29 States to vote on taxing online sales next month!

Hard to enforce... well maybe after the fact, when they throw you in jail for Tax evasion!

Those figures are a little high if you ask me - I can't imagine they are really "losing" that much money.

Even if they are - too bad. They don't use state services.

"I just have a strong bias against having our own business having to compete unfairly with somebody who can send the same product in here from out of state," Heath said.

I'm hard pressed to come up with examples that support this. Especially once you factor in shipping. Maybe it should read:

"I just have a strong bias against having our own business having to compete unfairly with somebody who can make a web site," Heath said.

Why not just enforce 'use tax'? It's supposed to cover mail order anyway, to replace sales tax. If you don't keep records of it, there's a line and formula for estimated use tax on your state tax return. Maybe the estimate formula should go up to account for internet business increasing the prevalence of mail-order?

The stats quoted in that article are grossly inflated.

The states know they can't enforce use tax.

1) Most people don't know they owe it.

2) Who is going to file for $2.00 in use tax. This can add up to ALOT of money for everyone.

3) It is much easier to try and force businesses to comply.

I have learned a lot about "running" a business in the last year.

In addition to filing all the forms I have to 940, 941, quarterly state, quarterly state unemployment, and quarterly unemployment federal - now I find the state wants me to pay taxes on everything my business owns.

This is not a use tax, but something else they want.

Also got a notice they want me to report all my employees and how much they make, when they started, and a whole bunch of other stuff.

Luckily I don't sell stuff to the public or I would have to file sales tax reports.

I have an employee and firm doing this stuff, and it takes a decent amount of time.

Now the states want people to pay more - for every state. This would be a huge imposition to the small business owner.

I don't think what I want to say is permitted by the tos - so I will leave it to your imagination.

This one is going to be hard to pass unless they include all the mail order. Same business, different media.

Hmmmmm, cheaper tv's from overseas.....that comes to mind. So our fabulous bureaucrats bog us down so much that imports from other countries are cheaper than what Americans can provide.

Looks like they're at it again...

Ok, ok, I'm ducking...oh that's your user name, welcome to the land of posts duck hunter.

It seems like US is killing all online businesses by encouraging them to go to countries like India where web talent is available and all the income earned outside that country is generally tax exempt (I believe this is to encourage ForEx or exports for that country)!.

No wonder I hear news almost everyday here in the valley (san jose/silicon) that businesses (IT/eCommerce) are closing shops and setting up offices overseas ... killing local employment and taxes!.

I don't know how this helps the overall state of the US economy!. One must wonder!.

Any comments on this are welcome!. Of course I have limited knowledge on taxation ;)

I ship to the USA from Canada. If the comptroller of each state think im going to collect and remit tax for each state, they have another thing coming.

It's says right on our web site, sales tax (outside Canada) is the responsibility of the customer (ie. self assessment).

Maybe they can get US customs to collect the tax. That should be good for another two years until the feds and states try to put together an aggreement.

If we as e-tailers, were responsible for obeying every tax law for every jursidiction on the planet, we all be in jail right now.

Ign, I agree... If the bureacrats makes this all too complicated or even levy tax, it is perhaps time to wind up US operations and migrate the business to other countries who have better laws ...

Personally, I think the sales tax laws are outdated. It is best to allow businesses to flourish without any sales taxes ...

All the taxes should be at individual income level upto a certain maximum limit of taxation per year!. A person/family is not consuming "unlimited" state/fed resources to attract "unlimited" taxation ...

The states/feds should learn to live with limited resources (like any other business) to control their budget deficits rather than sucking up businesses and individuals unendingly!

As a small business, I could operate much better without the state, federal, unemployment taxes and all the cr**!.

My only real objection to sales tax is that I see it as regressive. If person A makes $12,000 a year, and person B makes $120,000 a year, I presume that a much larger percentage of person A's income ends up being spent in ways that end up being subject to sales tax. (Maybe I'm wrong. If person B doesn't invest or save any of that, then my reasoning is flawed.) In which case the sales tax takes a larger percentage of person A's yearly income than of person B's. Since the system is obviously not working as well for person A as it is for person B, this seems backwards to me.

From a small business perspective, I've never had a problem with sales tax. I've been registered for it and filled out the returns, and basically found them to be pretty easy. I've never had employees, but that looks *far* harder to me. 'Course, make me keep track of the sales tax laws in 50 states and file 50 different sales tax returns and that would chance pretty fast.

I deffinitely don't see any reason why there should be any cap on how much money the government can take from a person in taxes. Maybe a cap on percentage of earnings, but not an absolute dollar cap. If you're doing that well, you are reaping many more benefits of living in a country with all the infrastructure and government services that ours has, and deserve to pay for a larger share of it. Not that there isn't work involved in getting there, but that work isn't taking place in a vacum.

I don't have any problem with people wanting to encourage responsable stewardship of the common resources our governments maintain. I do, however, have a serious issue with people who complain that they don't use this or that particular government service, and therefore shouldn't have to pay for it. (I have most often heard this view expressed with respect to public education, eg, "I don't have any kids so tax money shouldn't be spent on public schools. Breeders should have to pay tuition.", but I've heard it from someone about almost every government service. Suck it up and deal. I have no sympathy.)

dingman,

I have no problem with paying for what MY state and MY country want. (Ok - I do, but I can understand it).

But I am not very keen on the idea of ohio (for example) telling me how I should run my business. When I set up shop in ohio - then they can bother me. Otherwise - bother the people and businesses in ohio. Just because I happen to have customers in ohio - I don't care. I wouldn't want to have to deal with the canadian gov't for the same reason.

You are right about sales tax being more of a problem for poor people (I think there is another term other than the one you used, but I can't remember).

Same with liquor, cigarette tax, and all those other ones.

dingman:

keep track of the sales tax laws in 50 states and file 50 different sales tax returns

Not quite... I know of three local jurisdictions near me that all have DIFFERENT sales taxes... I bet there are over 1000 different sales tax rates.

Unfortunately, our governor is one of the leading propponents of this mess.

Personally, I do not want it to work (for obvious reasons). But I think if I have to track that many different rates, I should get something back for the accounting nightmare.... and it would be a nightmare.

If you add sales tax to shipping, you have effectively killed e-Commerce

dave

I have no problem with paying for what MY state and MY country want. (Ok - I do, but I can understand it).

I take issue with a number of the things my goverments spend money on. I just take a bigger issue with people failing to see the importance of contributing to the commons. This issue includes both failure or grumpyness in paying taxes and failure or grumpiness in participating in civil discourse - voting, campaigning, etc.

But I am not very keen on the idea of ohio (for example) telling me how I should run my business. When I set up shop in ohio - then they can bother me. Otherwise - bother the people and businesses in ohio. Just because I happen to have customers in ohio - I don't care.

In the case of sales tax, I see it as a tax on the person buying the goods, not on me. Making me act as a collecting agent is something else again. While dealing with local sales tax is, in my experience, no big deal, and as you point out is something my local government gets to do because it's my local goverment, acting as a collections agent for some other government is another matter. If they want to roll it into something as nice and manageable as state sales tax, and let me file one return, I'm not going to complain much. If they want to make my book keeping for sales tax fifty times as complicated, then I agree with the Supreme Court that it's an undue burden.

Same with liquor, cigarette tax, and all those other ones.

Yup. That's the reason why even though I hate the tobacco industry I'm never in favor of cigarette tax hikes. I doubt you could ever get it past the lobyists, but I like my wife's idea of a massive subsidy of quit-smoking aids to bring them down to the cost of cigarettes for a while, combined with a massive hike in tobacco costs that kicks in late enough to give everyone a fair chance to kick the addiction before it hits. Of course, there are lots of practical issues to work out before you do that even if you could ram it through an ellected body.

Not sure what terms you use for these concepts other than progressive (richer -> higher %), regressive (richer -> lower %), and flat (one %) taxes. As far as I can see, flat is effectively regressive.

dingman, a developed infrastructure and better services already translated here into huge cost of living ...! not enough to justify a friend of mine who lost job here (as his company, a huge network company, outsourced all IT operations to a firm in India) to immediately seek out refuge in his home country with much lower cost of living!. he came here 6 years ago and is one of the best technically savvy guys I ever worked with a few years ago!

I understand paying taxes if your business is reaping benefits of locals (local loop economy) .. but for a global borderless industry like web, web marketing, design, seo, etc., I cannot help myself think jobs moving out (as already happening here with most IT shops moving out ...!) unless there are incentives (rather than taxing) offered to businesses to stop the outflow!.

If you add sales tax to shipping, you have effectively killed e-Commerce

For the segments of the e-commerce market where this is true, e-commerce is enjoying the benefit of false savings. Individualized shipping is convenient as heck, but it's not efficient. Service types of things, or information delivery, have a real economy in internet delivery because it saves paper, gas, and manpower in delivery.

Not adding the same taxes to your prices as brick-and-mortar business locations masks the fact that more resources are used to deliver my special ordered 500g of Sri Lankan tea to my doorstep than would be if a store down town ordered 500lbs of it and people came and bought it when out doing their errands. As a matter of environmental policy, it's probably good that taxes encourage me to buy tea at the store. (In fact, I still order on-line because there aren't enough people in this town who appreciate good tea to make it possible for any store down town to sell 500lbs of good tea. But we buy our coffee at the store, because there are enough people around who appreciate good coffee to achieve that economy.)

I'm really not sure e-commerce in physical goods is a good thing. I'm sure that it ought to be more expensive compared to brick-and-mortar than it is. If businesses were only viable because they enabled customers to evade a tax they would have paid at a brick-and-mortar location, then from a cruel capitalist perspective, they should fail. That doesn't necessarily mean that I think now would be a good time to adjust policy to reflect reality. We don't need another kick at the moment to slow down any recovery that might be under way.

przero2 -

To the extent that web services, information, etc, are more cheaply produced outside of the 1st world and this leads to job loss, I'm distinctly of two minds. The first is that I like my high US standard of living, and I want those nice high-paying jobs to stay here. At least one for me, anyway. The second is that we 'first-world' folk use up far more than our share of the earth's resources, and are not necessarily using them at a sustainable rate. Some equalization is only fair.

In that light, it might well make sense for the US, Canada, the EU, etc to try to enact policies that will tend to keep the jobs here and money flowing in rather than out. Probably it does - I see that as something of a separate issue than the sales tax issue, though I could possibly see a consious decision to manipulate sales tax to encourage e-commerce. Hard to do in the US because sales tax is a local thing and e-commerce isn't. As a citizen of the world, and not just the first world, though, what looks like job loss from here looks like long delayed equalization from elsewhere.

<ot>I sit here writing all these posts wearing a t-shirt that says "knee-jerk moderate"... as I told the person who gave it to me, only at that particularly liberal campus could I possibly pass as a moderate ;) </ot>

I'm deffinitely enjoying this discussion. They're so much more fun and stimulating when people don't all agree. However, I need to sleep now. Then do lots of research if I'm going to continue this discussion with anyone at a level that feels thorough.

-Andrew

<about top puke> Being an out-of-work Web developer/Webmaster myself, this is even more horrible news! I was almost sickened when I read this article! </about top puke>

Taxing e-commerce will surely destroy the "small guys". One of the main reasons people buy online is because the difference in tax usually out-weighs the shipping cost.

IS ANYONE OUT THERE IN POLITICS CONCERNED ABOUT THIS ECONOMY! For that matter, IS ANYONE IN THE MEDIA CONCERNED ABOUT THIS ECONOMY!

My next Job... "So, would you like fries with that?"

It seems like US is killing all online businesses by encouraging them to go to countries like India where web talent is available and all the income earned outside that country is generally tax exempt (I believe this is to encourage ForEx or exports for that country)!.

Well pzero, just a word of caution :).
There could be other benefits of outsourcing from India, but this particular benefit that you have just talked about is being phased out. ForEx used to be fully tax exempt 3 years ago, they started reducing that by 20% per annum, this year 40% of it is exempt which will be 20% next year and then down to 0.

I thought the concept of NEXUS (buisness with a physical presence in the state), has been set down by the Supreme court.

If you don't have NEXUS, you can't be taxed by that state. However in some states (like California), consumers are expected in good faith to remit to the tax authorities, the tax owing on out of state purchases (which I expect if rarely done).

Why are the states, revisiting something that has already been thrown out of court (U.S. Supreme Court in Quill v. North Dakota, 504 U.S. 298 (1992)) . They lost, we won, I wish they get over it.

This whole idea is way out of wack!
As a merchant in New York state I all ready have to deal with over 250 different tax zones and rates.
Add all the other states to this mess and the book keeping would be a real mess.
Any one here heard of the Boston Tea Party?
Now how do we float a couple of tons of tea on the net?

As a veteran of the mail order biz, this is just a new wrinkle on a debate that's been going on for decades.

Local merchants form a strong lobby to push for taxing mail order sales and hence reduce competition from out of state merchants. The shipping/sales tax tradeoff is real, but for high value merchandise, shipping is often cheaper than the 5 - 8% tax. The state politicians themselves need little prodding, since they see collecting sales tax on out of state purchases as more revenue. If you are a politician, you can't ever have too much revenue to spend!

States have, I think, been relying on Congress to pass enabling legislation. At the federal level, the playing field is a bit more even, since there is no revenue benefit and a legislator risks the wrath of indidual voters if he/she supports taxing mail order purchases.

Nexus is an increasingly weird concept. In the old days, it was pretty simple - it was where you had a physical presence, like an office or warehouse. (Of course, some states claimed nexus if you mailed a catalog to someone in their state!) Now, you have different issues - does where the web site is hosted count? What if you have a call center staffed by virtual operators, some of whom may be in other states? Does your use of a fulfillment house in Kentucky to ship some products count? Ultimately, the feds will have to sort this out.

Conard makes a good point - any effective system for taxing internet sales would have to involve simplification of jurisdictions - keeping track of nearly 50 taxing entities would be difficult, but trying to accommodate all the county and city taxes would be impossible. A central reporting and distribution agency would be necessary for small businesses to comply - it's just not realistic to expect a small business to complete nearly 50 monthly forms, write checks, mail them, etc.

I too am Canadian.
It would be a real advantage for Canadian e-commerce companies. We are already working an under-valued dollar, so this tax issue will be the icing on the cake.
I can foresee a real rush to set up shop in Canadian border towns if this happens.

jaski,

please see [webmasterworld.com...] and see if you can comment ... The STPs in india offer 100% EOUs completed tax exemption to encourage local employment?.

I was reading through some of the links posted there, it seems 100% EOU corporations are exempted from taxes until 2010 ...!. Really attractive to me rather than splitting profits half way with the state and fed here in the US!
I guess it makes sense only for some businesses which are Global in nature and does not require touching a customer's hand!

I wonder why some corporations like Google is not operating out of India?. May be it is just a matter of time!

Quick Note to all of our Canadian posters.
The way the US economy is going with our current heads of state it looks like you should start seeing some closing of the gap between your currency and ours sometime next year.
It happens whenever there is a switch in the leading political parties down here. The US is looking at a coming devaluation of the dollar as we approach another period of deflation.
The deflation period has started with manufactures and wholesalers to a small extent already and will rise quickly after the Christmas season. Buckle your seat belts as we start down the path of high national debt, layoffs and an over abundance of consumer goods.
More reasons for the strapped states to want a cut of all Internet sales.

Seeing as it is a very complex if not impossible endeavor to set up a system to collect tax from retailers that ship to different states, perhaps the powers that be will try to introduce a new flat tax that applies to e-commerce transactions and then distributes the taxes to the individual states.