Online retailers may have to charge sales tax if Senate vote passes

[Dave LeClair]

The United States Senate is set to vote on whether online retailers should be forced to charge sales tax on all purchases, regardless if the buyer lives in a state where the retailer has a physical location or not, according to a report from Cnet. As the laws stand now, retailers do not charge sales tax on purchases made in states where the company has no physical presence. Instead, the onus falls on buyers to claim said sales tax on their government tax forms each year.

Of course, the problem comes from the fact that almost no consumers actually claim these taxes. In fact, most people probably don't even realize that they are supposed to. On the other hand, pursuing every buyer who purchases something on Amazon or any other online retailer would be a massive venture for the government, one that would hardly be worth the time.

States are reportedly losing out on $23 billion in uncollected sales tax revenue, according to estimates from the National Conference of State Legislators. This makes it easy to see why an online sales tax law is so sought after, as that is a tremendous amount of money left on the table.

This bill being passed would obviously cost consumers a lot of money, but technically, it should be a moot point, as at least in theory it is money they should have paid at the end of the year anyway. Still, as you might expect, there is plenty of opposition to this law. Surprisingly, e-commerce giant Amazon is supporting the bill this time around, and eBay's opposition is much more subtle.

With Amazon not fighting the bill, it seems likely at this point that the Senate will vote this through, but the bill would still have to pass through the House of Representatives and the desk of the President before it actually becomes a law. 

Permalink to story.

https://www.techspot.com/news/52480-online-retailers-may-have-to-charge-sales-tax-if-senate-vote-passes.html

 

[cmbjive]

This will pass the Senate, but it won't pass the House. Well, not unless a handful of Republicans buy into the lie that somehow online retailers are helping consumers skirt their state taxes by buying goods online.

Enforcement of this law will cost more than the law will help states collect taxes. And even if the states collected the tax, they wouldn't use it to balance their budgets anyway.

 

[Cycloid Torus]

Not such a big deal. "Sales Tax" is a tax to be paid by the BUYER. The seller is acting as the agent for the government when they charge it to you. For years I paid what is called "Use Tax" - until it turned out that almost all of my online purchases were through retailers with a 'local presence' so the tax is now being collected and paid. Making this a national requirement on all retailers with significant sales has a minimal impact..they already collect and pay wherever they have 'local presence'.

Now, the other issue remains...taxes which are collected, but do not really benefit the public. You'll get a crack at that during the next election - SO VOTE.

 

[cmbjive]

"Making this a national requirement on all retailers with significant sales has a minimal impact..they already collect and pay wherever they have 'local presence'."

If they did, there would be no need for Congress to make such a law requiring them to do so. As an example, Newegg has no location in Arizona, but it will now be required to know Arizona sales and use tax law in order to sell me something, even though it is based in California. Of course, Newegg has customers in every state so it will need to know the sales and use tax laws of any state it sells in that has sales and use tax. If you think that has no impact on Newegg's business you are dangerously naive.

 

[Timonius]

It'll eventually happen no matter the details. I wonder what happens in the case of international sales...

 

[Guest]

Well in Canada if the store has a presence in you province you pay your province tax, if not you pay the local tax of the seller

I.e order stuff from NCIX I only pay GST I dont pay quebecs PST

 

[Cycloid Torus]

"Making this a national requirement on all retailers with significant sales has a minimal impact..they already collect and pay wherever they have 'local presence'."

.. As an example, Newegg has no location in Arizona, but it will now be required to know Arizona sales and use tax law in order to sell me something, even though it is based in California. Of course, Newegg has customers in every state so it will need to know the sales and use tax laws of any state it sells in that has sales and use tax. If you think that has no impact on Newegg's business you are dangerously naive.

Still think it is minimal. NewEgg has 'local presence' in several states already. They collect and pay already. They have the software and computational capabilities. Their staff is capable of doing an expanded amount of work without significant training. True, they might have to add to staff, but won't have to build from nothing. If you live in New Jersey or California, there is no change.

I went through this with a leasing company that I worked for some years back. 42 states. Yes, it is a pain, and yes, we did have to hire another clerk. The compliance audits were the biggest pain...and I hope the federal law does something to normalize that. In the end, it is "the cost of doing business".

 

[MilwaukeeMike]

Yes, it is minimal to NewEgg and Amazon. That's one reason Amazon is ok with it. It's NOT minimal to the smaller online retailers who don't have IS departments full of developers who can throw this new stuff on their website. It'll also make competition a little tighter in the online retail space, which will slowly put some of the smaller retailers out of business.

As much as I'm normally against new taxes, the reason we don't already have taxes online is because the govt passed an act back in the 90s to keep sales tax off the internet as a way to promote e-commerce and help it grow. I think it's obvious that the internet doesn't need help growing anymore.

Either way... it probably won't get past the House, but if it does I'd bet Obama signs it.

 

[Cycloid Torus]

It's NOT minimal to the smaller online retailers who don't have IS departments full of developers who can throw this new stuff on their website. It'll also make competition a little tighter in the online retail space, which will slowly put some of the smaller retailers out of business.

I recall that the draft legislation continues the 'internet' exemption for retailers with sales under (unreliable memory guess) $10,000,000. This means the smaller retailer will be at an advantage to the Amazons.

 

[cmbjive]

It's NOT minimal to the smaller online retailers who don't have IS departments full of developers who can throw this new stuff on their website. It'll also make competition a little tighter in the online retail space, which will slowly put some of the smaller retailers out of business.

I recall that the draft legislation continues the 'internet' exemption for retailers with sales under (unreliable memory guess) $10,000,000. This means the smaller retailer will be at an advantage to the Amazons.

Amazon is currently collecting sales tax on behalf of the states that it delivers to. Amazon is already equipped to handle such transactions and will be looking to sell the software to help online retailers become compliant. Needless to say, small online retailers will not be at an advantage to Amazon (especially when a lot of those online retailers also sell through Amazon).

Simply because the internet has matured does not mean that the government should be looking at new avenues to get revenue. Standard brick and mortars, instead of arguing to get other retail outlets taxed, should be arguing to get their tax burdens reduced and that governments spend responsibly and not as though they have unlimited funds.

It is also disconcerting that so many Americans are so willing to allow themselves to be taxed into the ground. Well, it's not so disconcerting, considering that our current age has so demonized private business and elevated the cause of government.

 

[MilwaukeeMike]

Simply because the internet has matured does not mean that the government should be looking at new avenues to get revenue. Standard brick and mortars, instead of arguing to get other retail outlets taxed, should be arguing to get their tax burdens reduced and that governments spend responsibly and not as though they have unlimited funds.

It is also disconcerting that so many Americans are so willing to allow themselves to be taxed into the ground. Well, it's not so disconcerting, considering that our current age has so demonized private business and elevated the cause of government.

I agree, but if someone were to say to me, 'We should tax online sales because the reason for not taxing them no longer exists' I wouldn't be able to disagree. If you believe retailers pay too much tax in general, then that's a different reason. We'll have to see which reason the House chooses to base their votes on. Considering the concessions republicans have made recently toward higher taxes, I'm hoping they hold their ground on this one.

I don't think so many Americans would allow themselves to be taxed if they could help it. Many of the Americans who have elevated the role of govt don't pay much tax. They demonize private business (corporations in particular) because they believe that wealth is finite, and that in order to acquire wealth it must come from someone else. And who better to give them wealth than the govt, who is promising more and more without a second thought of how to pay for it. I just hope people figure out the real secret to creating wealth is something called 'hard work' before our government bankrupts the country.

 

[Cycloid Torus]

Simply because the internet has matured does not mean that the government should be looking at new avenues to get revenue. Standard brick and mortars, instead of arguing to get other retail outlets taxed, should be arguing to get their tax burdens reduced and that governments spend responsibly and not as though they have unlimited funds.

It is also disconcerting that so many Americans are so willing to allow themselves to be taxed into the ground. Well, it's not so disconcerting, considering that our current age has so demonized private business and elevated the cause of government.

Sales Tax is an existing tax which was held back on the internet to let it get off the ground. It really isn't "new".

I am glad they held back - it gave lots of neat stuff the chance to happen. Tax and regulatory burden strangles too many new ideas.

States and local governments are really short cash - and this will help.

The problem of government spending is another issue. It is a very real and very difficult problem. We vote some folks into office and they pander in order to be re-elected. They do not realize that they pander..."everybody does it"..."I serve my constituents"...little statesmanship. So we have excessive government payments and increasing debt. Tea Baggers tried to address this, but all that effort combined with polemics ended with the Sequester as a result.

I am not sure how to get the folks who spend our public money to do so wisely. PayGo made sense. Maybe we should ask GAO for 'pay-back analysis' on every expense. Tough problem. Remember to VOTE.

 

[cmbjive]

States and local governments are really short cash - and this will help.

The problem of government spending is another issue. It is a very real and very difficult problem. We vote some folks into office and they pander in order to be re-elected.

This won't help in the slightest. State and local governments will always spend money just like the federal government. These entities will never collect anywhere near the revenue they purport to be losing.

All governments at all levels have a spending issue. You don't need to be a "tea bagger" to realize this. It isn't a very real and difficult problem: Governments overpromised a bunch of people benefits but never thought about the money that would be needed to fund these promises. Now they're running around looking for money and trying to do it under rubrics of fairness and protecting "small business" and the "middle class".

Unfortunately, reality has a way of exposing the lie and trying to tax the internet isn't going to help these states recover their budgets.

 

[Tygerstrike]

Now as a physical retail manager, I have to say the internet sales have a sweet deal. Normally 25% off of what a physical store charges and no sales tax. Unfortunatly now online sales are really starting to hurt physical businesses. There should be no difference between ordering something online and ordering something out of a catalog. When ordering out of a catalog, you must pay local sales tax. Now they will be forcing online orders to have this same tax. Really guys.......youre going to complain that you will have to pay a few extra dollars on something you're already getting dirt cheap?? It really smacks of sour grapes. WHAAAA! WHAAAA! I want to stick it to the man!!! I wont pay sales tax!!!
Really look at the issue, and I dont mean look at it from your incredibly jaded and skewed viewpoint. Take a min and really look at the issue. Step back and observe and you will see this as what it is. A level playing field for retailers. Be it online or brick and mortar store.
I would try and explain the issue from the perspective of someone who works the retail field but I know better. Despite any information I can post with the pros and cons of this, It will simply degenerate to name calling. All that aside, I will simply say that since they are going to tax the online purchases maybe the local businesses will get a small taste of some of those online purchases since sales tax could be higher online then what you would pay in a physical store.
P.S.
I will also point out that online purchases have a direct line to the state of unemployment in the US. Now that some of that business may be heading to local stores, we might see more ppl hired and we might see our economy raise up a bit.

 

[howzz1854]

No one likes paying taxes, but lets face it, tax free online sales has been a great ride, and it's time to end. it was to incentivize e-commerce, but now that e-commerce has a solid ground, IT IS NOT going anywhere you guys. do you all really think this tax break/tax free ride were going to last forever. same as all rebates, incentives, tax cuts (yes), there comes a day you gotta flip the bill. I suppor the equal tax playing ground for all online and physical stores, even tho I hate paying taxes. our gov't needs money, I'd rather being taxes for online sales than forego fire fighters and teachers, or state disability programs. I know I can live without buying my next upgrade, but going without maternity/paternity leave, or lack of public services sucks even more.

 

[bexwhitt]

Like the dude above says online businesses have an advantage on bricks and mortar ones, this levels it somewhat.

How difficult would it be to add a government portal with the sales tax rates of each state that works out the tax then tallies how much each business took for each state?
As it stands it looks like Amazon who have the infrastructure are going to get a slice of most transactions.


Over here in Europe where we have the harder to avoid value added tax you pay regardless (20% VAT in the UK).

 

[cmbjive]

http://online.wsj.com/article/SB100...72316784496.html?mod=WSJ_Opinion_AboveLEFTTop

You guys shall have your wish.

 

[Tygerstrike]

@CMB
I really dont see what your issue with the tax itself is. Im sorry if im dense, but all I see is you reposting ppls comments then a link to a article about how the tax will effect indians. Yes there will be many problems that will need to be hammered out. However the article you posted a link to states it VERY VERY clearly. Its a equalizer. Yes there will be citys and counties with their hand out at the appropriate time. How exactly do you think the roads get cleaned up or schools funded or any number of other services that we as a ppl take for granted. Thats what taxs fund. If we did not have taxes we could not have a society that would ALLOW you to do simple things like online purchases. Taxs pay for roads and schools and parks....the list goes on. If you would, can you explain your reluctance to this tax. Or is this more of a butthurt "I dont like change" kinda thing.

 

[cmbjive]

@CMB
I really dont see what your issue with the tax itself is. Im sorry if im dense, but all I see is you reposting ppls comments then a link to a article about how the tax will effect indians. Yes there will be many problems that will need to be hammered out. However the article you posted a link to states it VERY VERY clearly. Its a equalizer. Yes there will be citys and counties with their hand out at the appropriate time. How exactly do you think the roads get cleaned up or schools funded or any number of other services that we as a ppl take for granted. Thats what taxs fund. If we did not have taxes we could not have a society that would ALLOW you to do simple things like online purchases. Taxs pay for roads and schools and parks....the list goes on. If you would, can you explain your reluctance to this tax. Or is this more of a butthurt "I dont like change" kinda thing.

I've already explained my reluctance to the tax. But there is also another problem I have with the law and you state it precisely: The law is an equalizer and an attempt at "fairness". This is not an attempt to bring "fairness" to competition; it is an attempt to punish one group of businesses because other businesses feel they are at a disadvantage.

If you think these new taxes will go to fund schools, roads and what not you are foolish. If states and localities only kept themselves to such things they would not be in dire straits. Your liberal claptrap about government is useless here: When I see cities building stadiums for sports teams and not putting those same funds into improving roads or when I see students failing while administrators and teachers get fat with lavish pensions and benefits I know that the problem isn't that the cities and states are lacking in revenue.

Instead of asking me why I am against the tax answer why a business that is located in one state should become knowledgeable in your state tax laws so that it can deprive that business of its revenue. Stop being envious of the success of others and stop looking to government to mete out "fairness".

And the point of me putting up the article is to show you that what you support and what the Congress writes are two different things.

 

[captaincranky]

Yeah well, here's the soundtrack for this topic:

Tom Petty & friends cover George Harrison's, "Taxman"....

 

[cliffordcooley]

Enforcement of this law will cost more than the law will help states collect taxes.

Thats all lawyers are good for anyway, why would this make things any different than they already are?

 

[cliffordcooley]

This is not an attempt to bring "fairness" to competition; it is an attempt to punish one group of businesses because other businesses feel they are at a disadvantage.

No its not, its about charging tax on items that have been sold for centuries. But now that items are sold on the Internet and there are no regulations in place to uphold taxes, many people think they can prevent its implementation. It's not the idea of taxes on the Internet that you are condemning, its the concept behind taxes in general. If you have an issue with tax, fight the tax not when or where it is implemented.

Edit:
Oops, here I am double posting. :/

 

[cmbjive]

" It's not the idea of taxes on the Internet that you are condemning, its the concept behind taxes in general. If you have an issue with tax, fight the tax not when or where it is implemented."

I'm doing both. I'm fine with paying taxes on goods I buy provided the business already has a presence in the state. I am not fine with the idea that a business that has no presence within the state now has to learn tax law or buy services from someone who already knows tax law of a particular state simply because some retailers feel they need to implement fairness to compete. If the other businesses didn't feel they were at a disadvantage they wouldn't bother asking the Congress to implement a law to force businesses to collect sales taxes for other states. When this is passed it is the brick and mortars that will be at the advantage because the brick and mortars already are compliant with collecting sales taxes for each state they operate in. It is no wonder that Wal-Mart, Best Buy and other larger retailers including Amazon are for such a bill.

What the states are trying to do is nationalize their budget woes; the Congress is being complicit in helping them do so.

 

[cliffordcooley]

I am not fine with the idea that a business that has no presence within the state now has to learn tax law or buy services from someone who already knows tax law of a particular state

I will agree with you, but I'm not certain that will be the case. Are you certain of this?

I could understand paying state taxes to the state you are purchasing from, but don't feel our taxes should be of any concern to a nationwide distributor unless they do have a local presence within the state. Why differentiate between purchasing on-line or traveling to the state in question for purchases. If we traveled to the state we would be required to pay their taxes, so why not pay on-line taxes to the state we are purchasing from?

 

[cmbjive]

"I will agree with you, but I'm not certain that will be the case. Are you certain of this?"

The bill authorizes each state and territory that has sales and use tax laws to audit the online retailer. Also, according to the WSJ I linked to earlier, it authorizes federally recognized tribal nations to audit the online retailer as well. I would say that that alone means that in order to be in compliance that business should become familiar with each state, territory or tribal nation's sales and use tax laws where it will be conducting business. Since an online retailer knows not where its customers will be coming from, would it not make sense to err on the side of caution and become knowledgeable or hire someone that is knowledgeable in each state to ensure compliance?

The bill also states that a centralized system to ensure compliance is to be completed, but that is an election on the part of the state AND the seller to join. Most states will not give up their taxing autonomy to a centralized authority. I should know: I work in property and casualty and each state guards it insurance regulatory authority jealously and does not want it centralized. In fact, if the centralized system were not an election for states and sellers to join, NO state would sign onto this bill.

The more I read the bill, the more I don't like it. You can read the bill <a href="http://www.gpo.gov/fdsys/pkg/BILLS-112s1452is/pdf/BILLS-112s1452is.pdf>here</a>. Don't worry: It isn't as long as Obamacare or the immigration bill in front of Congress now.

I considered your last question as well, but the difference here is that you are physically leaving one state to go to another. Since you are physically within the other state's borders you are subject to its laws and regulations, including sales tax. This internet bill takes the most tangential of actions and tries to stretch logic to tax its resident by forcing an out-of-state retailer to be the passthrough through which that person is taxed. It's a bad idea and I wouldn't be surprised that, if this were to pass the House, that the Congress and states would collude in other ways to harm citizens.