News Will the New Internet Sales Tax Affect Online Shopping?

[Greg Bernhardt]

So the bill passed the senate. Will it pass the house? Do you support it?

As someone who buys most things online I'm against it, but it's hard to justify.

The Senate approved a long-anticipated Internet sales tax proposal on Monday, moving the legislation one step closer to enactment and paving the way for shoppers to pay sales tax on the majority of online purchases.
The so-called Marketplace Fairness Act would allow the 45 states (and the District of Columbia) that currently charge sales taxes to require large online retailers to collect tax on purchases made by their residents. The law would only apply to online sellers that have sales of at least $1 million in states where they don't have physical operations, like a store or a warehouse.

http://money.cnn.com/2013/05/06/pf/taxes/internet-sales-tax-vote/index.html

 

[WannabeNewton]

Nooooooo Amazon why have you forsaken meeeeeeee

 

[Danger]

I couldn't care less. If the Canadian government tried that, on the other hand, I would be up in arms.

 

[ModusPwnd]

I suppose my answer is yes, I do support it. I prefer taxes based on luxury purchases, land ownership and environmental damage to taxes based on income and profit. I would consider most internet purchases to be luxury purchases.

It doesn't seem very fair the way its done though. They have taken it from favoring internet sellers over brick and mortar sellers to favoring small sellers over big sellers. I think the notion of the "noble small business" vs the "evil big business" is not appropriate and this bill seems to embrace it.

I live in a state without sales tax, so I guess it won't explicitly effect me (though I'm sure it implicitly will). I wish my state did have sales tax with correspondingly lower property and income tax.

edit - I think the thread title is a little misleading. This is a tax on transactions conducted through the internet and mail, not a tax on the internet. What about old school catalog shopping through the mail? I guess that is not included since its rarely done anymore.

 

[phinds]

... They have taken it from favoring internet sellers over brick and mortar sellers to favoring small sellers over big sellers.

BOY, do you have THAT backwards. The new law will be devastating to small on-line sellers. The record-keeping for 40+ states that have income tax will be overwhelming for them whereas big outfits can deal with it because they have the computer infrastructure to do so.

 

[Greg Bernhardt]

BOY, do you have THAT backwards. The new law will be devastating to small on-line sellers.

I think the bill only affects those retailers making over $1,000,000 a year

 

[ModusPwnd]

BOY, do you have THAT backwards. The new law will be devastating to small on-line sellers. The record-keeping for 40+ states that have income tax will be overwhelming for them whereas big outfits can deal with it because they have the computer infrastructure to do so.

Record keeping will be overwhelming? I doubt it. Shouldn't they be keeping records of their sales already? For other non-sales taxes and simply for good practice.

What kind of computer infrastructure do you mean?

 

[Vanadium 50]

Sales of $1M and making $1M are two completely different things. The most profitable small businesses are CPAs, making 16.5% profit. There are no businesses in the Top 20 that sell goods, and the lowest one is 10.4%. For selling something physical, $1M in sales probably supports one full-timer and maybe a part timer: these are not large businesses by any stretch of the imagination.

 

[Evo]

BOY, do you have THAT backwards. The new law will be devastating to small on-line sellers. The record-keeping for 40+ states that have income tax will be overwhelming for them whereas big outfits can deal with it because they have the computer infrastructure to do so.

They only have to collect tax in states where they sell over $1 million and have no physical presence, So if they sell in 40 states, but the rule only applies to one state, that is the only state they need to collect tax for.

 

[AlephZero]

I'm not sure what the big deal is. It already applies in the EU, to VAT. I assume there was never a time when it didn't apply.

Of course very small businesses are exempt from VAT, but the size limit in the UK is £80,000 turnover, not $1m..

"Cross border" issues don't complicate anything. The tax rate is based on the location of the seller, not the location of te buyer.

That does lead to a few loopholes that are being closed - for example companies basing their internet operations in the Channel Islands because of the low (or zero) sales tax rate.

Those principles seem sensible enough to me - i.e. the sales tax is independent of whether the transaction is online or offline.

 

[ModusPwnd]

The tax rate is based on the location of the seller, not the location of te buyer.

Thats not how I interpret the quote in the original post. Its based on the location of the buyer.

The so-called Marketplace Fairness Act would allow the 45 states (and the District of Columbia) that currently charge sales taxes to require large online retailers to collect tax on purchases made by their residents.

 

[chemisttree]

So the bill passed the senate. Will it pass the house? Do you support it?

Yes. Why discriminate against brick and mortar?

 

[jtbell]

They only have to collect tax in states where they sell over $1 million and have no physical presence, So if they sell in 40 states, but the rule only applies to one state, that is the only state they need to collect tax for.

No, the $1 million is not per state, it's the total for all "remote sales" in the US. From the bill:

SECTION 2. AUTHORIZATION TO REQUIRE COLLECTION OF SALES AND USE TAXES.

[...]

c. SMALL SELLER EXCEPTION.-A State is authorized to require a remote seller to collect sales and use taxes under this Act only if the remote seller has gross annual receipts in total remote sales in the United States in the preceding calendar year exceeding $1,000,000. [...]

Even though I enjoy not being forced to pay sales tax on Internet purchases, I support the basic idea of this bill on fairness grounds. I can see adjusting the small seller exception if there are good economic arguments for that.

Companies like Ebay and Amazon should be able to handle compliance for their individual sellers.

 

[Greg Bernhardt]

Yes. Why discriminate against brick and mortar?

It helps off set shipping charges?

 

[Evo]

No, the $1 million is not per state, it's the total for all "remote sales" in the US. From the bill:

Ah, I was going by the quote posted from the article, which is worded poorly.

The law would only apply to online sellers that have sales of at least $1 million in states where they don't have physical operations, like a store or a warehouse.

 

[lisab]

I couldn't care less. If the Canadian government tried that, on the other hand, I would be up in arms.

Yeah but up where you are 'arms' is pretty much...well, just your arms.

Yes. Why discriminate against brick and mortar?

I have to agree here, I don't *like* an online sales tax but it's hard to see how it's fair not having one. I enjoy having a downtown shopping area, and where I live we have an old-fashioned downtown that's nice. Their lot is hard enough, why make it harder on them?

 

[Danger]

Yeah but up where you are 'arms' is pretty much...well, just your arms.

Yeah, and I can walk down a dark ally at night with no fear.
That's off-topic, though.

 

[Dotini]

I perceive that many taxation authorities such as municipalities and states, not to mention the federal government, are spending more than they take in. If adjustments to technological advances such as internet shopping and resulting tax collection imbalances can help to correct this unsustainable situation, then I am for it.

Respectfully,
Steve

 

[FlexGunship]

So the bill passed the senate. Will it pass the house? Do you support it?

As someone who buys most things online I'm against it, but it's hard to justify.

Article 1, Section 8, Clause 3 of the constitution forbids it. In fact, interstate commerce is supposed to be protected by the federal government and free between states. This is why, when you shop online, you see notes like "Nebraska residents must pay sales tax" or "California residents must pay sales tax" because a company must only charge sales tax on sales that happen within state borders.

I'm against the "internet sales tax" for two reasons: (1) it's illegal (or, at least it used to be), and (2) it's just another drain on my wallet at micro-level and the economy at the macro-level.

 

[phinds]

Article 1, Section 8, Clause 3 of the constitution forbids it. In fact, interstate commerce is supposed to be protected by the federal government and free between states. This is why, when you shop online, you see notes like "Nebraska residents must pay sales tax" or "California residents must pay sales tax" because a company must only charge sales tax on sales that happen within state borders.

I'm against the "internet sales tax" for two reasons: (1) it's illegal ...

So are you saying that if you leave your state of residence and go to the state next door, you expect them to exempt you from sales tax because you don't live in that state?

 

[FlexGunship]

So are you saying that if you leave your state of residence and go to the state next door, you expect them to exempt you from sales tax because you don't live in that state?

Not at all. You abide by LOCAL tax laws. We get a lot of tourism in New Hampshire because we have no sales tax in the state; we get that tourism from neighboring states that DO have sales tax. Major purchases are cheaper in New Hampshire than Massachusetts, Maine, or Vermont.

Cross-boarder transactions were the same before the internet. If you call up a company on the phone and order something you don't pay taxes ACROSS state borders.

Regardless of the legality, it's just another "revenue stream" right? Another way to take the flow of money in a struggling economy, and starve it a little more.

EDIT: Keep in mind that we are not talking about taxing the companies that profit from these sales; internet sales are not "off the books."

 

[phinds]

Regardless of the legality, it's just another "revenue stream" right? Another way to take the flow of money in a struggling economy, and starve it a little more.

I don't follow you on that. Are you suggesting that states don't pay their employees and contractors? The money that you pay in sales tax flows through the economy the same way as most any money you spend. If the state just squirrelled it away THEN I could see how you say it is being taken out of the economy.

 

[chemisttree]

Article 1, Section 8, Clause 3 of the constitution forbids it.

Please explain this. I don't see any language in the commerce clause that "forbids". The clause you reference says, " ; but all Duties, Imposts and Excises shall be uniform throughout the United States." That refers to duties, imposts and excises that congress imposes, not those imposed by the various states on their own citizens.

 

[Evo]

This thread has been completely dragged off topic (not you chem). Let's get back to specifically discussing the OP, not if you like paying taxes in general, or don't like that you don't use all services taxes pay, etc...

 

[Evo]

If you call up a company on the phone and order something you don't pay taxes ACROSS state borders.

Yes, you do. I am charged tax for placing out of state phone orders all of the time.

Just wanted to clarify that.

We will NOT discuss personal rants and go off topic anymore.

 

[jim hardy]

Do you support an internet tax?

For me, there's a basic principle at work here:
I oppose anything that gives government more power or money.

You cannot base an economy on half the people regulating the other half. Russia already tried that.
I am old enough to remember when 3% sales tax was plenty to support Florida's state government.
The only remedy for a morbidly obese bureaucracy is to stop feeding it.

 

[BobG]

"Cross border" issues don't complicate anything. The tax rate is based on the location of the seller, not the location of te buyer.

That does lead to a few loopholes that are being closed - for example companies basing their internet operations in the Channel Islands because of the low (or zero) sales tax rate.

Thats not how I interpret the quote in the original post. Its based on the location of the buyer.

He was explaining how the EU does things; not the US. Internet purchases does muddy up the idea of where the transaction is actually taking place - the buyer's home or the seller's store (especially if seller is relying on a third party to manage online sales and the servers are located in yet a third state).

Basing the tax rates on the seller's location would make things a lot simpler for the seller. With today's technology, I don't see determining tax rates for 50 different states as insurmountable, but it is more difficult than just having one tax rate for all of your sales.

But, the difference in tax rates would have impact on internet sales. Companies selling primarily over the internet would relocate to states with no sales tax, thereby recreating the status quo as far as local merchants are concerned. (Or they'd at least have their headquarters in a tax friendly state - perhaps even a state friendlier than Delaware, which is currently the most popular state for corporate headquarters.)