Semi-OT: Online Sales Tax Levied by States

[FlashUNC]

Supreme Court just over-turned its own 1992 precedent on online sales tax collection, opening the way for states to collect sales tax on online purchases.

I figure this will has something of an impact on folks here:

http://money.cnn.com/2018/06/21/technology/wayfair-vs-south-dakota/index.html

[jlwdm]

Most things I buy has sales tax added. Amazon’s own sales have sales tax already.

I think find internet purchases have great convenience and selection value. Tax is not an important issue.

Jeff

[MattTuck]

New Hampshire baby! No sales tax here. Live free or Die!

[veloduffer]

I imagine this is a logistical nightmare for small businesses with the various rates and exemptions. It will probably be a huge waste of resources/cost unless Congress passes a uniform internet sales tax.


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[jrsbike]

Its really amazing what a critical part of the economy that small businesses play yet they continuously get hammered. This will not help.

[Mark McM]

I imagine this is a logistical nightmare for small businesses with the various rates and exemptions. It will probably be a huge waste of resources/cost unless Congress passes a uniform internet sales tax.

I understand the arguments about competition and fairness. But it is not clear to me under what legal authority a state has to compel a company completely in a different state to collect the first state's sales tax. If a mail order company refused to collect sales tax for a different state, is that other state going to march across the border and arrest the company owners?

Surely, different states can make agreements with each other to collect sales tax for each other. And since this is about interstate commerce, it falls under federal government authority, so the US Congress likely has the power to legislate this. But absence of these, how can the government of one state force a company to do something?

[rnhood]

Well, I guess you do it just like custom fees. Merchandise has a declared value and if taxes were not paid, return to shipper or hold until fees are collected.

Amazon may collect taxes on what they produce/ship but, they are also a pipeline for lots of small businesses, and don't collect taxes on this merchandise.

I have little sympathy for a business that bases their profit model on tax avoidance. If they go down the tube, good riddance.

[muz]

Its really amazing what a critical part of the economy that small businesses play yet they continuously get hammered. This will not help.

The current SD law SCOTUS found constitutional has exemptions for small businesses (minimum number of employees).


Surely, different states can make agreements with each other to collect sales tax for each other.

Sales taxes are local and quite complicated. Depending on the zipcode (county), what is taxed and how much varies.

[saf-t]

Sales tax is generally at the bottom of my list when I'm considering where to buy something.

[HenryA]

This does not simply open the floodgates of taxation tomorrow morning. There will be other issues to resolve. Many states are part of a compact agreement that promises simplified compliance methods. http://www.mtc.gov/The-Commission/Multistate-Tax-Compact. Much of the compact’s process is around resolving tax oddities and normalizing them in a unified ruleset. I think we’ll see some play there where on-line retailers make agreements they can live with. That ruleset and those agreements will likely overcome the need to sue over every single dispute over how much tax to collect on a candy bar in Illinois versus a wheelbarrow in Colorado or wine in New York.

And mostly this opinion does take into account the very different economy we have now as compared to 50 years ago. It may help the small retailers who still exist, simply by leveling the playing field. In high sales tax states (some near 10%) that is a huge consideration. That part makes sense to me.

The dissent makes lots of sense too. But expecting Congress to address this is pretty far fetched. And they still can if they could choose to act.

Finally, this was decided 5-4 so its hardly unanimous and so not much of an indication of where the next case will go.

[pbarry]

Yeah, I'll be more likely to buy from a local retailer on a larger tech purchase like camera gear if sales tax is included either way.. Free shipping and no tax was fun while it lasted. That was a good run. :) Oh, but, what will happen to eBay purchases from out of state??

[buddybikes]

I bought some parts to build a weathervane today, went to shop 4 guys there, looked like a simple framebuilding shop. He does lot of his business online, all over the country. How will such a specialized small business, probably grossing 500K be able to handle it? Amazon is laughing all way to the bank again, as businesses like this need to use Amazon to handle transactions. Assume tax accountants are also laughing all the way to the bank.

[Frankwurst]

I don't buy online to avoid sales tax. I do it to sit at home and drink beer in my yard. :beer:

[jlwdm]

I bought some parts to build a weathervane today, went to shop 4 guys there, looked like a simple framebuilding shop. He does lot of his business online, all over the country. How will such a specialized small business, probably grossing 500K be able to handle it? Amazon is laughing all way to the bank again, as businesses like this need to use Amazon to handle transactions. Assume tax accountants are also laughing all the way to the bank.

Really? They should handle it the way other businesses do - collect the tax. Like Amazon does with its sales. And like they did with the sale to you assuming you live in a state with a sales tax.

Jeff

[ColonelJLloyd]

I bought some parts to build a weathervane today, went to shop 4 guys there, looked like a simple framebuilding shop. He does lot of his business online, all over the country. How will such a specialized small business, probably grossing 500K be able to handle it?

Handle the accounting and tax compliance? POS and accounting software can go a long way. Also, there are third party companies that do this in much the same way as payroll processing companies.

I would expect to see state laws that set floors based on gross sales that would result in many small businesses not being required to collect and remit sales taxes. Or other language that exempts most of the small potatoes businesses.

[soulspinner]

i don't buy online to avoid sales tax. I do it to sit at home and drink beer in my yard. :beer:

yes

[oldpotatoe]

Its really amazing what a critical part of the economy that small businesses play yet they continuously get hammered. This will not help.

Collecting sales tax isn't hammering any small business..you are just collecting it for somebody else...30 minutes at end of month..write 2 checks(state and local)..out in envelope(what I did for 13 years).

[tlittlefield]

New Hampshire baby! No sales tax here. Live free or Die!

I am from NH as well and from what I understand is that our local business who ship out of state will now have to collect sales tax from the state it ships to.

[Mark McM]

I have little sympathy for a business that bases their profit model on tax avoidance. If they go down the tube, good riddance.

It's not the businesses that are avoiding the tax - it is the customers. People who buy goods that have not had sales tax added still owe that tax to the state they live in. The only question that this decision answers is who has the obligation of collecting that tax for the state.

My question is this: Say there is a business in a state that has no sales tax, like my neighboring state New Hampshire. They don't collect sales tax for in-person sales, and they don't collect sales tax for mail-order sales to customers who also live in New Hampshire. But now they may be asked to collect sales tax for their customers that live in other states - but who has the authority to enforce that? For international sales, there are procedures and systems to enforce duties and tariffs, since every item coming into the US has to be processed through a US customs office. Are the states going to open their own customs offices, which will stop and process all packages entering the state to ensure the sales tax has been paid?

[Mark McM]

Collecting sales tax isn't hammering any small business..you are just collecting it for somebody else...30 minutes at end of month..write 2 checks(state and local)..out in envelope(what I did for 13 years).

But that may now be increased up to 50 fold (for all 50 states). So instead taking 30 minutes to write 2 checks, will they have to take 1500 minutes to write 100 checks?

[notsew]

Handle the accounting and tax compliance? POS and accounting software can go a long way. Also, there are third party companies that do this in much the same way as payroll processing companies.

I would expect to see state laws that set floors based on gross sales that would result in many small businesses not being required to collect and remit sales taxes. Or other language that exempts most of the small potatoes businesses.

Yep. The law being challenged had a floor of $100k of sales or 200 transactions in the state, not exactly small potatoes. Of course this will vary by states, and it will certainly cause challenges, but it's not insurmountable - much can be automated. The states do have some work to do to simplify the remittance process.

Aside from the implications to bike parts, this is a really good thing. It somewhat levels the playing field for local retailers and restores lost revenue to your local municipality, which it could almost certainly use.

[rnhood]

It's not the businesses that are avoiding the tax - it is the customers. People who buy goods that have not had sales tax added still owe that tax to the state they live in. The only question that this decision answers is who has the obligation of collecting that tax for the state.

My question is this: Say there is a business in a state that has no sales tax, like my neighboring state New Hampshire. They don't collect sales tax for in-person sales, and they don't collect sales tax for mail-order sales to customers who also live in New Hampshire. But now they may be asked to collect sales tax for their customers that live in other states - but who has the authority to enforce that? For international sales, there are procedures and systems to enforce duties and tariffs, since every item coming into the US has to be processed through a US customs office. Are the states going to open their own customs offices, which will stop and process all packages entering the state to ensure the sales tax has been paid?

I would think these companies would just have to register with the state that has taxes, and thus be required to collect the taxes. Pretty much the same way states that have taxes do today with in state businesses. I can't see that it will be that difficult. It should be a very automated process and the respective states will probably give the software to said companies once they register. I'm not an expert though, so there may be complications that have to be resolved. But I'm sure they can do it, and will since it probably represents big income, and will continue to get bigger with our fashionable on-line purchasing venue.

[nickl]

New Hampshire baby! No sales tax here. Live free or Die!

Not exclusive to NH. Delaware, Montana and Oregon do not collect sales tax.

[oldpotatoe]

But that may now be increased up to 50 fold (for all 50 states). So instead taking 30 minutes to write 2 checks, will they have to take 1500 minutes to write 100 checks?

That’s assuming all/most of it’s sales are online, then sent out of state. I’m commenting that for local small biz, like Veccho’s, it’s not getting ‘hammered’ by this new law.

[nickl]

But that may now be increased up to 50 fold (for all 50 states). So instead taking 30 minutes to write 2 checks, will they have to take 1500 minutes to write 100 checks?

This could be a nightmare for medium and small business since some states allow municipalities, counties and other jurisdictions to levy separate sales taxes. Computer programs to handle the variations are available but may be costly to maintain especially since these entities constantly change the percentage they charge on purchases.

[batman1425]

That’s assuming all/most of it’s sales are online, then sent out of state. I’m commenting that for local small biz, like Veccho’s, it’s not getting ‘hammered’ by this new law.

I agree, the locally sustainable folks won't see a change, but anyone with even a modest internet based component - (Excel Sports, Arts Cyclery to use LBS examples) will have a more work to do in the data collection and at the end of the month. Especially for states with non-unified sales tax rates. There's more and more of those kinds of places emerging. The internet is a powerful marketing tool and selling and distributing nation wide is easily accessible for even the smallest businesses.

I wonder how this will affect places like Etsy? Folks there sell in such small volume, I wonder if this kind of barrier will make those folks stick to the local craft fair. It might force Etsy to include functionality for sales tax collection or else see a big dropout in users.

Kentucky addressed this in the past by letting you chose to submit receipts for everything you bought out of state or pay an estimated sales tax based on your AGI. They realize that no one keeps those records in practice so they made a table that ball parks about how much the average person spends on non-taxed out of state goods per year relative to income and you pay that as part of your return. Folks that buy a lot online pay a little less than they should, folks that don't pay a little more but the state gets something than nothing. Something they are technically entitled to. I think this is a pretty reasonable way to go about it given the ever increasing state of internet based commerce.

[batman1425]

This could be a nightmare for medium and small business since some states allow municipalities, counties and other jurisdictions to levy separate sales taxes. Computer programs to handle the variations are available but may be costly to maintain especially since these entities constantly change the percentage they charge on purchases.

I've lived in 3 different states where that kind of thing was a nightmare.

[bikinchris]

I understand the arguments about competition and fairness. But it is not clear to me under what legal authority a state has to compel a company completely in a different state to collect the first state's sales tax. If a mail order company refused to collect sales tax for a different state, is that other state going to march across the border and arrest the company owners?

Surely, different states can make agreements with each other to collect sales tax for each other. And since this is about interstate commerce, it falls under federal government authority, so the US Congress likely has the power to legislate this. But absence of these, how can the government of one state force a company to do something?

Actually, No matter where I am with my mobile bike repairs, I am required to collect all city, parish (counties for you) and state taxes and file and send taxes of the site where I did the repair.
This just levels the field IMO.

[Ozz]

It's not the businesses that are avoiding the tax - it is the customers. People who buy goods that have not had sales tax added still owe that tax to the state they live in. ...

WA has a Sales Tax and Use Tax...essentially, if you buy something in a state without sales tax (Oregon) or online and no sales tax is collected, but then bring it home and use it in WA, you are supposed to pay taxes on it.

Of course, everyone I know is very diligent about this.....:rolleyes:

[nickl]

WA has a Sales Tax and Use Tax...essentially, if you buy something in a state without sales tax (Oregon) or online and no sales tax is collected, but then bring it home and use it in WA, you are supposed to pay taxes on it.

Of course, everyone I know is very diligent about this.....:rolleyes:

A friend avoided Washington State sales taxes for years by shopping in Oregon almost exclusively, since he lived in a border city. Unfortunately, he was audited resulting in him paying back taxes, fines and penalties. Credit card records provided WA with a paper trail. Painful.

[Mark McM]

Actually, No matter where I am with my mobile bike repairs, I am required to collect all city, parish (counties for you) and state taxes and file and send taxes of the site where I did the repair.
This just levels the field IMO.

Yes, but for retail, it is a bit of a tit-for-tat arrangement. A town, city, parish or state allows you to conduct business within its jurisdiction, and you agree to collect taxes for that jurisdiction.

But for internet sales between states, is the retailer conducting business in the state the customer lives in? Or are they only conducting business in the state when the sale is transacted? Ultimately, it is the customer who is responsible for paying the tax, and as previously mentioned, there are systems in place for the customer to report purchases and pay taxes. But if the transaction occurred outside of the jurisdiction where the customer's lives, how does that jurisdiction have the authority to enforce that the retailer collects the tax?

Also, out of curiosity, if a retailer in state A refuses to collect taxes for state B, what are state B's options in their attempt to get the retailer to comply?

[Mark McM]

That’s assuming all/most of it’s sales are online, then sent out of state. I’m commenting that for local small biz, like Veccho’s, it’s not getting ‘hammered’ by this new law.

Well, you actually make it out to be far simpler than it actually is. In addition to knowing the different tax rates in different states, cities, towns, counties, etc. in the entire US, you also have to know exactly what products are or are not taxed in the different localities. For example, one state may tax all shoes, and another state may tax only athletic shoes, and another state may not tax flat soled athletic shoes but may tax cleated athletic shoes, etc. For each state, town and city, there may be completely different lists of what items are or are not taxed. Yes, there may be tools to help the retailers sort through all this, but there's a lot ways to get this wrong.

[notsew]

Well, you actually make it out to be far simpler than it actually is. In addition to knowing the different tax rates in different states, cities, towns, counties, etc. in the entire US, you also have to know exactly what products are or are not taxed in the different localities. For example, one state may tax all shoes, and another state may tax only athletic shoes, and another state may not tax flat soled athletic shoes but may tax cleated athletic shoes, etc. For each state, town and city, there may be completely different lists of what items are or are not taxed. Yes, there may be tools to help the retailers sort through all this, but there's a lot ways to get this wrong.

There will have to be automated solutions to this. It's complicated, but much is complicated in this digital age. There will be good motvation for a market solution to these challenges. It will add to the cost of doing business, I'm sure, but it's not going to be debilitating.

[AngryScientist]

Grumble.

Was going to order something on PBK in the UK this morning and they are charging sales tax now.

Don't understand either. the tax rate they are applying is about 5%, and NJ sales tax is 7%. So where is this collected tax even going?

that's pretty much going to kill buying stuff from the UK for me if i have to pay sales tax and wait for UK delivery.

the golden days of internet cheap bike stuff is dead.

le sigh.

[Spaghetti Legs]

Grumble.

Was going to order something on PBK in the UK this morning and they are charging sales tax now.

Don't understand either. the tax rate they are applying is about 5%, and NJ sales tax is 7%. So where is this collected tax even going?


Interesting. I wonder if they are warehousing some stuff in the states. Maybe some confusion with upcoming Brexit?

I had known ebay was charging sales tax for a while and didn't think much of it for the small bits I'd been buying but got hit with an extra $20 on a 35 year old slightly beat up bike frame. I'm by no means anti-tax but felt a little off paying tax on an old frame from some dude's storage bin in California. This will definitely skew me towards online friends and CL for used bike purchases.