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Opposition To U.S. Online Sales Tax Waning

     
2:21 pm on Jul 16, 2012 (gmt 0)

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Opposition To U.S. Online Sales Tax Waning [online.wsj.com]
Republican governors, eager for new revenue to ease budget strains, are dropping their longtime opposition to imposing sales taxes on online purchases, a significant political shift that could soon bring an end to tax-free sales on the Internet.

Conservative governors, joining their Democratic counterparts, have been making deals with online retail giant Amazon.com AMZN -0.97% to collect state sales taxes. The movement picked up an important ally when New Jersey Gov. Chris Christieówidely mentioned as a potential vice-presidential candidateórecently reached an agreement under which Amazon would collect sales taxes on his state's online purchases in exchange for locating distribution facilities there.

Mr. Christie called taxation of online sales "an important issue to all the nation's governors" and endorsed federal legislation giving all states taxing authority.
3:02 pm on July 16, 2012 (gmt 0)

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My only hope is we have a standard internet sales tax fee across all states. To add all the states different taxing fees would be my last straw.
3:04 pm on July 16, 2012 (gmt 0)

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At this point, e-commerce has proven it's value far beyond a 5-10% tax rate.

The real trouble with charging state sales-tax is the complexity. Since each state (and many counties) has separate tax laws, it will make it incredibly difficult for smaller e-commerce players to succeed.

Think about it -- every single website will need an accurate tax database by zip code and the ability to generate monthly/quarterly/semiannual/annual reports to 50 states as needed and to mail a few hundred physical checks a year to all those different states.

The cost to sell your first widget to a new state may be in the hundreds or thousands of dollars.

I hate to say it, but a federal "internet sales tax" would probably be better than dealing with state sales tax laws.
3:30 pm on July 16, 2012 (gmt 0)

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Some of the tax rates aren't even consistent by zip code; it's a mess and a half.
4:22 pm on July 16, 2012 (gmt 0)

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but a federal "internet sales tax" would probably be better than dealing with state sales tax laws.


Agreed!

Marshall
4:37 pm on July 16, 2012 (gmt 0)

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What will happen to sales to persons outside of the US? For example in Australia our sales to persons outside the country is tax free because it is considered an export (bringing money into our country)?
4:51 pm on July 16, 2012 (gmt 0)

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Without an amendment to the US Constitution, I do not see how they can implement any sort of national sales tax or a state to impose their taxes on an entity that does not have some type of nexus within that state. The US Constitution is very clear on this issue, see Section 9, limits on Congress:

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

No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another: nor shall Vessels bound to, or from, one State, be obliged to enter, clear, or pay Duties in another.
4:53 pm on July 16, 2012 (gmt 0)

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@Kendo - Congress does have the authority to tax exports to foreign countries. However, it would be stupid to do this as it would hurt your domestic economy.
4:56 pm on July 16, 2012 (gmt 0)

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Some ( but not all ) US only* companies already charge EU residents VAT / TVA ..even on "intangibles" such as domain names and or hosting..

*Amazon already has an official presence in many countries outside of the USA..and charges sales taxes such as VAT/TVA at the rates where it is based..

But if say Amazon UK or Amazon France sell to someone outside the EU..they do not add VAT/TVA..
5:31 pm on July 16, 2012 (gmt 0)

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@JackieBlue, I believe Section 9 only applies to inernational exportation. Congress DOES have the ability to regular interstate commerce, and that's what a national internet sales tax would come under.

However, for years the states have been trying to get each other all on board with some kind of simplified tax code that would let the states get at least some tax on these purchases without making it so expensive for small internet businesses to keep up with sales tax.

I'm personally fine with paying the tax - you're supposed to voluntarily pay it anyway, and I do because many of my online purchases are deductible (so the state's going to know about them). But the states are pretty deluded if they think this is going to dig them out of debt. This economy NEEDS people to be spending money, and that means more jobs and not raising taxes on working and middle class folks. (Because the rich don't spend - they get too many freebies.)
6:56 pm on July 16, 2012 (gmt 0)

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I don't think this is going anywhere. Individual states will continue to strike deals with individual companies with a physical presence in their state. And that will be the end of it...

This is just a strategic piece from the WSJ to get us debating how to tax ourselves. Don't give it traction. The fact still remains; we have a spending problem, not a tax problem...
11:02 pm on July 16, 2012 (gmt 0)

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We live in a time where taxes are used to transfer wealth from those who have earned it to those who don't deserve it. This simply shows that anyone approving this is part of the corruption, period.

- John
12:46 am on July 17, 2012 (gmt 0)

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>>Some of the tax rates aren't even consistent by zip code

The last bill before the senate would require states that wish to participate to simplify tax districts and keep their data current in a central and free database.

>>We live in a time where taxes are used to transfer wealth

We live in a time where we have the lowest marginal tax rates on the wealthy in the decades, unfunded mandates on the states and citizens who don't pay tax on items bought online (as they are legally bound to do in most states - at least in California, but law, I am supposed to declare all online purchases and pay use tax on them. That's the law and yes, because it's a hassle, I am breaking that law every time I buy something online from out of state).
4:21 am on July 17, 2012 (gmt 0)

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What about foreign stores?
Wouldn't this push buyers to buy outside the country to avoid the tax?
10:47 am on July 17, 2012 (gmt 0)

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Websites hosted outside the U.S., owned by non U.S. citizens, will keep more of what they earn from U.S. traffic than webmasters who live in the U.S.? It doesn't seem like a well thought out plan.
11:51 am on July 17, 2012 (gmt 0)

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>> because it's a hassle

There's the rub. If it were easier for buyers and sellers to follow the law than it was for them to break it, then we wouldn't have an issue - for awhile.
11:55 am on July 17, 2012 (gmt 0)

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Websites hosted outside the U.S., owned by non U.S. citizens, will keep more of what they earn from U.S. traffic than webmasters who live in the U.S.? It doesn't seem like a well thought out plan.


...they already do. US has the highest corporate income tax rates in the world!
1:08 pm on July 17, 2012 (gmt 0)

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Imo, we've needed the Streamlined Sales Tax for a long time.

[en.wikipedia.org...]
5:14 pm on July 17, 2012 (gmt 0)

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How would this be enforced for small web eshops?

Lets say I'm a small proprietor in Oregon, running a website on a server in Virginia, and I collect 6-1/4 percent sales tax on an item I sell to a customer in Texas.

If I forget to forward the tax to Texas, how would they know, and what is their remedy against an Oreganian with a website, who doesn't even know what sales tax is?

Even if I sell 100 items to Texans, how is this anything but an accidental 6-1/4 percent bump in profits due to a filing oversight?
1:17 am on July 18, 2012 (gmt 0)

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US has the highest corporate income tax rates in the world!


And with plenty of loopholes that allow corporations to escape those "high rates."
2:43 am on July 18, 2012 (gmt 0)

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In 1992, the U.S. Supreme Court ruled in Quill Corp. v North Dakota that under the Constitutionís commerce clause, only sellers with a physical presence ("nexus" in taxspeak) in a state can be required by that state to collect its sales taxes. The court added, however, that Congress has the power to direct such collections.

Marshall
8:24 am on July 18, 2012 (gmt 0)

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Websites hosted outside the U.S., owned by non U.S. citizens, will keep more of what they earn from U.S. traffic than webmasters who live in the U.S.?

I don't charge VAT to US customers, US sites don't charge me state sales taxes. Where is my advantage?
3:55 pm on July 18, 2012 (gmt 0)

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Yeah, I don't see Americans flooding European vendors with sales if they have to pay sales tax for online purchases in the US. Americans do not trust foreign vendors. I often buy from foreign vendors for certain widgets and if it is something I don't stock, I will recommend the vendor to a customer. But they will never buy from them. They are foolishly suspicious, even of Canadian vendors. It's crazy. If they do this, I hope they make it a single percentage and let us pay to some central authority, because the keeping track would be a PIA.
4:03 pm on July 18, 2012 (gmt 0)

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eBay is putting up a big fight against the online tax as they would have to collect it as well.
1:06 pm on July 19, 2012 (gmt 0)

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Map of where AMZN is / will be charging Sales Tax:
[finance.yahoo.com...]

Big issue... resolution unfolding slowly... wait, govt is involved, so relatively speaking, it's a govt lightning speed! :-)
1:34 am on July 23, 2012 (gmt 0)

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I have been watching this online sales tax go on for over 13 years now. Being from Canada, I always assumed that if this thing is ever put in place, then US customs would collect the sales tax; just like Canada customs collects the GST on everything coming into Canada.

If not, combine with Section 321, I will have a distinct advantage over my American competition. Either that, or all my American competitors will move to the "Great White North".
3:27 am on July 23, 2012 (gmt 0)

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If not, combine with Section 321, I will have a distinct advantage over my American competition. Either that, or all my American competitors will move to the "Great White North".


You still have that international shipping issue making purchases from Canada for delivery in the US (and reverse) too expensive.

Marshall
11:09 am on Aug 21, 2012 (gmt 0)

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Actually, I am getting very competitive shipping rates into the USA from Canada. I have no trouble competing with the Americans on shipping.

If you are paying high shipping rates for orders from Canada to the USA, and you are doing a reasonable volume; you really need to regnegotiate your shipping agreement.

Especially if you are dealing with small packages (under 3 cubic feet); which is not subject to the minimun density weight calculation.

If the Americans bring in a universal online sales tax; without customs collecting at the border; I will be laughing all the way to the bank.
4:11 pm on Aug 21, 2012 (gmt 0)

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I hope this goes through evenly to everyone who sells online. If you are based in California, and have a large customer base in California then you are at a disadvantage as compared to merchants outside of CA who dont have to collect CA sales tax.
11:50 pm on Aug 21, 2012 (gmt 0)

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Pardon my incoherent babbling...I am tired, and I am tired of hearing about this.

To start, I am tired of the language used to misrepresent the issue. "Tax free sales" for one as if online retailers aren't collecting sales taxes in the states where it is required.

Secondly, I am tired of people acting like the only reason people shop online is to avoid sales tax....let's forget about not standing in lines, wanting to easily price compare, shopping while at work, shopping late at night, people who don't feel like carrying heavy items--- no. People shop online because they want to avoid sales tax while paying shipping fees. "It's not fair, it's not fair!"

Ok, well fellow B & M owners- we should also collect sales tax as well- for every state where our customers live. Please check ID's, and send in sales taxes for those "out of state sales" for every customer without an in state ID. Because use tax still applies. It's only fair...right?

And stop referring to Amazon as if their motives are pure. They want this because not only can they handle the reporting, but they can also charge smaller merchants a fee for their "tax collection services". Small merchants who don't sell on Amazon? Well, you are bait too because they want you out of business.

Now if something new comes to light, I'll take off my cranky pants. But until then, I am tired of hearing this same old song. Get a new tune please.
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