California begins demanding on-line retailers collect CA sales tax

[Pengwuino]

http://www.latimes.com/business/la-fi-amazon-california-20110702,0,1004958.story
http://blogs.wsj.com/in-charge/2011...housands-of-small-firms/?mod=google_news_blog

Amazon.com Inc. is sticking by its vow not to collect California sales tax on Internet purchases — and state officials must decide what to do about it.

But the showdown over the new tax collection law that took effect Friday could be months away. Companies don't send the taxes to the state until the end of each quarter, which means the California Board of Equalization won't know officially about Amazon's refusal to collect them until Oct. 1.

I'm not entirely sure how I feel about this. Putting aside the obvious money grab by the state, there is some argument to be made about online businesses being obligated to pay sales tax. On the other hand, outside of what it seems like 1 facility, Amazon has no presence in California. California is not part of the internet.

I think this is just another case of California shooting itself in the foot. It amazes me that California thinks businesses are obligated to do business in the state and it's turning a blind eye to the fact that businesses are leaving California in droves for the very reason that they aren't obligated to do business in California.

 

[Al68]

I'm not entirely sure how I feel about this. Putting aside the obvious money grab by the state, there is some argument to be made about online businesses being obligated to pay sales tax. On the other hand, outside of what it seems like 1 facility, Amazon has no presence in California. California is not part of the internet.

I think this is just another case of California shooting itself in the foot. It amazes me that California thinks businesses are obligated to do business in the state and it's turning a blind eye to the fact that businesses are leaving California in droves for the very reason that they aren't obligated to do business in California.

Regardless of what California law says, they simply have no jurisdiction outside California. The fact that someone in a different state sells one of their residents a product and sends it to them doesn't give them jurisdiction over people in other states. Amazon is not their tax collector, they can collect taxes from their residents themselves.

 

[mege]

Many retailers already do collect local sales tax where they have a physical presence. I thought Amazon had a distro-center in CA?

 

[Pengwuino]

One thing I remember hearing when this law was originally being discussed is the precedent that magazine catalogs had. I forget whether the courts decided magazine catalogs had to collect sales tax or not. It seems like it would be a foundation for ruling against this idea.

 

[Evo]

Many states now have a flat tax which is collected on state income tax. In my state it is a Percentage of your income. It is to recover loss of sales within the state when you purcase something online out of state.

I'll dig up the tax form and post it later.

 

[CAC1001]

One thing I remember hearing when this law was originally being discussed is the precedent that magazine catalogs had. I forget whether the courts decided magazine catalogs had to collect sales tax or not. It seems like it would be a foundation for ruling against this idea.

What California is doing here is saying that the California affiliates of Amazon (websites that have content that are located in California, that have a link to Amazon that visitors can click on), allow California to tax Amazon. Affiliates make money from Amazon in that when the visitor to their website clicks the link, Amazon pays a few cents to the website's owner.

It's like if you create a footwear/shoes website with lots of traffic, so you have a link to various footwear websites on the Internet. When visitors click those links, you get a few cents paid from the owner of the website linked to. Ecommerce businesses use affiliate programs to drive traffic to their sites. What California is claiming is that these links on those websites located in California allow them to tax Amazon for sales to people who click on the links. So basically if a person in North Carolina visits a site that happens to be hosted from California, sees a link to a product they like on the site, click it, go to Amazon, and buy said product, Amazon must pay a tax to California.

The problem is that the actual sale occurred between Amazon and a person in North Carolina. The fact that they clicked on an ad on a website hosted in California should not allow California to tax (it may be un-Constitutional as well, as only the federal government can regulate interstate commerce).

It would be like a magazine company that is located in California publishing an ad for a mail-order company located in Washington, D.C., and a person in North Carolina buys a copy of a magazine the company published, sees the ad, and thus buys something from the Washington mail-order company. California is doing the equivalent of saying that since the magazine company is located in California, then the Washington mail-order company must pay California a tax too.

 

[Evo]

The problem is that the actual sale occurred between Amazon and a person in North Carolina. The fact that they clicked on an ad on a website hosted in California should not allow California to tax (it may be un-Constitutional as well, as only the federal government can regulate interstate commerce).

No, you have it backwards. It's the people in California that are purchasing items from outside of California.

The tax-collecting agency said Amazon accounts for about half the Internet sales in California from large out-of-state firms that, prior to the new law, did not have to collect sales tax for the state. It said the new law would capture about $317 million a year in sales taxes that previously went uncollected.

I think the tax tables on state income tax returns makes more sense. Forcing companies like Amazon to do all of the tax collecting, reporting and disbursement will create unnecessary costs and price increases that will hurt everyone.

 

[CAC1001]

No, you have it backwards. It's the people in California that are purchasing items from outside of California.

Could it be both? I know Amazon ended all of their affiliate operations in California, I have read that there is a lot of legal precedent regarding mail-order companies and how those are taxed (the precedent generally is that only the state in which the mail-order company is located can tax it).

 

[BobG]

Could it be both? I know Amazon ended all of their affiliate operations in California, I have read that there is a lot of legal precedent regarding mail-order companies and how those are taxed (the precedent generally is that only the state in which the mail-order company is located can tax it).

Depends on the state.

If you live in one state, but purchase an item in another state, you usually have to pay sales tax to the state you purchased the item in. However, the state you live in could charge a use tax, or charge the difference between their own sales tax and the sales tax of the state you made the purchase in.

In other words, if you buy a foamy finger for $5.00 in a state with a 3% sales tax, and your state charges a 5% sales tax, you could still owe your state 10 cents in sale tax. And, the absurdity is intended, because, in the states that do that, it's a regulation that's unenforceable in just about all situations...

... unless you buy a car out of state. That's a situation where it's easy for a state to figure out how much you owe them and an amount that's worth them worrying about. Or other large purchase, such as a truckload of furniture.

With the power of modern computers, though, it should be a lot easier for a state to track and tax your on-line purchases, if the state had jurisdiction to require sales records, etc. from the company you made your purchase from. There's lots of problems with trying to request out of state vendors outside the state's jurisdiction to collect state sales tax, never mind the privacy issues of requiring companies to release your purchasing habits (if sales tax were to be paid by the individuals at tax time instead of collected by the vendors).

 

[Evo]

The issue is that states want you to pay taxes in the state in which you live, not the state where the seller is. The problem is that the states all have different ideas on how this should be handled.

Several states, such as the one I live in, have decided to just make it a percent of your gross income.

Some states want the sellers to charge the buyer tax based on the shipping address.

The new tax agreement means state residents now could be charged sales tax that they're unaccustomed to paying on certain Internet and catalog purchases from businesses in other states. More than 1,000 companies have agreed to collect the tax and send it to states where the items are delivered. More dramatic changes are planned next year.

http://seattletimes.nwsource.com/html/nationworld/2003769812_webtax01.html

Here is what they added to kansas State Income tax returns for 2010.

USE TAX
LINE 18 – Use Tax Due: If you made purchases of items from retailers located outside of Kansas on which no sales tax was paid (including freight, shipping or handling fees), complete line 18. If you are unsure as to the amount of tax due, use the following chart to estimate the compensating use tax for calendar year 2010. See page 2 for more information about the Kansas Use Tax.

If line 3, K-40 is: - Use tax is:
$0-$15,00 - $ 5
$15,001- $30,000 - $15
$30,001- $45,000 - $25
$45,001- $60,000 - $35
$60,001- $75,000 - $45
$75,001and over - line 3 X .073%[/quote]