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States Band Together - Approve Internet Sales Tax

They all agree - they want internet money

     
4:31 pm on Nov 13, 2002 (gmt 0)

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4:35 pm on Nov 13, 2002 (gmt 0)

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it's not internet money. it's your and my money they want...
4:37 pm on Nov 13, 2002 (gmt 0)

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Of course they want internet money. My state, California, cannot even keep a budget balanced. The state had to steal the tobacco settlement dollars (originally intended to be put to health related issues) to help pay it's massive deficit this year (trading billions over many years for a few billions now). We would have better finances if the state was run by trained monkeys than by the current idiots. In fact, small stones are smarter than our legislature (are my biases showing?)

Richard Lowe

4:39 pm on Nov 13, 2002 (gmt 0)

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Internet vendors would likely bear substantial costs just in terms of the tax preparation needed to file as many as 45 separate tax returns each year, experts contacted for this story said.

Lovely... :( as if it's not complicated enough!

4:43 pm on Nov 13, 2002 (gmt 0)

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My spouse works in IT for the local government. It is appalling how our money is spent - naturally the "elected officals" want more.

It was just a matter of time before this was an issue. Look at the lengths that they are going to in order to subvert internet revuenues into their own pockets. A flat sales tax nationwide?

Look out Barbados.............here comes corporate ex-American-based internet companies.............

4:45 pm on Nov 13, 2002 (gmt 0)

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Internet Sales Tax? ;P hah my business is moving to some other country then (:
4:56 pm on Nov 13, 2002 (gmt 0)

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I wonder how this could impact affiliate sales generated by people selling through their own site who do not physically handle the product, but produce "sales" none the less.

Their responsibility - or would it fall directly upon the product producer?

5:02 pm on Nov 13, 2002 (gmt 0)

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I doubt moving one's servers to another country would skirt the law legally for those in the USA.

I suspect there will be some requirement that US citizens or companies selling to US based folks comply with whatever law is passed -- regardless of where the server is located.

What would be much more workable is a central sales tax collection entity, a flat nation wide rate, and the only filing requirement being one monthly form to the central sales tax collection entity. One would list sales tax collected broken down by zip code of customers.

That way the merchant writes one check every month, and the central sales tax collection entity distributes the funds to the multitude of jurisdictions electronically.

Since something is likely, I suspect the above would be the simplest thing that would be workable. A twist might be if they had a table where sales tax was computed based on zip code. That's only if they can't come up with one flat rate.

It has to be simple. No endless arguments over how stuff gets classified. Any tiered rate system -- like one rate for food and "necessities" and a higher rate for everything else would be a slipery slope towards getting an agreement.

Normally, I would have a dim view of so many jurisdictions coming to a simple and workable agreement. However, I think their collective desire for more revenue will overcome any petty political foibles and turf protecting tendencies.

IMO,

Louis

5:05 pm on Nov 13, 2002 (gmt 0)

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I wonder how this could impact affiliate sales generated by people selling through their own site.

I don't think it will affect affiliate commissions, since affiliates already have to report that income to the IRS.
5:05 pm on Nov 13, 2002 (gmt 0)

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collective desire for more revenue

In California, at least, it's not a desire - it's desperation. Our state was 24 billion short this year (before the monkey games started). That's more than the GDP of most countries on the planet.

Richard Lowe

5:18 pm on Nov 13, 2002 (gmt 0)

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>I wonder how this could impact affiliate sales generated by people selling through their own site.

Typically affiliates don't sell to the public.
They act as a sales agent or broker.
The merchant makes the sale.

3:36 am on Nov 14, 2002 (gmt 0)

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stlouislouis says: "Since something is likely"

There is a constitutional hurdle to be overcome. Unless the sales tax is federal, it would violate the interstate commerce clause. So I would not look for this soon.

I know New Jersey sales tax laws. They apply to all sales from merchants in the other states. I am required by law to report these sales and pay the taxes on them. This applied to sales made through the mail, over the phone, by fax or over the Internet. So the law exists but is mostly unenforcable.

New Jersey can not compel an out of state merchant to collect taxes for it. Until this legal limitation is addressed no viable out of state tax collection system will work. This problem is not just an Internet problem. The mail and phone questions are settled law. New Jersey can't make a law binding merchants outside its jurisdiction. This Internet try will be unconstitutional too.

4:31 am on Nov 14, 2002 (gmt 0)

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Hi Cyril,

You make very good and valid points. I may be totally wrong on this, as I don't know the law.

However, I have a large respect for the ability of governments to figure out ways to overcome hurdles at extracting taxes from folks.

For instance, why couldn't the 50 individual States simply assign their soverign right to collect "use taxes" due them from their citizen's internet purchases to -- if not a Federal, at least a central -- "fiscal agent" of the 50 individual and collective States? The fiscal agent's purpose would be the efficient collection and distribution of sales/use tax due from all 50 member State's "use tax" due and assigned to the fiscal agent for collection. The 50 States collectively pays the non profit state chartered yet central fiscal agent it's cost of collection. Maybe even throw the merchants a bone, too.

The central fiscal agent could easily be an organization created just for this purpose and in no way directly associated with the Federal government.

If each State made it mandatory thru a "tax treaty" with all the other 50 States for any merchant doing business in any of the 50 States to send sales/use tax to the central fiscal agent for all 50 States who are members of the tax treaty, any US based business would be forced into collecting what are effectively sales/use taxes on sales to residents of other states.

Details may vary, but I don't short change the 50 State governments their ability to figure out a legal way to get their share of sales taxes on internet sales -- whatever the structure needed to get around the hurdles you raise.

I hope I'm wrong, but I doubt it. I don't think it will happen real soon. But sometime this decade, yes.

Take care. IMO,

Louis

4:16 pm on Nov 14, 2002 (gmt 0)

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stlouislouis
I think some approach to taxation is possible. It can be imposed by the federal government. This was tried first and it was not passed.

The two hurdles, that keep it from getting passed are the legal principle that that a government can't make a law that it has no right to enforce. California may not say that car manufactures in Detroit must produce ONLT cars that meet CA's pollution standards. They can only pass laws that say no cars may be sold in CA that meet CA's standards.

The US Constitution clearly gives the right to regulate Interstate Commerce to the federal government.

Both of these are settled law.

Don't miss the main point Internet sales are no different that sales made through the mail or over the phone. The states have been dealing with this problem for well over 50 years and there is a lot of case law in this area.

The will of the people as expressed by congress is that the Internet will not be taxed. Bureaucrats at the state level will just have to live with doing what the people want.

lgn

1:23 am on Nov 21, 2002 (gmt 0)

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I suspect there will be some requirement that US citizens or companies selling to US based folks comply with whatever law is passed -- regardless of where the server is located.

Highly unlikely. US laws are not enforceable outside the USA. Most likely US customs will
become responsible for collecting sales tax, on imports. We do this already for shipments to Canada from the USA.

I would not lose sleep over this issue. This is going to be a long long way off, if it ever comes to pass.

You are going to need to get the 7000 plus tax rates down to 50 or less. You will need to get the states and the feds to agree on this, you will need to integrate US customs into the picture, and the whole mess must survive a constitutional challenge.

2:53 am on Nov 21, 2002 (gmt 0)

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I am about to read the article but I am in Thailand and my server is in the States. I am supposed to pay tax in the US as well as in Thailand?
10:02 pm on Dec 9, 2002 (gmt 0)

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It will become very difficult for the government to collect taxes on all of the goods sold across the Internet unless they develop a third party module that all merchants are required to have on their shopping carts to record the transaction.

Especially for those sites that sell non-tangible items such as software scripts and website design. I conduct 100% of my business via my laptop. I do my billing and communication and software design all on my laptop. I have no physical overhead and most of my customers pay me through PayPal which didn't require a SSN when I signed up with them.

Other than it being illegal, it would be very easy for me to only report 30k of my income and keep the rest in my PayPal account and withdraw it as I need it via the ATM card they supplied me with. I don't live lavishly so the IRS wouldn't be allerted by any sudden large purchases such as a boat or even a high end luxury car.

If online merchants do end up having to pay taxes in 45 individual states I imagine there will be a slight problem due to taxation without representation which if I remember sparked a little bit of a revolution a while back.

However IMHO, when the government tries to squeeze as much as they can from it's citizens they are tempting them to find new and creative ways to keep as much money in their own pockets.

Jerrod

Xoc

10:06 pm on Dec 19, 2002 (gmt 0)

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Except that you have just recorded with your own full name in a permanent message that you are going to be a tax cheat. You don't think the IRS can use Google on your name?
6:58 am on Dec 24, 2002 (gmt 0)

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Our company also does application programming for wholesalers and manufacturers. We have been heavily involved with sales tax for approximately 20 years. Our company is located in New York, which has by far the most complicated sales tax system in the country.

In New York we have over one hundred different tax localities with different sales tax rates. We also have different charts and filing charts for different groups of items. This give you thousands of different rates. Now factor in fact that different items have different rules of sales tax collection. Sales tax collection in NY has the state sales tax, the county sales tax, and sometimes city sales tax. For example you could buy a piece of clothing in one county, and pay 4%, but in another county pay 8%. But, sometimes the price of the item may change everything. Sometimes they have "special" exempts for certain periods of time. Then we have another rule. Necessities need to live are not taxable, but toilet paper is taxable, but someone decided that it is a luxury. Go figure. Or, in some counties, you can walk across the street and pay a different rate. We also have cash and accrual collection methods. Some merchants have to file once a year, others every quarter, monthly, and weekly. And, the list keeps going on and on. To add insult to injury, New York sales tax law is intentionally written vague so that during sales tax audits, sales tax auditors can make their own decisions. Now just image how some small mom-and-pop merchant in Billing Montana is going to be knowledgable enough to know this? They can't. In fact, over 90% of applications packages are not even capable of collecting NY sales tax. It is a complete mess.

I have been in many sales tax audits in New York, and seen confusion on many auditors and business people over what should be collected, and how much. In the past 20 years, I have never seen an audit where the merchant had collected sales tax perfectly. It just does not happen. Now think about having people from other states collecting NY sales tax. There is no way it can be collected accurately. It is an impossible task. What a mess it would be.

The National sales tax system is an utopian dream of state sales tax people. The laws, exceptions, and other factors would make the IRS tax code look like a one page summary of War and Peace when comparied to the National Sales Tax laws. It would collapse under it's own weight and complexity. In the process it would put thousands of small merchants out of business. It would quicly drive the country into a depression due to massive business failures.

I have been hearing about this Utopian dream for years. Just the prospect of it's implimentation will cause it to never pass. This is what has held it back for years. Every state wants it's own quirks put in, and this dooms it towards failure each time.

There are those government officals who want a National Sales tax system, and I also want to win the lottery. Both are unlikely to happen.

 

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