The biggest issue for me is practicality. You have thousands of taxing jurisdictions nationwide, each with a different tax rate. That’s reasonably solvable. Amazon, or Google, or somebody can publish a database keyed by zip code that will give you the tax rate. But, how in hell can a Mom & Pop operation follow the myriad tax rules - in this town, soda is taxed by milk isn’t, while in that town it is exactly the other way around.
Exactly. The big retailers like Amazon, can handle this, but how can the Mom & Pop operations deal with it?
Hopefully other states will follow South Dakota’s example and only require it for large sales volumes. It would make sense since administering a sales tax for a business that produces 5 or 6 small sales a year might cost a state more than it collects on those sales.
Not only that, but the small merchants have to submit payment for $0.37 on their one sale to the state. How do they do that? Do they need a state tax ID? A business license in that state?
One single sale subjects me to all of that? Far from being part of the dormant commerce clause, that state’s taxation of me interferes with interstate commerce as I will now likely only sell to those states that either have no sales tax or do not subject small retailers like me to the tax. Why is this not a matter for federal instead of state regulation?
The Court has it backwards: when faced with a clear matter of interstate commerce like this, they defer to states. When faced with a clear matter of purely intrastate commerce, like me buying a gun at the local store, the Court finds that to be a federal issue.
Suppose you buy nothing or almost nothing online. How could you possibly document that?
In Quebec, at least, the provincial and federal governments have uniformized their sales tax laws so that there is just a fixed rate, set by each of the two governments separately, but on exactly the same classes of goods (and services, BTW). In practice Quebec collects 15% (actually something like 14.975%, IIRC) and sends 5% to the feds and keeps the other 10%. If all the states agreed to that, the problem would go away. If I order in Canada, Amazon charges the same amount as any store.
I haven’t used sales taxes to decide online vs. offline, but I have used it to determine where I buy something online. And, since Arkansas changed its laws, that meant I was often going somewhere other than Amazon to buy things. Some of those places were smaller brick-and-mortar stores that also had an online presence (or an eBay account).
Granted, none of them were in Arkansas.
If I had to pay 10.25% sales tax I’d take it into consideration too.
Also, technically (at least in NJ), you are supposed to voluntarily tell them how much you spent on line and pay the estimated taxes that weren’t collected. There is a space for it on the form.
This was inevitable. Sales tax is a very fair tax, you pay tax on what you spend, and states weren’t going to be satisfied with a loophole that allows an enormous amount of sales to go untaxed.
This doesn’t have to be difficult to deal with either. The states should work out sales tax transfer agreements so that a business doesn’t have to deal with every state’s tax department, just present the state the business resides in with sales tax totals for each state that they’ve sold products to and the home state can write out one big check for each state they owe the tax money too, even deducting what each state owes them.
If this system weren’t put in place the lost sales tax would end up being replaced by other taxes that most people would find to be even more distasteful.
Back in the day, I absolutely made an effort to buy most stuff online to avoid sales tax. Nowadays it’s less of a concern since many large retailers charge it anyway.
Good idea, but lacking. Sales taxes are often levied at nearly every level of government below the state level… counties, townships, municipalities, you name it. Your plan must also have the states take responsibility for the taxes their subsidiary jurisdictions want to collect as well.
Why? If you’re purchasing from or delivering to, say, Texas then you should pay Texas sales tax. The calculation can be done automatically.
Look for card operators to step in and handle this for smaller operations - for a fee, of course.
It is a problem for taxes below the state level, and I’d say those should be excluded because it’s a ridiculous burden on the seller to calculate the taxes for every locality and to even keep those tax rates up to date. Let the states deal with that issue internally. And even if they have to be collected it should still be the state’s responsibility to distribute those taxes to their lower levels of government, not the seller’s or the seller’s state.
I think that’s where I was going with the phrase “states take responsibility”. That seems like the simplest solution. But with the competing interests in play, don’t expect the simplest solution to be palatable if someone thinks they’re not getting what they want.
This ridiculously overcomplex thicket of tax jurisdictions and rules makes me think the Europeans with their one-shot VAT would be the better answer.
This is a terrible situation. My wife and I run a small business and our average sale price is about $10 for digital goods. We could now be required to collect sales tax for the more than 10,000 taxing jurisdictions in the USA. Collecting it is not really a huge problem as there is software to calculate the right rate based on a customer address. The real problem is remitting the taxes. Taking just our sales in June, I would have to send roughly 50 cents to 400 different jurisdictions all over the country.
What is to stop White Pine County, Nevada (population 9,811) from demanding that a mom & pop website in Bloomington, IL collect and remit sales taxes for all their sales each month to residents of White Pine County? And if they made no sales, the county could still demand that they submit a form showing that they had no sales in the county.
Nevada sales tax is 4.6% and White Pine county adds another 3.125% that must be paid to the county…the state may or may not collect it on behalf of the county, depending on the state.
A seller should only have to remit taxes to the place where the seller is based. If they want to pass a law that says I can collect Nevada sales tax in Nevada for sales to people in Illinois, fine. Just don’t make me pay it out to Illinois and the other 10,000 tax locales in the USA. If I buy something from a website based in Texas, I’m ok with paying Texas sales tax on it… no different than if I walked physically into a store in Texas. And the Texas-based seller never has to deal with sending money to Nevada.
This is from the state of Colorado which collects county sales tax on behalf of its counties but for cities:
“City - There are 224 cities that have established city sales taxes. Most small cities’ sales taxes are collected by the state. However, most of the larger cities (home rule cities) collect the city portion of the sales tax directly from the vendor and require a separate reporting form.”
So now your mom & pop business in Clearwater, FL will have to fill out a monthly form and send it to the city of Silverthorne, CO, population 4,500.
“The Town of Silverthorne uses Xpress Bill Pay for online payments – new users will be required to create an account when logging on for the first time for utility payments, sales tax and business licenses.”
https://www.coloradosbdc.org/FAQRetrieve.aspx?ID=63059
Colorado will make this a huge mess… and there are still 49 more states do deal with.
This is an opportunity. All your sales are by card, aren’t they? Your card processor takes the relevant address, looks up the tax rates, and automatically adds them and pays them direct to the taxing authorities. Job done.
Would this really work? I think most, maybe all, states that collect a sales tax require you to have a license and to file paperwork quarterly. Card processors aren’t the sellers. The states want to hear from the sellers.
I think excessive taxing will reduce internet sales
We already pay for shipping. ( directly, or with inflated prices and free shipping).
The uncharged sales tax made it worthwhile to buy online.
Now it’ll be cheaper buying local. The tax will be the same and there’s no shipping fees.
Internet sales won’t disappear but I think more people will be buying locally.
As has been noted, that’s pretty much an impossible burden for many, but put the task where the handling of the money actually occurs and it becomes easy thanks to economies of scale.
I think you are severely underestimating how much people enjoy shopping from the convenience of their own home. As seen in this thread, apparently many people don’t even pay attention to the sales tax, anyway, when shopping. And in many jurisdictions, they’re paying sales tax anyway on internet sales. Amazon sales in Illinois have included sales tax since 2015. It’s still cheaper for me to buy Amazon, as it’s taxes at the state rate (6.25%), not the local rate (10.25%).
And, of course, you are legally supposed to pay the tax on those items (at least in my jurisdiction and many others) even if the seller did not collect them. Just because the seller wasn’t required by law to collect Illinois sales tax because they didn’t have a physical presence in the state, an Illinois resident is supposed to declare it on their state income tax forms and pay the tax they skirted. (Not that most individuals do, but that is the law. In Illinois, it’s line 23 on your Illinois return: “Use tax on internet, mail order, or other out of state purchases from UT Worsheet or UT Table in the instructions. Do no leave blank.” And that worksheet leads you to a table where you’re supposed to fill out how much stuff you bought out-of-state and did not pay tax on or paid less that 6.25% tax on [or 1% on certain items].)
There are services that can handle this for you. Heck, I work for a company that makes financial/point of sale software (Cougar Mountain Software) and coded the interface to Avatax myself! (Buy our software! Okay, enough of that.)
On the thread topic, I’ve been paying sales tax on Amazon sales for months, maybe years now. It hasn’t slowed me down any.