"Main Street Fairness Act" to be attempted

Act would end longtime ecommerce tax exemption

[bw100]

Senate Majority Whip Dick Durbin (D-Ill.) says he plans to introduce a bill, called the Main Street Fairness Act, mandating that all businesses collect the sales tax in the state where the consumer resides.
[businessweek.com ]

This is where the ongoing tax battle between Amazon and the individual state governments is going ...

Here is one CPA's review and analysis of the history and issues, for any who might wish to dig into the background and issues a bit more deeply.
[nationallawforum.com ]

[LifeinAsia]

called the Main Street Fairness Act, mandating that all businesses collect the sales tax in the state where the consumer resides.

Is this going apply to B&M stores as well? If a California resident buys something in a store in Montana (no state sales tax), are they going to have to charge me almost 10% sales tax because of being a CA resident?

If so, that's yet one more reason to move outta the state...

[SilverShine]

or businesses in threatened states can stand up and refuse to co-operate?

No state should have income and sales tax. Just one or the other, preferably the latter.

[Leosghost]

I think you'll find the rest of the world , in particular Europe has both ..the only people who lose when you have both ( in spite of FUD to the contrary..mainly from them ) are accountants and tax lawyers..:)

[wheel]

Where the product is 'sold' should be where the tax is collected.

Just need a uniform decision on where the product is sold, and who's responsible for paying the taxes.

There's only four combinations, where the business is/where the consumer is and business collects and remits the tax, or consumer remits tax.

[LifeinAsia]

According to current law, online retailers are not required to collect sales taxes where they do not have a physical presence. Individual states have indirectly driven (or kept out) many retailers because of their high or complicated sales taxes.

Individual taxpayers are responsible for paying any use taxes for items purchased out of state.

I am completely against placing the burden of tax collection on out of state retailers. Especially considering how complex some states' sales taxes are- California has different rates for some counties and even some cities/areas within counties!

As a compromise, I might be less opposed (yet still against) to either:
A) a flat state-wide tax (you would be charged the same use tax regardless of whether you lived in Los Angeles County or Ventura Country- this is no different from now where people cross county lines to buy at the cheaper sales tax)
B) requiring retailers to report sales made to other states- an annual report to the state lists the name, address, and total amount for the year. The state can use that info to try to match against individuals for auditing. If individuals knew the amounts were being reported, they would be less likely to lie on their tax returns (similar to people who receive 1099s).

Either way, local money grubbing politicians will still grouse about not getting 100% of what they feel they are due. But I suspect the amount would be a lot higher than it is now.

For those who advocate a flat VAT- it fill face a huge fight in those states without a states tax as well as an even bigger fight by those states with high sales taxes.

[mhansen]

I still vote for a flat consumption tax for internet purchases.

- Flat rate: 1-2% of the total purchase. (used items and services excluded)
- Paid to: A Single Payer Federal Clearinghouse. (little to no burden on business to manage)
- Paid: Quarterly with other business reporting obligations.
- Distribution to States: Based on voting delegates, aka the Electoral College.

Edited to add: They could even credit the business back 1% of the total quarterly amount, to encourage them to file on time and pay them back for their time to manage the clearinghouse payment.

In this case, a huge retailer just sends 1 check for all 50 states, a small retailer just sends one small check, etc.

Quick, easy and done!

[jecasc]

Amazon will rejoice when half of US online businesses close because of the bureaucracy involved.

Here in Europe you have to collect the sales tax of the country your company resides in. But only up to a certain threshold. Every country has set its own threshold and if you cross it in one year you have to collect the sales tax at the customers residence. This year I will probably cross the threshold for Finland where the threshhold is only at 35,000 EUR/year which means I will stop shipping to Finland at the end of November to stay below.

It's the same insanity everywhere. You would think that governments want to make it easy for companies to do business and collect and pay taxes. Instead they make it a bureaucratic nightmare so you rather stop selling goods.

[SilverShine]

The so called "single currency", the Euro and the alleged EU single marketplace, which was promised and hailed for years, is a well known & 100% total lie.

Every country is at administrative and policy war with it's neighbours and every EU country still conducts its affairs largely as it used to before joining the "union".

The stinking rotten abomination of European ideologies are coming to your shores soon.

[Leosghost]

want a biscuit with that tea?

[pageoneresults]

I foresee a Government Tax API that ALL ecommerce platforms will be required to use. You can't do business without it. Taxes will be collected and paid at time of purchase. Simple process. Minimal paperwork. Put the burden on the Government, not the Merchant. Just like Credit Card fees are collected at time of purchases, so will taxes. It's coming, mark my words. ;)

[bwnbwn]

pageoneresults nailed it. I see this as the only way it can be done. All taxes are collected at sale with the billing address as the state that will get a porition of the tax. You know the Gov. is gonna get a bit of it and pass on the rest to the States. There can't really be another way with so many having different values. This would take out the ones reporting x sales when they had xx sales and kept the sales tax money they collected.

[Chrispcritters]

And, of course, the government will charge businesses a transaction fee to use the API...

[Leosghost]

Taxes will be collected and paid at time of purchase.
Very similar to how VAT works..

[Webwork]

Advances in computing and networking have provided the foundation and often easier/more efficient solutions to business process issues.

That is, all business processes except the collection of sales taxes.

Amazon, et al, should/could have had a handle on sales tax collection 3-5 years ago . . "but for" losing the (illicit) "competitive advantage" :-/ of . . . not collecting sales tax on sales of consumer goods.

It's about time that Main Street regain a bit of competitive . . fairness . . i.e., everyone pays their fair share of whatever the taxes are to maintain the public goods/services that taxation has always been meant to fund: roads, police/safety, education, public spaces (parks/recreation), etc.

I'm not a big fan of paying taxes, but I am a big fan of leveling economic playing fields by removing illicit, economically inefficient, advantages such as the "WE, Amazon.com, won't collect taxes from you . . because we don't have to . . and we know, fer shur, that YOU ALL will pay the sales tax, nonetheless . . fer shur . . because shirking duties is something Amazon.com wouldn't encourage . . "

It's about time the game change. Score 1 for Main Street if this bill passes. It's also time to stop "fixing this" by firing the local affiliates.

Now, about those Main Street devouring BigBoxStores . . .

[MamaDawg]

Now, about those Main Street devouring BigBoxStores . . .

... who are a driving force behind all the state-level affiliate nexus laws...

everyone pays their fair share of whatever the taxes are to maintain the public goods/services that taxation has always been meant to fund: roads, police/safety, education, public spaces (parks/recreation), etc.

Even though businesses which are located out of state don't benefit from those services?

It's also time to stop "fixing this" by firing the local affiliates.

States should stop unfairly singling out affiliates as creating a nexus. Affiliates are publishers and advertisers.

If Amazon runs an ad in a magazine which is sold on a newsstand in California to a resident who subsequently makes a purchase, should the sale of the magazine create a nexus in the state of California? Why should a web site publisher be treated differently? The compensation model is different because better tracking is available online, but a publisher is a publisher is a publisher.

What pageoneresults described might actually be the best way out of this mess.

[jecasc]

Even though businesses which are located out of state don't benefit from those services?

They don't? If they do not beam their products to the customers they do. The parcel services need roads to deliver their parcels.

Also do not forget - the customer pays the sales tax the businesses only collect it.

[Demaestro]

Where the product is 'sold' should be where the tax is collected.

In the case of E-Commerce wouldn't that be the physical location of the server?

My business is in Cali, my customer is in Illinois, my server is in Mexico. Where was the product sold from?

[bwnbwn]

Not sold but delivered. I am in Arkansas dropshipper is in Texas, NC or Illionis so sold would not work, but the billing address of the buyer would. Not much point is sold but were it was purchased.

I can buy a car in Texas but I pay sales tax on the address I live at AR. Texas sales tax is 8.25% Tx. AR is 10% I pay 10%. Same with sales over the net. Except there would be a set % for all states paid by the Govt. collected from the point of sale.

Actually if the processing companies were asked I am sure they could put together a collection process very fast. Thinking over this some it would be a nightmare to add this new tax collection to a cart, but with the CC processors it is a simple fix.

[wheel]

In the case of E-Commerce wouldn't that be the physical location of the server?

I'm actually gov't approved to sell my products,and that approval is on a perlocation basis. Folks in the past have tried to use that 'where the server is located' argument to suggest they only need gov't approval in one location. The argument doesn't wash with the gov't :).

[Demaestro]

Wheel, Regarding your statement that where the product is 'sold' should be where the tax is collected.

I was just wondering how you determine where a sale took place.

I agree that it should be where the sale took place, but I wonder for online sales where would you would consider the sale having taken place when the customer and the server and the vendor are all in different locations?

[edited by: Demaestro at 7:28 pm (utc) on Jun 14, 2011]

[shallow]

When our family had a business, we collected sales tax on taxable items and remitted quarterly to the state. I don't recall the amount, but we deducted a percentage of the total taxes due. So businesses were compensated for processing taxes for the state.

I totally agree with Webwork!

[StoutFiles]

Where the product is 'sold' should be where the tax is collected.

How so? California looks at it this way...every item bought out of state is an item that you won't be buying there, which would be generating income for the state. They still want their money.

[bwnbwn]

I can see but one way this would work without a quicksand effect and that is use the billing address of the buyer. The state were the person lives gets the money as it should be, not me living in Texas buying something in Calif and Calif getting the sales tax. This defeats the whole purpose of the tax. A state should get the tax from a sale.

This would also take in effect those companies that want to move into another country. Products can't get in unless a sales tax has been applied to the sale. Now collecting them is another whole bag left to be opened.

[pageoneresults]

Taxes will be collected and paid at time of purchase.

It's easy to say that but when it comes to the logistics of something like this, it's a monumental task. A few years ago I sat down and laid out a rough draft of how this might work. I then purchased a small portfolio of domains in anticipation that something like this might become a reality.

My concept revolved around a shared Internet tax. The seller pays half, the buyer pays half. Both fees collected at time of purchase, both regions share in the revenues.

It really wouldn't be a Government Tax. It would be more like an International Internet Tax managed by a World Bank. Ya, I've been watching too many movies. ;)

[Leosghost]

btw ..Some USA businesses already charge VAT to European buyers, added to purchase price at the end of the checkout ..godaddy/bluerazor for instance, do this.

[gmb21]

Amazon might be able to afford to make tax returns to thousands of different tax offices, but this would be the death of any small online businesses.

[edited by: gmb21 at 8:22 pm (utc) on Jun 14, 2011]

[Demaestro]

every item bought out of state is an item that you won't be buying there, which would be generating income for the state. They still want their money.

That sounds like a state to state tariff. It almost sounds like this is where things are heading. I am not sure how well that would go over though

[walkman]

Despite the beating they've taken in these states, Amazon's opponents contend that time is on their side. "Ultimately, this is a battle they are going to lose, and this is about how long they can push off that day of reckoning,"

Duh :) ! I'd say any tax will start in 1-2 years after being passed so the (then) current Congress doesn't suffer in elections. Remember, it's a TAX, right or wrong a lot of people will pay extra.

[diberry]

If Amazon runs an ad in a magazine which is sold on a newsstand in California to a resident who subsequently makes a purchase, should the sale of the magazine create a nexus in the state of California? Why should a web site publisher be treated differently? The compensation model is different because better tracking is available online, but a publisher is a publisher is a publisher.

I've been thinking about this more and more lately. It's absurd to suggest we're agents of any company we affiliate with. It's called affiliate "marketing" for a reason.

And yet, when Amazon/Overstock sued NY on that very point, the judge refused to hear it: [blog.seattlepi.com...]

Which in effect means the judge thought it was nonsense, and NY's new definition of affiliates as a "physical presence" for retailers was justified.

If I'm a physical presence for Amazon, why am I not an employee? Why do I not get regular wages as a base for my commissions? Why am I not offered health insurance, which even independent contractors often have the option to buy through their companies?

Because I am not part of Amazon in any way. I'm a sole proprietor "internet marketer" on my schedule C - I'm in effect another company that does business with Amazon and others.

So what was that state supreme court judge in NY smoking? Cash from the Big Box Cabal would be my guess.