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Internet Sales Tax Fight Coming Back To US Congress

     
5:42 pm on Nov 30, 2011 (gmt 0)

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Internet Sales Tax Fight Coming Back To US Congress [news.cnet.com]
eBay is preparing to amplify its attack on a proposed law that would usher in sales taxes on Internet shopping, CNET has learned.

The online auctioneer plans to tell a congressional panel considering the legislation tomorrow that the measure would merely consolidate the market power of Amazon.com and the largest big box retailers while putting eBay's small sellers out of business.

5:51 pm on Nov 30, 2011 (gmt 0)

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As a small business owner of a small(er) eCommerce site, this "internet tax law" would further harm my brand that I'm trying to build. I'm already at a disadvantage because I "reside" in an industry where there are huge corporate American giants already established.

I have a great product, but I do not have millions of dollars like the big corporations do, in order to promote my brand. This is why I use the internet. It allows "average American" like myself (with no financial backers) to try and reach for the "American Dream". Google has already given much favor to these huge corporations....

I'm wondering out loud here.....why aren't small businesses looked after more by the government in this country? Why do most of the laws they create or seek to create, benefit the huge multi-million dollar corporations?

SOPA/internet tax/etc et al.
6:27 pm on Nov 30, 2011 (gmt 0)

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Why do most of the laws they create or seek to create, benefit the huge multi-million dollar corporations?


Because the big companies can afford lobbyists.

Either all the little guys need to band together and do the same, or go the cheaper route and simply fire them by voting out all incumbents at every election until they hear the message loud and clear.

However, if there is a flat tax on the internet, it will still be a level playing field and I don't buy eBay's reasoning because it will cost the same amount of tax no matter where you shop online, opposed to no tax currently. The battle is currently price and shipping costs and it will still be price and shipping costs leading the shoppers wallets. Assuming the flat tax is only 5% or some such opposed to many states that have hit 10% like California, shopping online will still be cheaper.

If the little guy can't compete with a flat 5% tax he can't compete today either.

Those that will obviously survive will be specialty sites that sell things you simply can't find anywhere else except online or have prices so low that you literally can't find it cheaper anywhere else.
6:32 pm on Nov 30, 2011 (gmt 0)

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Because the big companies can afford lobbyists.

Either all the little guys need to band together and do the same, or go the cheaper route and simply fire them by voting out all incumbents at every election until they hear the message loud and clear.

Yuuuuup.

There's a national small business advocacy group where I am that purports to lobby the gov't. I belonged to it for many years, then quit because I didn't like some of their policies. And every second small business is going to disagree with them on something or other.
9:38 pm on Nov 30, 2011 (gmt 0)

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incrediBILL the flat tax just makes to much sense for a politician to go for. Why, because they will be reaching under the table for cookies, pressured by the different political areas, or probably just plain to stupid to see the light.
11:11 pm on Nov 30, 2011 (gmt 0)

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This issue is going to get very messy. The big box stores and large non-internet retailers want to see a tax on online sales, and they have some power in the halls of government.

Add to this the states that are being pressured by the off-line guys. If there is a 5% (for instance) national tax, will it be collected on top of your state's 8% (for instance again) internet sales tax? Ouch!

The small guy's voice won't be but a whisper in the storm of BS that is going to get thrown. And its not a political party issue; the two parties are dumb and dumber. IMHO, the average person on the street will have no opinion about this mess.
4:48 am on Dec 1, 2011 (gmt 0)

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Where are they talking about a flat tax? As I understand the discussion, Congress would simply reverse the Quill v. North Dakota ruling via new legislation. This would open the gates for each state to collect sales taxes from out of state online merchants. The problem is that there are thousands of taxing jurisdictions, each with its own rule set and audit rulebook.

Compliance with each NY City sales tax - where different products are taxed at different rates by Burroughs - is whacked. California with all the special tax districts is similar. The whole setup is messed up. The taxing system was setup for stationary bricks and mortar establishments. If there was a central dataset with a firm set of rules and a clearinghouse for remitting payments, the notion of collecting a tax and remitting it would not look so daunting. As it stands now, NEXUS is also a bloody mess.

At some level, I think that e-merchants should be subjected to the same rules as bricks and mortar merchants. We’ve had an unfair advantage for more than a decade. At the end of the day, we still have the advantage because we have a lower cost structure.

I run e-commerce sites in Europe and Canada as well as the US. We’ve got it easy. PST, GST, HST… what a mess… Deep down, I hope Congress does nothing. Ya. A do nothing congress. Let’s hope they stay in gridlock.
3:36 pm on Dec 1, 2011 (gmt 0)

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Compliance with each NY City sales tax - where different products are taxed at different rates by Burroughs - is whacked. California with all the special tax districts is similar. The whole setup is messed up. The taxing system was setup for stationary bricks and mortar establishments. If there was a central dataset with a firm set of rules and a clearinghouse for remitting payments, the notion of collecting a tax and remitting it would not look so daunting. As it stands now, NEXUS is also a bloody mess.


Exactly what I`m worried about. A lot of states have similar outdated models (WA being one that comes to mind). There is no way any business without a full time accounting department and IT staff can track the sales tax rate to apply in thousands of jurisdictions and report and file for this in 45 states.
5:08 pm on Dec 1, 2011 (gmt 0)

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Putting aside the issue of affiliate sales, which is a big problem on its own, does anyone think that some state might declare itself a no-tax (or low-tax) haven, ala Delaware on corporate filings?
9:21 pm on Dec 1, 2011 (gmt 0)

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I refuse to believe they would allow the states to start setting all the rates and not have a national standard. Not even our government could be that stupid.
10:49 pm on Dec 1, 2011 (gmt 0)

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Not even our government could be that stupid.


The Federal government has no authority to charge a sales tax. They’re governed by the Constitution and the Commerce Clause. Only states have that authority. At least this is how I understand our Constitution. Any webmaster lawyers out there that can explain this better (do Lawyer/webmasters even exist)?

In Quill v. North Dakota the U.S. Supreme Court ruled that retailers are exempt from collecting sales taxes in states where they have no Nexus. The Court specifically said that Congress had the authority to change this policy and could enact legislation requiring all retailers to collect sales taxes – this is within the bounds of the U.S. Constitution. The argument was that requiring companies to comply with the varied state sales tax rules and regulations would burden interstate commerce.

Some have made the argument that software has eliminated this burden. Well, if you’ve every rolled your own commerce system or run your own large scale web business you know that this argument is bunk. Collecting and remitting taxes on a national scale is burdensome. At $50MM in sales with a livable margin collecting and remitting taxes is certainly affordable. At $500K to $20MM, no way.

PLEASE DISAGREE WITH ME IF YOU KNOW BETTER. I’m not sure how some of the larger SaaS solutions or commercial software e-commerce solutions deal with this. I’m sure that Amazon, Ebay and OS Commerce have solid systems. How about Miva and some of the $2MM - $30MM revenue / mid-tier e-commerce packages?

As of July 2010, 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, Wyoming and the District of Columbia had approved an interstate agreement that establishes uniform sales tax rules and definitions. Until all states are on board, the process is still too burdensome. If the rest of the states could agree on a simplified system, then the burden would go away.

Under the proposed legislation, states and cities would still have the authority to determine what goods are taxed at what rate. They would simply need to adhere to rules governing such things as how and when they can change tax rates, as well as uniform definitions like whether marshmallows are food or candy for tax purposes. This taxonomy has yet to be developed.

So I believe that a "government rate" is out of the question.

If this law passes it will consolidate more commerce into the big boys and stifle competition. The big firms support the legislation because they know that they’ll get richer. Smaller e-commerce sites are in the cross-hairs. Not good.
11:07 pm on Dec 1, 2011 (gmt 0)

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@dibbern2 I don't understand your question.

Even if you were domiciled in a state like New Hampshire which has no sales tax, under the new rules proposed you’d be subject to the Nexus of other states. Anything that you shipped from New Hampshire to Maine would be subject to the 5% State of Maine sales tax. We've got it easy because the entire state has a single tax rate.

Out of state internet purchases are not really tax free. This is a myth. The proposed legislation has to do more with enforcement and collection.

In Maine - where I live - citizens are required already to report on their State income tax form tax free purchases shipped to Maine so that the state can assess a 5% tax. This is called a Use Tax. The majority of Maine citizens simply ignore the law. With the exception of super large purchases, use tax is rarely if ever monitored on a large scale, as it would simply be an impossible feat for any state government to handle. Taxing larger commerce sites is simpler. We’re an easy mark.

Most states currently have use tax which specifically requires consumers to pay their state sales tax on purchases they make online that are not taxed by the business. States with some sort of Use Tax include: Alabama, Arizona, Arkansas, California, Connecticut, Colorado, Florida, Georgia, Hawaii, Idaho, Illinios, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, DC
11:11 pm on Dec 1, 2011 (gmt 0)

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(do Lawyer/webmasters even exist)?

Try visiting "domains" and "foo" here ..both have "teams" of extremely respected mods..one of whom, in each "team" are also lawyers..
6:10 pm on Dec 2, 2011 (gmt 0)

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Dirigo,
I think you're right, my mistake. I was thinking of where the business is located, and not where the customer resides.