The main reasons Amazon shifted are two-fold. First, they were sued by several states to collect taxes, and have lost several times. Second, in part because of reason one, they have shifted approaches. They are building warehouses in many states in an effort to offer same-day delivery and local pickup at designated lockers. See here and here. While what you stated is probably true, the vast majority of Amazon merchants do not have over $1mm/year in out of state revenue, so they would not have to collect taxes. Furthermore, the bill requires states to pay for the software to simplify the process, not merchants (although they obviously would incur some additional labor costs).
So the revenue floor coupled with the streamlined and subsidized tax collection process alleviates many concerns about the effects it will have on small businesses. The bill also indemnifies retailers for incorrect collection as a result of software problems, which would hopefully limit the number of frivolous audits and the like.
I guess it depends on your definition of small. If a business has out of state revenues in excess of $1mm/year, it’s hard to argue they are particularly vulnerable to modest bookkeeping cost increases. That said, I would bet some owners would not even take home six figures, which is hardly rich in many areas. Either way, I will bet the revenue level will be increased as per Ebay’s suggestion. I think $3mm would be appropriate.
And I own an online retail site with sales of just over a million dollars a year. My overhead is about 85%. Which of us do you think has a better grasp of the finances of the average Internet retailer? We’re not all Amazons or Targets or Best Buys.
Since you are on the cusp of being subject to these restrictions, what impact do you think this will have on you? How much do you think this would add to your costs? Is there a way you would be able to split up your business in order to stay below the million dollar threshold?
I think you’re underestimating the number of people who enter zero. Maybe compliance is higher in Michigan since you can just enter an amount based on your income (in Ohio you have to calculate the exact amount owed), but one survey by the Minnesota legislature found that only 1.6% of filers in states they surveyed reported that they owed use tax. I’m pretty sure more than 1.6% of filers buy stuff in other states. The states realistically can’t raise the chances of auditing 98.4% of taxpayers.
ETA: The map at the bottom says 2.3% of Michigan filers pay use tax.
That won’t really matter too much if the law is enacted as proposed given that the states will need to provide software to simplify the process, and designate one place to send tax revenue. Additionally, businesses will not be held liable or subject to audits as a result of tax errors due to the software. Compliance should only represent modest costs for businesses if everything goes right.
Of course they won’t. Sales taxes are local. In some cases (Alaska comes to mind), sales taxes are not even statewide. Example: Fairbanks has a sales tax; Anchorage doesn’t.
That would assume consumers will buy the same items and just pay more for them.
I assume must consumers will still have the same amount to spend; they’ll just be able to buy fewer things. The states will probably collect about the same amount but the GDP will drop slightly.
I guess I did in fact know that, I just didn’t think before posting from my Canadian perspective. We have one national sales tax and each province does its own thing on top of that, with no local taxes.
I have no idea; that’s the really scary part. I spend about half a day each quarter filing my sales tax for the state I’m based in, and I usually have to come in on a weekend to fit it in. I’m launching a new site this summer which (because of this pending bill) I’ll likely incorporate as a separate entity. The warehouse, business, and my personal income are already three different entities; I don’t look forward to having to file a fourth tax return on a separate business. I don’t have (and can’t really afford) an in house accountant which seems about the only way I’d be able to manage sales tax collection for all of my customers in the US. Also, I don’t have the technical savvy to configure my checkout for a zillion different zip codes. Not only will I have to purchase a new ecommerce solution, but I’ll also have to spend the time to learn how to use it.
I wonder how this would affect international digital sales. For instance, I purchase computer games (as downloads, no physical media) from GreenManGaming in the UK and GamersGate in Sweden. If I bought them from Amazon or Steam (both US companies) after this bill passes, I’d expect to pay sales tax. Would I get dinged for taxes from the international companies? Seems hard to enforce making every merchant globally meet the US tax requirements.
When I buy something online why is my state “owed” a cut?
I don’t want to see a world dominated by big box stores and retail conglomerates, but price, tax and shipping costs add up real quick. Unfortunately, shopping locally is often the wost deal. If this use tax went to local retailers, I’d be ok with it, but why should I pay the state for something they had nothing to do with?
Are duty free shops next on the chopping block? Will I be checked at a state border for items I might need to pay tax on?
If this sort of thing turns me into a republican, I’m going to toss myself into a trash compacting dump truck.
Because you’re in the state, and the state has chosen through its democratic processes to tax purchases made by everyone who lives in the state. This is not some inerrant and unchanging tablet written by God, so it could change if people really really wanted it to.
It’s fundamentally no different from a property tax, except it’s only levied once.
It will go to local retailers. It will fund the operations of the state but for which the retailers (and you) would not be able to operate effectively.
It’s supposed to go to the states, but with the Feds getting involved, I’m sure there is lots of buried legislation which will ‘redirect’ at least some of the tax revenue to the Federal Government.
Hey, that would make this easy, just establish a “Federal Sales Tax”, one rate nationwide, on everything, then have the feds divide up the money equally and disperse to the states.
When you buy something down the street why is your state owed a cut?
If a company chooses to do business with people in your state, why should they be exempt from collecting and distributing state sales taxes that other businesses do as a matter of course?
It’s always been a tax dodge, the internet company may not have a physical presence in your state, but they sure as hell have a virtual presence, they are capable of doing significant business in the state, competing directly with local tax-collecting businesses. They then get a competitive advantage by virtue of helping locals commit tax fraud. It’s kind of silly on its face to consider this a valid business model.
Also remember, the sales and use tax is a tax paid by the purchaser not by the merchant. The state simply appointed the businesses present in the state as collectors for the tax on their sales for efficency’s sake; we the individuals were supposed to remit the use tax on out-of-state purchases on the honor system all along.
I guess Article 1, Section 8, Clause 1 of the Constitution doesn’t exist in your world? This was practically THE reason why the Articles of Confederation failed, because the federal government had no way to tax, no way to enforce, no power except that which the states decided to grant it. It wasn’t a government at all.
So you’re right: states rights, who needs them? If the federal government can tax, which it most certainly has the power to, then we should federalize one national sales tax. Let the feds collect the taxes and divide up the money to states that needs it. It would simplify tax codes and take the power out of local politicians who can control their own little fifedoms because nobody is looking at what Joe Blow does in Podunk, North Dakota.