If you think it’s just the federal government that is scrambling for revenue to cut their deficits, you are badly mistaken, Almost every single state is desperate to increase the tax coffers to balance budgets and/or deal with immediate needs- including transportation needs. And, one source they are desperate to tax is internet sales. Some $ 23 billion a year escapes state coffers (National Conference of State Legislature estimates) because of the 1992 Supreme Court ruling that currently obtains.
As I reported last October, the Supreme Court ruled that there is no way for a state to collect tax revenues from a company, if it does not have a physical presence in a given state. That ruling came about when Quill sued North Dakota for it’s imposition of sales taxes upon their firm. Way back then, Quill was growing dramatically, picking up office equipment and supply sales across the US by offering lower prices than local firms- and not charging sales taxes.
Now, you notice I italicized the word company. That’s because the laws in the states that impose sales taxes actually require us (that’s you and me, in case you missed the point) to track our purchases from out-of-state vendors and file an annual report covering those sales- and pay the taxes ourselves. I recall my ex-wife receiving a bill from the Commonwealth of Virginia for furniture purchases she made in North Carolina, upon which Virginia wanted their sales taxes. (Yes, they collected. There is no defense against the failure to pay these taxes. It’s the law.) But, in reality, few citizens abide by this law. (Do you really drive at or below the speed limit?)
And, many of you (especially if you live in California) may recall that Amazon stopped having authorized resellers for a few months in California about two years ago. Amazon hadset up a distribution center in California, and that meant California could assess sales tax on Amazon sales, which ticked Amazon off. But, Amazon eventually capitulated. And, now, some 9 states (California, Virginia, Texas, Pennsylvania, among them) are collecting sales tax from Amazon, because it has distribution centers in those states. The Amazon revenue model has now changed- it wants to offer rapid delivery; to do that, it needs many distribution centers, so it can deliver almost as quickly as the big box stores or local vendors can.
It is, therefore, leaving its former compatriots in the dust. Overstock.com, Facebook, eBay still want to fight sales taxes. (They belong to a trade association- NetChoice– read lobbying group- to oppose this effort to collect sales taxes on their sales.)
Mike Enzi (R-WY) and Dick Durbin (D-IL), with 12 additional sponsors have proposed the Marketplace Equity Act, which will be passing the Senate very soon.. Really! With a aye-vote well in excess of 60 votes; perhaps, even as high as 75 votes in favor. It’s disposition in the House is more problematic, with the additional opposition of Grover Norquist, who incorrectly claims it is a new tax. (Obviously, reading the law is not part of his efforts. Admittedly, it’s a law often contravened, but the requirement to pay sales taxes is the law of the land [O.K., of 45 the 50 states].)
And, to make it easier for smaller companies to deal with the paperwork, firms with online sales less than either $ 500,000 or $ 1,000,000 in a given state will be exempt, dependent upon the final version of the bill. They will not have to compute, collect, or submit sales taxes to the states. And, supposedly, the bill also requires the states to rationalize their sales taxes computations, so a company with no physical presence in the state will not have to compute each county’s sales volume because they have separate tax rates; just one rate for a given state seems to be the compromise position in this bill. (Again, it has not yet really passed, so we are looking at versions, without amendments.)
Ah, yes…the fun begins…
And so it does, I listened to the CEO of Nestles the other day, when he proposed that water is a food and therefore should be under the control of big business. A mass undertaking but one that will draw more attention in coming years, If government smells money, they will find a way to get what they consider to be their share, even though they do none of the work.
Chef William recently posted..The Food Revolution
Water already is a big business venture for Nestle. And, it would be nice if they paid their fair share of taxes on those revenues- to the localities where they draw the water, to the localities where they process the water, to the federal government for the taxes on the profits that they still make off the products.
Geez, Roy, my husband and I have to live within our means. We can’t (or at least we won’t) spend more than we make each year. Why can’t the federal (and state) governments be required to do the same thing, instead of spending more than they have, and then scrambling to make up the difference. Hmph. Grrr. and Sigh.
Amy recently posted..A student’s Big Question: “How can I prepare for an audition?”
OK, Amy… Let’s consider this fact.
G-d forbid, you were in Boston last week. And, got hit with the terrorist’s “present”. Are you telling me that because you only have $ 25 in your pocket, you won’t pay for the hospital bill, the ridiculously high rehab costs, the prosthetic limbs you may need?
That’s to some degree what is happening now around the US. Sales are down, companies are laying off people and making others work overtime without compensation- so the money that would normally be collected by taxes is not there. Will you pleased if they announce they are no longer picking up your garbage, because the money is not there? (By the way, that will mean you will need to pay someone else to do that job…)
I am not saying that all the spending is absolutely correct- there needs to be analysis of what is necessary and prudent.
But, we do need to pay our taxes, to disallow companies from paying NO taxes when they are making record profits, and stop sticking it to the smaller guys and gals who can’t hire the lobbyists and tax professionals that shelter their money from the taxman (or woman)…
Taxes, I hate them. Not sure what type of news your post brings. That is why I hate taxes I don’t understand them I just know they cost me money and I never see benefit from it.
Shawn recently posted..The Secret To Your Sales Success
Really, Shawn? Do you drive on roads? Is your garbage collected? Those are two simple things- and that’s what taxes provide.
Am I a fan of internet taxes- of course not, but we are required (except for 5 states) to apy sales taxes on those things we buy. It’s a little unfair for Tom to be able to sell me a pen that is tax-free, while Joanna, the small business person down the block, who can sell the pen for the same price has to charge $2 more (at least, that’s how it feels to you) because she must collect sales taxes for the state and county.
It is so interesting to read this from a UK perspective. Some of us (me included) tend to be quite pro-taxes and we don’t much like tax cuts unless they benefit the poorest people. However, we have VAT here which is a sales tax levied on most non-essential goods and services, effectively collected by organisations and paid only by consumers (because the organisations are paid back any VAT they pay). It’s an across the board tax so it hits poorer people harder than richer ones. But I can see that it’s easy for us to manage it as a country because we have one set of tax laws – sounds like a nightmare with different states doing different things!
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Yes, there have been discussions about starting VAT programs here, Harriet.
But, I, too, have problems with sales tax since it does have great impact upon those at the lower end of the economic spectrum.
Thanks for bringing up BOTH of those important issues.
Blimey, as if tax laws weren’t complicated enough, the inexorable rise of the internet was bound to muddy the waters further. More hand rubbing from the tax lawyer brigade!
Cheers, Gordon
The Great Gordino recently posted..Inspiration? You Can Bank On Dave!
I’m not sure it’s the last lawyer brigade.
On this side of the pond, we have sales taxes and not VAT. It and real estate taxes are the primary funding sources for local governments…
Yes, I drive below the speed limit…whenever there is a hay wagon in front of me!
David- I almost just hit approve…
But, I wanted you to know I read it and LAUGHED…
RT @adjuvancy: Thanks 4 alereting folks to the internet sales tax @Widow_Lady302: Have Sales- Will Tax http://t.co/JIw8aknNLQ via @Adjuvancy
Tank You for the detailed and simple explanation.
Mark
Mark recently posted..What is Lean Accounting?
Mark:
It’s a pleasure to “meet” you. And, thrilled that your found my site. Hopefully, you found more than one post that meets your needs.
Again- thanks for your visit AND your comment.