Senate bill powers up state online sales taxes

[PoliticAverse]

Source: Reuters

(Reuters) - State governments would be able to collect online sales taxes under a bill due to be introduced in the Senate on Wednesday, said sources familiar with the bill.

Supporters of the online sales tax collection requirement include Wal-Mart Stores Inc, Target Corp and other "big box" retailers who argue they are at a disadvantage against online-only competitors.

A bipartisan group of up to seven senators will introduce the bill, which is broader than similar legislation introduced in the Senate in July. The new bill will differ from a bill in the House of Representatives by affecting more small businesses under a lower exemption threshold, the sources said.

State and local governments support the upcoming bill even more than earlier measures.


Read more: http://www.reuters.com/article/2011/11/09/us-usa-salestax-idUSTRE7A801H20111109?feedType=RSS&feedName=internetNews&rpc=22&sp=true

[LAGC]

1. Fuckers. Time to move to a state with no sales tax.

I do most of my shopping online, I'm not going to put up with this regressive sales tax crap.

[RC]

2. Won't help.

"Retailers have been exempted from collecting taxes on sales in states where they do not have a physical presence since a 1992 Supreme Court case -- before the advent of e-commerce."

What this means is is they want to collect sales tax from you that would be charged in the state where the on-line site is located.
You buy something from a business in say, New Jersey, you get charged New Jersey sales tax. Never mind you are in South Dakota or Texas or where ever.

This idea keeps dying only because it is a major hardship on smaller on-line businesses to keep track of all the various state and maybe even city sales taxes tables across the country. And what is and is not taxed in EACH local!

In other words, you go to another state and buy something, you get charged a sales tax, they want this to apply the same way to on-line stores also, even if you live in a state with no sales tax, you will pay the sales tax of the location of the on-line site.

[LAGC]

3. Are you sure about that?

If true, that's crazy.

So if an online business is located in Montana, there would be no sales tax even if I lived in California?

I thought the big push was by states with sales taxes to collect some of those taxes for itself for its own residents who order from out-of-state?

[RC]

4. How would each state know? Who would report back to each state?

The Main Street Fairness Act

There are two primary strategies that states are pursuing to move toward a level playing field in which all retailers are subject to the same sales tax requirements.

One involves persuading Congress that collecting sales taxes for numerous state and local jurisdictions is no longer a burden for remote sellers. As noted above, software makes complying with state and local sales tax rules much simpler than when the Supreme Court issued its 1992 ruling.

To further simplify things, the National Governors Association established the Streamlined Sales Tax Project, a multi-state effort to simplify and align sales tax policies. As of July 2010, 44 states and the District of Columbia had approved an interstate agreement that establishes uniform sales tax rules and definitions, and 24 states had taken the next step of passing implementing legislation. Those 24 states are: Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin, and Wyoming.

Under this legislation, states and cities still have the authority to determine what goods are taxed at what rate, but must adhere to rules governing such things as how and when they can change tax rates, as well as uniform definitions (e.g., whether marshmallows are considered food or candy for tax purposes).

Having aligned and greatly simplified their sales tax policies, states are hoping to persuade Congress to pass the Main Street Fairness Act. The bill would authorize those states that have implemented the Streamlined Sales Tax to require large online and catalog retailers to collect sales taxes. (Small online and mail order retailers would still be exempt.)

http://www.newrules.org/retail/rules/internet-sales-tax-fairness

[LAGC]

5. Well, if a bill passes, wouldn't the retailers have to factor in each state's sales tax rate?

Just like they do already for states where they have a physical presence, just extend that to everyone else as well.

Granted, collecting would be a hassle, but that's the problem with consumption taxes in general.

[droidamus2]

6. sure that sounds workable

Okay I have a small crafts business and though I don't usually sell to all 50 states in one year lets look at a best/worst case scenario. Let's say I come up with a new product or my existing products become really popular all of a sudden due to a larger presence on the internet. Lo and behold I end up having sales in all 50 states. So I now have to file sales tax totals and payments in all 50 states? Oh, wait some states want you to post quarterly so now I need to know which states want quarterly payment and which states want it yearly. Not only will you need to make payments to all 50 states but each state usually have some products that you pay sales tax and some you don't like food. So now I need to know the peculiarities of each states sales tax laws. I guess if you are a big company you can afford to have this capability but most internet sales are not big company sales. Another problem, I know here in Vermont you use your resale license number to report and pay your sales tax online so do I now need a resale license in all 50 states? Here's another scenario. What if my business does 'drop shipping' (I think that's what its called) where I never actually take possession of the product I just connect the buyer to the supplier and take my cut out of the middle. So now we have a seller in let's say Vermont, a supplier in oh I don't know Florida and a buyer in Oregon. What's the probability that at some point if 'internet sales tax' went through that all 3 states would argue they should get full or partial sales tax on the transaction?

The only ways I can see that you could possibly make this work is that all internet transactions would have to go through some kind of clearinghouse software that would add in the sales tax for the given locale (buyer or sellers state or both) and charge it to the customer and direct that part of the payment to the appropriate state(s). Another possibility is that any e-commerce software would have to be built to send each transaction to a central database (or database in the appropriate state) with identifiers for the seller and location of the buyer. Basically a national online sales license to identify the seller. I guess in that case each state could mail a sales tax bill to the seller. Of course that depends on the fact the seller hasn't moved during the year. Otherwise, it would be impossible to assure that any and all sales taxes were being paid by a particular vendor. Then what about businesses that allow payment by check rather than online? Will all online transactions have to be digitally consummated?

Well I know my lead into this rant was 'its workable' but after thinking about I don't think it ever will be workable.

[PoliticAverse]

7. The bill is expected to include an exemption for businesses with less than $500,000 in annual sales.

[droidamus2]

9. Oh, that's better

I guess I should do more research before I mouth off about a subject. Thanks for the information. Applying the tax to only those businesses with the resources to handle that diverse a tax situation makes sense.

[sinkingfeeling]

8. Sure, because Wal-Mart, Target, etc. don't have any on-line sales!

Rep. Steve Womack (R-Wal-Mart, AR) introduced this in the House as well.

[Roland99]

10. YART! Yet Another Regressive Tax!

[goforit]

11. less sales....big boys!

[meow2u3]

12. There's going to be a major constitutional problem

If online sales taxes collections become law, it's going to run into a giant obstacle with the courts, i.e., the tax clause from Article 1, Section 9.
This bill would treat e-commerce purchases differently from snail mail catalog ones, in that online sales, but not traditional catalog sales, would be subject to sales tax, even from out-of-state customers. In other words, e-commerce would be singled out for discriminatory taxation.

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

http://www.usconstitution.net/xconst_A1Sec9.html

It would take a Constitutional amendment to allow online-only or catalog-only retailers to collect taxes from out-of-state customers.

[PoliticAverse]

13. Link to the actual bill (pdf)

http://enzi.senate.gov/uploads/marketplacebill.pdf