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The Internet tax Scrooge
The LA Times has an editorial admonishing Internet shoppers for not paying tax on the items they buy. It says taxpayers owe the state of California more than a billion dollars.
On this glorious day before Christmas, I have a message for all you sales tax scofflaws out there:
Pay up.
This means you. You, who bought your big-screen TV online from Amazon.com instead of at Best Buy and your fleece-lined parka from L.L. Bean instead of Eddie Bauer because Amazon and Bean don't charge you sales tax and the others do.
Guess what. You owe it anyway.
Author Michael Hiltzik says the billion in lost revenue would pay the salaries of more than 15,000 schoolteachers for a full year; this at a time when California is soaked in red ink (hardly the fault of the taxpayers, mind you). He also says the state makes almost no effort to enforce the law.
Well, there you go. California and other states have made their own budgetary beds; I hardly expect taxpayers to rush to their aid if they can get away with saving a few bucks in this economic climate, and they see how the state has managed its money. Perhaps people would be more willing to pay the tax if there was anything resembling a cohesive policy nationwide or state policies that were stronger.
Hiltzik also points a finger at Amazon:
Once a purveyor of modestly priced books and videos, Amazon now offers big-ticket electronics and more. I found a men's titanium watch on its website priced at $92,000. Buy it at your local jeweler, and you'd pay about $7,400 in tax...
At least one of Amazon's claims is worth a horselaugh. This is that sales tax rules are so "horrendously complicated," with some 20,000 separate jurisdictions nationwide to track, that it's an "undue burden" to force Amazon to get it all right. (The words are from Amazon Chief Executive Jeff Bezos at the company's annual meeting last year.)
This from a company that has no problem keeping track of the "millions of unique products" it sells. (These words are from its 2009 annual report.)
What's your stance on this issue?
To the reader comments regarding buying a TV from another state, and transporting it back to your home state - unless you live in one of the few states which do not collect sales tax, <b>you still owe your local "Use Tax"</b> (equivilent to sales tax).
We also like to remind people that local sales tax <b>are not new taxes</b>. Local sales taxes are decided upon directly (or indirectly) <b>by you</b>, in the voting booth at every election. When you vote for local services (police, schools, hospitals, etc) or projects (parks, transportation, sports facilities), <i><b>these voter mandates are funded almost entirely by local sales tax revenues</b></i>. When you avoid paying these local sales taxes (intentionally or not), only your local community suffers.
Responding to the article itself now, it is unfortunate that Amazon is being singled out as the target in this LA Times article (and others), as the uncollected tax associated with their transactions represent <b>a small fraction of the $20 Billion or so of uncollected B2B and B2C ecommerce sales taxes annually</b>. As much as half of this uncollected tax revenue is generated by transactions from the smallest merchants on the Internet.
<i>Hopefully</i> the revised <b>Main Street Fairness Act</b> will be soon introduced before congress to address this very issue.
The Main Street Fairness Act will <i>finally</i> mature efforts which has been underway for the last ten years called the <b>Streamlined Sales and Use Tax Agreement</b> (or SSUTA). SSUTA has been developed collectively by 44 states, along with industry groups and retailers (including Amazon), in an effort to simplify and modernize state-by-state sales tax codes to eliminate the overly burdensome "entanglements" cited by the US Supreme Court opinions from 1967 (Bellas Hess) and again in 1992 (Quill). Complete details about SSUTA are available at their website, <a href="http://www.streamlinedsalestax.org" target="_blank">www.streamlinedsalestax.org</a>.
We maintain that with basic application of modern technology with SSUTA simplified rules and procedures, systems within e-commerce websites could <i>easily</i> calculate (and collect, and remit) accurate local destination-based sales tax, using techniques akin to real-time shipping calculation – a feature frequently a part of most modern web purchasing experiences today.
Our <b>TaxCloud</b> sales tax-as-a-service, which will be available later this year, will be offered <b>at no charge to merchants</b>, to facilitate collection and compliance. You can see a preliminary demonstration of TaxCloud calculating tax rates for thousands of state and local tax jurisdictions at <a href="http://myrate.taxcloud.net" target="_blank">myrate.taxcloud.net</a>. As states, counties or sewer districts update their rates, TaxCloud and all TaxCloud merchants get the change automatically, and maintain compliance with all local sales tax laws.
We believe <b>it should be easy</b> for everyone- merchants, purchasers and government, to comply with existing tax law and <i>do the right thing</i> for our communities.
R. David L. Campbell
<i>Chief Executive
The Federal Tax Authority (<a href="http://fed-tax.net" target="_blank"><b>Fed-Tax.net</b></a>)</i>
Just because a state has a sales tax on items sold within its state does not mean it has a right to collect taxes in other jurisdictions. If I visit friends in Montana (which has no sales tax) and buy a big screen tv and take it across state lines to my home state, does not mean that I should pay Nebraska 7%. In their efforts to increase regressive taxes and avoid taxing mansions and high incomes they have gotten themselves into this situation.
We have not had a fair tax system in this country for longer than I can remember.
What we need is to eliminate income taxes at all levels of government and have instead a national sales tax that would apply to everyone. Every individual and corporation would pay the national sales tax on everything that is bought, regardless of where it was bought or whether it was bought from a web based seller or not. A portion would go to running the federal government and the remainder would go running state governments.
Also, for this to work, we should have a constitutional ammendment requiring that government entities operate with balanced budgets. Continued deficit spending by irresponsible elected officials will drive this country to ruin sooner than you may think.
"He also says the state makes almost no effort to enforce the law. "
There is your problem. ENFORCE EXISTING LAW. Don't be blaming consumers for lack of Legislators poor action.
I wrote a long email to the author. He felt his solution was so easy, yet does not realize that the nation wide system proposed by SSUT is designed to put small business out of business trying to keep up with 8000 tax districts that are not defined by zip code.
More details here http://bit.ly/6mfsqg
He wants to go after Amazon. While Amazon does avoid paying Sales tax where the law says they must, the NY 'Amazon Tax' law is unconstitutional and will be repealed.
Advantage of online vs. B&M. What a MYTH! The only dis-advantage is legislators see a slice of pie missing.
It may vary State to Sate, but if you purchase items out of state, and have it delivered by freight carrier, the sale is subject to Use Tax in your state, not where it came from. I hope that clears up the questions asked by other posters.
As an online retailer on the East Coast, I refuse to collect Sales Tax from CA buyers. That's a problem for CA to collect Use Tax, not for me to be the tax collector.
To CA Legislators I have this for a Christmas present:
Bah-Humbug !!
Even though I'm well aware of the difference, on-line shopping from California based e-tailers still feels like it has a sales tax since I have to pay for shipping... and wait three days to receive my goods.
However, I will admit that I appreciate these e-tailers for giving me an outlet to stick it to Stroger (Chicago sales-tax reference)
If states were more efficient then they would not need a regressive sales tax. This costs the regular person so that person can not afford additional purchases of goods or services. From being on both sides of the counter I hate the sales tax as I feel it is legalized extortion. Just look at the results in Rhode Island.
If I buy a TV in PA from a server farm in NC from a company based in CA who ships via UPS from NY, who do I pay sales tax to?
popular responses:
consumer: NO TAXES!
Government: YOU ALL OWE 5% (Thats 5% x4 mind you)
Should there be sales tax? probably as its an unfair advantage over brick and mortar. Who should get the dough? That will be fought over for a long time.
