U.S.: Renewed Push For Internet Sales Taxes

[engine]

U.S.: Renewed Push For Internet Sales Taxes [news.cnet.com]

The halcyon days of tax-free Internet shopping will, if Rep. Bill Delahunt gets his way, soon be coming to an abrupt end.

Delahunt, a Massachusetts Democrat, introduced a bill on Thursday that would rewrite the ground rules for Internet and mail order sales by eliminating the option for many Americans to shop over the Internet without paying state sales taxes.

At the moment, Americans who shop over the Internet from out-of-state vendors usually aren't required to pay sales taxes. Californians buying books from Amazon.com or cameras from Manhattan's B&H Photo, for example, won't be required to cough up the sales taxes that they would if shopping at a local mall.

[rbarker]

Just a thought...

Quit debating how to tax the Internet and start demanding it remain a tax free zone.

You all might be amazed at how quickly your reps will adopt your argument.

Just a thought...

[outland88]

Frankly I'm amazed how many people are volunteering to increase their taxes and those of others to underwrite inefficient government with its already lavish pensions, benefits, and salaries. Its Wall Street all over again except you won't be getting your money back. If it’s not purely about the money lets have a national referendum banning taxes on all Internet sales in all states. Instead all our politicians will accomplish is driving more jobs out of the country which began with NAFTA. Meanwhile they'll wonder why the new taxes didn't correct matters so they'll encourage more tax increases. Once they get the foot in the door that's all she wrote.

[lgn1]

Why not enforce, the use tax, and get better compliance from consumers. Make it part of the IRS tax form. Impose heavy penalties.

I bet that most consumers don't even know, that they are supposed to pay use tax on purchases made out of state.

The states should run some commercials, let the consumers know. I find it hard to believe that most Americans are dishonest and will engage in tax avoidance, if they actually know about it, and the damage it may be causing.

Sure some people will rip off the state, but those are the same people that work under the table, and are constantly ripping off the system, and lying on tax forms anyways.

And if the goods are arriving out of country, then get the federal government to collect the tax, as they do in Canada.

[motorhaven]

Why not? Because we get too heavily taxed as it is. The lack of sales tax collection across state lines isn't causing one bit of damage. No one is ripping off the state. Its the other way around. Its your money they are taking, not visa versa.

Irresponsible spending, citizens who think taxes and big government are the solutions to their own personal security, corruption, bloated budgets, union and corporate lobby influences, etc. are problems. What is needed is a tax system which eliminates many of these problems (ie Fair Tax) and puts the power back in the hands of the people.

When economies are slow what is needed to bring in more tax income and grow the economies is tax cuts. Both John Kennedy and Ronald Reagan's tax cuts illustrated this.

The states aren't going to dig themselves out of their holes by digging into out pockets. Doing so will only spell their own further ruin.

[buckworks]

Instead all our politicians will accomplish is driving more jobs out of the country

That's the exact concern that a lot of brick-and-mortar merchants have, only at the local level.

I'm familiar with a business sector that has seen hundreds of small retailers close in the last few years, and competition from online sellers has been a significant factor in that.

Unfairly so, in some aspects, as the present chaotic tax situation creates a disadvantage of several percentage points against the local physical store that has nothing to do with the intrinsic costs of running a business. The bigger the price tag of the item, the worse the problem.

I'd consider it perfectly fair for online businesses to be competing against local physical stores based on cost efficiencies, service, selection, etc ... but I consider it both unjust and unhealthy that the sales tax situation creates an artificial disadvantage for the local retailers.

If it's okay to have sales taxes at all, the responsibilities of both paying and collecting them need to be shared equitably and consistently. That's certainly not happening now. There is wayyyy too much illogicality in the system.

For small local retailers, the present situation is like requiring a runner to compete in a marathon with weights strapped to his back that some of his competitors don't have to carry.

[dickbaker]

I believe (but would have to verify) that the majority of states have a use tax consumers are supposed to pay on items purchased from out of state.

What the proposals for internet sales taxes are really saying is that the states are unable to enforce their use tax laws, so they want the online merchants to handle the enforcement for them, and for free.

[aleksl]

Bravo.

outland88: Frankly I'm amazed how many people are volunteering to increase their taxes and those of others to underwrite inefficient government

Only one voice of reason so far in this thread.

This tells me that U.S.A. is fast approaching U.S.S.R. There's no escape. You folks are brainwashed that you apparently need to support the parasite that sucking you dry, tired and eventually dead - the inefficient, corrupt and militaristic "Federal" gubbermint (ok, let's remind everyone - $1 trillion dollars per year military spending , half of that in the open and half hidden).

This country is doomed.

The more you tax business, the more advantage international conglomerates and international bankers have over you, your local economies, and american businesses. You tax your businesses so that large corporations don't get competition, so they can buy you out when you are tired of the race uphill with two boulders tied to your back.

ergophobe
4. let states go bankrupt
We probably need some combination of #1-#3, but if this conversation is any indication, we're going to get #4.

Cry me a river.

States have tens and hundreds of billions of dollars of REVENUE. As opposed to "budget", which is a small portion of their revenue. Example: a crying State of California hid $250 Billion dollar CALPERS pension fund offshore recently. States have the money, they just pretend they don't. They don't want to disturb pensions for the unions and investment income.

When your revenue suddenly decreases, what do YOU do? You, responsible businessman? You cut expenses. Somehow states missed that part of economy 101 class.

[mhansen]

This will probably get passed in one form or another... you simply cannot continue to fund all the social programs the US has (I'm in NC, and already felt the pinch from Amazon) without finding ways to pay for it. (Have you looked at the local un-or-under employment rates?)

The solution is stupid-simple, probably too simple... which is why our Govt will spend BILLIONS of dollars just in the debate and law creation process.

- Add a 1% tax to internet, phone, mail order, etc purchases.
- Allow vendors and businesses a tax credit for managing it, based on the amount they pay in.
- Have a Federal Clearinghouse manage the tax.
- Distribute to states based on voting delegates.

Done...

IMO, This tax WILL HAPPEN no matter what we do... one way or another. Maybe it wont be called an Internet tax, but it will be a new local tax, or a new road use tax, or a new bandwidth tax, etc...

Just for disclosure sake... I support a complete flat-tax system anyhow. Abolish the IRS and pay at the register.

[enigma1]

It's the individual state laws which are essentially unenforceable since they have no access to purchase data without the help of out-of-state merchants.

Yes perhaps, but states have their share of the income tax after all. And when you file for taxes they exclude "certain" expenses isn't it?

This whole mess with the sales tax could had been avoided if they could simply rely on income tax and remove basically sales tax. Sales tax does not help commerce, instead weakens the economy substantially. See EU, 20%-25% sales tax, making consumers...not consuming, by legal means at least, helping black markets to grow.

US may not follow USSR, but seems they're shifting towards the EU model and that's not capitalism.

[akmac]

Buckworks,
Isn't the argument that "tax free" online shopping puts B&M retailers at a competitive disadvantage ignoring the fact that these businesses could have gone online themselves?

We were a business that was B&M since before the web. The same artificial disadvantage we had as a result of having to collect sales tax in our stores became an advantage in nearly every other market-and was one factor that caused us to go online.

I hate to see small shops going out of business, and there are some genuinely under-handed and anti-competitive practices that should be condemned. However, truly anti-competitive practices are not available as an advantage to small businesses like the sales tax benefit (for going online) is.

Businesses that close their doors because a failure to adapt and take advantage of changing markets is an indication that free markets are functioning properly.

[buckworks]

Isn't the argument that "tax free" online shopping puts B&M retailers at a competitive disadvantage ignoring the fact that these businesses could have gone online themselves?

That is true but not relevant. The issue here is that the competitive disadvantage is purely artificial.

I consider it a significant injustice that the present, highly confused policy patchwork effectively creates a government-funded incentive for consumers to shop outside their home communities.

[akmac]

Injustice to whom? The state governments, or the businesses that refuse to adapt to the reality of a global marketplace?

Arguing for either of these entities is an argument against the consumer. Are you sure that's the side you want to be on?

Wait a minute Buckworks-aren't you in Canada? ;-)

[buckworks]

You're right that I'm am in Canada, but the small businesses I mentioned earlier, that I have observed closing, are primarily in the US.

Consumers are ending up with fewer and fewer choices in that sector so it's flat wrong to assert that questioning the current situation is somehow against consumers.

Injustice to whom? The state governments, or the businesses that refuse to adapt to the reality of a global marketplace?

Those who cling to the sales tax status quo are the ones having the most trouble adapting to the global marketplace.

The root problem here is that while many local taxes made perfect sense at the purely local level, the local patchwork approach to sales tax simply doesn't scale well to commerce at interstate or international levels.

The injustice is to businesses in your town who are forced to charge sales tax to the patrons they serve in person, while an out-of-state business who serves that same consumer can dodge that requirement.

There is no way you can convince me that government policies / procedures which effectively encourage people to shop out of state are "pro business".

Neither could anyone convince me that a tax system that arbitrarily puts some businesses at a disadvantage merely because of their chosen sales channel can possibly fit with "conservative" values.

It's just nuts.

Even more nuts: why do some people think their world would be a better place if their governments just went broke? Did they sleep through history class in school? I invite you to ponder a couple of cases where national governments were forced to default on their debts. One led to the French Revolution and another to the English Civil War.

Definitely Not Cool.

Of course this will cost buyers more, a politician is pushing for it!

Suggestion: if you think your local politician is an idiot or a crook, or even just boring, get your act together and run against him in the next election.

[dpd1]

Even more nuts: why do some people think their world would be a better place if their governments just went broke? Did they sleep through history class in school? I invite you to ponder a couple of cases where national governments were forced to default on their debts. One led to the French Revolution and another to the English Civil War.

I don't think people want to see the country go broke... Although, you do have some of the libertarian types that have some stupid notion that we should just let everything go to hell, and spend our whole lives living in our bunkers... Of course, they conveniently forget that when they have a problem and call the cops, or expect the fire department to put their house out.

But I think most average people aren't necessarily 100% opposed to tax, or even increased tax... They're just opposed to what's done with it. And unfortunately, what is done with it is often times completely irresponsible. I do some gov procurement, and let me tell you... The way things are done when it comes to procurement, are in many cases complete insanity. You've got orgs spending money on stuff they have no use for, simply because if they don't spend all their money, they will not get more. You have gov orgs going through multiple layers of middle men, because of some prehistoric level of bureaucracy that insists on involving 10 different groups of people, to do what it should take one person making a phone call could do. And in that process, things are purchased in reality, for an amount that is four times what it's really worth.

Then you have the handouts of tax money to private industry for "studies" on this, and "research" on that... Studies to decided who should consult, to decide who should be contracted, to do a survey, on how much it would cost, to do researcher, on how many chickens we eat every year... or some similar nonsense. You think I'm exaggerating? Look in the budgetary details from congress. People think NASA is some huge budgetary nightmare, when in reality, there is 500 times that going to a bunch of stuff that nobody can even define.

People are just tired of being asked for money to go to police, teachers and fire fighters, when we know that's the absolute last place it will actually go.

And voting... I'm sure you saw how many people were convinced our new beloved savor was going to come and rescue us from our doom (I didn't buy it for a second). And what did we get? Same old crap. Nobody is ever going to vote for the right guy, because the right guy would be realistic and expect people to sacrifice. And nobody is ever going to vote for anybody that wants them to sacrifice. They're only going to vote for people that make pretty speeches about how all our problems will magically be solved. So here we are.

[akmac]

it's flat wrong to assert that questioning the current situation is somehow against consumers.

Don't put words in my Quick Reply ;-). I didn't suggest that questioning "the current situation" is anti-consumer. What I consider anti-consumer is a bill that will cost US consumers an estimated 23 Billion, while adding an additional level of complexity to the already untenable sales/use tax mess, and result in most of the US enjoying a competitive disadvantage in the global marketplace.

And why should we do this? Because certain states are unable to close their budget gaps. I don't suffer under the illusion that all states can accomplish a balanced budget with cuts alone-but it should certainly be the starting point.

Your belief that the current patchwork sales tax law is inequitable is hardly a reason to apply it more broadly. Whether you acknowledge it or not, you're arguing in favor of equal DISadvantage for every US market with state sales/use tax, which will weaken their ability to compete globally. But then... you're in Canada. ;-)

[willybfriendly]

I consider it a significant injustice that the present, highly confused policy patchwork effectively creates a government-funded incentive for consumers to shop outside their home communities.

OT: Last Holiday season I was in the market for a camera. Went to a local shop with the same belief you express above. They were over $100 above net prices. Tried to bargain, not just on price, but accessories as well (memory card, case, etc.). The shop wouldn't budge, so I went online. They lost a sale where simply throwing in one or more high margin accessories probably would have closed it.

Tax was a non-issue.

Back on topic...

What bothers me is the govt. shifting responsibility for tax collection and accounting onto the retailer. It would become an absolute nightmare when spread across multiple jurisdictions. I am associated with an on-line presence that does about 50% wholesale sales (tax exempt). Every State appears to have different regs and reporting requirements for such things.

States need to get their money from their citizens. Of course, that opens up the whole can of worms of privacy, since etailers would have to report sales to the State govt's.

[buckworks]

Every State appears to have different regs and reporting requirements for such things.

All those differences create huge inefficiencies which are a major part of the problem. Why not just cut the Gordian Knot and figure out a way to coordinate and streamline the whole situation?

Too many folks seem locked into the idea that the present complex, complicated way of doing things is the only way they can be done.

It's not.

a bill that will cost US consumers an estimated 23 Billion

By law, by EXISTING law, those consumers are already supposed to be paying that. Is it your intention to condone tax evasion?

that opens up the whole can of worms of privacy, since etailers would have to report sales to the State govt's

I'm curious: does it bother you that the store on your local main street reports sales to the state government?

But then... you're in Canada. ;-)

Yes, so on one level I have no dog in this particular fight. On another level, though, I am an affiliate who works with a number of American companies so I have a keen interest in seeing some solutions arise here that are efficient, sensible, scalable and fair.

[rachel123]

All those differences create huge inefficiencies which are a major part of the problem. Why not just cut the Gordian Knot and figure out a way to coordinate and streamline the whole situation?

Because the autonomy of the states, while I agree it causes some issues in the 'global economy', is still one of the fundamental principles that the US was built on. States regulate their own commerce.

If I have to start collecting Minnesota sales tax on everything, so be it.

What I won't do is start collecting and remitting state and local taxes to every jurisdiction in the country.

Personally, I think that use taxes are what is absurd.

I'm curious: does it bother you that the store on your local main street reports sales to the state government?

Of course not, apples to oranges. Local main street reports sales to the state as an aggregate sales number purchased by anonymous buyers. In order for other states to enforce their use taxes, the retailer has to turn over the name, address, amount, and purchase information of a specific person to the government. Completely different ball of wax.

[buckworks]

Tax was a non-issue.

If a local retailer gets out-competed on issues like price, product selection, speed of delivery and so on, then I would simply tell those folks not to whine if someone out-competes them.

But competing against the attractions of easy tax evasion should not be part of the mix.

[buckworks]

Completely different ball of wax.

Agreed. So finding a completely different approach might make a lot more sense than merely trying to rejigger a system that is so poorly adapted to the realities of global commerce.

What I won't do is start collecting and remitting state and local taxes to every jurisdiction in the country.

Yes. That prospect is truly bizarre.

[willybfriendly]

buckworks, this [taxadmin.org] is what US etailers are up against. Tax rates run from zero to 8.25%. Some States allow for additional tax by cities.

Some tax food. Some don't...

Some tax prescription drugs. Some don't...

Then there are wholesale accounts that generally are not subject to tax.

A "federal" fix would presumably apply a flat rate, take a cut for "administration" and then divvy up the remaining amongst the States. Of course, States such as mine that currently have no VAT would then find themselves at a competitive disadvantage.

Given the repressive nature of value added taxes, perhaps the completely different approach would be to ditch them for something more progressive.