Arizona Tries To Shake Amazon Down For $53 Million In Sales Tax

The burden of state sales tax continues to plague Amazon. Groups of states hold Amazon to different standards when it comes to collecting the tax. While some disagreements end amicably — such as the company’s January deal with Indiana that it will have to start collecting state sales tax in 2014 — other states are a bit more confrontational.

According to The Wall Street Journal, Arizona billed Amazon for $53 million in uncollected state sales tax from 2006 to 2010. Amazon reps say the invoice, sent in November, is bogus. Arizona’s invoice echoes a similar maneuver by Texas, which hit Amazon up for $269 million. Amazon’s reaction? Shutting down a Dallas warehouse.

At some point it would be helpful for all parties if online retailers and state governments worked out a uniform way to handle the state tax issue. Don’t count on that happening any time soon.

Arizona to Amazon: About That Sales Tax… [The Wall Street Journal]

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  1. Mr. Fix-It says: "Canadian Bacon is best bacon!" says:

    At some point it would be helpful for all parties if online retailers and state governments worked out a uniform way to handle the state tax issue.

    That would require both parties to handle this in a mature and responsible manner.

    The IBEW, this ain’t.

  2. Swins says:

    If you have a presence in the state, you collect sales tax for items sold in the state, it’s that simple

    • absherlock says:

      A presence or a retail presence? Does “presence” include using a state’s roads to transfer inventory from one point outside the state to another point outside the state? What if you have business offices in a state, but no inventory is stored there?

      • Robert Nagel says:

        “Presence” has generally been meant to be a physical presence such as a store, office, distribution center, etc.

    • sth9669 says:

      Except for any number of states like Delaware or Oregon for example that don’t collect sales tax. Also, some states only require you to collect sales tax if you have RETAIL presence so just having a warehouse is not enough to trigger the need for collecting sales tax.

      I understand the need for collecting sales tax for internet purchases, but I understand that it’s a huge burden for websites since each state and often locality (ie counties, cities, etc) have their own rules. Perhaps we need to pass a federal law that sets a standard tax rate of 5% that goes to the state of the billing address for the order?

      • ptkdude says:

        It is quite a challenge to keep up with the thousands of different tax rates in the country. That’s why there are companies that specialize in keeping track with what the tax rate is at every address in the country, and their services are used by many companies with a multi-state presence (think large retailers like Target or service providers like Verizon Wireless). I don’t think this boils down to it being too difficult for Amazon to keep up with constantly-changing tax rates; instead I think it’s either Amazon wanting to maintain the “pricing advantage” they have by not collecting sales tax, or some executive there has it in his/her head that they shouldn’t be required to collect taxes so they’re being a dick about it.

        • Jaynor says:

          More to point – Amazon is being targeted to implement this ahead of all other online retailers (bc of size/volume). Amazon doesn’t want to be out-amazoned by the next smaller comer who isn’t saddled with the maintenance of system to calculate regional taxation.

          Their big argument is “we’re cool with collecting this – just make it standard for all online merchants… don’t target us individually just bc we’re biggest”

          • Lyn Torden says:

            And I think this is conceptually fair. One problem is, the systems that have been proposed to handle this have setup costs above $100k, and maintenance costs above $20k/yr regardless of volume (e.g. due to licensing, database requirements, etc). That’s nothing to Amazon. It’s a show stopper for over a million existing online retailers (that run on systems with far, far less cost).

            What is needed is a solution that imposes NO cost to either online or brick+mortar retailers, while still being fair. If that means the feds collect 5% of everything and distribute it to the states (for those states that opt in), then maybe that is the solution (but you can be sure it will meet a huge resistance).

            • darklighter says:

              [citation needed]

            • Mephron says:

              The ‘show-stopper’ would be integrating a database of this nature with the Amazon infrastructure, along with all the possible issue with licensing and updates this would cause. I would expect that if a company did this kind of setup, Amazon would pay a lot more than $100K+20K/yr.

        • Not Given says:

          You would think Walmart could do this but they don’t. I bought a wedding present to be sent to the bride’s parent’s address. They didn’t charge the tax based on my billing address, they charged the tax based on the town in the shipping address. Even though the address was rural, I was charged for the state, county and city taxes when I should have been charged just the state and county taxes. My state keeps a subscription database for every tax rate in the state searchable by zip+4 but apparently it’s too hard for Walmart.
          I vote to charge the tax rate at the corporate or home offices of the company, payable to that state. Then, see how long it takes the companies to move their home offices to states without a sales tax.

    • Lyn Torden says:

      Technicall/legally this is a “use tax” which is conceptually applied to the buyers of a product. The tax is owed to the taxing jurisdiction where you live. Traditionally the state required the tax be collected at the time of sale by retailers to reduce costs and ensure better compliance (as opposed to the higher cost of collecting the tax directly from individuals). So it was not perfect because of things like collecting from out of state visits. But this was deemed close enough (because it would roughly balance out both ways) and the costs would be too high to make it perfect.

      Things change over time. At first there was mail order and phone order. But these volumes were not so high to worry about, and they still balanced out somewhat because they were still collecting tax from where the seller is. Then came the internet and the convenience was so great, that it became a huge part of the retail economy. Taxes were suspended for the internet to promote that (though I am no sure it really played a useful role).

      At the same time, tax rates started to get complicated. What used to be a 3% tax throughout one state became a complex mix of tax rates scattered throughout the state and even counties and zip codes. But the brick+mortar stores never had to worry about that, as they only had to deal with the one rate for their physical location (as if it were not a tax on buyers, but on sellers).

      A few states have no “use tax”. People would travel to those states to buy stuff “tax free”. Technically, they still owed tax on it.

      The internet situation is, however, a huge mess. The internet retailers are being expected to collect the correct tax rate base on where the buyer lives. They can’t base it on the seller location because it is in another state, or perhaps doesn’t even have a physical location. This imposes a huge burden on the internet retailers that brick+mortar does not have to deal with. Internet retailers have to figure out where the buyer actually lives to be able to determine the correct rate. B+M retailers do not. And this determination is quite error prone, as well as being very costly. Just ask ANY state taxing agency in a state which has varying rates to provide a detailed map of rates suitable for precise determination of the rate.

      Fortunately, most internet sales are done by credit/debit cards. If we shift the burden of collecting the tax there, then these FEWER companies can determine the tax rate ONCE per account and apply it to all transactions. They just need a mechanism to know which charges are “already taxed” and which are “not yet taxed”. In the latter case, they also need the product class code (rates can vary for this, too, such as food vs. furniture). While it would be a cost to the card companies, it would be a lower cost to them because they don’t need to do the lookup for each transaction, and it would be a lower national cost because the millions of retailers would not be burdened. Brick+mortar stores could also choose to operate this way (except for cash transactions … just do those the same old way).

      The only other fair alternative is to compel each state to collect a specific single rate for the entire state, and figure out how to deal with the inconsistencies of their state, within their state. 50-some different rates by state would still be some burden, but not that much. They just need to mail out rate changes to the millions of retailers whenever there are changes.

      • Bsamm09 says:

        So now the credit card/debit card companies should get involved? Why? Will the debit card companies be able to raise their fees now? How will the card companies know what tax rate to apply?

        This is a far worse solution to this problem. Why would you want to involve a company that is only an intermediary for payment into sales tax compliance issues? Do they have a SALT dept?

      • dg says:

        Even if you have ONE rate for the whole country, if you have to submit more than one form – it’s a giant burden. And at some point, some state will say “Well, we have more transactions here in our state, we need a bigger cut of the federal pot”, so you’ll get some nitwit modifying the form to require a breakdown of sales by State.

        For a large business? No problem. Buy some software, hire some human.

        For a small business? It’s a giant burden. They might not even make enough to be able to buy that software, or hire some human. What about people who sell on eBay?

        This problem is entirely the State’s. Forget the Sales tax altogether and move on. Spend less. Tax less. I’ll decide how to spend my own money, thank you very much.

    • MeowMaximus says:

      Arizona is screwing themselves over. Amazon will leave the state, and jobs will be lost. I hope the governor has the good sense to put a stop to this.

    • mindaika says:

      Okay: I, domiciled in Michigan, purchase an item using my sister’s credit card, which has a Texas zip code, to be shipped to California from a warehouse in Nevada. I place the order from a computer in Hawaii.

      Which sales tax rate gets applied?

      • failurate says:

        California. You could skip all the other stuff and just write… I bought something online and had it shipped to … and the “to” place would be the answer.

        • Nigerian prince looking for business partner says:

          Under that system, I imagine a re-shipping company in Delaware could make a killing. Have big ticket items sent to Delaware for “inspection” and re-sent to your home address, avoiding that pesky 9% sales tax.

        • Difdi says:

          The problem is that Nevada, Texas and Michigan all want their cut, regardless of what the law says.

          And when confronted with this, far too many states are trying to pass laws targeting specific businesses by name, which is also illegal.

  3. clippy2.0 says:

    My wife works for an online retailer, implementing state and country taxes. her opinion seems to be places with a national sales tax > state to state retardedness. But I’m sure she’s biased

    • ARP says:

      Unless this is offset by a reduction in income taxes, it’s impact would be to further centralize power with the Federal government since the Feds would receive the money and then would hand it back out.

      I’d be all for a NST, on top of our existing tax structure if we actually got something for it, like healthcare.

  4. Alessar says:

    In Michigan we have ‘use tax’ which you fill-in as a part of your normal state return. They have a formula to estimate your tax owed on various small purchases, though for big ticket items you’re required to pay that specifically. I just browse my account history on Amazon and Newegg as part of doing my taxes and fill it in appropriately. If people aren’t, well, that’s what audits are for, right?

    • Fubish says: I don't know anything about it, but it seems to me... says:

      Hahahahahaha.

    • PunditGuy says:

      Are you suggesting that your state’s tax personnel are going to enter your home, check to see if anything is new-ish, and then demand to see a receipt from a local retailer or charge you for unpaid tax?

      • Lyn Torden says:

        It has already happened. And it happened before there were retailers on the internet.

        • Nigerian prince looking for business partner says:

          How common is this? I’ve heard of personal property tax inspections but never for sales tax.

          • axhandler1 says:

            So uncommon you will probably never hear of it happening. I would love it if Lyn could provide sources for her claims. I’m very curious to read about it if this actually ever took place.

    • Maltboy wanders aimlessly through the Uncanny Valley says:

      ROFLMFAO!

    • MurderGirl says:

      I pay sales tax at Newegg, mostly for the convenience of driving down and picking up my goodies.

  5. Cat says:

    How does a state “estimate” a tax bill for an out of state corporation? And do they exclude the taxes paid by people who are honest and actually paid use taxes on their out-of-state purchases?

    They call it a tax bill. Extortion, I call it.

    • yabdor says:

      Actually it’s called Federal Mail Fraud. To knowingly send an improper demand for money through the postal service is a felony.

  6. TimelessFinanceCom says:

    Poor Amazon having to bear the “burden” of state tax like the rest of us. You know who pays almost no American federal or state taxes? Carnival Cruise Lines. It’s called pulling your weight for humanity. Most of us have to do it. Corporations have one goal: maximize profits. They are fantastic institutions to this end and have been one of the biggest factors in wealth creation; but don’t trust them to set tax policy.

    • Difdi says:

      Just one problem with that:

      The goods in question aren’t taxable.

      If I, in Washington, ordered something to be ground-shipped from a warehouse in Arizona, I would not owe sales tax on it, because the goods were not sold in the state of Washington. I might owe taxes to Arizona, if they taxed all goods sold there, but only if the law requires it. Arizona has no such law. Nor would I owe any taxes to Oregon or Nevada, even though the truck the goods were shipped on drove through those states.

      The commerce clause of the U.S. constitution makes it illegal for those states to interfere with the commerce I have with that company in Arizona. Some states do have a Use Tax, for goods consumed in the state but not purchased there, but if there is such a tax, it is my duty as a citizen to report that when filing my taxes, not the company in Arizona I bought them from. But if the state I am in does not have a Use Tax, then my state has no business interfering in the commerce of another state.

  7. u1itn0w2day says:

    As much as I hate taxes I see this coming more & more. And I’d rather see internet retailers taxed than me.

    My solution for both federal and state taxes would be this. Think about all the billions of gallons of gas sold each day. Just think if you just put one penny, not one percent but just one penny on every gallon of gas sold. Even if it’s a penny for the feds and a penny for your state that could raise alot of money.

    • sth9669 says:

      Um, they’re not taxing the retailers, they’re trying to tax you. If they go after the taxes that amazon should’ve paid in 2006-2010 then amazon will start collecting taxes for that state and you will have to pay them. Amazon paying this bill won’t make it so you don’t have to pay taxes. . .

    • mszabo says:

      On average there is already about 50 cents in taxes for every gallon of gasoline sold.

    • Cat says:

      I don’t know what state you live in, but fed tax on gas is 18.4 cents / gallon.
      State taxes are listed here:
      http://www.gaspricewatch.com/usgastaxes.asp

      • kingofmars says:

        Thank you for this website. Maryland is about to pass an additional 15c/gal tax, making it the highest tax rate in the country.

    • LizziePoo says:

      Wow, you are an idiot. This is already being done by state and federal and is common knowledge.

    • Such an Interesting Monster says:

      58.2 cents per gallon here in NY.

    • Doubting thomas says:

      You need to think this through. There is already a greater than $0.50 tax on gas and online retailers are not expected to pay sales tax, they are being expected to do the governments job and collect it from you

  8. esc27 says:

    We have the technology. We can fix this easily and fairly.
    1. Build a Federally maintained database to keep up with all the different regional sales taxes.
    2. Establish an organization/agency to manage the database.
    3. Local and state governments contact the agency, prove their identity, and submit their current sales tax rates.
    4. Online retailers use a very simple API to connect to the database and charge the appropriate tax, which is then sent wirelessly to an account specified in the database by the state/local government requesting the tax.
    5. Optional: A small portion of the sales tax goes to fund the system.

    • Mr. Fix-It says: "Canadian Bacon is best bacon!" says:

      All fine and dandy in theory, but you’re gonna need money, for establishing the agency and hiring its workers and representatives, and that’s only if it doesn’t end up stonewalled in Congress for eons.

      Look how long it took just to get a chairperson for the Consumer Protection Bureau. :/

    • Cat says:

      1. Build a Federally maintained database to keep up with all the different regional sales taxes.

      I have a feeling this will not turn out well.

      • maruawe says:

        A tax rat of 2% on internet sales and all states must agree to this rate or be left out and cannot collect a tax on internet goods period

    • way2trivial says:

      and for each taxing region you have to track every item.. my state taxes candy, unless it has flour in it.. it taxes books but not newspapers & periodicals.. it taxes cooking oil but not toilet paper.

      and you want a master database that covers EVERY ITEM in the amazon database, for every taxable region/entity? it’s not just state by state… it doesn’t even fly by zipcode.. people in the same zip can be in different counties/have different tax rates on purchases…

    • Dont lump me into your 99%! says:

      A private company could build such a system, no need for government to do it, everything they do ends up costing 10x what it should.

    • Lyn Torden says:

      This is still a burden on internet retailers that brick+mortar retailers won’t have to deal with.

      “Simple API” is no longer meaningful, these days, given the wide range of programming systems involved (hundreds). A “simple network protocol” would be better, as long as the designers of it think NOT in terms of any specific software. Meeting this goal would be unlikely, given the propensity of most programmers to think only in narrow terms (especially those that work for corporations and governments).

      I say, let the credit/debit card processors do it. They already know where the buyer lives. They can lookup the tax rate for each buyer ONCE per tax rate change cycle, then add it themselves to the billed amount. This would also reduce government costs because it is fewer entities to collect the bulk tax payments from.

    • kjherron says:

      In other words, build a federally run database, and require every merchant to report each sale to it, including the street address of the purchaser which would be needed to reconcile local taxes.

      Privacy, maybe you’ve heard of it?

      • Lyn Torden says:

        I downloaded what I bought. They didn’t need my address to send it. They didn’t need my address to charge paypal (or equivalent). I even gave them a fake name. They can’t collect a tax if they don’t know what jurisdiction applies.

    • coffee100 says:

      The entire system would be unconstitutional several times over. The Federal Government has no Constitutional authority to establish such a database. They have no jurisdiction over state sales taxes. Shipments of goods that leave any state cannot be taxed under the law. State sales taxes cannot be diverted to pay for Federal programs without 50 legislatures authorizing it.

      We’re also $14 trillion in debt. The Federal Government cannot afford such a program, either.

  9. winstonthorne says:

    Vaguely nutty libertarian observation to follow:

    They tax us when we receive income (including, absurdly, income that was generated by our own tax revenue like unemployment benefits and lottery payouts). They then tax us AGAIN when we buy stuff from each other.

    Crazy.

    I’m not saying that we have the worst tax system in the world – my sister lives in the UK and their stupid VAT nonsense is a constant reminder that our taxes here at home could be much worse – it’s just fundamentally offensive to me to be so heavily taxed. One of these years I want to save up every single receipt and calculate a fully loaded tax percentage for myself – including the idiotic and redundant sales taxes mentioned in this article. I bet taxes represent one of my top five expenses.

    Yet our government still runs a deficit. Huh.

    • DariusC says:

      Tax when you earn it, tax when you save it, tax when you spend it, tax when you share it, tax when you give it (unless to charities the government deems non-profit) and tax if you die with it, otherwise the government gets to claim all your worldy possessions when you die. You won’t need them anyways where you’re going, right?

    • Such an Interesting Monster says:

      Yet I suspect many in the US would gladly pay a VAT if it meant free healthcare, schools, and extensive benefit programs.

      • winstonthorne says:

        Unless they knew how crappy those healthcare systems actually are.

        In general though, I agree. I’m all about value, and if my taxes pay for good programs I’m not opposed to kicking in. As it is, however, this country does a terrible job in terms of managing its revenues, and I don’t believe I’m getting a good ROI on my taxes. Do you?

        This is now officially way off-topic, and off the rails, but it’s Monday and I’m cranky, so here goes:

        Our roads and bridges are falling apart. Our education system sucks in comparison to many other developed countries. Our population is generally unhealthy. We have no mass transit to speak of, except in the most urban areas. We have resorted to forcibly injecting the earth with toxic chemicals to eke out natural gas instead of developing alternative sustainable fuels. People still actually go *hungry* in this country, despite the fact that we are allegedly a world-leading superpower. And yet, we’re constantly getting boned with insane taxes. Somehow I don’t think giving the government even more money would solve anything.

        • Such an Interesting Monster says:

          Nope, not our government anyway. There is absolutely no desire for our government to spend our money on us. All they want to do is find ways of spending our money to benefit the obscenely wealthy while making the rest of us systematically more and more disenfranchised. Yet despite a 30+ year pattern of Republican behavior, idiots who are incapable of separating fact from fiction and are raptured by catchy buzzwords still keep voting for them. So when our education system finally collapses along with our entire infrastructure and economy the only people to blame will be ourselves.

          While I have no firsthand knowledge of the NHS, I must imagine that crappy healthcare is better than unaffordable or no healthcare. But remember folks, just say NO to any and all dirty filthy socialist healthcare plans from that African-born Muslim. But don’t you dare lay a finger on my Medicare!

        • Jules Noctambule says:

          Is it crappier than not being able to afford healthcare at all? No? Then sign me up.

        • Mr. Bill says:

          Do you know how expenses and crappy our health system is. I’m always seeing benefits to help pay for some kid medical treatment.

    • humphrmi says:

      I don’t disagree with you but just FYI both of your examples are non-tax generated payouts… unemployment is state-by-state insurance program that is funded by premiums paid by employers, while you could argue that those premiums are a “tax”, in the truest sense of the word the state’s general tax funds are not used to fund them. And lottery payouts… really? 100% funded by gamblers…

      • winstonthorne says:

        You’re right – I played fast and loose with the term “tax.” As far as I’m concerned, if something is state or federally mandated and comes out of my income (like unemployment), it’s a tax.

        The lottery one is interesting: revenue generated from the lottery goes into state coffers, and is used to fund state programs which would otherwise be paid for with other taxes (like income, cap gains, sales, property, stupid phone bill taxes, etc). Therefore, it is a tax, albeit a voluntary one, and taxing the payouts is indeed double dipping on the part of the government.

      • Such an Interesting Monster says:

        IIRC the current round of extended unemployment benefits are funded by the Fed from our tax money. This of course is not the norm, but it is what’s currently happening.

      • Maltboy wanders aimlessly through the Uncanny Valley says:

        *except for the 1-1/2 year period between 27 and 99 weeks which is 100% taxpayer funded.

        /facepalm

    • hansolo247 says:

      I’m a vaguely nutty Libertarian, and I did exactly what you thought of doing.

      My fully loaded tax rate is 48.3% (will be 50.3% when the payroll tax comes back).

      Federal Income: 23%
      State Income: 5.6%
      FICA/Med: 13.5% (until it goes back to 15.5%)
      Property Tax: 4%
      Sales: 1.7%
      Personal Property: 0.5%

      Absurd. Half my income is pushing it, especially when so many pay nothing.

      • Such an Interesting Monster says:

        See, you’re clearly doing it wrong. You need to make MORE money. Like Mittens. Despite having 40+ million in the bank he only pays 15% in taxes.

        • winstonthorne says:

          MITTENS – LOL! Brilliant! It’s probably old as hell but this is the first time I’ve heard/seen it. I will henceforth refer to that man as Mittens. You’ve made my day.

        • hansolo247 says:

          Yes, he only pays 15%, which is unfair in so many ways, since I’m at well over that.

          BUT…

          When he combines taxes and charitable contributions, it’s closer to 40%. Sure, many will say that “doesn’t count” but a dollar sent to charity is almost certainly more effective than a dollar sent to the government in serving the public good. More people would be helped if everyone donated more to Charity…the government wouldn’t need to do as much as it does now.

          No, I’m not voting for him.

          • darklighter says:

            “a dollar sent to charity is almost certainly more effective than a dollar sent to the government in serving the public good”

            Not at all. A dollar sent to charity is more effective at serving the donor’s personal causes, but an individual private donor is never going to have the resources or coordination to do the kind of public government spending can do. If a rich man donates $15 million to get his name on a building at a private university, is that really more effective than the government spreading it across a wide variety of efforts?

            • hansolo247 says:

              Good point.

              But, what if it was to, say, the United Way or the Red Cross?

              And, your example of the name on the building is kind of a bad one. Yes, one may donate a lot to get that, but physically putting the name on the building will cost less than the actual donation.

              And, there’s the fact that the taxes are a forced contribution (with a threat of force) while charity is entirely voluntary.

          • Such an Interesting Monster says:

            Umm, not really, since most of the money donated goes to the corporation that runs the charity and not the beneficiary thereof.

            I know nothing about his charitable contributions but I certainly wouldn’t be surprised to find that he is in some way affiliated with the companies or boards that run them.

      • wrjohnston91283 says:

        Half the country pays no income tax, but I would bet that close to 100% pay at least ONE of the taxes you list. Almost all wage earners pay FICA/Medicare. Unless you live in one of the few states with no sales tax, its going to be very hard to not pay a penny in sales tax.

        • Such an Interesting Monster says:

          Not only that, but the poor pay a significantly higher proportion of their income in taxes due to the fact that nearly all of their money is spent on taxable goods and services, unlike those that are able to save or leverage their extra income for tax breaks and low or no-tax investments.

        • hansolo247 says:

          Yes, you’re correct, but many of those same people receive all kinds of tax credits, EICs, child tax credits to get one big massive tax rebate that swamps out all of those other taxes.

          I have read that around 25% have no tax burden whatsoever when “total taxes actually paid” is taken into account.

          • hansolo247 says:

            And don’t forget other forms of assistance, too.

            Did one that paid sales tax with EBT really pay sales tax?

            • Such an Interesting Monster says:

              I’m not 100% certain, but I don’t believe purchases using EBT funds are subject to sales taxes.

          • Such an Interesting Monster says:

            Well if you want to live on $10k – $15k a year you too have have little to no tax burden.

      • Mr. Bill says:

        No one pays nothing! Everybody pays sales tax a part of the rent goes to property tax etc.

      • Nigerian prince looking for business partner says:

        Is 23% your effective or marginal rate?

      • jeb says:

        Slight flaw with your last statement:

        Most people pay at least sales tax, even if they don’t pay income or property tax. (Though renters still feel the effect of property tax through their rental cost.)

    • Difdi says:

      Want nuttier?

      I recall reading about (though I can’t find the link anymore) a 1921 U.S. Supreme Court ruling that stated that the Income Tax Act didn’t add any ability to tax that wasn’t already in existence constitutionally. The ruling also made mention (in passing) of the fact that wages are not income.

      Wages not income? There’s a brain twister for you, given the way the IRS operates now.

      Here’s another: Find where in the law it specifies a punishment for not paying federal income taxes.

  10. Worstdaysinceyesterday says:

    Coming from an area where we have 5.6% sales tax – pretty low, I would hate to see a federal sales tax. Frankly, I hate to see any state power transferred to the federal level. I know there are complications for businesses to charge each sales tax per municipality, but set up the database and update as needed.

    With more and more purchases being done online, we have to renew our local tax revenue streams. I think it is fair to charge the tax, I would even consider taxing services (which are not taxed in all areas) because we have such a large service based economy tax base. But work out a deal like IN did, sending a passive aggressive ‘invoice’ is not going to start any collaboration or meaningful dialog on the subject.

  11. Lyn Torden says:

    There continues to be the burden on internet retailers where they have to figure out just what the tax rate is in all those micro-jurisdictions. My zip code has 3 different tax rates because it covers two towns and some county land. A brick+mortar store only need to charge the one tax rate that store is in, even though the intent of these “use tax” laws is meant to have the rate applied based on the residence of the buyer.

    So they need to impose the same requirement on brick+mortar stores. They need to find out where every patron lives and charge the correct rate.

    A better solution is to shift the burden of collecting the tax from the retailer to the payment system (e.g. the credit/debit cards add the tax in based on the product codes included in the charge coming from the retailer). Of course this won’t cover cash sales.

    • hansolo247 says:

      It’s not even just that.

      Depending on the location, certain products and services are not taxable.

      There is extensive lobbying on the state/local level and it makes sales taxes a huge mess.

      It’s not just find the address, and multiply the total by a percent. It is far, far more complex than that.

      • Lyn Torden says:

        Yes, product specific tax rates are a mess. Last time I dealt with some of this (many years ago), classifying all product types over all states yielded 95 different classes. I’d imagine it is a lot worse today. The retailers would need to transmit the product codes (and amount specific to each code) to the payment processor, too. That is manageable, though clearly part of the overall problem. And this one is not easy to get around in a federally mandated state/local tax overhaul, because some products (for example food) have a particularly strong basis for differences. Still, it is plausible for such an overhaul to, itself, identify a few allowed product class differences.

        Is just eliminating use tax (sales tax) suitable? Perhaps it is. But it would be a substantial upheaval for some states where this is the primary tax mechanism (e.g. don’t have an income tax, and if they lose use tax, they would have to quickly set up a new tax system in a hurry).

        But I would sure love to see the Sales And Use Tax Uniformity Act (SAUTUA) tell the states that if they want to participate in this, they MUST report ONE tax rate for the whole state, as a WHOLE percentage (no fractions) for food, and one for everything else (and all other taxes, like vehicle registration, be collected by other means).

        Still, for retailers that sell downloaded software, music, etc., which don’t really need to know where people physically live, or in some cases don’t even need to know their name, how do you figure out what state … or country … to use for the tax rate lookup.

        Fundamentally, imposing on retailers to collect a tax being charged to individuals where they live, is a broken concept. But getting out of this will be very troubling, even in the long term.

    • Extended-Warranty says:

      No. There is no burden for anyone to figure out anything. Quit feeding on the BS that Amazon pushes out. For as easily as a law is created and enforced, a database can keep track of it. It’s amazing that everyone suddenly forgets that technology exists and runs everything.

      • Lyn Torden says:

        You clearly do not understand the scope of the problem. I did work in this field for another tax related purpose. There is no simple “look up a database”. Often, you simply don’t have all the information. For example, delivery of a product by download only requires a payment, not a delivery address. But even when you do have a delivery address, it is not simple to look it up in a database unless the state has a single tax rate for the entire state (half the states do not). If you think it is simple, prove it by posting the simple source code that does it correctly and reliably.

      • Such an Interesting Monster says:

        Please, my local chain supermarket can’t accurately keep track of what’s taxable and not taxable in their own stores, how the hell are companies supposed to keep track over every single tax rate and code in 50 states? Where is this mythical database you speak of, and how much are they going to have to pay to access it? And who is going to have to pay for it?

  12. webweazel says:

    How about this idea-

    Sales tax is collected by the state that the item is actually shipped FROM. Let’s say you live in Michigan and order two things from Amazon. One is being shipped from Texas and the other is being shipped from Kansas. Tax is paid in Texas and Kansas just like if you had physically went to those states and picked up the items there in person.

    I think of it this way-if you live in Georgia and go to Florida to buy something, you pay the Florida tax on it, not the Georgia Tax, and nobody complains about it.

    Think about it-if states had no other way to get the sales taxes except to have the shippers in their state, maybe the states would try really hard to get those warehouses in their states, and/or the additional jobs they would create. Maybe they would even drop the sales tax% on just those stores as an incentive for people to buy from there, considering they would make up far more than they’re losing in property taxes and/or income taxes for the workers hired. I see an all around good here, that could potentially invigorate some smaller-town economies. Plus, it would keep things simpler for the company, rather than having to deal and figure out each state’s taxes, city taxes, local taxes, and all that other horseshit. The change would be- states would stop treating online stores like their mortal enemy, which is what they’re doing now, and would be seen as a benefit to be encouraged to come to their respective states.

    It’s such a simple solution, I cannot fathom why no one can see it.

    • PunditGuy says:

      I’ve been advocating this for a while. I’ll happily pay Washington state sales tax on my purchases from Amazon. Washington did a hell of a lot more to facilitate the sale than Minnesota did.

      Invariably, there’s a chorus of people screaming about how that’s unfair to your home state and how I must hate my home state to not want my taxes to benefit people locally. But what did my state do that makes it deserve a cut of the transaction? Roads? Please. That delivery company bought gas around here, which is almost a perfect use tax. Internet? The state takes a cut of my Internet bill already.

    • Such an Interesting Monster says:

      And what’s to stop all Internet retailers from relocating to states that don’t have any sales taxes? Kinda like how all the credit card companies are located in states that have the most lenient banking laws.

      • Doubting thomas says:

        You mean businesses might relocate to states that provide friendly environments? What a concept. Then those states would have more employers, a lower rate of unemployment, still no state income tax, and hundreds of thousands of people from liberal “utopias” like CA would flood their state and immediately start trying to change it to be more like the place they fled from?

        • ARP says:

          No, because if they don’t have income tax and they don’t have sales tax, then they’re paying astronomical property taxes. If employers/employees actually flooded a state, they’d be overrun quickly with infrastructure issues. The only way to get the money to maintain all the infrastructure in that state would be to tax people more.

      • Loias supports harsher punishments against corporations says:

        I’m with thomas – companies already take advantage of states with more lenient laws. This kind of thing already happens, so his point is to make it easier to enforce and more fair to all parties involved.

        Hell, not a single cruise line is actually based in the U.S. – they hold their business in the island nations with the most relaxed maritime laws.

  13. Loias supports harsher punishments against corporations says:

    If you really care about the injustice, do what Colorado did and pass a law forcing any Amazon vendor in the state collect taxes, which will make Amazon drop all your state’s vendors. No, you won’t get any tax revenue, but at least you won’t be “cheated” out of lost tax revenue.

    Or is this more about the money grab than the justice? Hmm??

  14. lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

    This reminds me: I ordered a few more items from Amazon, so now I owe the Commonwealth of PA approximately $3.00 on my 2012 taxes. Sigh.

    • Lyn Torden says:

      Send it to Harrisburg immediately!

      • lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

        Actually, I should – just on principle. Can you imagine what it would cost the Dept of Revenue to process a check for ~$3.00 and put the money in the correct account? Of course I would include a printout of what was ordered so they could see the $$ was figured correctly. And it would cost me $.44 to mail it (I use forever stamps).

  15. maruawe says:

    What needs to happen is a uniformed tax that would cover every state. Or do not collect tax on internet sales… The changing tax rates in 50 states is completely out of the question …

  16. Extended-Warranty says:

    I pay a lot of taxes, when you look at my federal & state income, med, property tax, and sales taxes, it’s a significant chunk of my income. With that said, I don’t get how collecting online sales tax is so frowned upon.

    If anything, this should make us taxpayers side with this issue. I’m tired of the people who don’t pay their part. If this country collected online sales taxes, boosted capital gains tax for those who currently exploit it, raise the top tax bracket by 3% for those over a mil, and addressed the issue where almost half of Americans don’t pay any taxes where would we be? Then ans only then can we start to provide relief to the responsible tax payers.

    • Lyn Torden says:

      This issue regarding retailers collecting the personal use tax for various states has nothing to do with the actual tax rates.

  17. mdoneil says:

    There is an easy way, it is called a use tax return. I file them quarterly and so should anyone else who is subject to the tax. Buy something otherwise taxable in your state from an out of state merchant and the buyer is responsible for paying the tax.

    Just because most people are scofflaws does not shift the burden to Amazon.

    • coffee100 says:

      What if your state is a scofflaw? Under the Constitution (Article I section 9), goods exported from any state cannot be taxed, which means all “use taxes” are unconstitutional.

      Then there’s the fact that states are interfering in interstate commerce which is also unconstitutional.

  18. Warren - aka The Piddler on the Roof says:

    The whole ‘Use Tax’ thing is 100% pure, Grade-A government bullshit. They didn’t do anything to earn this money. Not. One. Thing. It reminds me of when we were kids playing super heroes, there was always one kid who’d make up rules off the cuff: “Well…your super punch doesn’t effect me because…I just had a…kryptonite enema and…it makes me invincible!” What is this tax for? Use of what? The Internet? Use of a computer the owner paid for with after-tax money? It’s a complete fabrication of a bloated, broken, greedy, inefficient system. No presence in the state, no tax. That’s how it would be in a sane world. Too bad we don’t live in that world.

    It’s only a matter of time before cops start walking up to people and demanding a ‘use tax’ for walking down the street. Or simply because they feel like it.

  19. dush says:

    The idea that the government can charge you for using your own money is abhorrent.

  20. coffee100 says:

    No Tax or Duty shall be laid on Articles exported from any State.

    - Article I, Section 9 of the Constitution

    • hansolo247 says:

      Yea, I try that one all the time.

      The progressives just bemoan it by saying that export means from another country…even though when I look it up in the dictionary, it doesn’t always say that.

      Oh, they’ll over-analyze the 2nd Amendment to say that gun control is just dandy or use the time-honored “times have changed” argument…but when it comes to extracting money from your pocket via force, they’re all AOK with that.

  21. sjgarg says:

    I don`t look forward to the day that the USA starts requiring my online store (in Canada) to collect sales tax for all the 1000`s of micro jurisdictions of tax rates located everywhere.

  22. hahatanka says:

    Read National Bellas Hess v. Department of Revenue – 386 U.S. 753 (1967)
    There are over 40,000 sales tax districts in this country.
    A nightmare for any accountant.