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The Ramifications of Congress's Internet Sales Tax
ATR ^ | 2012-08-01 | Kelly William Cobb

Posted on 08/02/2012 8:11:39 AM PDT by 92nina

[Yester]day the Senate Commerce Committee [held] a hearing to push for an Internet sales tax. This follows a similar effort by the House Judiciary Committee late last month. And while the Wall Street Journal ran a cover story recently claiming (somewhat misleadingly) that GOP governors are throwing in the low-tax towel and signing off on online sales taxes, Sen. Jim DeMint (R-S.C.) has an op-ed in the same pages today telling fiscal conservatives why they should do the opposite. So, what’s all this Internet tax talk about?

The Senate’s Marketplace Fairness Act and House’s Marketplace Equity Act – currently the leading contenders amongst federal online tax bills – would raise state-level taxes on Internet and out-of-state purchases while upending critical taxpayer protections built into the tax code to protect Americans from the tax laws of other states. From a taxpayer perspective, any bill that touches Internet sales taxes must preserve the physical presence standard and protect consumers from a higher tax burden. Unfortunately for taxpayers, the federal online sales tax bills miss the mark widely on both fronts.

Under the U.S. Supreme Court’s ruling in Quill v. North Dakota, it is a violation of the Commerce Clause for a state to require an online or remote retailer without a physical presence in that state to collect and remit the sales tax. The Senate’s Marketplace Fairness Act, sponsored by Sens. Dick Durbin (D-Ill.) and Mike Enzi (R-Wyo.), would permit overzealous state tax collectors to reach well outside their borders and force online and other out-of-state retailers to collect their state’s sales tax.

[Yester]day, ATR submitted written testimony against the Senate bill. Here’s the long and short of it for taxpayers:

State-level Tax Burden Will Increase: In support of his bill, Sen. Enzi stated recently that “the Marketplace Fairness Act is not about new taxes.” The legislation even included a purely rhetorical section called “No New Taxes.” Yet, proponents are also quick to point out that it could raise as much as $23 billion in tax revenue from consumers at the state level. And while consumers do owe “use tax” on products they purchase online and out-of-state, this measure shifts the tax collection burden to out-of-state retailers, which is certainly a new form of taxation. At the least, businesses that do not pass sales tax liability onto consumers at the register will see new out-of-state sales taxes come out of their bottom line.

Dissolving Physical Nexus Weakens a Fundamental Taxpayer Protection: The physical nexus standard is a staple of our tax code, preventing states from reaching across their borders to force out-of-state businesses and individuals from complying with their tax codes. The Marketplace Fairness Act will dissolve the physical nexus requirement for collecting sales taxes. To put it simply, measures to dissolve the physical presence standard have the potential to usher in the second coming of taxation without representation in America.

Outsources State Tax Rules to an Unelected Body: Under the Marketplace Fairness Act, twenty-four states operating under the Streamlined Sales and Use Tax Agreement (SSUTA) would be able to tax remote sales almost automatically. Remaining states would have to comply with a number of requirements or choose to join the Streamlined Sales Tax Project (SSTP).

Reliance on SSUTA allows a handful of tax administrators and state lawmakers on the Streamlined Sales Tax Governing Board – which has long advocated for tearing down the physical nexus standard for sales taxes – to control remote sales tax decisions for states and incents the states that are not part of SSUTA to join. Non-SSUTA states will watch helplessly as the “streamline states” hassle their resident businesses to collect more tax revenue.

Increases Tax Code Complexity: The bill will force online, catalogue, TV and other retailers to comply with over 9,600 sales tax jurisdictions across the country, while brick-and-mortar stores must comply with only the one where they are located.

Here’s the bottom: The effects on taxpayers of the Marketplace Fairness Act and similar legislation would be dramatic. From a taxpayer perspective, any bill that touches remote sales taxes must preserve the physical presence standard and protect consumers from a higher net tax burden. Unfortunately, the federal online sales tax bills miss the mark widely on both fronts.

For a more indepth look, check out ATR's written testimony.

Read more: http://atr.org/ramifications-congresss-internet-sales-tax-a7096#ixzz22Oxo5Au8


TOPICS: Business/Economy; Computers/Internet; Government; Society
KEYWORDS: business; communists; congress; destroy; internet; statesrights; tax; taxes
Federal Internet sales tax bills would burden taxpayers and usher in the second coming of taxation without representation in America.
1 posted on 08/02/2012 8:11:44 AM PDT by 92nina
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To: 92nina

This administration is working overtime to put small business out of business. An internet tax would drive many companies out of business completely. I believe this is what they want.


2 posted on 08/02/2012 8:16:51 AM PDT by RC2 (http://www.youtube.com/watch?v=nDMeDmV0ufU)
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To: 92nina

The proper Internet tax method would be to:

1) have each state publish as single internet tax rate expresed as a percentage of sales
2) Determine the tax by averaging the tax rates of the states in question (shipping location and billing location)
3) seller/shipper collects the tax
4) sends half of the tax amount to each state

The net effect will be for shippers to move operations and jobs to lower tax states. Likewise, individuals will want to move to lower tax states.


3 posted on 08/02/2012 8:18:43 AM PDT by taxcontrol
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To: 92nina

List of Taxes that exist today

TAXES:
Accounts Receivable Tax
Building Permit Tax
Capital Gains Tax
CDL license Tax
Cigarette Tax
Corporate Income Tax
Court Fines (indirect taxes)
Dog License Tax
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel permit tax
Gasoline Tax (42 cents per gallon)
Hunting License Tax
Inheritance Tax Interest expense (tax on the money)
Inventory tax IRS Interest Charges (tax on top of tax)
IRS Penalties (tax on top of tax)
Liquor Tax
Local Income Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Property Tax
Real Estate Tax
Septic Permit Tax
Service Charge Taxes
Social Security Tax
Road Usage Taxes (Truckers)
Sales Taxes
Recreational Vehicle Tax
Road Toll Booth Taxes
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone federal excise tax
Telephone federal universal service fee tax
Telephone federal, state and
local surcharge taxes
Telephone minimum usage surcharge tax
Telephone recurring and non-recurring charges tax
Telephone state and local tax
Telephone usage charge tax
Toll Bridge Taxes
Toll Tunnel Taxes
Traffic Fines (indirect taxation)
Trailer Registration Tax
Utility Taxes
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax

Workers Compensation Tax

COMMENTS:
“Not one of these taxes existed 100 years ago and our nation was the most prosperous in the world, had absolutely no national debt, had the largest middle class in the world and only one parent had to work to support the family.”
They’re out of control
What happened?


4 posted on 08/02/2012 8:21:04 AM PDT by sunny48
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To: 92nina

List of Taxes that exist today

TAXES:
Accounts Receivable Tax
Building Permit Tax
Capital Gains Tax
CDL license Tax
Cigarette Tax
Corporate Income Tax
Court Fines (indirect taxes)
Dog License Tax
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel permit tax
Gasoline Tax (42 cents per gallon)
Hunting License Tax
Inheritance Tax Interest expense (tax on the money)
Inventory tax IRS Interest Charges (tax on top of tax)
IRS Penalties (tax on top of tax)
Liquor Tax
Local Income Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Property Tax
Real Estate Tax
Septic Permit Tax
Service Charge Taxes
Social Security Tax
Road Usage Taxes (Truckers)
Sales Taxes
Recreational Vehicle Tax
Road Toll Booth Taxes
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone federal excise tax
Telephone federal universal service fee tax
Telephone federal, state and
local surcharge taxes
Telephone minimum usage surcharge tax
Telephone recurring and non-recurring charges tax
Telephone state and local tax
Telephone usage charge tax
Toll Bridge Taxes
Toll Tunnel Taxes
Traffic Fines (indirect taxation)
Trailer Registration Tax
Utility Taxes
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax

Workers Compensation Tax

COMMENTS:
“Not one of these taxes existed 100 years ago and our nation was the most prosperous in the world, had absolutely no national debt, had the largest middle class in the world and only one parent had to work to support the family.”
They’re out of control
What happened?


5 posted on 08/02/2012 8:21:04 AM PDT by sunny48
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To: 92nina
Federal Internet sales tax bills would burden taxpayers and usher in the second coming of taxation without representation in America.

The largest burden would fall on small business's that have internet sales. To subject small online retailers to the tax collecting efforts from 50 different states and who knows how many municipalities will be a disaster.

6 posted on 08/02/2012 8:21:15 AM PDT by ALPAPilot
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To: 92nina
This isn't the only thing threatening business in the country. Under the radar now, states are trying to concoct ways of making out of state businesses file income tax returns in states where the business has no presence. Under the concept of Economic Nexus, an out of state company will be dragged into a court to fight a tax assessment. This is a no-cost maneuver for states as their revenue division are already in place and assessing in-state companies.
7 posted on 08/02/2012 8:24:55 AM PDT by Sgt_Schultze (A half-truth is a complete lie)
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To: sunny48

And the telephone tax was the 1st tax and to this day remains the most ubiquitous in terms of number of taxes on services.


8 posted on 08/02/2012 8:26:46 AM PDT by Vendome (Don't take life so seriously, you won't live through it anyway)
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To: 92nina

Such a ‘tax’ could become a nightmare for businesses.

They could eventually have to establish appropriate taxation for individual states, for individual counties, for individual municipalities that have different tax rates.

Documenting the various taxes could cost the small businesses more than they might get from some sales.

==

This is another idea that looked good on paper but has not been thought through.

==

Oh yeah more tax money. So what if it ends up killing many small internet businesses. They probably didn’t need to exist anyway. [/s]


9 posted on 08/02/2012 8:26:56 AM PDT by TomGuy
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To: sunny48
Apropos of your list of taxes, an example of how the system is gamed.
10 posted on 08/02/2012 8:28:23 AM PDT by Sgt_Schultze (A half-truth is a complete lie)
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To: ALPAPilot

Even walking into a store here in Pennsylvania and trying to figure out how much sales tax you owe is next to impossible because the law is so complicated and riddled with exemptions.

Most clothing is not taxed. Sewing thread is taxed. Unless you tell the clerk you are going to use it to make clothing, in which case it is not taxed (I am not making that up!) Six or more donuts are not taxed as they are assumed to be grocery, but five or less are taxed as it is assumed you will eat them on-premesis and hence they are restaurant food.

The tax rate is 6%, unless you are in Allegheny County where it is 7%. How is an online retailer half a continent away supposed to keep track of all that? Local shop owners who were born and raised here can barely do it.


11 posted on 08/02/2012 8:28:53 AM PDT by Buckeye McFrog
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To: 92nina

This will compel people to either buy local, shop by phone, or do without.


12 posted on 08/02/2012 8:29:23 AM PDT by Westbrook (Children do not divide your love, they multiply it.)
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To: sunny48

100 years is what happened. How many would like to live in 1912?


13 posted on 08/02/2012 8:32:06 AM PDT by stuartcr ("When silence speaks, it speaks only to those that have already decided what they want to hear.")
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To: RC2

Except that is isn't just the current administration. Many on the GOP side of both Chambers are supporting the idea.


14 posted on 08/02/2012 8:32:36 AM PDT by TomGuy
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To: Westbrook

That would be horrible...why?


15 posted on 08/02/2012 8:34:43 AM PDT by stuartcr ("When silence speaks, it speaks only to those that have already decided what they want to hear.")
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To: Sgt_Schultze

Proving once again, the road to hell is paved with good intentions.


16 posted on 08/02/2012 8:34:46 AM PDT by Impala64ssa (You call me an islamophobe like it's a bad thing.)
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To: Westbrook

The government wants at least two out of those three things.

Or maybe all three.

Government hates the Internet.


17 posted on 08/02/2012 8:35:05 AM PDT by rlmorel ("The safest road to Hell is the gradual one." Screwtape (C.S. Lewis))
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To: 92nina

I’ll just come right out and say it. I EXPECT every vendor on the internet to subvert, avoid, not report, or to defray any no-value added sales tax to their products sold online.

I don’t care if it becomes law, I expect them to find a way around it. I’m not going to subsidize a government skimoff of their efforts and mine.

Business, do what you need to do. We both have a common enemy now. I don’t care about the ‘brick and mortar’ argument or any of that tripe. And, I don’t care if the government gets its due. They aren’t a friend of freedom and they certainly don’t earn their keep.


18 posted on 08/02/2012 8:37:50 AM PDT by Gaffer
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To: RC2

It’s not just dems and this administration.One of my states’ senators, Lamar Alexander (R), has been pushing this for years.Taxation is out of control and needs to be reduced, but neither side will do it


19 posted on 08/02/2012 8:38:14 AM PDT by Figment
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To: Buckeye McFrog

In NY the DMV tacked in a temporary(HA!) $50 surcharge on car registrations to subsidize mass transit. No doubt quite a few tree huggers and “train brains” are making out like bandits.


20 posted on 08/02/2012 8:39:39 AM PDT by Impala64ssa (You call me an islamophobe like it's a bad thing.)
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To: sunny48

They’ve nickle and dimed us to death


21 posted on 08/02/2012 8:40:44 AM PDT by Figment
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To: Figment

Fools like Alexander are 100% stupid on this issue. If they force taxes for state to state then consumers will go OUT of state.

Government needs corporations
Corporations do not need the governments.


22 posted on 08/02/2012 8:41:40 AM PDT by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: 92nina

Local governments use sales taxes to promote and benefit their local brick-and-mortar businesses. Making an out of state internet seller collect those taxes for them is basically requiring them to do the work to collect and forward tax money that will be used to benefit their competition, who will put them out of business if they can.


23 posted on 08/02/2012 8:42:49 AM PDT by tacticalogic ("Oh, bother!" said Pooh, as he chambered his last round.)
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To: 92nina

Heeere comes our national sales tax!
The democrats’ wet dream is coming true


24 posted on 08/02/2012 8:46:03 AM PDT by silverleaf (Every human spent about half an hour as a single cell)
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To: rlmorel

But the govt uses it a lot.


25 posted on 08/02/2012 8:47:03 AM PDT by stuartcr ("When silence speaks, it speaks only to those that have already decided what they want to hear.")
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To: Gaffer

You don’t want our troops to get paid?


26 posted on 08/02/2012 8:48:27 AM PDT by stuartcr ("When silence speaks, it speaks only to those that have already decided what they want to hear.")
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To: 92nina

Local governments use sales taxes to promote and benefit their local brick-and-mortar businesses. Making an out of state internet seller collect those taxes for them is basically requiring them to do the work to collect and forward tax money that will be used to benefit their competition, who will put them out of business if they can.


27 posted on 08/02/2012 8:49:51 AM PDT by tacticalogic ("Oh, bother!" said Pooh, as he chambered his last round.)
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To: stuartcr

Here in NH, we have no sales tax.

People have been adamant that if the state imposes a sales or income tax, they will have to repeal the property tax.

Most of us will buy local or shop by phone if the feds do this.

As for states that already have a sales tax, I surmise that most of those folks are already rankled about the state sales tax.

Having to fork-over additional sales tax to the feds is a deal-killer.


28 posted on 08/02/2012 8:51:17 AM PDT by Westbrook (Children do not divide your love, they multiply it.)
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To: taxcontrol

Actually the proper internet tax method is to realize that it’s mail order and all the old mail order rules apply exactly the same way as they did for the Sears catalog in the 19th century. Really this is a puzzle that’s been solved, and everybody conveniently forgot about it in the 90s.


29 posted on 08/02/2012 8:51:26 AM PDT by discostu (Welcome back my friends to the show that never ends.)
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To: Gaffer

Some small local businesses are already reverting to cash only.

Now, why do you think that is?
:)


30 posted on 08/02/2012 8:55:59 AM PDT by Westbrook (Children do not divide your love, they multiply it.)
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To: TomGuy
Many on the GOP side of both Chambers are supporting the idea.

We don't need a third party; we need a second party....

31 posted on 08/02/2012 8:57:42 AM PDT by Wise Hectare
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To: Westbrook

Or Craigslist will become even more popular and there will be even more bartering.

FedGuv Inc gets enough money.


32 posted on 08/02/2012 9:08:47 AM PDT by TurboZamboni (Looting the future to bribe the present)
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To: Westbrook

I would rather buy local.


33 posted on 08/02/2012 9:12:30 AM PDT by stuartcr ("When silence speaks, it speaks only to those that have already decided what they want to hear.")
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To: 92nina

If it happens, I will buy locally,even if they have to order the item...I am 70 years old,and have paid the feds a lot of money in taxes.....I am fed up with it is their money and let us use it. After $100,000 in education, it is my money..We did it...my wife and I....thank God for a wonderful CHRISTIAN WOMAN..


34 posted on 08/02/2012 9:17:40 AM PDT by rxtn41
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To: taxcontrol

I can understand large and even some specific medium sized companies trying this, but; no mom and pop shop or any average Ebay seller should be expected to collect taxes and send them to every state that they or he and/or she sold an item or more to. This is another administrative nightmare for every small business, not to mention the time wasted and the cost. So, are these sellers or even of used goods going to have to charge a tax,too? Once something like this starts where does it end?


35 posted on 08/02/2012 9:18:39 AM PDT by Lumper20
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To: TomGuy
Never let it be said that the "Stupid Party" moniker isn't earned by the GOP. If nothing else, this is proof that neither party is committed to reducing spending and the size of government. The GOP gives the idea lip service, but they always seem to have excuses for not doing it when they have the opportunity to actually make some progress (see the Bush years).
36 posted on 08/02/2012 9:23:25 AM PDT by Major Matt Mason ("Journalism is dead. All news is suspect." - Noamie)
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To: Major Matt Mason

Agreed. This WY. Rep must have his head in the sand, as he darn sure is not pro business. He sounds like an attorney or more like a person who has worked for the gov all his life. Read this carefully about the 9,600 different tax rates. Heck, we have 9.25 here, and 6 miles down the interstate it is less in the next county. Talk about a nighmare -UNREAL.The Internet business will dry up for all but the largest corporations.


37 posted on 08/02/2012 9:54:28 AM PDT by Lumper20
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To: stuartcr
You don't want our troops to get paid?

You forgot 'cuts to police and fire', 'it's for the children', 'babies going hungry' and 'wanting grandma to eat dog food while pushing her down the steps'.

38 posted on 08/02/2012 10:01:06 AM PDT by tnlibertarian (Government's solution to everything: Less freedom.)
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To: Major Matt Mason

To believe that any group is committed to reducing their money is naive. Even churches don’t do that.

The only spending that a political party wants to reduce, is the other party’s spending. Who would/could run on a platform of reducing their own spending? They would never get elected.


39 posted on 08/02/2012 10:06:24 AM PDT by stuartcr ("When silence speaks, it speaks only to those that have already decided what they want to hear.")
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To: tnlibertarian

Got that right, but it would be a waste of dog food.


40 posted on 08/02/2012 10:08:17 AM PDT by stuartcr ("When silence speaks, it speaks only to those that have already decided what they want to hear.")
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To: Gaffer

I do not suggest breaking laws, but; this is the worse anti small business and anti consumer damn bill in some time. Home Depot and other large stores already taxe us for Internet sales at the local rate as they have a physical location in the state and also in this county. This bill is totally a bunch of hogwash. I see the foreign Internet sales types winning until Obama puts a VAT tax on us. This WY Senator has a lifetime of Gov and corporation work, and; add the NG. He has never owned a business. He has lived off us most of his life as his daddy’s shoe business was not his style. Vote him out.


41 posted on 08/02/2012 10:21:53 AM PDT by Lumper20
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To: longtermmemmory

Fools like Alexander are 100% stupid on this issue. If they force taxes for state to state then consumers will go OUT of state.

In TN they already do.There is a tax on food in TN (instituted when Alexander was governor), folks regularly go to other states to grocery shop. TN borders more states than any other and for many it is a viable alternative


42 posted on 08/02/2012 5:00:28 PM PDT by Figment
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To: Figment
This would be an absolute nightmare for a small business. When you file sales taxes for a state, you are required to open up an account with the state. The state will expect a quarterly report filed on the sales in the state. Even if there was no sales to that state. If you file that report late, they could administer fines. Had to pay a quarterly fine once to a state that I had no sales in just because the return was filed late.

And then you add on the fact that the world economy is collapsing, wars are breaking out all over, terrorist attacks are occurring daily on the planet and you can see that worrying about filing a quarterly tax statement with each of the 57 states would be almost impossible. From what I could tell, the way the tax collectors work, we could be living in bunkers during a global nuclear war, and the tax collectors will still expect on time filing.

43 posted on 08/02/2012 7:59:52 PM PDT by justa-hairyape
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