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What is the Right Solution for Internet Tax?

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  1. I have been following this issue for several years now. Finding a compromise that works for all is no easy task.
    Of course local tax districts want destination based tax. Just look at the latest battle Chicago just lost w StubHub. While fine for a local store w one location and one tax rate, why should I be required to know that a local community 3000 miles away want an extra 1% for a voter approaved Statue in Town Square to celebrate Earth Day? Worse is that town has 3 zip codes, and the city divides all 3.
    Is Cotton Candy a Food, Entertainment, or Sugar? Depending on where you live, you may be taxed for one, noe, or all 3 classes. Again, it’s fine for a local store that knows local law, but it is fair to require a seller 15 States away to know local law?
    The Marketplace Equity Act only requires a State’s Base Tax Rate. That’s a lot better than SSUTA’s plan to allow all tax districts into play. The downside is requiring online to make 45 Tax returns, which may cost small sellers more in administratives costs than the tax collected. A bad idea, if you ask me.
    My solution is to have the Merchant Accounts (Visa, MC, PayPal, etc.) collect Sales Tax @ POS and remit tax directly to the States (States pay related fees) ~ States get instant funds, no privacy issues, no exemptions required, and it works for B&Ms as well as online. MA fees are taken from Sales Tax collected now, and that’s unfair (and costly) to businesses now. Shifting that cost back to the States is not only fair, it reduces out of pocket expenses online and B&Ms emdure now.
    More in my blog http://www.thedumbdog.com/blog

  2. factchecker

    One of the more sensible arguments, you pay taxes and receive services to your local and state government, the b and m stores want out of state companies to pay sales taxes while not receiving services.

  3. sales tax of ant type will give the local and BIG government the start to taxing anything and everything without limits. It is all unconstitutional. Noticed it starts in California. Where all the librals dream upthe wierdsest of all things. A cess pool of corrupt local governments wanting to impose taxes on the whole country in order to pay for their local governments corrupt leaders who have been stealing money from their tax payers for years. You know I find it amazing Texas has no state income tax and has less financial problems than all the states that do combined. If Texas does not create a sales tasx as such, I bet all those companies will soon re-locate to Texas and other states that won’t tryn this. Taht will do wonders for the bowl of fruits and flakes in California.

    • We can only assume that you are purchasing tax free on the internet and breaking the law by not declaring this on your tax return to pay your taxes to your state which is constitutional. And by the way…. California is the land of the Fruits & Nuts. There are plenty of flakes throughout our county and you can keep em.

  4. Government stupidity at it’s finest.

    • I aggree the Goverment can do anything it wants as long as it benifits them sad

  5. Joe Canti

    This simply represents politicians gazing at the online market with dollar signs in their eyes…while the rest of the economy faltered, online sales grew by a sizeable amount and the politicians want a piece of the pie.

    A more apt solution would be to impose cuts on the defense industry, which so far has not absorbed any cuts or efficiency savings. It’s inconceivable that an industry which takes a third of the entire US budget should carry on as if nothing has happened – totally unrealistic.

    • I don’t believe online sales have grown that sizeable during the great recession when people stopped spending and no longer had the credit to send as they were before. The internet sales were already explosive before the banks faltered. Of course they are seeing dollar signs. Over many years they have lost more and more tax income while people spent more on the internet. That is why the states are so in debt and do not have enough money to run themselves.

      Not sure what you have read about the defence industry, but their have been cuts. Contracts have been put unsold (even those that have been won) and programs are feeling the pinch. Some companies that completely rely on the defence industry have layed off 1000′s of employees during and economy where people can’t find a job. All because of major budget cuts in the defense industry which you seem to think are non-existent. Now if you are saying defence industry and primarily talking about the money we have spent on these wars over recent years then that is another story all together.

  6. Small business is already facing a magnitude of regulations that inhibit the primary function of business, to serve the population and make money while doing it. Simplify PLEASE

  7. Internet taxes are a major headache. We’re based in the UK so will eventually come under the European VAT system when our turnover dictates – but I have no idea if we’d stay in business if we had to have separate tax rates for every US state – and work out who to pay and when – probably we’d give up and call it a day at that point.

    I personally think it would be a lot simpler if there was a global taxation system (which could be down to where you live, country or even State) whereby whatever you buy (online or in the High St.) is attributable to where your credit/debit card is issued. So, for example, a UK issued card may automatically add 20% (our VAT rate) to the value of any purchase, whilst a card issued in say Texas could only incur a 10% charge (or whatever rate Texas want to apply). This would move the onus of collection onto the source (ie the card issuers) and require them to deal directly with their governments. It would free up millions of small businesses to focus on their business rather than worry about getting taxes right, especially on the Internet where the customer base is truly global – and the same rules could be applied to High St. shops so if an American citizen came to the UK they would only pay their own country’s tax rate and not the UK one – which could be great for tourism!

    By governments dealing with card issuers directly it would also make it much less likely for taxes not to be properly calculated and collected – and if a business goes “out of business” then the government has not lost the tax already collected.

    I’m not a tax expert by any means, but it seems logical that taxes should be charged based on the individual customer and where they live as opposed to where they choose to shop – especially when it comes to the Internet.

    • I’m UK based too. Just wanted to say being VAT registered can work out in your favour. If your turnover dicates you’ll need to be VAT registered soon, it’s well worth having a look at “the flat rate scheme”. Can work out great for on-line businesses!

  8. What is the Government doing to support the local businesses which they want to tax? Nothing, nada, zilch. Taxes are supposed to be used to give back to the economy. Taxing internet businesses just because banks have failed is not the right way to go.

  9. I run a couple of websites selling music related products. As a “one man shop” my preferred solution is one that no one seems to be discussing. All states that I am aware of require their resident taxpayers to disclose out of state purchases on their tax filings. I would prefer to furnish the states with the names and addresses of their residents that had made purchases from me as well as the amount of the purchase. Their revenue departments are then responsible for comparing this information with the filed tax forms. Since failing to report these purchases is a criminal offense (tax fraud) and subject to some nasty penalties and fines I think a few well placed criminal cases would cause many, if not most, of the tax cheats to start obeying the laws that are already in existence. Additionally, the fines involved should, if structured properly, be another revenue enhancer for the states. Tax collectors are paid to collect taxes and merchants are paid by selling merchandise, not for being a tax collector. Let me do my job and you do your own—collect your own damn taxes!

    • CO and NC tried that. The court cases got dismissed over privacy issues under the First Amendment.
      My solution is to have the Merchant Accounts (Visa, MC, Authorize.net, PayPal) collect the Use Tax @ POS, then remit directly to the States (States pay related fees). ~ States get instant funds, no privacy issues, it’s paperless for online and no exemptions need. Best of all, it works for B&Ms as well as online retail.

      • This plan will most likely increase merchant account fees and only cause merchants to increase their prices or charge a fee to their customers for using a credit card (which is already illegal in some states). Raising prices in the economy we are in is a losing proposition for all and eating additional charges will only hurt many small online businesses.

  10. Tax should be paid at the point of purchase or not at all.

    It is then up to the country,state or region to tax itself out of competitiveness or not. You could in addition place an import duty on goods imported but that is a separate matter and a liability that the customer and not the trader would have to shoulder. So if the tax is at point of consumption it needs to be matter for the taxing authority and the consumer.

  11. I think Congress needs to step in an impose a law at the federal level on internet taxation under its authority to regulate interstate commerce. Business on the internet is inherently a national issue. If each state tries to make a grab for tax revenue from the internet ala California then internet marketers end up subject to 51 sets of tax rules. And I don’t think it is enough to for Congress just set a uniform law so that each state is allowed to collect taxes from the internet in a uniform manner. If Congress allows for an internet sales tax then it needs to set one national organization to whom internet marketers file their tax return and pay one tax (and then the national tax organization can split up the pie to the states according to some formula derived from data contained in the tax return filed by the internet marketer).

    • Like it, Medlaw. Good, workable details.

  12. Daniel

    Obviously, this shows that any taxation is going to REDUCE business, and REDUCE revenue for the state.
    The more states that do this, places like Amazon may drop their affiliate programs entirely. You know what it means? More money for Amazon from people buying directly from them instead of affiliates!
    Completely backwards from the intent of the laws.

    From what I’ve seen and heard, it seems like Congress folk have no idea what it takes to be an online retailer, they seem to think it can be just a guy in his basement putting nothing out, where a brick and mortar store needs buildings, employees, so on.
    Well, guess what! An online retailer that handles more than, say 10 orders a week, needs huge buildings to store their stock, employees to sort it, and to package it, and employees to deal with customers. On top of that, they need to pay to ship it to people! That’s an expense that brick and mortar stores do not have. On top of that, the prices are still lower!
    If anything, this sounds like CA is trying to divert revenue from online businesses and bring it back to local brick and mortar stores. Failure. Failure failure failure.. Talk about twisting laws for personal gain.

  13. To begin with, computing and filing sales tax reports would be, as is the case with regulations/taxes in general, more of a bookkeeping burden on small businesses than on large ones, who would have the staff available to deal with the paperwork. Then, if you tax using the rate of the state of origin, you would disadvantage businesses in high-rate states. Moreover, since current regulations do not tax goods shipped to another state, it would be adding a burden not borne by the brick-and-mortar seller. A national sales tax sounds like the most fair idea, but things could be muddied if we get into the cookie-cany bar thing. Actually, though, we favor none of the above.

  14. The only true solution is to some how come up with a flat internet rate, pay it to one place, which then sends the taxes to each state. Someone said that it would cause a major issue to have businesses pay out to 51 states. That’s not exactly true… Each county and even city can have a different sales tax percent which means you could end up sending out hundreds or more sales tax returns each month, quarter, or year depending on how you pay your sales taxes. This is impossible for even the biggest of companies… Let alone the small to medium size businesses. It has to be easy and at this point needs to be done. Everyone knows you need to pay your sakes tax on your tax return but we all know this doesn’t happen and has put the country and states in the mess we are in. It is a mixture of many peoples faukts, not just the banks. They may have allowed things to happen and put you in a home you could not afford, but who ultimately signed the loan docs and agreed to take the risk?

    • John

      What’s that new 51st state?

      • That what I thought when I read it on another post, but thought I was crazy and missed one. :-)

  15. Has there been any discussion on whether non-US based companies, doing business over the internet and delivering products to customers in the US, would be required to collect and remit sales taxes to the States? I could see a lot folks moving to Canada should this not be required.

  16. Sten Wilson

    Technology today can calculate shipping costs in seconds for almost any location in the world. Ebay, Overstock and many others including NetChoice all maintain that multi-jurisdictional interstate sales tax calculation is too difficult, however all maintain vast computer infrastructures capable of keeping track of millions of global transactions including commissions, cost of goods, and even incredibly complicated Value Added Taxes, Provincial Taxes and many other taxes and fees across many different country borders. I assure you sales tax calculation, collection and remittance for online sales tax legally due is easily accomplished.

    The Main Street Fairness Act will assist many businesses of all sizes to realize unknown profits making them more competitive. The online component of my business is in its infancy. After examining possible avenues of growth I was immediately confronted by the tremendous burden of tax collection and remittance in my own state as well neighboring states. I said to myself, “there has to be a better way!” So I turned to the Internet.

    There is a simple solution: TaxCloud (http://taxcloud.net).

    The statements by large Internet merchants and others continue to confuse me. My company now utilizes a PayPal checkout button seamlessly integrated with TaxCloud.net. Now my business is enabled to calculate, collect and remit sales tax for any jurisdiction in any state. It is simpler in most cases for my business to calculate and remit sales tax than to deal with shipping. If my business can manage to collect legally due sales tax simplifying my customer’s lives, why is it so hard for Ebay, Overstock and their affiliates as NetChoice claims?

    Technology available freely on the Internet (like TaxCloud) is more than capable of seamlessly handling sales tax calculation and remittance. Sorry everyone, the “too burdensome” argument carried merit in 1967 and in 1992 (when SCOTUS last ruled on this matter), but in the era of modern computing where Ebay maintains a dominant position, multi-jurisdictional sales tax calculation and remittance is easily accomplished. TaxCloud accurately calculated sales tax for any jurisdiction for any state in less than 13 MILLISECONDS!

    So what is the real reason Ebay and other companies choose to evade supporting our schools, hospitals, infrastructure, libraries, public parks and so much more by refusing to easily collect and remit sales tax legally due?

    It is clear that the real burden of sales tax falls upon the consumer, and there is no burden to business of any size. Any business can easily calculate, collect and remit sales tax legally due utilizing modern technology while simultaneously realizing greater efficiencies and profit. Consumers truly benefit by eliminating the burden of having to track and remit sales tax due on Internet purchases.

    The MSFA (Main Street Fairness Act) is proper legislation enabling states rights to collect sales tax legally due while maintaining states individual rights to tax independently. Remember the Boston Tea Party. Origin based sales tax fails to maintain state’s Constitutional autonomous taxing authority.

    Unrealized to most consumers are the true costs of permitting and embracing the illegal practice of tax evasion. This year Connecticut enacted the largest tax increase in it’s history. The increase included eliminating clothing exemptions, raising the sales tax rate %.35, %1 on all luxury goods over $1000 and tax on alcohol went up %20. CT is not alone. West Virginia now taxes groceries to make up for lost sales tax revenues resulting from increasing convenience of online shopping. Rhode Island as well as doubled, that’s right a %100 increase, on all park entry and parking fees. Property taxes in states such as NY have increasing at an alarming rate to maintain funding primarily for education.

    Lower income wage earners are actually the hardest hit. Without the means and available credit to participate in online sales their only option is to shop locally paying increased sales tax rates, such as in CT, paying the tax bill for those who selfishly continue to evade their tax obligations. More interesting is the fact that for every million dollars in sales a brick and mortar company provides 3.8 jobs, while large online merchants provide only .8 jobs for the same amount of sales. Tax policies are not created or imposed to provide segregation of businesses. The passage of the MSFA will level the playing field benefitting many businesses and workers in every state.

    Sales tax is a fair and impartial tax billed directly to the consumer and in no way harms businesses when applied fairly and equally. Mall vacancy rates are now over %20 nationally and increasing as more brick and mortar stores continue to close their doors. As more stores close jobs are lost, homes are lost and…. you get the picture. The real burden is now upon the millions of small businesses who provide many more jobs and opportunities to find ways to compete with the large Internet retailers.

    The real burden today is upon the consumer and the many small to medium sized businesses being consumed by misinformation. I discovered that by progressively employing modern technology my small start up business is now able to compete in any state without fear of nexus laws or affiliate relationships, and is more efficient and profitable. The Main Street Fairness Act will enable states rights to collect sales tax legally due providing much needed revenue, create and save many jobs, and most importantly permit states to eliminate other harmful taxing methods while simultaneously removing the many burdens confronting businesses today.

    I applaud Amazon for their Integrity publicly supporting the Main Street Fairness Act.

  17. robert

    Just one more excuse to order from overseas companies which do collect taxes. Let’s keep siphoning our money out of the country – that seems like a smart idea.

  18. robert

    do not collect taxes*

  19. No more!
    States like California are broke due to mismanagement and out of control bureaucracy. Plain and simple. Not because they don’t collect enough taxes. Californians pay some of the highest taxes in the country.

  20. There is no solution because there is no problem. The commerce clause says and always has said that states cannot regulate interstate trade. The supreme court on more than one occasion has said that taxes are a regulation, therefore states cannot reach out across their borders into another state and withdraw revenue in the form of taxes. It’s not complicated. This is another time when everyone is running around with their hair on fire screaming about the founding fathers and the constitution yet they find that that very document doesn’t allowed them to put their hair brained ideas into play.
    Sales taxes are regressive taxes anyway and they turn every business into an accounting house for the state. If they want to collect their taxes, let them collect it. Send everyone a bill but don’t put the burden of collection, reporting and payment on to the backs of every business in the country.

  21. Some states do not have sales tax . If tax is going to be due at the point of sale rather than the destination ( the only logical conclusion in my opinion) then I will move my business to Delaware or Oregon where I will gladly collect and pay the zero % sales tax rate.

  22. This is an easy one. Do I trust Facebook and Google more than the idiots who run our country? Yes. Is there anyone in Washington, DC who is not willing to tax anybody or anything so they feed their own agendas? No one I know of. Would I give a responsible job to someone who has consistently failed to a good job in the past? No. And if these morons cant competently manage the money they are given now, who in their right mind would give them more? Lets raise more money by dissolving both Houses of Congress and restructuring the election process; beginning with shorter terms of office and far less pay. It works for juries; why not Congress? The internet is fine the way it is; if it aint broke, dont fix it. The hilarious statement about fair competition made me laugh (something our country hasnt had since 1945). And taxes go a long way toward eliminating competition rather than creating it (study economics). If a tax was absolutely necessary (and I have grave doubts it is), the only compromise I would see of any value would be to only tax any business that was in the top ten per cent of the retail market on the internet. This way small businesses would not be affected and h burdened with an additional new tax. This, of course, would still impact consumers (especially the beleaguered middle class)and cause an increase in prices of practically everything sold on the internet across the board. These intellectual midgets in Washington don’t fully understand the ramifications of their tax ideas. They don’t follow the thread of the action all the way through where it hits the honest-working people of our country. Just like the same morons who want to plant an import tax on Chinese goods because they cant compete with the Chinese “because they dont play fair in captitalism”. That gave me my biggest laugh of the year. The only thing that would do would increase the prices across the board for lower and middle class Americans for the 90% of the clothes they buy in Walmart and other places; not to mention all the other products that the Chinese provide for us at reasonable prices. Talk is cheap. Saving the average American taxpayer money is far more important than harebrained tax schemes. When the motley crew in DC actually comes up with a scheme for that, then I would consider the possibility that they are actually working for the people, you know, the other 99% of us.

    Best Regards,
    Arthur H Tafero
    Professor of Strategic Management
    Jimei University, PRC

  23. Let’s be honest! Most taxes are a scam.
    Most taxes are a cancer on a free society which are promoted by a crooked, amoral Government which in-turn is infested by self-serving, sophomoric thinking swindlers. These people steal your money in the guise of taxes and use that money to buy themselves re-election, wealth, power and to feed their personal habits. They always sell you a lie about what good this new “mugging” is going to do but when/if you look at all the past “muggings” you see that none of what you were told ever really happened or that things actually got worse and so more “taxes” were needed to fix the “unintended consequences”.
    The cure for taxation is spending cessation (stop needless spending … waste like Solyndra, the Fisker Karma, Agenda 21, etc.). there is no “need” to tax the internet commerce just a “greed” to do so.
    The United States was basically founded on the act of a tax rebellion.
    Fight ALL taxes. Make the powers-that-be prove the need of MORE taxes by example.
    Let those who preach using other people’s money to accomplish certain deeds first prove the outcome by using their own money/assets and then present their case!
    NO Internet Tax!

    • Mike Jarvis

      Captain I could agree more a person from my own heart, please check my responses on page one..!!

  24. The Truth

    Its against the Constitution!!
    CASE CLOSED!!
    Except for you idiots that want to continue to dismantle our country for your own personal gain..

  25. Shouldn’t have the tax implementation for Internet. It’s totally against our rights.

  26. I like Thierer’s proposal, it’s simple and practical. Translation: It will not likely happen. Unfortunately, politics, simplicity, and pragmatism are not good partners.

    • I agree David. Thierer’s proposal is a thoughtful, logical solution and as such, will probably not be adopted. The company I work for sells audio and video equipment to churches nationwide and is in the process of creating a new brand to sell primarily online. We are located in Washington state. We also technically have a physical presence in California, which has over 15,000 tax jurisdictions. The amount of time and effort it takes to maintain accurate tax tables, accounting and programming is enough to preclude most smaller businesses from undertaking the task at all. As careful as we are, we still always end up paying penalties and spending weeks being audited. Most mom and pop businesses do not have the infrastructure, manpower or money to even go through that. Destination-based sales taxation is just another way for the largest corporations, like Amazon, to shut out smaller businesses and entrepreneurs.

  27. Ryan Kempf

    I hate to be the bear of bad news yet when you stop and really think about what really happening I think if we are not careful we could be headed for trouble and that I mean if the majority of shopping happens online how is the local economy supported simply put if the local economy doesn’t get any revenue from online sales how are the local in our co stores in our local communities going to stay open something to think about

  28. Of course these taxes won’t ‘solve’ any tax deficit issue but they will help.

    Just as taxing the rich more won’t solve the US’s deficit problems either. But instituting them will help.

    If we said NO to any new taxes the problems will not get solved but lots of little contributions can and will make a very big difference.

  29. Why should people be taxed on what they buy and what they earn? It’s ridiculous. Tax one or the other. That would make things a lot simpler.

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