Posted on 06/24/2018 12:56:31 PM PDT by Tolerance Sucks Rocks
One question before the Supreme Court this term was a big one: As technology evolves, how do our laws governing commerce evolve with it?
The answer, issued in the ruling held in a 5-4 decision on Thursday, is a bad one for taxpayers.
Many proponents of an online sales tax have argued that we must completely revisit what we know about interstate commerce, and create illusory tax regimes to contemplate a brave new order of online transactions.
In reality, none of this is true. For one, while it has been 26 years since the Supreme Court visited the issue in Quill Corp v. North Dakota, the principles outlined in that decision translate easily to today’s retail environment. In that decision, the Supreme Court declared that a business must have a physical presence inside a state in order to be exposed to that state’s tax authority. This "physical presence" doctrine requires no further clarification when applied to today’s online era.
It did, however, prevent states from taxing outside their own geographic boundaries. And for good reason — politicians should not be granted the power to tax citizens who cannot hold them accountable for that leaching.
South Dakota, chafing at these restraints, attempted to flout the Constitution’s obvious deference to Congress on matters of interstate commerce and crafted a law in 2016 that required all businesses with effectively any business nexus with South Dakota to pay taxes to the state. As the National Taxpayers Union stated in its amicus brief to the court: “This obligation apparently attaches regardless of the location or domicile, domestic or foreign, of the seller and even of the purchaser. An Illinois resident may purchase a product in New York for delivery to South Dakota that would trigger this monitoring requirement.”
(Excerpt) Read more at washingtonexaminer.com ...
Nice, you don't have to report what was sold (is there a tax on this particular product in this particular jurisdiction, sub-jurisdiction, or sub-sub-jurisdition??? Do they just guess?) How much it cost, who it was sold to, when, what was the shipping address, was it the same as the billing address, else how can they tell if there's a separate tax for that jurisdition?
God help you if your data entry clerk (that you had to hire to track all this crap) makes a data entry error.
Yes, I agree you would have to integrate which you would not have to do if you used only one channel (e.g. eBay). But other tax service providers could ease the integration by allowing bulk import (provided each channel let you bulk export the tax data). However, there's no incentive for eBay or Amazon to make bulk export easy. So realistically you would ignore all of Amazon and eBay's sales tax calculations and do your own with a reliable service for all channels. But I suppose Amazon could throw a wrench into that by adding sales tax themselves whether you ask them to or not.
I appreciate your insighta. I assumed it wasn't easy to compete with Amazon especially if Amazon is one of your channeks and they monkey with those sales. But again I think there are potential third party service solutions to some of this. But as STC seems to demonstrate, keeping up with the changes may be difficult.
Your customer does and you collect the money
My statement was simply that the states collect everything and then dole out the amounts you are talking about. You are not filing and submitting to 10,000 jurisdictions. That's a red herring and I was pointing that out
You do the lookups for each transaction for 10 cents per. Then each month or quarter all those lookups are integrated into a report and sent to each of 50 states with the total payment. That's likely to be a more expensive service, and I have not found prices for filing services.
That's a service that is easy to automate. You don't have to do much, just enter the amount and the zip. The types of products you sell might not be taxable in some jurisdictions, but except for food that's probably a red herring. Most small online companies sell products that are taxable everywhere.
In this example, it's not the question of the rate - it's the question of which county gets credit for the 2% charged above the 4.75% state rate. I have to report (monthly) which tax due by county. The state takes care of distributing to the counties (and/or cities). If I used STC, it would all go to Forsythe County - even if the shipment went to Davidson. If I were audited, I'd get the fine or penalty.
And yes, I have a love/hate relationship with Amazon (love to hate them :-> ). I get a lot of orders through them as a 3rd-party seller in their marketplace. But they also compete directly against me on certain listings, and where they're not authorized by the manufacturer of the goods as a dealer. The manufacturers won't take them on - either because they like the revenue too, or because they're afraid to take them on.
Got it thanks. A compliant service cannot just go by zip. I write a lot of web services and this one definitely sounds like an interesting challenge. I think for such a service to keep up with all the tax changes and jurisdiction minutiae it would need to be crowd sourced. In order for such a crowd sourcing to be accurate (not sabotaged or sloppy) it would have to validate and reward the people who add the tax entries and write the 50+ automated filing add-ons.
Ideally it would be a cooperative effort by vendors who get to use the service as their reward while vendors who do not contribute would pay some of the upkeep. Although web service upkeep is getting cheaper all the time, the challenge here is the messy and inconsistent tax information and e-filing systems in the 50 states.
But a further complication is that simply copying Avalara's information is likely to violate their copyrights, and that would be hard to detect. But the biggest challenge is the filing not the calculation for each transaction
Yep - you get it now. The data has to be VERY granular - down to the street address - so county can be determined, or city within county.
If there were such a “golden reference” database the calculations are trivial. I could have a system that does a service-call, submitting an address with zip, and receiving back a county and/or city, plus rate to apply. My system would then have to store the info within the transaction that would be necessary to aggregate and report the data on the required frequencies. As I subscribe to a system, it would be up to my vendor to make such changes (which they’d be happy to charge for!).
But, in addition to what you note in the difficulties of filing and remitting, you still have the issue of taxable/non-taxable sales. While most of my physical products would be taxable, some of my clients are tax-exempt entities - whether because they’re agencies of their states, or because they’re re-sellers and therefore exempt. Until last year, “services” were not taxable in NC - now they are. I imagine that they are in some other areas of the country, but not in others.
To keep all of this straight, Minimally, I would have to have an indicator in my product database - at the product level - as to whether it was taxable in each state. That’s (at least) 50 new data-elements per-product to enter and maintain.
And all of this still glosses over the ruling being bogus overall (IMHO), as implementation along the lines of their reasoning STILL is a violation of the Commerce Clause.
Fortunately it seems it will be a long while before anything comes of this. The pressure will be on Congress to deal with it through legislation, as it is their explicit responsibility to regulate commerce.
You don't get it...do you?...Thats the idea!!!!!!!!
Of course the danger is that dime will creep up to a dollar.<<<
I rest my case your Honor....
Puppets never speaks for themselves..Kinda like Guns...you need someone in the background to pull a string or a trigger....but do your own DD..,..
From various comments here, and some direct experience of my own, it appears the collection of taxes can be computerized at moderate cost for small businesses. I say moderate because web competition can be fierce and margins razor thin. Back when I was selling online, I often considered myself lucky to gross 20% on a $5 item, meaning my net might be 10%. So... take out even the $.10 mentioned above for calculation for the collection - yeah, even that is pretty significant.
Worse, however, is the time involved in filing. In my state you do it annually, quarterly, or monthly depending on overall sales, which in my case recently became a real pain because although my consulting income (by far my biggest source of income) is not subject to sales tax (unless I sell an item in conjunction with the consulting work, and that item is of course then taxed), that consulting income now adds to the total used to figure how often I must file, even if I do not sell a single item. Grrrrrr....!
But, anyway, back to the filing & sending in payments - it’s semi-automated on my state’s tax authority’s website, but, still, when all is said and done, I’ve probably spent couple hours on it, each time I file. It might be a LITTLE more efficient to do ‘em all sequentially, but that’s offset by the time needed to understand all the different States’forms, and any changes as they crop up occasionally. Once registered, I have to file each period even if there is NO tax liability for that period. This times 50? Quarterly, most likely? Oh, yiii-yiii-yiii!!!
This is not a matter of how “smart” I or another poster may be (a really “fugly”, telling, and not very “smart” comment by you, I would say.) Some stuff takes time no matter how smart or evolved or “whatever” one is. And you know what time is, right?
I also fail to see the big advantage small operations have in usually not having to mess with all this for out of state sales, up until now. Shipping has become EXPENSIVE, esp. if one is a small operator and doesn’t get eBay or Amazon or even, oh, say “$20 million a year shipped” type discounts. If one only sells relatively small / light items for the item cost, then maybe tax is more than shipping, but my experience is that shipping is usually more than sales tax on the item(s). As a (quite small) former online retailer, I had to add something the locals could not, to make sales, in most cases.
Another thing: I find a $100,000.00 sales “threshold” ludicrous. The net profit from that $ amount of online sales in most cases would not even be close to poverty level income.
Last, I suppose all the arguments of who in business (and consumers) is or is not benefitted, taken in total, might be a wash? For a moment, I’ll accept that.
What is left is “more government”. Just what you support, eh? Eh?
bump
Government MUST have a LOT of little taxes EVERYWHERE; else the mere compilation of all of them would be such a BIG number the serfs would light their torches and hone their pitchforks!
Used merchandise never has sales tax. There’s always an interesting tension at the flea market with people selling only used items and the ones with gray market items (e.g. “durasil” batteries which are not alkaline, cheap tools from China, etc) The latter are supposed to collect sales tax but many do not or underreport.
Since I was one of those proposing automated solutions to this, I should reply. I was educated in the thread about the complexities that I didn't think about, such as the taxabiltiy of items and the tax exemptions of some customers. Forf the consulting work you do, you have at least federal tax on that income and perhaps state depending if your state taxes income. But for some other states you would also have to collect sales tax on that same income from your customers in those states. I appreciate getting more informed about this.
The internet merchant can collect, probably very easily. It’s just a table of tax rates based on customer zip codes. What is not easy is reporting and remittance. That is much more difficult.
I agree this will do nothing to help B&M businesses. It is a response from a state that has little online presence and light population to recoup lost revenue by its residents who are using out of state online sellers in lieu of in-state B&M - which I would guess is largely due to convenience. Imagine the distance many ND residents are driving in a given year for items most other state residents consider routine.
I don’t think it was a good decision but my original point was that there could be/should be competitively priced software options to collect the tax at the point of sale - absolving the merchant of any additional responsibility. Credit Card merchants should handle it and rake the tax off the top. Let the merchants focus on their business and absolve them of all responsibility to collect the tax and report/file the returns.
The $100,000 threshold is supposed to make it easier, but it will still require time for the merchant to run reports to see which states cross the threshold and require filing. Like each state has different rates, so too will each state have different thresholds. And this, assuming that it will only be state by state and not city by city and county by county which would be very cumbersome as each state that charges sales tax allows the counties and cities to add on additional points.
Why didn’t ND legislature think of going after the central source (banks & cc merchants) instead of after every mom and pop in the country? IMO if Congress is not going to take corrective action then the responsibility should fall to the credit card merchant rather than the online seller. The CC merchant captures the ship to zip code and the amount of sale. Let them keep and remit the tax on behalf of the merchant and let the online merchant have zero responsibility for any of it. I don’t know why ND has the ability to reach across states to enforce its sales tax on individuals but doesn’t have the authority to simply assess credit card processing companies (and banks) operating in their state (and I am sure they think they do). If they went after CC companies they would need no minimum threshold.
A Phoenix moment for brick and mortars? An FU to Bezos at the same time?8
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