does not pay any tax out of pocket.

(1) In order to be required to collect sales tax from customers, a company has to have nexus in the state in which it makes sales.

(2) Prior to and including the 1992 Quill decision, the US Supreme Court has held that in order for a company to have nexus in a state, it must have some minimum connection and physical presence (among other things that aren't immediately relevant).

(3) Sales of product over the internet started to become big business. Like a company selling product through catalogs, an internet company avoided nexus by having products deliverd by common carrier; the internet company would never set foot in the state and therefore not have nexus.

(3b) Every state that has a sales tax also has a corresponding use tax. The use tax requires that a purchaser who does not pay sales tax on a taxable product (for whatever reason; like the seller doesn't have nexus in the purchaser's state). Therefore the state should always get it's tax. However, most individuals don't actually pay use tax. So on internet sales where the seller doesn't have nexus, no sales tax is collected and the purchaser isn't paying use tax on the purchaser; so the state gets zero tax.

(4) States began to assert the concept of "economic nexus" whereby if a company merely advertised into a state over the internet, it would have nexus and therefore a sales tax collection responsibility. In my opinion, states did this because it was more cost-effective than auditing every individual that didn't pay use tax on the purchaser.

(5) Amazon (and other companies) started getting audits from states where they did not have nexus under a theory of "economic nexus."

(6) Internet Sales Tax is passed.

So, again, the bulk of the burden here does not fall on Amazon or any other inernet companies. The bulk of the burden falls on the consumers. If you are against this tax, you should not be against it because it hurts internet companies. Because it doesn't really hurt internet companies.

Pre-internet tax world:

The prices of goods provided by brick-and-mortar companies is 10% higher due to the 10% sales tax.
The prices of goods provided by internet companies is 10% lower due to the 0% sales tax.

By raising the prices of goods provided by internet companies (by imposing a 10% tax), then you reduce their competitiveness--relative to the brick-and-mortar companies.

That's what I'm talking about. Therein is the motive to restricting the competitiveness of internet companies.

[BigBallinStalin]

Right, I understand that, but why?

Why wouldn't I?

The purpose of a sales tax is to allegedly pay for government-controlled and/or owned enterprises (e.g. streets). The internet doesn't have streets, the transaction costs are gladly undertaken by various financial intermediaries, and it's not like the businesses which make the deliveries do not pay their taxes for using the government-owned streets.

It's an unnecessary tax whose main purpose is to restrict competition, thereby enriching the embedded businesses.

The consumer is using those resources though and they are the one paying the tax.

Oh, but what of the State's property tax? Or federal taxes for federal highways? Or DMV fees and drivers permits for direct usage of city roads--not someone else's use, like delivery companies, which hey by the way pay taxes for those resources?

I'm not finding any compelling argument for taxing internet transactions.

I don't see the difference between a sale at a brick and mortar location and a sale at a digital location.In my opinion both are theoretically using state resources. Besides since when are taxes tied to useage? Governments can levy taxes as they please(and face the resultant public outcry). Regardless this legislation is about enforcing taxes already in place, but are not currently enforceable.

Why should the Internet be tax exempt while all other retailers pay sales taxes? In my mind this would cause some pretty serious economic distortions.

Because they obviously use less state-provided resources.

What economic distortions? Customers save more money? The internet market creates a demand for the delivery of such goods--and those delivery companies buy stuff, which is taxed? Looks like a self-correcting 'distortion'.

[Juan_Bottom]

Wouldn't it make more sense to force e-businesses to have a declared nexus, then pay 100% of the taxes to that state?

[tzor]

Another interesting thought would be to have the Feds collect a national Internet sales tax and then distribute that to the states on a population basis(considering how us law is I'm pretty sure that wouldn't fly).

The only problem is that some people would say it is technically illegal. That darned Constitution getting in the way. The Constitution had to be amended to allow the income tax. But I do think it would be a great idea. More paranoid people (on the left) might fear this would be a back door attempt to get the "Fair Tax" by starting with the national sales tax on interstate internet commerce and then going to all commerce.

[thegreekdog]

Pre-internet tax world:

The prices of goods provided by brick-and-mortar companies is 10% higher due to the 10% sales tax.
The prices of goods provided by internet companies is 10% lower due to the 0% sales tax.

By raising the prices of goods provided by internet companies (by imposing a 10% tax), then you reduce their competitiveness--relative to the brick-and-mortar companies.

That's what I'm talking about. Therein is the motive to restricting the competitiveness of internet companies.

Consder the following:

Pre-internet tax world:

The prices of goods provided by brick-and-mortar companies are 10% higher due to the 10% sales tax.
The prices of goods provided by internet companies are 10% lower due to the 0% sales tax.

By raising the price of goods provided by internet companies (by imposing a 10% tax), then you increase the competitveness of brick and mortar stores relative to internet companies.

The motive could be to level the playing field, or to use your words, increase the competitiveness of brick-and-mortar stores.

[Baron Von PWN]

Because they obviously use less state-provided resources.

What economic distortions? Customers save more money? The internet market creates a demand for the delivery of such goods--and those delivery companies buy stuff, which is taxed? Looks like a self-correcting 'distortion'.

Seems to me(using your TGD example) things being automatically 10% cheaper online would cause more people to buy things online, for no other reason than the tax loophole. Maybe I'm misusing the term "economic distortion" but the situation seems to be distorting the market in favour of online. In other words without the tax loophole online stores wouldn't be as competitive versus brick and mortar.
I'm no economist but that seems to make sense to me.

Online retailers do actually exist somewhere. They use roads, are protected by police/fire departments, they take advantage of information networks which may be publicly funded, they use electricity often publicly funded/subsidized, their children go to school, their customers possibly use state assistance. However as the tax is charged to the consumer that's all irrelevant, as the consumer is without a doubt using state resources.

[Baron Von PWN]

Another interesting thought would be to have the Feds collect a national Internet sales tax and then distribute that to the states on a population basis(considering how us law is I'm pretty sure that wouldn't fly).

The only problem is that some people would say it is technically illegal. That darned Constitution getting in the way. The Constitution had to be amended to allow the income tax. But I do think it would be a great idea. More paranoid people (on the left) might fear this would be a back door attempt to get the "Fair Tax" by starting with the national sales tax on interstate internet commerce and then going to all commerce.

As a Canadian a national sales tax isn't that scary an idea (we already have it). Just because it's unconstitutional doesn't necessarily make it bad policy. It does make it near political suicide though.

[thegreekdog]

Because they obviously use less state-provided resources.

What economic distortions? Customers save more money? The internet market creates a demand for the delivery of such goods--and those delivery companies buy stuff, which is taxed? Looks like a self-correcting 'distortion'.

Seems to me(using your TGD example) things being automatically 10% cheaper online would cause more people to buy things online, for no other reason than the tax loophole. Maybe I'm misusing the term "economic distortion" but the situation seems to be distorting the market in favour of online. In other words without the tax loophole online stores wouldn't be as competitive versus brick and mortar.
I'm no economist but that seems to make sense to me.

Online retailers do actually exist somewhere. They use roads, are protected by police/fire departments, they take advantage of information networks which may be publicly funded, they use electricity often publicly funded/subsidized, their children go to school, their customers possibly use state assistance. However as the tax is charged to the consumer that's all irrelevant, as the consumer is without a doubt using state resources.

The other problem with BBS's example is that the products are not actually cheaper online. The purchaser is REQUIRED to pay use tax on the purchase if sales tax is not paid. Consider the following pre-Internet sales tax scenario:

Bob purchases a book from Sally's Bookstore in Pennsylvania. Bob pays $10 for the book and 60 cents sales tax which Sally's Bookstore pays to the state of Pennsylvania. Cost of the transaction - $10.60

The next day, Bob purchases a book from Amazon online. Bob pays $10 for the book and does not pay any sales tax. Bob is required, by law, to pay use tax to Pennsylvania in the amount of 60 cents. Cost of the transaction - $10.60

[BigBallinStalin]

Pre-internet tax world:

The prices of goods provided by brick-and-mortar companies is 10% higher due to the 10% sales tax.
The prices of goods provided by internet companies is 10% lower due to the 0% sales tax.

By raising the prices of goods provided by internet companies (by imposing a 10% tax), then you reduce their competitiveness--relative to the brick-and-mortar companies.

That's what I'm talking about. Therein is the motive to restricting the competitiveness of internet companies.

Consder the following:

Pre-internet tax world:

The prices of goods provided by brick-and-mortar companies are 10% higher due to the 10% sales tax.
The prices of goods provided by internet companies are 10% lower due to the 0% sales tax.

By raising the price of goods provided by internet companies (by imposing a 10% tax), then you increase the competitveness of brick and mortar stores relative to internet companies.

The motive could be to level the playing field, or to use your words, increase the competitiveness of brick-and-mortar stores.

It didn't work out that way, and that wasn't the motive, so why are you making stuff up?

[BigBallinStalin]

Because they obviously use less state-provided resources.

What economic distortions? Customers save more money? The internet market creates a demand for the delivery of such goods--and those delivery companies buy stuff, which is taxed? Looks like a self-correcting 'distortion'.

Seems to me(using your TGD example) things being automatically 10% cheaper online would cause more people to buy things online, for no other reason than the tax loophole. Maybe I'm misusing the term "economic distortion" but the situation seems to be distorting the market in favour of online. In other words without the tax loophole online stores wouldn't be as competitive versus brick and mortar.
I'm no economist but that seems to make sense to me.

Online retailers do actually exist somewhere. They use roads, are protected by police/fire departments, they take advantage of information networks which may be publicly funded, they use electricity often publicly funded/subsidized, their children go to school, their customers possibly use state assistance. However as the tax is charged to the consumer that's all irrelevant, as the consumer is without a doubt using state resources.

The other problem with BBS's example is that the products are not actually cheaper online. The purchaser is REQUIRED to pay use tax on the purchase if sales tax is not paid. Consider the following pre-Internet sales tax scenario:

Bob purchases a book from Sally's Bookstore in Pennsylvania. Bob pays $10 for the book and 60 cents sales tax which Sally's Bookstore pays to the state of Pennsylvania. Cost of the transaction - $10.60

The next day, Bob purchases a book from Amazon online. Bob pays $10 for the book and does not pay any sales tax. Bob is required, by law, to pay use tax to Pennsylvania in the amount of 60 cents. Cost of the transaction - $10.60

Hey, lemme make up prices in my counter-example, and I can 'prove' you wrong too.

[BigBallinStalin]

Because they obviously use less state-provided resources.

What economic distortions? Customers save more money? The internet market creates a demand for the delivery of such goods--and those delivery companies buy stuff, which is taxed? Looks like a self-correcting 'distortion'.

Seems to me(using your TGD example) things being automatically 10% cheaper online would cause more people to buy things online, for no other reason than the tax loophole. Maybe I'm misusing the term "economic distortion" but the situation seems to be distorting the market in favour of online. In other words without the tax loophole online stores wouldn't be as competitive versus brick and mortar.
I'm no economist but that seems to make sense to me.

Yeah, no one's arguing against that, except maybe TGD.

Online retailers do actually exist somewhere. They use roads, are protected by police/fire departments, they take advantage of information networks which may be publicly funded, they use electricity often publicly funded/subsidized, their children go to school, their customers possibly use state assistance. However as the tax is charged to the consumer that's all irrelevant, as the consumer is without a doubt using state resources.

Sure dude, that's why they pay taxes on other items, or on their income--e.g. corporate tax, or income tax.

When considering the minimal amount of government-provided/controlled resources that these people use, your kind of justification is grasping at straws. For infrastructure, the proportion of taxes justified is less than 5% of total tax revenue of the US. The overwhelming amount of taxes doesn't go to the more useful things (cuz without free prices, there's no rational planning), and most of it doesn't go to anything relevant to purchasing books on the internet.

The argument in support of additional taxes is based on imagined 'strain' of government-provided resources. They get enough money as is for the services people actually used.

[Bruceswar]

Let me just say this as a small business owner I fully support an equal playing field. I have a brick a mortar store and have been there for 33 years. Let me break it down for you.

Pre internet: Person would come in and purchase the item, pay sales tax and you would only be competing with local businesses.

Internet: Person now comes in stating they can get items sometimes at a dollar over your cost and pay NO sales tax. You tell me where that person is going to buy it.

What cost more for a business? Running a brick and mortar store, with all that comes with it, or some guy online who only uses a computer and a tiny shed in his backyard to store product. (even a large warehouse) can be handled by a small few people in comparison.


Now I am not sure if this law will make it equal and how it should be ironed out, but tax on the internet should be charged on taxable items. It is totally unfair to people like me who have been in business for 33 years and paid taxes(Yes I know my customers pay those) to have some yahoo start an online company with the same product and pay zero taxes. (which the customer would be skating)


As a small business owner all I ask is to make it fair!


If you want to say online businesses make more jobs I will use this example...

You have 3 local businesses

A
B
C

People buy products from all 3 of them. They all compete and make it work. People pay sales tax at each one...

Company D starts online and advertises in the 3 local stores area. People then shop online because
A) There is no sales tax
B) The cost of goods might be slightly cheaper since the overhead is lower
C) It might be easier to not get up and just click a mouse.

Thus A, B, and C Suffer a 30% business loss and have to cut 2 employees each to stay alive. While D is run by 1 guy with a small warehouse.

So you have 6 lost jobs, and 1 created. That means company D would have to hire 5 people to equal out the number of people working. That is not likely to happen and everybody suffers some as those local companies and the state lose out on taxes while this internet business does not have to pay any sales tax or collect any as you want to say..

[Night Strike]

Bruceswar, why can't your company sell your products online also and reap those same benefits when selling to other states? That's the facet that's ignored in this entire debate: brick and mortar stores aren't stuck only selling things in person.

[thegreekdog]

Pre-internet tax world:

The prices of goods provided by brick-and-mortar companies is 10% higher due to the 10% sales tax.
The prices of goods provided by internet companies is 10% lower due to the 0% sales tax.

By raising the prices of goods provided by internet companies (by imposing a 10% tax), then you reduce their competitiveness--relative to the brick-and-mortar companies.

That's what I'm talking about. Therein is the motive to restricting the competitiveness of internet companies.

Consder the following:

Pre-internet tax world:

The prices of goods provided by brick-and-mortar companies are 10% higher due to the 10% sales tax.
The prices of goods provided by internet companies are 10% lower due to the 0% sales tax.

By raising the price of goods provided by internet companies (by imposing a 10% tax), then you increase the competitveness of brick and mortar stores relative to internet companies.

The motive could be to level the playing field, or to use your words, increase the competitiveness of brick-and-mortar stores.

It didn't work out that way, and that wasn't the motive, so why are you making stuff up?

It will work out that way (or, rather, it would work out that way if there was in any way in Hades the House would pass this bill).

It was the stated motive.

I'm not making anything up.

[thegreekdog]

Because they obviously use less state-provided resources.

What economic distortions? Customers save more money? The internet market creates a demand for the delivery of such goods--and those delivery companies buy stuff, which is taxed? Looks like a self-correcting 'distortion'.

Seems to me(using your TGD example) things being automatically 10% cheaper online would cause more people to buy things online, for no other reason than the tax loophole. Maybe I'm misusing the term "economic distortion" but the situation seems to be distorting the market in favour of online. In other words without the tax loophole online stores wouldn't be as competitive versus brick and mortar.
I'm no economist but that seems to make sense to me.

Online retailers do actually exist somewhere. They use roads, are protected by police/fire departments, they take advantage of information networks which may be publicly funded, they use electricity often publicly funded/subsidized, their children go to school, their customers possibly use state assistance. However as the tax is charged to the consumer that's all irrelevant, as the consumer is without a doubt using state resources.

The other problem with BBS's example is that the products are not actually cheaper online. The purchaser is REQUIRED to pay use tax on the purchase if sales tax is not paid. Consider the following pre-Internet sales tax scenario:

Bob purchases a book from Sally's Bookstore in Pennsylvania. Bob pays $10 for the book and 60 cents sales tax which Sally's Bookstore pays to the state of Pennsylvania. Cost of the transaction - $10.60

The next day, Bob purchases a book from Amazon online. Bob pays $10 for the book and does not pay any sales tax. Bob is required, by law, to pay use tax to Pennsylvania in the amount of 60 cents. Cost of the transaction - $10.60

Hey, lemme make up prices in my counter-example, and I can 'prove' you wrong too.

Wait, what? I'm just telling you the tax is the same if the item is priced the same (pre-tax). This is not an arguable point. It is and remains fact. But Cthullu forbid I prove you, Odin amongst men, wrong. I urgently look forward to your more than one sentence reply (preferably with links to books that I will never read... related aside - I actually thought about linking to Walter Hellerstein's continuously updated works on state taxation, just to troll you a little).

[thegreekdog]

Yeah, no one's arguing against that, except maybe TGD.

WTF? Are you Serbia? I mean drunk?

Seriously though. You're conflating my explanations for this proposal with the idea that I, in any way, support sales taxes. I hate them with the fire of a thousand suns. If internet companies are forced to pay sales tax it will absolutely make brick-and-mortar stores more competitive. Abso-fucking-lutely.

[thegreekdog]

Bruceswar, why can't your company sell your products online also and reap those same benefits when selling to other states? That's the facet that's ignored in this entire debate: brick and mortar stores aren't stuck only selling things in person.

Actually, what's lost in this debate is this:

FOR THE FIFTH FUCKING MOTHER f*ck TIME, SELLERS AREN'T PAYING TAX! THEY ARE FUCKING COLLECTING IT FROM THE PURCHASERS! GOD DAMMIT! READ AND UNDERSTAND MY FUCKING POSTS. I would normally excuse this sort of thing as being ignorance, but I fucking posted the explanation in this thread multiple times. f*ck you guys. Seriously. I hate you all. Night Strike, BBS, Bruce (who seems like a nice enough guy otherwise)... hate you.

[Night Strike]

TGD, even if a seller doesn't directly charge a customer for the sales tax, they're still required to pay it. Most businesses put it as a separate line item, but some places include it in the posted price (concession stands most typically).

[Bruceswar]

Bruceswar, why can't your company sell your products online also and reap those same benefits when selling to other states? That's the facet that's ignored in this entire debate: brick and mortar stores aren't stuck only selling things in person.

If You Do Not Think Businesses Like Mine Already Don't You Are Nuts... Putting Someone From Another State In Front Of Local People Is Just Stupid....


@TGd..... I Know We Do Not Pay The Taxes But We Still Have To Collect Them... So That Means Items Cost More Locally Than Online Many Times.....

Sorry For The Caps... Damn Phone

[thegreekdog]

TGD, even if a seller doesn't directly charge a customer for the sales tax, they're still required to pay it. Most businesses put it as a separate line item, but some places include it in the posted price (concession stands most typically).

If a seller isn't charging a customer for sales tax, the seller is stupid and deserves to go out of business. In the event that sales tax is not separately stated, the seller is also stupid (because state departments of revenue will assert that the price including sales tax is actually just the price and then assess sales tax on that basis), but paying the tax anyway.

So, not sure what your point is there buddy. There is no iteration of sales tax where the seller pays the tax and the purchaser doesn't pay the tax, unless the seller is stupid.

[thegreekdog]

[quot=NighT strike"]Bruceswar, why can't your company sell your products online also and reap those same benefits when selling to other states? That's the facet that's ignored in this entire debate: brick and mortar stores aren't stuck only selling things in person.

If You Do Not Think Businesses Like Mine Already Don't You Are Nuts... Putting Someone From AAnother State In Front Of Local People Is Just Stupid....


@TGd..... I Know We Doi Not Pay The Taxes But We Still Have To Collect Them... So That Means Items Cost More Locally Than Online Many Times.....

Sorry For The Caps... Damn Phone[/quote]

Correct! It costs purchasers more to purchase from you than from an internet company. Therefore you lose business. Therefore the internet sales tax makes it better for you. Therefore, BBS is full of shit.

[Baron Von PWN]

Because they obviously use less state-provided resources.

What economic distortions? Customers save more money? The internet market creates a demand for the delivery of such goods--and those delivery companies buy stuff, which is taxed? Looks like a self-correcting 'distortion'.

Seems to me(using your TGD example) things being automatically 10% cheaper online would cause more people to buy things online, for no other reason than the tax loophole. Maybe I'm misusing the term "economic distortion" but the situation seems to be distorting the market in favour of online. In other words without the tax loophole online stores wouldn't be as competitive versus brick and mortar.
I'm no economist but that seems to make sense to me.

Yeah, no one's arguing against that, except maybe TGD.

Online retailers do actually exist somewhere. They use roads, are protected by police/fire departments, they take advantage of information networks which may be publicly funded, they use electricity often publicly funded/subsidized, their children go to school, their customers possibly use state assistance. However as the tax is charged to the consumer that's all irrelevant, as the consumer is without a doubt using state resources.

Sure dude, that's why they pay taxes on other items, or on their income--e.g. corporate tax, or income tax.

When considering the minimal amount of government-provided/controlled resources that these people use, your kind of justification is grasping at straws. For infrastructure, the proportion of taxes justified is less than 5% of total tax revenue of the US. The overwhelming amount of taxes doesn't go to the more useful things (cuz without free prices, there's no rational planning), and most of it doesn't go to anything relevant to purchasing books on the internet.

The argument in support of additional taxes is based on imagined 'strain' of government-provided resources. They get enough money as is for the services people actually used.

So your argument seems to be more against sales taxes period/ against taxes in general. "the state provides very few services therefore there should be no new taxes".

I don't buy the argument that they don't use/benefit from state resources and therefore should not be taxed. Again though that is irrelevant as the tax is on the consumer not the business.

[Bruceswar]

@Tgd......It Will Be Better For Businesses Like Me. 100%... I Might Even Have Enough Money To Hire More People