Internet Sales Tax

[liberalmike27]

http://www.calthomas.com/index.php?news=3982

It's rare that I agree with Cal Thomas--and I don't necessarily agree that more tax collection would lead to "binge spending," as he says. But I don't agree we should add taxes to things we purchase, through the Internet, that aren't located in our States, any more than I think when we are in California, from Alabama, if we buy something we should come home and pay taxes on that.

He also makes the point we should be trying to cut the local, brick and mortar taxes.

Seeing as how this has only passed the Senate so far (again, whatever they agree on is always f**ked up), there is still time to stop it.

Again, the basic principle is sales taxes are regressive. Anyone who spends their whole income, as poor and middle class people often do, pay sales and gas taxes on EVERYTHING they take home. Yet people who save money, not only don't pay sales taxes on that, but they draw interest as well. Millionaires, pay an extraordinarily small portion of their incomes in sales taxes.

It would be smarter for everyone to push for a lower sales tax, to be replaced by a tax on everyone, indexed like the federal income tax. Even a flat one percent, or 2 percent tax on everyone, would at least be more fair than the poor paying a higher percentage of taxes per income, than the very rich.

[liberalmike27]

1. Full Text of Article

Last edited Fri May 17, 2013, 07:09 PM - Edit history (1)

xxxooo

[jberryhill]

2. "if we buy something we should come home and pay taxes on that"

But regardless of whether you think you should pay Alabama state tax on out-of-state purchases, you are obligated to do so:

http://revenue.alabama.gov/salestax/cutax.cfm

The Alabama use tax was enacted in 1939 to prevent vendors located outside the state from having an unfair competitive advantage against the instate vendors who have to charge the sales tax. The liability for paying the use tax falls on the purchaser. If the vendor does not collect the use tax, it is the responsibility of the purchaser to self-assess and report the tax due to the Department of Revenue.

So, basically, what you are saying is "I don't think I should comply with my existing state law, and I oppose a measure to address the widespread noncompliance."

I agree that sales taxes are regressive, and I live in one of the few states which does not have sales tax. But the Alabama provision noted above is not unusual in states that have sales tax, and I'm puzzled by the reaction to a federal measure designed to address widespread violation of state laws.

[liberalmike27]

8. Living in AL

If I buy something in Ohio, or California, or Arizona, I'm going to pay sales taxes in those states. Just because I'm doing it on the phone, or through the mail, or the Internet, I should not have to pay taxes in both states, particularly if I am actually in that State. And only a moron is going to cut a check to the State, for stuff they've bought elsewhere.

We should be smart. We should understand that lower earning people, actually pay a much, much higher percentage of this tax than the rich. Like the rich, we should be trying to lower brick and mortar sales taxes, rather than tack on extra taxes for ourselves, in such a regressive way.

We've got to stop dupishly going along with the media, just because they make this invalid comparison about B&M, vs Internet on the media thousands of times. Bottom-line is, they're just pushing a poor-man's tax onto us, and if we accept the idea, we're all just being dummies.

[liberalmike27]

9. Adding

I think a lot of people will inveigh against an unjust law like this one, or sales taxes in general.

Just so you'll know, while federal income taxes on top earners, and stock market players have gone down over the last 50 years, our sales taxes have doubled, our gas taxes have gone up. Don't think it is a coincidence either. It boils down to States getting less federal money, from taxes on top income groups once as high as 94% just after WW2, that have now dropped to 28, during Reagan. Then up to 40, down to 35, and back up to 40.

Add to that, people like Mitt have gotten this cushy capital gains rate, when they used to pay much more, even as high as regular income.

Bottom line, while they've been fighting for lower taxes, they've been heaping these opposite indexed poor taxes in ever higher proportion onto the poor. And even worse, that hurts the economy, as if you cut the sales taxes out, for about 80% of us, it would ALL be spend, thus driving the economy.

[jberryhill]

12. You seem to be misdirected

Once more, I agree with you that state sales taxes are regressive. I live in a state which does not have sales tax, and I understand that it is certainly possible not to have one.

You have not advanced an argument that collecting state taxes on internet purchases has the same impact by economic status as does collecting them at the cash register of the local grocery store.

If one looks at the set of "all brick and mortar retail sales in the state", absolutely that includes poor families buying essentials.

However, if one looks at the set of "all out of state internet purchases made by people in the state", then I would be willing to be that set skews toward upper incomes.

In other words, I do not believe that collecting the currently uncollected sales and use taxes on internet purchases is as regressive in its IMPACT as is the ordinary collection of sales taxes by in-state merchants. This is predicated on my belief that the volume of internet purchasing generally is not uniformly distributed across income levels.

Now, those are beliefs and I do not have numbers to back them up. But given that internet purchasing requires, as a pre-requisite, a computer, internet service, a bank account or credit card and a residence, I am not at all persuaded that the impact of collecting sales taxes on internet service is comparable to the impact of sales taxes generally.

If you don't like sales taxes, I am in total agreement with you. But given their existence, I do not favor the inequity in not collecting them when wealthy people buy luxury goods on the internet.

[jberryhill]

10. "only a moron is going to cut a check to the State, for stuff they've bought elsewhere"

Whether or not "only a moron" is going to comply with the AL state requirement is, I guess, up to the individual.

However, you are not paying sales to ANY state when you make online purchases from out of state vendors, so your first paragraph has nothing to do with the issue at hand.

Your second two paragraphs primarily consist of calling anyone who disagrees with you "stupid".

If you want to eliminate the AL sales tax because it is regressive, more power to you. As I said, I agree that sales taxes are regressive. However, they remain the law in many states which are experiencing revenue shortfalls precisely because people believe that "only a moron" should pay them.

[joeglow3]

22. You most certainly do NOT pay that tax to the other state

If you order something over the phone, through the mail or over the internet, you do NOT pay tax to the state the sale originates in. Taxes are subject on the first use of the property which, in most all cases, is your state of residence. If those companies are charging you sales tax, they are doing so against the law. It is your obligation to pay the use tax in the state you live. Basically, you are saying you want to cheat your local government out of taxes you legally owe, but evade and oppose any measure to force your compliance.

Where it gets more sticky is if you purchase the goods in a state when you are on vacation. Technically, you can (and probably should) file for a refund from the state your purchased the goods in and then file and pay the taxes in your home state on your "first use" of the property.

[L0oniX]

37. So I buy a product from Italy and install it here and then ship it to customer in another state...

Who sends the tax bill to Italy? So uhm tax gets paid 3 times on the product I buy from Italy? ...I pay it and the customer pays it too ...and on top of it I get to pay a Euro tax (not Italy) and an exchange fee.

[jberryhill]

40. Italy is not in the United States

And so a seller in Italy would be unaffected by this proposed US law relating to state taxes.

[joeglow3]

43. Ummm, are you really in business?

You don't know how this works?

No, you do not pay sales at every step of the process, thereby paying sales multiple times. The tax is owed by the end user. In your case, the person purchasing it owes the tax in their state of residence.


Now, if you are purchasing from a foreign country, you owe any taxes they charge based on their law. You then owe any taxes that would owed in the US. You MAY get a tax credit for taxes paid in another country (depending on the tax).

Are you pissed when companies pay taxes in foreign countries and then owe US taxes when it is repatriated? I bet not.

[graham4anything]

3. Cal Thomas is an ultra-conservative Ron Paul/Bush/Steve Forbes republican

and this is NOT adding tax.

It is basically telling the theives they have to stop stealing.

Brick and Mortar stores already pay this, and people who already save money by getting free shipping and NO gas bills to drive to malls, and parking fees parking at the stores, need to pony up their fair share.

and besides, this only affects firms making one million or more. NO small biz makes that kind of money online.

This evens the playing field.

Taxes=Good thing(and constitutional and patriotic), except to the Ron Paul's out there who want everything for free.

And sellers on line save rent, water, electricity, gas, etc. by dealing online.

[liberalmike27]

6. Thing Is

Were we Republicans, we'd be fighting tax increases on US--instead, we stupidly walk along as democrats, saying Duhhh, yea tax me please, I want to pay extra taxes.

Instead, were we to strategize a bit, we should be calling for LOWERING sales taxes, better yet, doing away with them, and replacing them with indexed taxes on incomes, or as I said, even if we all instead of sales tax, paid 2% of our incomes, we'd come out much better off, than we do. Flat is much better than SKEWED completely against us, a kind of reverse indexing, where the poor pay larger amounts than the rich.

See, this agreement by so many Democrats, just shows me how well we're manipulated as well as Republicans by FOX. We hear an argument, we agree with argument, "Yea, Internet should not get away with this," rather than thinking "Hey, I'm going to lose one of the few tax cuts I've ever gained in modern times."

[kcr]

11. But it's not an extra tax

It's a tax that was owed all along. It was always there. It just wasn't being collected, thus hurting local governments by depriving them of revenue, which hurts the residents who live there. Making the playing field even for local businesses also helps communities. You'll get no argument from me for more progressive taxation, but a flat tax? Bzzz. Wrong answer. Complete opposite of progressive.

[oldhippie]

18. But, it wasn't being collected because ...

... the residents of those states with a sales and use tax were not declaring those purchases they made on the internet and paying the tax with their state returns. And those residents is US, Democrats included. Even here on DU we have a poster sayng "only a moron" would pay such tax. So, the people breaking the law, and depriving the states and cities of their tax revenue is US.

The problem is that the State cannot seem to enforce it's own law and collect the revenue from their own citizens that they owe. So they want to take the easy way out and use the Feds to force businesses in other states, out of their jurisdiction, to collect the revenue for them and send it in. Why should the State of California be able to force a citizen of Arkansas to collect California taxes for it? With no compensation? Sounds like involuntary servitude to me.

[jberryhill]

19. Sounds like regulation of interstate commerce to me

It's one of the enumerated powers.

Why should the state of California recognize my Delaware driver's license when I visit that state and rent a car?

[oldhippie]

23. Uh, no. That would be ....

...Article IV, Section 1 of the United States Constitution, known familiarly as the "Full Faith and Credit Clause". It has nothing to do with Interstate commerce.

[jberryhill]

26. I referred to two things

Thing 1:

The "internet tax" thing is within the power to regulate interstate commerce.

Thing 2:

It is also, in addition, as a second and distinct thing, not at all unusual for states to be required to accommodate the official acts of other states.

These are two different concepts, and sometimes more than one principle applies to a complete analysis.

Do you remember when you used to travel on the highway, a truck would pass you by, and you'd see a whole collection of state license plates on the back of that truck?

Do you notice that you don't see that anymore?

Do you know why?

[oldhippie]

33. Agree on Thing 1 ...

... but my issue is the States getting Big Daddy to force compliance with a tax that they are not willing to enforce on their own citizens. Why doesn't the State of California prosecute a few cases of people not paying their use tax? I think we both know why.

Thing 2: Why don't California or New York accommodate the official act of the State of Texas, i.e. my Texas Concealed handgun License?

And yes, I know why, and you don't really need to answer my question. It's moot.

[oldhippie]

27. Can you honestly tell me ......

... that you declare and pay use tax you owe to your state on everything you buy on the internet? It seems to me that the thieves are those who are not paying their states their use tax and stealing that revenue. You couldn't possibly be one of those, right?

[DebJ]

4. Flat taxes are regressive.

[liberalmike27]

5. Flat taxes are regressive, yes

But this tax is beyond regressive, someone making $20K, after taxes, would pay probably about 6%, as they spend their whole income. Someone making $80K a year, would pay about 4%, as they'll save some money. Someone making a MILLION$ a year, would pay about 1-2%, depending on how much they'd buy.

These are made-up figures, sure, just estimates. But the pattern sticks. The higher your income, the less you'll pay, as a percentage of income.

So, why do we all clownishly go along with this sort of thing? What you are supporting, is something WORSE, than a flat tax.

[jberryhill]

21. There is a hidden assumption in your figures

How much is that person making $20K spending on internet purchases.

Purchasing something on the internet requires - a computer, a debit or credit card, internet service, and a residence (and preferably one in a place where packages can be left).

You are assuming that the distribution of purchasing behavior by income is the same for internet purchases and physical purchases.

I'd bet you a shiny penny that it is not the same distribution.

[Larkspur]

7. I have no problem with the internet sales tax as long as the tax goes to the

state I live in on purchases I and my fellow Nutmeggers make.

I shop online not to evade taxes but for convenience and because sometimes I find things online that I can't find locally.

Connecticut has a user tax, but I don't pay it because it's a hassle and easily forgotten. By the time I do my taxes the following year, I've lost or deleted my online receipts. The state also doesn't have the resources to enforce it.

The Internet sales tax would level the playing field among all businesses and help cash strapped states. For buyers, it would be no different than buying a product locally.

[oldhippie]

20. "...but I don't pay it because it's a hassle and easily forgotten. "

Connecticut has a user tax, but I don't pay it because it's a hassle and easily forgotten. By the time I do my taxes the following year, I've lost or deleted my online receipts. The state also doesn't have the resources to enforce it.

Well, gee, I find the Federal Income Tax a real hassle and easily forgotten, too. I imagine Donald Trump and the Mittster find those silly offshore wealth tax laws a hassle and quite annoying. Is it OK for you to ignore your state tax law because you think it's a hassle? Is it then OK for the Donald and the Mittster to do the same? Or is it different for them because they have so much more money?

I'm not advocating the internet sales tax one way or the other, I'm just trying to figure out your (and other DUers) ethical position.

[Larkspur]

30. I use Turbo Tax to do my 1040 form

and I get my W2 over the Internet and by snail mail.

Also my income tax is taken out of my paycheck each week I get paid.

That's what I mean by being easy.

I pay sales tax locally when I purchase my product, so it's easy to pay the sales tax.

There is no easy way to pay the user tax. That's why 99.9% of people don't pay it.
The only time I heard CT enforce this tax was with wealthy people buying expensive art in NYC. CT Revenue Dept was able to get the NYC art gallery to hand over its list of CT customers and the Rev Dept used it to send CT residents who purchased art from them a user tax bill. This was like 10 years ago.

If CT could easily enforce the user tax, like it does the sales tax, then they would. There are too many out of state businesses to contact for them to do this.

[oldhippie]

36. OK, I understand now ......

It's OK to evade taxes if it is hard to figure out how to pay them. Got it. Just wanted to see where we stand.

[jberryhill]

42. Yep

And instead of trying to find an efficient solution to the uncollected use taxes, the other argument is that states should spend $X on prosecutions of individuals to get $Y in unpaid taxes where, following that route, X >> Y.

As an implementation matter, adding a state tax module to online sales platforms is not a challenging problem. Especially in relation to conducting an annual inventory of everyone's possessions, which seems to be the suggestion to "enforce the existing use tax laws".

[oldhippie]

44. I would rather the States ....

... not enact tax laws that they cannot enforce. I do not advocate enforcing the existing use tax laws. They should be repealed.

And I don't think the state tax module to an online sales platform would be that simple. Each of the (how many?) state and local taxing jurisdictions are going to be contacting you (the internet retailer) and telling you what they interpret their rates and rules to be. Will they always be truthful? Correct? Some will want remittance monthly, some quarterly, some upon attaining a certain dollar amount. Do you really think having hundreds of state and local beauracrats telling you what to do with your accounting system is not a challenging problem? Being subject to audit by hundreds or thousands of different auditors?

I think if enacted, there will be endless litigation. I don't see it as an efficient way to collect revenue.

[jberryhill]

47. No, they are not going to be contacting anyone and lying to them

Somehow this function is built into programmable cash registers in every state which has a sales tax.

The scenario outlined above is simply silly.

[oldhippie]

48. Hello?

Somehow this function is built into programmable cash registers in every state which has a sales tax.

The scenario outlined above is simply silly.

Jesus Christ! Yes, it is built into cash registers in retail brick and mortar stores. BUT THEY ONLY HAVE TO DEAL WITH ONE STATE AND LOCAL TAXING JURISDICTION, THE ONE WHERE THEY ARE LOCATED.

[jberryhill]

52. My eyes aren't that bad

And it is not at all difficult to match the rate to the state on the dropdown box.

My goodness, how on earth do they figure out the shipping rates, which can depend on the origin and destination locations for options such as US mail, priority mail, express mail, parcel post, fedex air, fedex ground or UPS air or UPS ground.

It's a simple coding exercise. It's not some mystery what the sales tax rate is in various states, and the centralized accounting and inventory systems of major retailers already do it anyway, since they don't do their accounting on a state-by-state basis.

[Larkspur]

49. If the state wants the tax, then they have to find a way to enforce it

If they won't enforce the use tax for every individual, then they really don't want the tax income from it.

They enforce the income tax by making employers deduct their tax from their employees paycheck. I pay both RI and CT income taxes. Both states take their share from my paycheck but when I file my taxes, CT, not me, goes to RI to get the bulk of the income tax I owe them. RI keeps the difference even though I live in CT.

If states can do that with each other, then why not sales/use taxes?

I'm sure there must be some program and database that is either built already or in the design stage to process sales/use taxes similar to how income taxes are done among states.

[bluestate10]

65. My state has a line in it's tax code concerning out of state purchases.

I rather pay the damned taxes at the moment of purchase that they to figure out how much I have spent and how much I own at tax filing time.

[L0oniX]

13. Tax is for things that cost the nation and state and county and city money.

When they (the nation and state and county and city) can show me what the internet is costing them then maybe they can put a tax on what it is that is to make up for what it is costing them. Is there a pole on city property that carries the cable for internet? Is there a road or traffic light or stop sign needed? Is there an impact of opening a new cable internet store on a busy city road? Is there a a school or library needed? Maybe a police Dept? Well maybe some police detectives for internet scams, pedophiles ect. Sales tax is state and county tax usually so what is it actually costing them to have the internet? This is more about retail stores complaining than the reality of the internet ...and states/counties complaining about tax revenue decline. Internet sales tax IMO could only be national if any at all because the sales cross all state and county lines ...and what about sales from other countries? I buy stuff from Italy. Will they have to pay sales tax to my state and county? This will not work in a fair way IMO.

[jberryhill]

14. How do those purchases appear at your door?

Teleportation?

Or do they travel over the roads in trucks?

[L0oniX]

15. Gas, tire, property and other taxes already pay for that.

How much more of an impact does having everyone drive everywhere to buy stuff have?

[jberryhill]

17. Then why did you include it in your list?

You said:

"Is there a road or traffic light or stop sign needed?"

Well, yes, obviously those things are needed in order to get internet purchases to your home. You included that on your list.

And then you say....

"How much more of an impact does having everyone drive everywhere to buy stuff have?"

Well, the impact on roads of one truck is more than several cars, given the dynamics of things like roads and bridges. But why are you asking "how much more of an impact" local purchasing has, since you've already stated your belief that the "road or traffic light or stop sign" which you initially included on your list is "already paid for" by gas, tire property and other taxes. Even if we assumed that people driving to make local purchases had the same impact, the difference would be that those people are paying state sales tax on those local purchases.

So, don't put roads, traffic lights or stop signs on the table, and then say they don't count.

I am curious about this "tire tax" your state has. How does that work?

[L0oniX]

24. So hows that tax thing working out for Delaware?

Nice of you to go along with republican talking points about Dems wanting to raise taxes. On top of having blog nannies here we also have pro tax Dems. Nice that you've taken upon yourself to go on the attack "without offering any other course" other than seemingly agreeing with an internet tax. Consider my reference to your state and its lack of tax and home of many tax evading credit card companies a counter attack on you ...thanks for playing this game ...cause I had nothing better to do anyway. Let me know when you come up with a better solution rather than taxing the internet.

[jberryhill]

29. "a counter attack on you"?

I'm having trouble understanding this "counter attack". You asked whether roads and traffic controls were needed for internet purchases. I answered your question. Yes, they do.

A better solution is to eliminate regressive taxes like sales taxes in the first place and, yes, I live in a state which does not have a sales tax.

So, let me understand this. You believe (a) sales taxes should not be collected on internet purchases because sales taxes are regressive, and (b) there is something awful about a state which does not have sales tax.

Um, okay, do we get Joe Biden back?

[joeglow3]

25. But those goods don't magically appear on store shelves.

You said "Well, the impact on roads of one truck is more than several cars, given the dynamics of things like roads and bridges."

True, but those goods in stores arrived there on those same trucks.

[jberryhill]

32. Yes, and?

And state sales tax is paid when those items are purchased from those shelves, and state income tax is paid by the people who work in the store.

I'm not seeing your point.

LOOnix asked about roads, traffic signals and stop signs, and suggested they are not needed for internet purchases. Why? I don't know. My stuff gets to me by trucks on roads. You'll have to ask him how stuff gets to his place.

[joeglow3]

35. I agree with you, but in a stronger sense

I agree with your post, but do not give her any credit, as those stores are using the sames roads, in the same capacity. And she believes that generates the need for the sales tax at the brick and mortar store, but not internet purchase.

[jberryhill]

38. Ah

I'm always taken by reference to brick and mortar stores as "dinosaurs" when I reflect on the history of Sears.

The original business of Sears & Roebuck was mail order.

[JHB]

16. Once can argue the merits and demerits of sales taxt, but this is collecting taxes already owed.

Sales taxes are already due on online purchases, but the lack of enforcement dates to when mail- and later online ordering were a much smaller share of the market and enforcement wasn't really worth the expense.

That excuse doesn't exist any more, and it's brick-and-mortar shops that suffered due to having one set of rules for them, another for online.

If you want to reduce sales taxes, make sure everyone has to pay them, not just those unable to avoid them.

[L0oniX]

31. Most store front operations sell online too as I am sure you know...

so who gives a crap about the dinosaurs who refuse to go online or who slacked? My problem with internet tax is what is it paying for and in who's state and county and ...country. I buy products from Italy for my business. Does Italy have to pay tax to my state and county too? There's a gig difference between cost impact when comparing internet sales and what a local mall uses in public resources. How will that be balanced out? Can anyone say that the public cost is even between being a retail store front and an internet shop on Ebay? Well ...is isn't equal IMO. Tax should be "fairly" distributed.

[joeglow3]

39. It seems like you are making an odd connection here

1. Sales taxes are regressive and bad, soooooo
2. I am going to break the law and not pay use tax I owe because I think it is wrong.

Why do you get make that argument and evade taxes? Why can't Mittens make that same argument when he feels whatever way he does?

[L0oniX]

41. Oh jeeze ...another reframe to promote an argument on DU. Whatever pffft n/t

[oldhippie]

45. So, won't answer the question, huh?

I think I understand.

[RC]

46. Whether I buy online or in a brick and mortar has nothing to do with taxes.

It has to do with availability and sometimes total cost of a product. Charging taxes on Internet sales will NOT reduce any other taxes elsewhere.

Where we should be looking is at the income tax and what is taxed and what is NOT taxed.
Sales tax is small potatoes compared to the income taxes that are not being paid by those with the money. Why are we subsidizing those entities making billions in profits, with tax refunds, such that their total tax is hundreds of millions MORE in profits? In other words, the pay NO taxes and get tax refunds on billions in profits.
This Internet tax is just another distraction from the real problem. This country is fantastic in the "Look, shiny" department and lousy in the "Work on the Root Problem" department.

http://www.democraticunderground.com/1017118702

[jberryhill]

53. "Sales tax is small potatoes compared to the income taxes that are not being paid"

That is certainly untrue in states like Florida, which do not have a personal income tax at all.

In some states, sales taxes are one of the only potatoes.

[RC]

56. The federal Government does not have a sales tax.

Federal taxes from income are way down, so there is less money to flow back to the states. (Our War Dept isn't helping any at all either.)
The reason Federal taxes are way down is because the Well-to-Do are not paying their fair share AND of all the Living-Wage-Jobs that have been either shipped overseas, or otherwise eliminated. Average wages are flat to way down, compared to the obscenely low tax and tax free profits of big business, which reduces the money that otherwise would benefit "We the people..."
Also, most states do have both sales and income taxes.
If the Well-to-Do would start paying their fair share, the increased money flowing to the Federal Government, would start flowing back to the States again and would go a long way toward eliminating the pressure to raise sales taxes.
Increasing State sales taxes only prolongs the real problem caused by starving the Federal Government.

The biggest problem with Florida is that the Republicans have a strangle hold on the State.

[jberryhill]

57. The federal government is not proposing one either

I don't see the connection between lost state sales tax revenues and federal personal income tax.

[RC]

58. Not just personal income tax, but ALL Federal income tax, corporate and personal.

There is a strong correlation. Thanks to bu$h, because he cut the money flowing back to the States, most states are in financial trouble. This lost Federal money also means lost government jobs, both State and Federal. Which means less income taxes paid in through job losses. Also lost government jobs translate to lost private sector jobs as well, as more people are pinching pennies by less shopping, going out less, etc..
And around and around we go, as we spiral into the drain.

[FreeJoe]

28. Am I in the right place?

I didn't expect to be reading a DU post happily quoting a Cal Thomas article that itself quotes Calvin Cooledge.

As to the substance, I'll start by agreeing with many others here - This isn't about a new tax, it is about enforcing an existing tax. If we are going to have consumption taxes, we should make them as fair as possible. One way to do that is to not bias them in favor of the well off (who, I am guessing do more of their spending online both for having more/better access online and tending to spend more money on things sold online).

Whether we should have a consumption tax at all is another subject. Given that we need to raise revenue, we have only a few options - tax income, tax consumption, tax property/wealth, tax people (poll tax). What we should tax depends on what we want to encourage/discourace.

My first preference is for pigovian taxes. Those are taxes designed to price in the costs of externalities. For example, a carbon tax ensuring that those that emit carbon pay the costs to society of those carbon emmissions. Following that, my preference is for consumption taxes. They encourage savings, which leads to investment, which leads to higher productivity, which leads to be better living standards. My least favorite are property/wealth taxes because they do the opposite.

Of course, you shouldn't pick an approach to taxation without considering fairness. I would make the taxes progressive so that people pay taxes in some proportion to the burden it would place on them. Sadly, the difficulty in doing that is almost the opposite of my tax preferences. I still think it could be managed. We could put a system in place where everyone starts with a monthly tax credit of some amount and then the other taxes are paid on top of that - essentially adding a negative poll tax into the mix.

[jberryhill]

34. "to not bias them in favor of the well off"

I'm glad I'm not the only one wondering about the volume of internet purchases by income.

[alc]

50. it's only good if it's a federal tax

I've run sites that sell products on the internet as a one-man company. It's not too bad to collect and pay sales tax for my state. No way I could do it for 50 states. So I'd use some service to manage it which would certainly take away another couple % of my revenue (not profit). A single federal tax would be about as much effort as my single state obligations.

Big companies like Amazon love the idea of making me pay every state directly. They can manage it for a fraction of a % of their sales and beat me and even bigger competition.

And don't think it's going to stop at states. My city would love to collect their % of everything I buy online and what's the different between my state getting their % and my city getting theirs? So any online retailer will be dealing with 1000s of tax collectors. Need to keep up with rate changes, back to school tax-amnesty days (if they want to), penalties when the check doesn't arrive or gets lost by the city, etc. It's impossible for a one-man business. This must be single rate paid to a single entity (e.g. the feds) or the big players will be the only ones left who can afford to sell online because a tax processing service (e.g. paypal) will be taking 2-3% of all sales for handling taxes along with their 2-3% for payment processing.

[jberryhill]

54. "So I'd use some service to manage it"

It would most likely be built into the payment processing platform you were already using.

How were you charging credit cards?

[indepat]

51. One principle should be abundantly clear: only regressive taxes need

apply.

[jberryhill]

55. What are the demographics of internet purchasers?

[indepat]

59. I know not, but suspect the big-league professional basketball, football, and hockey players, who

probably earn 100 times or more what the average resident earns, pay little more taxes to the state (no income tax) than does the average-earning resident except when buying some luxury item.

[jberryhill]

60. Nothing like good, hard data

I doubt the impact of collecting sales taxes on internet purchases is as regressive as sales taxes generally.

[bluestate10]

66. A relatively well off, well educated group of people. They should pay the damned taxes. nt

[Savannahmann]

61. I am always suspicious when something is endorsed by Big Business.

In this case, Amazon.com. Now in honesty and fairness, I've bought many things from Amazon, things that either were not available locally, or were exceedingly inconvenient to get locally, generally speaking.

Now, that the honesty is out of the way, to the opinion. At this time, there is no software that will do everything for you that this legislation will require. When there is some such software, that will categorize products based upon their proper tax category, it will be exceedingly expensive. Now, what I mean by that is here in Georgia, food stuff for example, is taxed at a lower rate than other types of products. So someone is going to have to categorize every product, and check that categorization against every single taxation zone in the nation. In many cities, one part of the city will have a higher sales tax, because it is a separate city, than another part of the larger metropolitan area. Then there is the question of physical location. If I live in Georgia, but buy something in South Carolina, I pay south carolina sales tax, because I bought it there. But if I live in a suburb of Savannah GA, and am having the product shipped there, but am in downtown Savannah when I order it, which local gets the sales tax? If I had physically bought it in Savannah, I would have paid Savannah Sales tax right?

The biggest reason I am wary, is because of the reporting requirement. If I own a business, and do sales in Georgia, brick and mortar sales, I can be audited by the state department of revenue at any time that I submit my monthly reports and payments. However, under this law, would I have to make myself available to any of the states that I make sales to? Technically wouldn't I fall under their laws, and their auditing procedures? If the software maker enters some data wrong, and I submit it thinking it's honest and correct, will I still have to fly across the country to appear as commanded by some auditor? Or will I have to hire a lawyer, sight unseen, to appear for me locally in whatever jurisdiction that is demanded?

Amazon doesn't care, they have the lawyers, they have the accountants, they are big enough to afford that without huge overhead. Small business's don't have the money to do it. They say oh, it's a million dollars in sales before you qualify. OK, a million dollars in sales, which if the business has a large mark up of 10%, means that they are bringing in less than $100k profit gross. That is before whatever overhead they have.

This feels like it is targeting the little guy, in favor of the big business, wrapped in the flag of fairness. I don't think it's going to bring in a fraction of the money they claim it will. I don't think that the small business folks will play the game, I think they'll shut down before they get to the threshold for the year, and refuse any business until the next year. If they don't make the money, they don't have to get taxed and have the cost of compliance.

I also think that Amazon and the other big boys are trying to use this to get rid of the annoying little competition that dares to sell on the internet from their basement or garage.

[bluestate10]

67. Good business people understand money flow and document every movement.

A good business person would be able to tell Kansas, at any moment, how much tax money has been collected for that state.

[Savannahmann]

68. Here be the rub.

When you are audited, the onus of proving you haven't cheated, is on you. So you would have to provide to the State that is questioning you, and possibly every state every year, all your records, and prove that you haven't cheated on the taxes. Again, this is not too much of an inconvenience when you are dealing with one State, and you are in that state. It is a massive inconvenience when you are dealing with potentially fifty states, which could be six thousand miles from your current location.

Let's say you run a small business in Hawaii. You package and ship out Hawaiian stuff in addition to running the souvenir shop off Waikiki beach. So when someone in Iowa has a Hawaiian theme party, you supply the various stuff they need to hold their clever BBQ for friends and family. You submit that you had a sale in Iowa, and pay your sales tax for that one sale. Then Iowa refusing to believe that in the last three months, you have only had one sale in their state, demands that you prove you are not withholding sales tax from them.

They command that you or your representative appear in person in two weeks to see about this. You can hire a Lawyer in Iowa over the phone, but travel in person is a major annoyance.

Likely No. Possible? You bet. Probable? Not for every business, but for some of them you bet. When dealing with the Tax Collection offices of any Government, the burden of proof is always on the person filing the taxes, not the one collecting. When you file your income taxes, you have to include copies of your W-2, and interest statements, and any other earnings you have. To make sure you don't lie, those documents are sent to the IRS, to make sure it doesn't slip your mind. When you claim a deduction, you have to be able to prove that you are telling the truth, with receipts, and statements. Just saying you are a good businessman, and know where your money is, and where it came from, isn't good enough. You have to prove you did, or didn't do what they are interested in.

Wouldn't you say that such a scenario is possible? Where Iowa could think you have had more sales in their state? Are you suggesting that the State Department of Revenue will understand you aren't in Iowa, and leave you alone? Why? No legal reason to leave you alone, and every legal reason to demand compliance.

The more compliance costs, the less income taxes that will be collected. Remember, all those compliance costs are deductible. So when we see income tax collections drop, what will we do? If we follow form, we'll scream that people are cheating on their taxes, and screwing the people from the money they honestly owe the Government.

So lets say that the company making a million a year in sales, after deducting expenses, and the costs of compliance, pays more in sales tax, and far less in income taxes, because he's paying $25k a year in compliance costs. Accountants, and someone is certain to set up a fifty state legal representation system for this. So lawyers will get more money, accountants will get more money, and the states will get a little more in sales taxes collected, and less in income taxes collected. Those lawyers will not pay as much in taxes because they use every single loophole they can think of.

But in the end, if big business likes it, I am automatically wary.

[jberryhill]

69. Yeah, because...

...if the State of Iowa gets a $1000 check from you in the course of the year, they are going to sink $20K in staff time making you miserable.

[Savannahmann]

70. Have you ever noticed that the rich folks never get audited?

The idea of auditing someone is to prove they have done something wrong, not that they did something right. When the rich guy shows up he does so with accountants, lawyers, and ex IRS agents who can argue the law better than the auditor. Every point of contention is argued by the representatives of the rich guy.

When we the regular folks get audited, we show up a shoe box of receipts and pray that we aren't going to lose our houses. So who do you think they are going to audit? Remember, it isn't about the costs of the audit to the government. It is about the successful audit by the Government, not the amounts. If you go to your boss and tell him that you audited five people, and all of them were all good to go, no violations, you are not going to be auditing for much longer. You have to show up and bragg that you caught all five in some violation or another, and applicable fines have been assessed. That way YOU get promoted, and get to scowl at the other auditors who are not being successful in catching the cheats.

Think it though. Why would the state department of Revenues operate any differently? What happens if there isn't much crime? Cops get laid off. IF there aren't many injuries, the Hospital lets people go. Why would the Audit section be any different?

[liberalmike27]

62. Great post SavannahMann

My whole point was that we should fight this tax, just like the rich fight theirs, and we should find a DIFFERENT way to collect taxes for States and localities. Totally right about the "wrapped in fairness," thing, basically saying "Let's do some of the same very unfair (definition of regressive taxes) thing, by adding taxes to Internet sales, to match the other unfair thing we did. Yes, it still seems stupid to me.

Many seem to have the perception that only rich people buy stuff over the Internet. I've got 4 credit cards, right now I'm not buying much, but I have bought stuff. The variety is tremendous on the Internet. But I'm relatively poor, and getting assistance now to pay for the cards, so, poor guy here, made subject to the tax.

If I DID want to pay a tax, then I think we should pay the tax in the State, where the Internet store ships from, not here. After all, if I buy it IN a physical Tiger Direct, in CA, for instance, I'll pay it there. Why does Alabama get to collect anything? I'm buying it from CA.

I read a great article today, on Truthout, or Alternet,or perhaps RSN, about how taxes have been TRANSFERRED onto the poor. I've personally made this point for years, that the only people really getting tax cuts are the rich. The richer you are, the more you've gotten over the last 50 years, and if you did get a dollar or two, and earn less, it was probably replaced by sales, gas, property, Internet, or some other fee or tax, spread out in many different small places.

There are still a lot of people here, who are following the media line, taking it hook, line, and sinker, not realizing that there are other ways for States, or Cities to tax, perhaps the best way through Income earned. It sort of pushes the government to assure we've got jobs too, doesn't it.

[bluestate10]

63. I support an Internet sales tax and want it implemented asap.

You are conflating the issue of Internet sales taxes by cleverly tying them to sales taxes paid by poor people. I prefer buying local. I go to the Net to find items that I can't find locally. I have no objection with paying my state's sales tax on my purchase. The fact is, Internet purchasers as a group are economically privileged, that group can afford to pay a few damned dollars in taxes on purchases.

[alarimer]

64. Republicans LOVE sales taxes

It's regressive and poor people pay more of their income in sales taxes than any other.

Here in NC, the legislature is considering doing away with the state income tax (which is incredibly regressive the way it is structured) and replacing with a sales tax. How much that sales tax would have to be to replace money lost from the income tax, I can only imagine. Or it would be a good excuse to cut state services to the bone, and, of great concern to me as a state employee, lay off people.