Comments on: Tax-free Internet shopping may be at an end

An influential alliance of state tax collectors and large retailers are hoping to end what they view as a loophole allowing tax-free Internet and mail-order purchases.

[mhollis--2008]

This is absolute bunk. In the 1990s "They're going to tax your Internet" stories circulated regularly. The NYS and California "Use" tax has been on the books for quite a while now. And it is not news that the states, now strapped for cash, intend to enforce it with a few audits designed to catch a few good marks and bring in a little more to the coffers. But there is no real change here.

My full article and rebuttal is here: http://tinyurl.com/cwetsq

[SILGoodin]

If states, like California where I happen to currently live, are going to want me to pay the difference in sales tax for goods bought in lower tax jurisdictions, say Kansas, than I DEMAND tax credits for goods bought in higher tax jurisdictions. Like Oklahoma (where the property tax is lower) or Germany, where I had a vacation.

I could deduct 11% of the cost of the chocolate I bought. And the pens.

[markhca]

People are forgetting one aspect of this. Transit.

Because a user in New York purchases on-line from California, all states in-between will be able to justify taxation of passing transactions.

The simplest solution is a per-transaction tax not tied to the sales amount; every purchase has a 25-cent tax applied across the board.

It is easier for the vendor to track how many states it ships to and how often; the Fed pools the collected tax, takes 5 cents off each and distributes the remaining 20-cents in proportion to the sales from that state. International sales collects the same tax, but pads the pool larger if no tax treaty exists with that nation.

It's uniform, it's fair, and it's easily monitored at a low cost to all. That's why it will never be proposed, because creating loopholes and exceptions for special interests is needed to keep us guessing.

[jrzchic26]

I agree, we are taxed way too heavily. For those of you who feel the need to point out that "the government cannot run without tax money" you are correct; to a point. We are taxed on our income, property, what we buy, and what we sell. It is out of control. If you know your history, many of the taxes we incur now did NOT exist decades ago-and guess what? We seemed to have been doing pretty OK. Don't believe me? Ask anyone who grew up in the 30's, 40's, and 50's. I feel compelled to ask the party who chose to adress someone as "freeloader", you wouldn't happen to represent the very institution being discussed here, perhaps? If you are so keen on paying more of your money to the government, do us all a favor and pay our share too!

[Ahavah5]

Maybe I missed something here, but why can't the states just sign a simple, one page agreement to collect 6% or whatever on all internet sales, period, to be paid to the state of the person ordering? Why all this silliness with "what is candy" and whatnot? Tax exemptions for food should only occur at brick and mortar stores in the first place. If you're ordering it on the internet, it's a luxury, not a necessity of life. This whole thing is ridiculous.

[oldthingsseller]

I currently sell second-hand vintage and antique small items online (very small business). If this law is implemented it will put me out of business trying to figure out other state's tax rates. I currently pay sales and use tax when someone buys from me in my own state (as proscribed by law). And the tax actually comes out of my profit as I do not charge the customer. Leaving this to congress or the government to simplify for us gives me no confidence. Just look at what they've done so far. As far as I'm concerned I wish they would get their noses out of my small-time private business. At least I'm keeping myself employed and paying all taxes. I should have just operated below the radar, but no I had to follow the rules for conscience sake and a sense of right and wrong which I will never regret.

[stormytoo]

I too, have a small internet business & yes it will also put me out of business. I am only one person and the amount of time you would have to spend a month on taxes and making sure it was received on time & where. I now pay taxes on all my sales to Al (county & State) once a year. Then city also wants their fair share on all my sales every year. So now I would also have to pay every other state too. Doubled taxed. I really don't see how this can pass. Maybe the government would like to support me too, since I won't be able to stay in business. I will join the next Tea Party!!!! Pretty soon they will start taxing on how much you breath, along with everything else.

[ThisUserNameIsInUse]

I used to run a small mail order business. I didn't collect on out of state sales, but in-state - OMG. There's state tax, and county tax, and city tax, with many different values. There were about 30 lines on the sales tax return for totals from different locations. And what do you do when you get a customer address like "10950 State Hwy 60"? What freakin' county is that in? You have to look up the ZIP code to find out. I got so fed up after a while, I just refused all in-state sales.

Now multiply that situation by 50.

[dnj148]

I have thought all along that Internet purchases shoudl be taxed but I also know that the businesses could never keep up with the hodge-podge of tax rates thoughout our land. I would propose a simple 2-3% Tax on all items. Then at the end of the day, the supplier would only have to figure out how much he sent into each state and then pay the State. The Sate would be obliged to pay out equally, say, to each county.
Though having seen how Congress acted with the Stimulus and Budget BIls, any law passed will probably be the death knell of Internet business. Face it - Congess cannot even run themselves!

[ereal2000]

I already pay NY sales tax when I go to amazon, buy, newegg and others. If we do pay tax on purchases which is already happening for me it should be a flat sales tax. I think it should be a tax of 5% for all states for online purchases. That way it is less burden for online vendors in collecting these sales taxes. On the other hand I wish this won't pass and go back to not being charge sales tax for online purchases but it looks like it is going to happen eventually.

[whywhywhy?]

As a small internet retailer I find this scary. It's not the collecting taxes, it's the logistical nightmare.

When a brick and mortar collects taxes they do so for their state, city, county. So usually, they only need one set of tax info. This still can be complex if it is one of those places with variable tax rates, ie on different foods etc.

As an internet retailer paying tax rates to each state I would need to have not just the state tax rate but also the city and county rates and what I should charge taxes on. I would need a tax certificate for the businesses that buy from me. I would need to have a tax id for every state. I would then have to total the taxes paid in each city/county/state and file sales tax reports for every state I've sold.

Every tax change would have to be updated. Most likely, someone will figure out they can make money selling people like me tax tables to the tune of a few hundred a year. So then I'll have the choice of spending hours preparing all these reports or paying someone else to make it easy for me.

This is not an easy one for a small business to swallow.

If they are going to insist on the tax collection then they need to come up with a central agency that all online sales taxes are sent to, at a flat rate, and then they can figure out what city/state/county is entitled to it. I don't have the time or money to do this.

I see this as a way to stamp out small businesses like mine. Then the consumers will have no alternative but to buy from the mega stores. Small business will cease to exist due to the burden of preparing hundreds of tax reports per year.

[beelissa]

This sounds, to me, like another way to raise taxes. Ugh!

[nicmart]

Serf's up!

[jdubow]

This whole debate reeks of expediency and greed. Shopping by the internet out of state increases choice for consumers, increases the efficiency of the distribution chain by disintermediation, and allows internet vendors to remain competitive by compensating shipping costs with the absence of sales taxes.
This arrangement seems to have resulted in a more efficient and consumer friendly economy. The only ones complaining are the politicians who believe that any expenditures by anyone that aren't taxed are a blasphemy against their church of state control of everything and everyone. If this latest attack on economic freedom succeeds then the US economy will be less efficient, internet vendors will be less competitive and our economy will be less efficient relative to that of other world economies.

If the bill can't be defeated then perhaps some rationality can be returned by making shipping costs and sales taxes collectively deductable.

[drbyte]

I wouldn't have a problem with this (or any fair tax) if government was responsible with it's spending. They never fix what's wrong and in turn always look to gouge taxpayers.

[agreddon]

desertids has a good point, which is why in exchange for this right each state mandates that it, and only it, has the ultimate authority tax sales on the internet (i.e. no local taxes on online purchases). How they split it up is up to them. Also this should also be conditioned on the fact that internet sales taxes are solely based on price.

[mythicalpoet]

This is BEYOND ridiculous. Tax revolt cometh!!!!

[ljbg]

Okay, my husband had a small business selling items on his webstores. Over the last few years he has been selling about $75,000 worth of items a year. This year his sales were down abaout 15%. The state we are in requires us to report sales by county in which the purchaser lives and pay taxes to each city, county and MTA at their required tax rate. It is a nightmare now - and I am an Accountant.

If you multiply the time it takes to track and report these sales by 50 states, it will no longer be profitable for him to stay in business. If we could file a short form and pay all the taxes on all our sales to one taxing entity in one state, I wouldn't mind.

My next questions would be how are we supposed to keep track of changing tax rates in ALL States, cities, counties MTA's etc. Especially when you don't necessarily have repeat customers. God help small business owners who have to hire an Accountant or purchase new, fancy, expensive software. The small business owner would truely be better off to close their doors.

[mountainlady]

What about states that do not have a sales tax? If this would include these states places like Amazon etc. would lose a lot of business.

[syvart]

So who will pay the teachers, Police and the people to fill the pot holes in the roads if no taxes are collected. what about all the people in your community that lose their jobs because people buy online rather than locally to avoid paying taxes.

Not taxing the internet is killing community's and raising the unemployment rate. I hope they pass this very fast.

Be part of the solution not the problem.

[decisivemoment--2008]

In an ideal world, this would be good tax policy, good government policy.

However, state sales tax systems are almost universally screwed up and I see no real interest on the parts of the states in reforming those systems. Unless the states play ball and clean up their act, Congress should not pass this legislation.

Here's an example. Illinois taxes goods very heavily but does not touch most services. 10.25 percent sales tax on goods in Chicago. Outrageous -- almost the sort of tax you'd have in a VAT system as they have in Europe, except all on the end user rather than shared out between end-users, retailers and manufacturers as VAT at least attempts to do. And nothing at all on a $400 designer haircut.

Illinois and other states like it should be forced to adopt one single rate of sales tax in return for having the federal government back them up on collection. In our case we could well get down to a five or six percent rate even when local option taxes such as we have in Chicago are factored in. For a locale without a local option tax you might even get below four percent.

Other posters' remarks about the complexity of state sales tax collection policies (just what is and isn't taxable) are also well taken, and should be duly noted by legislators. As things stand the system would be a sitting duck for abuse by state authorities.

In principle the states should get federal support for enforcement. In practice, they don't deserve it until they reform and produce a tax system that is fair, transparent and straightforward.