Remember that internet sales tax? Wasn't that a great idea? It's dead

A law bill that would have allowed US states to collect sales tax from stuff sold online is all but dead. House of Representatives Speaker John Boehner has blocked a vote on the measure in the upcoming session of Congress. The move means the plan to tax internet sales will not be able to pass this session and thus would have …

[earl grey]

Internet taxes

Well, the states often have "use" taxes which are supposed to be the self-reported sales taxes for items bought over the interweb, but i suspect that most people don't even track their purchases much less worry about their local state and city having a few dollars more to piss away.

[phil dude]

Re: Internet taxes

although in TN they managed to pass a law singling out Amazon, who now DO force you to pay and collect it.

This is wrong on soooo many levels...

P.

[J.G.Harston]

"lawmakers are also looking to push through a bill that would make permanent a tax ban on internet access"

Whatever happened to legislation cannot bind future legislation?

[Tom 13]

Re: Whatever happened to legislation cannot bind future legislation?

Nothing. Any future Congress could rescind the legislation. Unless of course what the House and Senate did was start off the process to amend the Constitution and then 3/4 of the States approved it. In which case everything would be according to Hoyle anyway (or Roberts if you prefer).

[ratfox]

What are they thinking?

Though I'm not really overjoyed at being taxed, the current situation makes no sense at all. There is no reason why buying from the net should be in effect tax-free, and buying the same at a store should be taxed.

I can only assume that Boehner heard "new tax" and reflexively said "over my dead body".

[Anonymous Coward]

Re: What are they thinking?

Because it is complicated to tax. Some states have a sales tax, some do not. Some counties and cities also have a sales tax rate that adds to the state sales tax. So in a state there could be hundreds of different tax rates and you can't go by a city name as they can span more than one county and thus different tax rates within that city. You can't go by county as the cities in the county can have different tax rates. Zip codes cannot be used as they too span different cities and counties. So without a set sales tax rate, why should the burden be on the etailer? Then you have where does one send the collected sales tax, the information that needs to be submitted and when to send it? Once again, every state that collects sales tax will have different requirements. States also don't charge sales tax for some items and then also have days that no sales tax is charged.

If the states, counties and cities want sales tax charged, then maybe they should help ease the burden of collecting it. What are they doing to help except complaining about it not being collected?

[Eddy Ito]

Re: What are they thinking?

Complicated doesn't even begin to describe it. California can barely figure out how, when and if coffee is taxable so what hope does an out of state seller of anything have? I've reproduced the PDF link at the bottom of the article here if you want it straight(?) from the source.

[DiViDeD]

Re: complicated to tax @AC

I can only thank doG that other countries haven't adopted the impenetrable bloody maze that is american sales tax. There's federal tax, state tax, county tax, city tax, bit of the city tax, I wouldn't be surprised if there's an 'alternative tuesdays if you have a beard' bloody tax!

And none of it appears on the supermarket shelf price. You can try to keep a running tally in your head, but for most people, they don't know how much their shopping will cost them till they add all the taxes on at the checkout.

Just one of the quaint local customs that infuriated me while I was there.

[Version 1.0]

Re: complicated to tax @AC

You're forgetting "tax-free days" - locally we have several tax-free days every year (I kid you not!) when certain items are not taxed ... prior to hurricane season they have tax-free shopping for supplies like flash-lights, radios and generators, and before each school season we have tax-free shopping for school supplies - pencils, notebooks etc.

"I tremble for my country when I reflect that God is just; that his justice cannot sleep forever." - Thomas Jefferson

[Tom 13]

Re: impenetrable bloody maze that is american sales tax.

There's your problem! It isn't "the American sales tax." It is the State Sales tax + County of State Sales tax + City of County Sales tax. There might also be independent taxes for alcohol, tobacco, firearms, gasoline, as well as possible hospitality taxes.

[Medixstiff]

Re: What are they thinking?

Well at least in Australia, there's GST on everything even locally purchased online goods.

It would be funny to point out to the morons that keep wanting to add GST on all online purchases, that the US doesn't do this, it would be interesting to see their arguments and counter arguments be put aside when they consider "there's 23 million Australians that suddenly heard of this, now what do we do? Maybe we should have shut up when the going was good"

[Wade Burchette]

Re: What are they thinking?

Of course, knowing US law, 1/10th or less of the law would be about the sales tax, the rest would be bloat unrelated to the sales tax law in any way.

[Anonymous Coward]

Re: What are they thinking?

Yes, there's no reason for the discrepancy. Sales tax is a can of worms. Offline sales should be tax-free as well.

Unfortunately that can only happen if we repeal the 16th amendment. Hmmm.... "Repeal the war tax" just might work.

[Tom 13]

Re: repeal the 16th amendment.

You really ought to read that amendment before calling for it's abolition. It doesn't say what you think it does. In fact, if you want to eliminate the sales tax, you're going to need it.

[Robert Helpmann??]

Re: What are they thinking?

Boehner (R-Ohio) had been among the critics of the bill, funnily enough.

For those outside the US, Congressman Boehner is a "fiscal conservative." This means that he wants to reduce taxes so that the government will operate at an unsustainable deficit. This is in stark contrast to the "fiscal liberals" who want to achieve the same end by the socially reprehensible method of spending more than the amount brought in by current taxes. By alternating between the two camps, the American people have managed to achieve the stated goal with close to maximum efficiency.

[ratfox]

Oh noes, sales taxes are too complicated!!1!

This does not stop Amazon from already collecting sales taxes for all the states where they have a presence. For all the complexity of the system, it should be fairly easy to have a service which answers in real-time what is the tax rate for a particular address and a particular product at a particular time. Then have every online store call that service whenever they need it, job done.

[Eddy Ito]

Re: Oh noes, sales taxes are too complicated!!1!

That's just it. It's nearly impossible to tell because there is no such service as it would have to get down to areas so small that several fit into a single zip code. For instance zip code 90631 lies in both Orange and LA Counties meaning there are two different county tax rates in addition to the state sales tax and the part of the zip code in Orange also levies a city tax all in less than 14 sq. miles.

[ratfox]

Re: Oh noes, sales taxes are too complicated!!1!

@Eddy Ito: I'm not buying it. There are already online companies that are charging sales taxes when people are buying from zip code 90631, because they are based or "have presence" in California, and the law forces them to do it. It might well be that they charge the incorrect amount of tax, or that the money goes to the wrong county, or a myriad of other things that can go wrong; but they are charging sales tax.

For example, Amazon has a tax collection service which they claim is able to determine the taxes due anywhere in the US:

"The ability to specify tax collection obligations for orders at the state, county, city, and district level for each of the 50 states and the District of Columbia"

Amazon offers this service for all the companies that use Amazon as a marketplace to sell their wares, and which may be required to collect sales tax in any place. This is typically a problem that is very hard to figure out… for a human being, but that can be solved easily using computers.

[Eddy Ito]

Re: Oh noes, sales taxes are too complicated!!1!

"Amazon requires sellers to provide state tax registration numbers..."

You forgot to mention you also have to go to every state (I assume most have online registration) and acquire a tax registration number and hand it to Amazon so they can sell you the service. Does a little trinket maker in Vermont need tax registrations numbers in all 50 states just to sell their wares online?

The reason companies like Vertex exist is because it's too difficult for a small mom and pop shop to do keep up with all the rules. Saying that Rocko and his computer will gladly protect you from the California tax man - for a nominal fee, isn't much help.

Why does the seller have to sweat California's 'sales/use tax' on a nail file purchased by a California resident in Hong Kong? Why does California get a cut of business that was transacted outside of California? Why is the "internet", not the Californet, any different from Hong Kong? Why wasn't California taxing mail order/catalog sales forty years ago and why is the internet different? Well, we know that one since it's seen as a cash cow to cover the state's hyper-zealous spending that mail order never was, granted they will play the protectionist card and say it isn't fair to regular bricks and mortar stores but we know better than to buy what the state is selling.

[Terry Cloth]

Sales taxes are too complicated. Damn' straight.

In another life I was an IT consultant running my own company, and had to register with the state for sales-tax collection. I made it simple by only charging for my services, and any equipment needed I effectively had the client buy and pay tax for—thus no liability for me, and all kosher.

The real eye-opener was when they’d send me a monthly missive on changes to the tax. Tires taxed this year, but not next. Redefinitions of what was considered taxable clothing. “Clarifications” of changes they’d made earlier. This was a whole sheet of (pre-electronic) 8½"x11" paper each month. If you think any service could keep that straight for 45 states, plus counties and cities continuously, correctly, I have a pony for you.

I really pity anyone who’s a wholesaler, and has to keep track ot that morass. I suspect this is one of those situations where, if the state wanted do, it could audit anyone and nail them with a fine and penalties.

[Eddy Ito]

Re: Sales taxes are too complicated. Damn' straight.

I suspect this is one of those situations where, if the state wanted do, it could audit anyone and nail them with a fine and penalties.

Ding, ding, ding! I think we have a winner!

[Tom 13]

Re: Oh noes, sales taxes are too complicated!!1!

Written with all the assurance and aplomb of someone who has less than no clue.

It might be possible to write such a system if the tax rates were actually fixed. But the truth is they come out like patches did before MS instituted Patch Tuesday. Only there are even more entities that can initiate changes than any IT person ever deals with for patching, even if they work in a shop that supports PCs, Macs, Linux, BSD, and Wang.

[Preston Munchensonton]

Re: What are they thinking?

"For those outside the US, Congressman Boehner is a 'fiscal conservative.' This means that he wants to reduce taxes so that the government will operate at an unsustainable deficit."

What? I think you're missing the difference between fiscal conservative and fiscal liberal. Fiscal conservatives want to reign in both taxes and spending. Fiscal liberals are more widely known by their "tax and spend" labels.

[Robert Helpmann??]

Re: What are they thinking?

What? I think you're missing the difference between fiscal conservative and fiscal liberal. Fiscal conservatives want to reign in both taxes and spending. Fiscal liberals are more widely known by their "tax and spend" labels.

On the contrary, I am quite aware of the differences between and among the different camps. You either missed or ignored the irony in my comment. From yours, I would guess you style yourself a fiscal conservative. Play the devil's advocate for a moment: explain the point of taxing without spending. Too, the preferred method of the conservatives in this area is to supposedly reign in spending by reducing taxes (look up Starve the Beast). Reducing spending is never a popular cause, so it is seldom approached directly.

[lynnfredricks]

Re: What are they thinking?

State sales taxes are regulated at the state level (surprise), and they are not uniform with each other. If you are already in a sales tax state, you are collecting sales tax on sales in your own state and 1) every state in which you have a tax nexus and 2) every state that has a cooperative collection agreement with other states.

Here in the lovely state of Oregon, we do not have a state sales tax. We do have a somewhat sizable state income tax instead. When you purchase goods through our website, we don't collect sales tax. That does give us a bit of an advantage sometimes. It also gives reason for people in border states to cross over and buy here.

Other border states are wise to this practice, and therefore have tax systems that compensate. For example, if you buy a car in Oregon, and bring it to Washington, they nick you when you register your vehicle.

As compared with many other countries, USA states have much more autonomy (and different cultural attitudes) from each other and from the federal government. Its a rough point when the EU wants US companies to cough up VAT payments. We cannot uniformly collect taxes from each other, let alone consider paying them to other countries.

[DrJaymansLoveCookie]

congresscritters

Congresscritters is a bit too evolved, perhaps "Congressional complex organic molecules"?

[Fluffy Bunny]

Re: congresscritters

"Congressasites" - a combination of Congress and parasite?

We have the same problem in Australia.

[Anonymous Coward]

Recipe for disaster

once asked a US tax attorney to answer a very simple question. "What tax do I pay on a phone call from the United Kingdom to the United States?"

Later, we received a bill for an hour's worth of advice, and an offer for a reduced rate on the other five hours they thought it would take them to actually answer the question. We counter-offered; double or nothing on the fees if they would accept full liability if their answer was wrong in any way. Funnily enough they did not feel that was an offer they could accept.

[Grumpy Fellow]

Not dead yet

Amazon collects sales tax for 23 states at the present, including many big ones. To the best of my knowledge the blocking of this bill doesn't undo that situation, it just keeps the present mess in place and lets the remaining states go after Amazon on their own if they wish. I live in one of the five states without sales tax so this is primarily of academic interest to me. I'm not a big fan of sales tax in general because I think it is a regressive way to fund a state.

[Eddy Ito]

Re: Not dead yet

Funny thing about Amazon. If you buy something from some sellers and not Amazon proper it's possible to not get charged sales tax since Amazon only acts as bank and bazaar but not the actual merchant. As a result if the merchant doesn't have the all important point of presence in the state thus no tax. I was shocked that the Cali tax didn't show up on one of my wife's purchases and it took me a while to figure out why and sure enough the seller was in Tennessee and the product shipped direct from China.

[Version 1.0]

Re: Not dead yet

Purchased from Amazon via a vendor in Tennessee and shipped from China - so that was just a simple transaction and quite easy to follow. You lucky lad!

[redhunter]

Confusion

The U.S. Internet Tax Freedom Act of 1998 did not prohibit states from requiring out-of-state online retaillers to collect sales tax on in-state purchases. The 1998 act prohibited states and local governments from taxing internet access. This is a big distinction and a source of confusion in the minds of the press, taxpayers, and even the legislators that passed the law in the first place.

There has been no U.S. federal law enacted to limit a state's ability to require the collection of sales tax on internet purchases. The restriction that currently exist is based on judical interpretations of Contitutional restrictions, e.g., Quill Corp. v. North Dakota. In general, the Quill decision provides that a company must have a phyisical presence in a state before the state can require the company to collect sales tax on in-state purchases. Quill was decided by the U.S. Supreme Court in 1992 and related to mail order purchases, but has been applied to internet sales by lower courts.

[unitron]

Re: Confusion

Well explained.

Would upvote more than once if both possible and not considered bad form.