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Congress is grappling with two different issues. One is whether to expand a ban on states and localities from taxing Internet access - such as dial-up, DSL or cable modem service. ... The second issue involves whether Internet companies like Amazon.com, eBay and Colorado-based eBags should be required to collect local and state taxes from sales of their products.
The ban, which has lasted seven years, expires Saturday
Net sales tax bill exempts small biz [bizjournals.com]
CMP newsmedia [techweb.com]
Rocky Mountain News [rockymountainnews.com]
Associated Press article [wate.com]
Voices for states crying in D.C. wilderness [gomemphis.com]
Best part about this is that I get to talk one-on-one with our Senator about issues such as this...but it may be after the fact if a vote does or doesn't happen.
Total public misperception
The way I understand it is there are two parts to the bill. One for Internet ACCESS and one for Internet COMMERCE.
People think there's a ban on collecting sales taxes for selling widgets online.
I don't believe this is true. Anyone who has ever bought anything from an online store in there state has checked the little box saying they need to pay sales tax.
On the otherhand, they do NOT pay taxes on interstate commerce.
This, IMHO, is the real issue to myself and other small ecommerce businesses.
If a state/states get together and decide to start forcing businesses to do this, there is going to be a Federal case very soon afterward. (And the Supreme Court has already ruled on this.)
How will all the states, counties, and localities collect their share?
The only solution is to have merchants pay the taxes collected into one huge fund, then have that fund and whoever manages it disperse the funds to states, counties, etc. A national BOE, so to speak.
There is no way individual merchants can do the dispersements themselves. Not without an easy software program. All kinds of issues will arise, including some constitutional ones I imagine. The government will have a hard time taxing Internet state-to-state sales without taxing long standing/non-Internet/state-to-state trade.
But I don't think states will continue to ignore all that potential money. So the program is, I'm sure, in the works by some industrious company. The Internet used to be a place for us small guys, and I shudder to think that that is coming to an end.
There is no way individual merchants can do the dispersements themselves
Exactly one of the reasons the Supreme Court has rejected this in the past.
Not without an easy software program.
VERY true. If it comes to this...think "picks and shovels" in the gold rush years.
All kinds of issues will arise, including some constitutional ones I imagine
Most certainly. I'm having a hard time trying to figure out how some city in Texas is going to force me to collect sales tax for them. I'm no constitutional expert, but it seems they lack the authority to do so. The keyword here is to "force" me to collect those taxes.
This is a State issue, so the Feds can't really get involved, per se. Again, as I understand it.
Think of a worst case scenario. Let's say I refuse to collect the sales tax from a jurisdiction outside of my state. What can they do to me? I don't see how they could do anything. They would need to prosecute me, but I don't see how they could. They don't have any authority over me. Granted, MY state could give them authority, but if they don't....what would happen? My understanding is nothing would happen. That's why states have to request extradition of accused criminals. If the State says, "No". It ends there. AND....if a single state refuses to cooperate with the extradition, that state will become the new home to several web based businesses.
Another possible scenario?:
I live in town "X". Now in my brilliance as "Mayor" of town x, I get together with the local council members and we decide/vote on a 1 BILLION percent sales tax on any purchases in our city.
THEN we all go out and order a bunch of stuff online. Ooops! these items weren't charged the additional tax (the tax software of the web based company was an hour outdated-we do our meetings fast.), so we get them tax free. But then we go after the web business for our "tax" we intitiated. After all, it's "OUR" money. Those purchases should have been taxed...
Obviously us townfolk don't have that kind of money, but the business still should of collected it and they owe us that money. They could sue us, but we (as citizens) just declare bankruptcy and then still go after the tax money as a legal taxing jurisdiction. (Sorry for the pathetic example.)
Now the above may or may not be entirely accurate, but it is my understanding of the issue and I'm open to be corrected and educated on this matter.
The government will have a hard time taxing Internet state-to-state sales without taxing long standing/non-Internet/state-to-state trade.
The "Government" (as in the US Government) won't be doing/taxing anything. It's a State issue. BUT, if it happens, the above industries will certainly be included.
7500 taxing jurisdictions currently in the US. 7500. Think how often those percentages change based on local votes. Think about cutting checks for each of them. Some weekly. Maybe even daily...
Every time a consumer turns to Google research service, they could be taxed for each key stroke. If that happened, no question, some in my office would just go bankrupt.
Some humor from the cosponsor of the original bill here [noemailtax.com]
Also, I found this from the Harvard Law School. Pay particular attention to section 3 and even closer to subparagraph/section d. [law.harvard.edu]
Indeed, the ITFA WAS written in order to give Internet ecommerce the same protection as mail-order, (IE no tax collection).
Co-sponsor Cox's own words a year after it passed:
The Internet Tax Freedom Act treats sales over the Internet the same as catalog sales over the telephone.
I got HAMMERED, personally (claimed I misrepresented the ITFA), in an article by one of our State Reps. He basically denied the above was true.
Also, answering myself:
Let's say I refuse to collect the sales tax from a jurisdiction outside of my state. What can they do to me?
This is what happens [supct.law.cornell.edu]
And...interestingly enough, that's why we HAVE the ITFA.
Further 'oh-ohs' [nga.org]
The above article is incorrect, though, the Congress did not side-step this...they passed it unchanged. [jointventure.org]