Is Tax-Free Internet Shopping Soon To Be A Thing Of The Past?
America wants YOU!... to pay tax on that Body Snake you bought online last week.
Sales taxes, one of the largest source of state tax revenue, dropped 6.1% nationwide since last year. That's the biggest drop in 50 years. And how does the government plan to make up this shortfall? Why, by taxing internet shoppers, of course! (Although, in theory, you're supposed to be paying a "Use Tax" already...)
A bill to be introduced in Congress this week would close the loophole that allows you to avoid paying sales tax when buying online from an out-of-state vendor. The proposal has been kicked back again and again over the past seven years, but it has gained momentum now that most local governments are hurting for cash. And we're talking major cash — losses of about $10 billion a year nationwide due to uncollected sales taxes from Internet and mail order purchases.
But the main reason taxes aren't paid online is that each state has its own convoluted set of tax rules and regulations, and there is no sane way to organize them. Enter the Streamlined Sales Tax Project, a group of tax-loving officials who are devising a uniform tax code to ease collection online. So very sweet of them.
For a fascinating look at your government at work, check out the SSTP website. Sample: Breath mints are food, toothpaste is not. Pumpkins are food, even though "the purchaser may use them for a purpose other than for ingestion or chewing." And: "When is an item sold heated? When it is offered for sale heated. Not sold heated if sold from a refrigerated display case."
Tax-Free Internet Shopping May Be Almost Over [CBS News]
Photo:Kevin Zollman
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Comments:
How is congress going to fix this? A federal tax in addition to taxes that some states charge already?
"Change"...gotta love it.
Since I live in California, almost everything I buy online already has sales tax on it (simply because a lot of the retailers I frequent online are based in California). I can only think of one thing I've purchased online in the past year that didn't already have sales tax applied to it.
I think that I subconsciously (or semi-consciously) steer towards doing business with companies in-state or nearer to me to reduce shipping distances (to be ever-so incrementally greener) and promote the "local" economy while shopping online.
@dragonfire81: It just doesn't make sense to me...it doesn't seem like something Congress needs to be involved in, why not just let the states take care of it? If you're losing money from a loop hole, close it!
Screw them and their system of taxes. I seriously hope that people will oppose this bill. (Even though the TARP passed anyway with all that opposition, but still.)
@snowburnt: The court decision re: Interstate Commerce regulation basically said the only way to close the loop hole was to do something at the federal level - because only the federal end has the constitutional authority to regulate interstate commerce on most levels.
I live in NY and the only stores that don't have sales tax for me are Newegg, Ebay and maybe a couple others. Needless to say I buy a lot of things off ebay.
Kind of a shame. One reason I buy so many things online is the fact I don't pay tax for a majority of them. Sure, governments hurt (meaning less money for them to waste), but corporations make out due to the fact I am buying a lot more products than I would normally.
Heck, even if they just charged 10 cent per order it would add up fast.
@snowburnt: Its interstate commerce. Its exactly the sort of thing Congress needs to be involved in. The "loop hole" is one states aren't well suited to close. New York has tried, but in a very convoluted manner. Because we're dealing with commerce across state lines, Congress would be needed for a good solution.
Also, don't be sure that there won't be industry support for this. Online sites that have a B&M presence in a state already collect sales tax, after all. All of those companies have a strong incentive to lobby to level the playing field with sites that avoid tax collection.
I was thinking the exact same thing. Being from texas if I ordered from texas would I have to pay sales tax and "internet sales" tax? Seems like that would be a slight against internet sales, then again I suppose that might drive people to buy stuff outside the internet which might be what they are driving at in the first place.
Indeed it would, but that doesnt mean they will. I would expect it to be much larger than that, most likely a percentage.
So every company/person who wants to do business on the internet is going to need two giant databases (one on which items are taxable and when, and another containing detail down to the zip+4 level on what the tax rate is for that particular house (our town has 3 different school districts and is in 2 different counties, for example).
This is stupid.
And why should MY state get the money?
If I drive over to the next state and buy something there, that state gets the money. If I order it on the internet, why should that change?
Large retailers are a big part of the support for this measure as online dealers have a defacto 10% sales advantage without it. Declan McCullagh wrote an excellent piece on this for CNET: [news.cnet.com]
@Outrun1986: I hated when I moved to NYC and found that my MMORPG and TiVo subscriptions were subject to tax monthly. I failed to see in what way New York could justify it. (Then again, there are a lot of things NYC can't justify.)
@NigerianScammer: Err, I don't like paying taxes either, but if you're going to agree to have sales taxes in order to fund gov't services, then you might as well apply them evenly and tax Internet purchases too.
@Jeremy82465: Err, well, yeah. I would expect it to be the exact percentage they charge for sales tax on in-state purchases.
@j-o-h-n: I don't think your question about driving to the next state is valid. I know when people in Oregon (no sales tax) buy things in Washington, they can show their Oregon ID and not be charged sales tax. It's really a use tax, not a sales tax.
And as for the databases, you're a bit off base. Firstly, you don't need a separate database for which items are taxable. It's just a flag on that item's entry in the database. Then there's your assumption that zip+4 is required to assess sales tax. I've never seen sales tax vary at anything other than the county level. And, to top it all off, did you miss the bit about the SSTP?
@logicalnoise: To an anti-Obama person, any negative change anywhere in the world is entirely his fault.
Why this time we will see the Internet tax:
President Obama is a strong ally of the new tax laws and is expected to sign them into law. Internet companies like Amazon.com, eBay and Google are outraged. Until now, they have remained recession proof by offering products at lower prices than comparable brick and mortar stores.
This is because congress has been unsuccessful in enacting Internet tax laws for at least seven years. They have argued that reduced sales tax revenue threatens budgets for schools and police, and say that, as a matter of fairness, online retailers should be forced to collect the same taxes that brick-and-mortar retailers do.
While these arguments have been unsuccessful so far, the National Conference of State Legislatures and its allies believe the recession has sliced into sales tax revenue so much that Congress will have to act. In addition, Obama is said to support this legislation, along with a broad coalition of Democrats in congress. A report this week from the Rockefeller Institute says that sales taxes have declined by 6.1 percent, the largest decline in half a century.
Outrage is huge. See the comments here:
If this nonsense goes through I might get big ticket items shipped to someone I know in Delaware.
I wonder if people will be as pissed off NOW as they should be with this bail out BS. I dont mind paying taxes for advancement of the country but NOT for bigger Govt. "Change" is all i'll have left in my pockets.
Why this time we will see the Internet tax:
President Obama is a strong ally of the new tax laws and is expected to sign them into law. Internet companies like Amazon.com, eBay and Google are outraged. Until now, they have remained recession proof by offering products at lower prices than comparable brick and mortar stores.
This is because congress has been unsuccessful in enacting Internet tax laws for at least seven years. They have argued that reduced sales tax revenue threatens budgets for schools and police, and say that, as a matter of fairness, online retailers should be forced to collect the same taxes that brick-and-mortar retailers do.
While these arguments have been unsuccessful so far, the National Conference of State Legislatures and its allies believe the recession has sliced into sales tax revenue so much that Congress will have to act. In addition, Obama is said to support this legislation, along with a broad coalition of Democrats in congress. A report this week from the Rockefeller Institute says that sales taxes have declined by 6.1 percent, the largest decline in half a century.
Outrage is huge. See the comments here:
@dragonfire81: Just like the american people didn't want the bailout? They did that anyway didn't they, with out even reading it mind you. Dont be a fool, they (the dem controled govt) are going to tax us into effin next century.
Delaware has the right idea.
This is only going to lead to headaches for our online store...
@simplegreen: I think I agree. The bailout was ridiculous, and now they want us to pay for it. Less taxes, less wasting the taxpayer money they do have.
@Wesley Rock: Yeah... thanks for repeating info already stated in the post, double posting, and pimping a site...
@Darklighter: Cities exist which have their own sales taxes. There are a few of those in New York state, among other places.
There is a simpler solution.
Tax everything sold as an over the counter transaction. Which means the merchants LOCAL tax rate is applicable.
Solves a lot of problems.
Canadian retailers do this, but I suppose it's easier when you only have to figure one or two taxes, being Federal and Provincial (or just federal), or the harmonized tax which combines the two.
Isn't the huge presumption here that declining revenue is because people are buying more online?
What if people are just buying less *in general*?
Why is this a problem? If you are not paying sales tax, you are paying use tax. At least with sales tax, you don't have to keep track of your purchases at the end of the year and calculate the use tax. I think it would save all of us a lot of time and headache during tax time.
@simplegreen: So I guess its the Democrats taxing us or the Republicans spending all our money.
Spending seems to be the policy for both parties, considering 8 straight years of budget deficits.
Information technology can fix the problem, especially if sellers are given a chance to correct errors early on without punative penalties. Hell, you don't even have to have everyone doing their individual research into what's taxable where; establish an industry group that publishes all of that information to members.
I hate taxes as much as the next guy, but I still pay the use taxes on my state return anyway. Those that are supposed to do so but don't are tax evaders and breaking the law.
If you don't like it, take it up with your state (and where applicable, local) legislatures. They have the power to not tax internet purchases from out of state. I think you'll find, though, that governments need money to maintain power, and therefore without an initiative, your pleas will fall on deaf ears.
@rbb: I don't think the left (other than the fringe) has ever been dishonest enough to blame state-based initiatives on the president.
For starters, I don't think I can take this SSTP group seriously until they redesign their website. For people asking for more money, they're being awfully cheap about it.
Secondly, they would still need to get all the states to ratify this. Many will, but not all states, especially the ones that don't charge sales tax.
Thirdly, this will create a niche industry in the eCommerce sector dedicated to nothing but this damned tax code.
And finally, we'll see an internet "black market" spring up at some point. People hate taxes and always have. You can manipulate whole societies with taxes, even spread religion.
But come on, one of the biggest points in setting this country up was so that we wouldn't be burdened with too many taxes and that's all we've been seeing for the past few years. When does the money being spent equal out to the money going in?
Let's say I live in a state that charges 6% sales tax. The state next to me charges 7%. The state next to me charges 0% (the internet). If I buy things from the 0% state, I owe my government the taxes I would have been charged. But if I buy things from the 7% state, my state sure as hell isn't giving me back the 1%.
I hate tax laws.
From the article:
The final legislation is expected to be introduced by Sen. Mike Enzi, a Wyoming Republican, and Rep. Bill Delahunt, a Massachusetts Democrat.
Seems bi-partisian to me.
How will companies pay out the sales tax to each state? The large ones like amazon might be able to put something into place, but small online vendors are going to have a nightmare trying to keep track of the $1.50 sales tax that has to get sent to alaska, the $25.00 sales tax that has to go to New Jersey, the $1.05 that has to go to Texas in a year...
@ludwigk: My biggest online expenses are to Amazon.com, and they do not pay sales tax in California.
However, California has a use tax, so every year, I have to go through all of my Amazon.com purchases, add them up (except magazines, which are not taxable), and pay my 8.25% use tax. I sometimes feel like I'm the only one who does that; no one else that I've ever asked does it.
The annoying part for me, other than doing it in the first place, is that only Handling is subject to use tax, not Shipping. However, the tax low sates that if they are listed as "Shipping & Handling", you must pay on the full amount. Since Amazon.com treats them as one item, I have to pay the tax on the full amount. Since I buy lots of stuff off Amazon.com Marketplace, probably 75% of my purchases through them are for Shipping & Handling. So, I feel that I'm getting shafted into paying twice the use tax than I should.
Taxation of internet transactions is inevitable. Congress will not let an opportunity to stick their grubby hands in your pockets pass them by forever. There's pork to fund, dontchya know!
Tax rates differ from county to county in my state (NY). Does that mean depending on the county I live in, online sales taxes would also be different?
Why not just audit the folks who aren't claiming sales tax on their state taxes, like they're supposed to?
@Blinky987: no they blamed everything on Bush. Get over yourself.
Both parties suck we need a viable 3rd party if you want real change.
I like somethings Obama has tried to do, but much of what he's done I do not like. It's better than ANYTHING Bush did. :P
Methinks the big powerful industry lobbying groups will put the brakes on this bill. I just can't see a lot of support from either the business or consumer side.