White House Endorses Internet Sales Tax ["Not One Dime" of your taxes will go up?]

I would be shocked if the bill being considered would even apply to your business if you didn't make $20,000. Most of the bills I've seen discussed have a cutoff in the millions of dollars. Many have requirements for simplified state computations. At least one specifically required a state to have a single state sales tax to which this applied, so at most you'd need to compute 50 states worth of taxes.

I support the principle of taxing out-of-state sales, but believe the legislation should provide ways to make this simple. I think there should be remittance to the out-of-state collectors, for example -- maybe a sliding percentage of the collected tax, like 20% of the first thousand, 10% of the next 10,000, and 2% of any additional amounts. I'd love to see each state set up an online service to provide the information needed.

Unfortunately, it does mean that an online transaction has to pass through this additional step. I know that Amazon can do it, and Walmart does it, but I realize the program costs for such capabilities are high. That is why I'd almost rather see a simpler solution -- a tax form of sorts each company would send to each state at the end of the year, giving the gross sales made to each person in the state by address.

Let the state use this information to beat up on their own citizens if they like.

Then, a purchaser can decide if they would rather do business with an out-of-state online company that does NOT collect sales tax, but will tell the state about the purchase, or find a company that will collect the sales tax and keep the specifics under wraps.

That way, everybody gets a choice. States get a way to track down people who don't pay. And the burden on out-of-state companies is minimized.

BTW, I do understand that, in the end, congress is highly unlikely to do any bill correctly, and is much more likely to write a bill that precisely favors the big companies who give them large donations at the expense of little companies.

Which means, oddly for what I'm arguing here, that I actually will likely oppose anything that comes of this.

I believe collecting sales tax from all sales is the right thing to do. I do believe that the government will do it wrong in the end, and when the bill is written, I'll be surprised if I can support it.

Sales taxes on over the counter purchases are assessed on the basis of the place where the sale takes place, so your scenario doesn’t apply. The impact of the bill falls on out of state retailers who sell you merchandise and ship it to you.

In states that have use taxes, you are already required by law to pay the state sales tax on property you buy outside the state, then bring in. That’s existing law. What the proposed bill does is shift the already existing obligation to report (and pay tax on) out of state purchases from you to the retailer who sells it to you.

In both cases, the rate which you or the out of state retailer pay is the rate applicable in your state of residence. Using California as an example, you can make mail purchases from every other state that charges sales tax and you’ll have no obligation to pay their local sales tax. You will (as you already do) be required to pay sales tax at the California rate on those items you have shipped to you.

“As a conservative, I think it should be as easy as possible to have taxes collected. I don’t want to think that the only reason the government doesn’t tax us more is that it is too hard...”

So what happens when Internet companies located out of Canada or any other country decide not to follow our convoluted mess of state and local sales tax laws because they don’t have to? Then what? Of course, the solution will have to be a global Internet tax to make everything “fair.”

Also, let’s say I live in Hudson, Wisconsin and choose to drive 10 minutes across the Minnesota border to buy clothing without sales tax. Should they now start asking me where I live and force me to pay taxes in my local jurisdiction? That’s just as ‘fair and reasonable’ as this idea, are you for that as well?

so at most you'd need to compute 50 states worth of taxes.

Oh, is that all. Well la-de-fracking-da!

That is going to be so easy then.

I just every week check where every single one of my customers live and do their taxes for them.

It will be April 15th every week.

I believe collecting sales tax from all sales is the right thing to do.

I believe you should pay your own taxes and not make me do them just because you bought five bucks worth of my product.

I pay my taxes. I pay my taxes for my in-state customers.

BTW you forgot taxes in all US territories.

It would apply there as well.

What is the tax rate in American Samoa?

Sales taxes on over the counter purchases are assessed on the basis of the place where the sale takes place, so your scenario doesn’t apply.

Yeah, it does. You are making me collect taxes based on where the customer lives. The same should apply to any store. You do want this to be fair right?

What the proposed bill does is shift the already existing obligation to report (and pay tax on) out of state purchases from you to the retailer who sells it to you.

That is what I said honey child, you have removed the responsibility from the buyer to pay his taxes and dumped them on me to be the unpaid tax collector for 9600 different tax districts.

Oh joy! Oh bliss.

I will close down and there are thousands of little businesses who will close down with me. You aren't hitting Amazon, you are hitting the retired lady who makes soap, the guy who carves wooden toys, the teenager who sells candy bars on line to save for college.

There have been several posts from folks claiming that retailers in over the counter transactions would have to determine where their buyers live, and I misinterpreted your question as being based on that assumption.

Yes, if you’re a company that ships merchandise in excess of the minimum amount (I’ve seen figures of 1 to five million a year), into some other state, and if that state requests you to do so, you’ll need to charge sales tax at your point of sale. There are a number of requirements in the proposed bill aimed at seeing to it that the sole impact is on large enterprises and that the states make it easy for them to comply. For everyone else, the obligation to report will remain on the purchaser.

“Your hypothetical misses the point. When you drive across the river to buy something, you pay tax at their rate. When you bring your purchase back into your state, you owe tax at your rate. Most states allow you to write off the tax you paid across the river from the tax you owe in your own state. The obligation’s yours, not the seller’s.”

Well, if this law even exists, it’s definitely one that is not followed by 99.9% of the public. I’d like to know what law compels me to pay sales tax in my home jurisdiction regardless of where I make the purchase. Is this a federal law? If so, when was it written and what exactly does it say?

It may be true, but if it is, the right step would be to repeal this ridiculous law that is impossible to enforce and almost nobody even knows exists.

That isn’t really an issue in most cases. You end up paying the sales tax in the state you go to, and when their citizens come to your state, those people pay your sales tax, and it tends to wash out.

In certain places where there is no sales tax, the states have agreements to collect information. For example, people in Virginia would drive down to North Carolina and buy furniture, but then they would get reported to the state, and if they didn’t do their use tax, they would be caught and punished.

Can’t say there’s a solution to the out-of-country purchases, although most things truly out-of-country will suffer from the higher costs of shipment, and the exchange rate issue. Ever tried to buy anything from Amazon.uk?

Once you are bringing things in from out of country, you will also fall into real tariff and other laws.

And in the end, the people who do this will still owe the taxes, just as they do today. They will simply have to work harder to keep their illicit tax cheating off the government radar.

I’m still surprised that all the people who argue for enabling this type of tax cheating aren’t advocating falsifying charity papers to get out of paying sales tax within the state.

All you need is a non-profit letter, and in most states the stores will not collect sales tax from you. Sure, you are breaking the law, but you were breaking the law when you didn’t report your out-of-state purchases either.

I guess that falsifying a non-profit letter is somehow less onerous to these cheaters than falsely signing their state income tax forms.

And this is the real point — if so many people weren’t actually bragging about breaking the law, if we instead were all OBEYING the law, we wouldn’t have ANY NEED for any new law to help enforce the existing laws.

Our government passing more laws is in part a symptom of the real problem, a citizenry that has lost it’s interest in obeying any laws they don’t like.

There are hundreds of online stores that have no trouble at all running a calculation when I make a purchase, and adding sales tax to my bill.

Of course, every store in my state does it for every purchase I make in the state. So every company that exists in any of the 45 states which have sales tax already have to have all the hooks in place to calculate sales tax based on an address. Those programs must take the address and look up how much tax is due.

Are you really saying that making that same program capable of storing 50 sales tax rates, and storing the amount of tax collected based on state, is impossibly onerous?

I don’t know the tax rate in American Samoa. Nobody has ever posted from there before discussing the sales tax situation. I’m not even sure they have a sales tax.

A good bill to do this would only require remittance of the tax on a yearly basis, so while you would have to have some way to charge the correct sales tax on a per-purchase basis, you’d only have to “do the taxes” to 50 states once a year. And a good bill would reimburse you for this, and also exempt you if the total sales from a previous year were under a rational threshold, say 1 million in gross sales to a particular state (which would translate to 50 thousand or so in taxes).

You do bring up an interesting point. It is a lot easier to run a business that sells 5-dollar items to random people around the country on a one-off basis if you don’t have to worry about collecting sales tax or paying business licensing costs or determining if the people buying your product are allowed to have it (probably not an issue for your product, but some products do have restrictions), etc.

Government regulation drives up cost and limits choices.

On the other hand, if you are going to have a government intrusion, it is worse if some companies are not burdened by it while others are. It skews the market.

If you told me your state, I could send you links to the exact forms you need to fill out, and the descriptions of the law in your state.

In general, the sales tax is based on two criteria — do you live within the state, and is the product you purchased intended for use within the state.

If the answer to these two questions is “yes”, then a state with sales tax will also require people to file their own sale tax for items purchased out-of-state.

And when you do, if your purchase was already taxes in that other state, every state I’ve looked into allows you to subtract that amount from what you owe. So if you bought something in a state with 6% tax, and your state has 5% tax, you don’t owe anything. If reversed, you’d have to pay 1%.

If you bought something out-of-state, and use it out-of-state, then you don’t owe taxes in most states. If you bought something as a gift for someone in another state, you may not owe taxes.

The authority for this tax is your own state government which represents you as a resident of that state. You elect the people who pass these laws. It has nothing to do with the federal government — your own state can require you to pay tax on anything they want, subject to your own state constitutional limits.

You are also right — in most states, the compliance rate for these laws is in the 1% to 2% range.

“In general, the sales tax is based on two criteria — do you live within the state, and is the product you purchased intended for use within the state.

If the answer to these two questions is “yes”, then a state with sales tax will also require people to file their own sale tax for items purchased out-of-state...”

Thanks for the education. So this really is an issue that varies by state. So then the follow-up question is do ALL states that have a sales tax require you to report out of state purchases? I’m thinking in particular of a state with no income tax like Nevada.

When I lived there, I never had to file a state income tax return. So if I ran up to Oregon with a wad of cash and bought a bunch of stuff sales tax free, then brought it back to Nevada, it seems there was no mechanism for me to report that — even if I wanted to. The same would hold true I assume for Texas, Tennessee, and any other state without a state income tax.

Yes. Nevada requires residents to fill out a Use Tax form for untaxed purchases made out-of-state.

Here is a link with some Nevada information: Nevada Use Tax Questions and Answers:

Use Tax, the counterpart of Sales Tax, applies to mail order, out-of-state, toll-free “800” numbers, purchases made on the internet and other purchases of tangible personal property on which Nevada Sales Tax has not been paid.
Nevada first imposed a Use Tax in 1955.
Any individual, business, corporation or other entity can be liable for Use Tax, when Sales Tax is not collected by the seller. Below are examples in which Nevada Sales Tax is not collected by the seller and therefore, Use Tax is due from the purchaser (examples followed).
A Use Tax liability, of a person not in business, may be reported on a one-time return available at any Department of Taxation office.

Now, Nevada actually has an online form for reporting your use tax, or you can do a paper form. You get that at here: Common Tax Forms (sales/use tax partway down page)

And here is the link to the actual current form: Consumer Use Tax Return

They have a FAQ page: About Use Tax and FAQs

There is no mention of how often you have to file -- the form supports monthly. However, the FAQ says: "Those who regularly incur Use Tax liability should register and obtain a consumer's Use Tax certificate if they don’t already have a sales permit. "

I'm guessing if you do that, you then have some schedule to report, probably quarterly but don't hold me to it.

As to which states do this, every state with a sales tax also has a use tax. The rules are different for each state, but it is mostly online, so you can find out everything you need.

Since you don't fill out an income tax, you at least don't have the problem of signing a form with fraudulent information. But you still are subject to penalty if you don't file in Nevada, and they threaten that they have ways of finding you, and the penalties, interest can add up.

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