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Sales tax on Internet purchases

Last response: in News & Leisure
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April 12, 2011 5:49:28 PM

I'd like to see some opinions on the following, which I believe to be facts:

  • People who buy things in the United States are generally supposed to pay state sales tax.
  • If something is bought in State A and taken back to the consumer's home in State B, then the tax is due to State B, at the rate of State B's sales tax.

    This implies that if I buy something from a Web site anywhere in the United States and use it in my home in New York, I should be paying New York state (and my local) sales taxes. If it's true for cars, and it's true for shoes, why isn't it true for the DVD drive I bought from Newegg?

    Yes, collection and payment are a pain in the tuches. A brick-and-mortar store needs to account for the local taxes, collect them, and submit them to the local tax authority. Newegg faces the difficult problem of having to collect state taxes at 50 different rates, plus local taxes at who knows how many, keep them in separate baskets, and remit them to all those state and local entities.

    But the fact that collection is inconvenient does not change the fact that the payment is required by law, or the fact that there are already consistent laws in place on how much tax should be paid and to whom, which are in no way affected by where the item is warehoused or shipped from, or where the sale is transacted.

    Have I missed something, or is the basic premise of all this complaining about taxing sales on the Internet whining by people who don't want to pay the existing taxes according to the existing tax code? It's not a new tax. It's the equivalent of New York trying to collect from people who buy cartons of cigarettes in Nevada and bring them home to NY.

    Edit: This was prompted by my getting really pissed over this CNET piece: http://news.cnet.com/8301-31921_3-20052999-281.html?tag...

    The statement
    Quote:
    The proposal--expected to be made public soon after Tax Day--would rewrite the ground rules for Internet and mail order sales by eliminating the ability of Americans to shop at Web sites like Amazon.com and Overstock.com without paying state sales taxes
    grabbed my attention. Gee, it eliminates our ability to ignore the law. Let's get rid of parking tickets, too - they eliminate my ability to park wherever the heck I find it convenient. I'm afraid that I really don't see the difference between the two cases.

    Actually, under the few laws with which I am familiar, it is the purchaser's responsibility to pay the appropriate sales taxes after taking delivery in a locale other than the one in which the sale was made. New York's income tax form has a line to declare how much you owe. But good luck to the government on collecting that way.
    April 12, 2011 6:10:29 PM

    I agree with the article and totally agree on the taxes. Mom and Pop shops can't survive because nobody will buy from them, they have to pay tax.

    Why would I when I can order online, get free shipping and not pay tax?

    We should be spending our money where we live, and supporting our local economies, not someone elses in Silicon Valley. That will only happen if this new law goes into effect.
    April 12, 2011 6:12:08 PM

    If newegg or Amazon were required to start keeping track of state and local taxes in online transactions, it would eliminate the benefits of shopping online at those sites because they would necessarily have to raise prices on the items to compensate for the "pain in the ass" of having to keep track of said taxes. They would eventually go out of business becuase I would just shop at Best Buy locally and pay the same price, less shipping.
    Related resources
    April 12, 2011 6:13:28 PM

    Oldmangamer_73 said:
    If newegg or Amazon were required to start keeping track of state and local taxes in online transactions, it would eliminate the benefits of shopping online at that sites because they would necessarily have to raise prices on the items to compensate for the "pain in the ass" of having to keep track of said taxes. They would eventually go out of business becuase I would just shop at Best Buy locally and pay the same price, less shipping.


    It would be a simple automated software program on a computer that charges you tax based on your zip code. Really wouldn't be a big deal.
    April 12, 2011 6:14:00 PM

    geekapproved said:
    I agree with the article and totally agree on the taxes. Mom and Pop shops can't survive because nobody will buy from them, they have to pay tax.

    Why would I when I can order online, get free shipping and not pay tax?

    We should be spending our money where we live, and supporting our local economies, not someone elses in Silicon Valley. That will only happen if this new law goes into effect.

    I think that you missed my point, or that I did not make it clear enough. I think that current law already requires sales tax to be paid on what people buy online. If that tax were actually (somehow) collected, it would solve that particular problem of small local stores.

    My objection is to the fierce opposition to the collecting of taxes on online sales, as if it were a new tax.
    April 12, 2011 6:15:28 PM

    Quote:
    They would eventually go out of business becuase I would just shop at Best Buy locally and pay the same price, less shipping.


    That's the whole point of the law. So people shop locally and create more businesses. Mom and Pop shops, like there used to be. States get their sales tax. Everyone's happy.

    It does not mean that Newegg would go about of business. They would simply sell mostly to Californians.
    April 12, 2011 6:23:16 PM

    WyomingKnott said:
    I think that you missed my point, or that I did not make it clear enough. I think that current law already requires sales tax to be paid on what people buy online. If that tax were actually (somehow) collected, it would solve that particular problem of small local stores.

    My objection is to the fierce opposition to the collecting of taxes on online sales, as if it were a new tax.



    The language in the law doesn't allow for electronic sales. I think that's the controversy. The laws were written at a time when online retailers didn't exist. I'm no law expert though, just speculating here.

    Also, If Newegg has there volume significantly cut by only "selling to mostly californians" they very well could go out of business. Name a retailer that can afford a 50-70% (guess) drop in sales volume. I think they and other online retailers are probably lobbying hard NOT to enforce the tax collection because that is their ace in the hole and they know it.
    April 12, 2011 6:49:55 PM

    Oldmangamer_73 said:
    If newegg or Amazon were required to start keeping track of state and local taxes in online transactions, it would eliminate the benefits of shopping online at those sites because they would necessarily have to raise prices on the items to compensate for the "pain in the ass" of having to keep track of said taxes. They would eventually go out of business becuase I would just shop at Best Buy locally and pay the same price, less shipping.

    And would that be a good thing or a bad thing? Let's see: I pay more, the local mom and pop shop stays in business, my community collects sales taxes that they should have had but were not getting. Unless I'm totally self-centered, this would be a good thing.
    The one loss is that Newegg has a lot more items then the best local computer shop. Even the chains.
    April 12, 2011 7:20:28 PM

    Wait, let me understand. I live in VA. Say I buy something from Bob's Boots and Bits in Idaho from his online store. Shouldn't the tax go to Idaho since that's where the sale originated? Why would VA get the tax money?
    April 12, 2011 7:27:07 PM

    Oldmangamer_73 said:
    Wait, let me understand. I live in VA. Say I buy something from Bob's Boots and Bits in Idaho from his online store. Shouldn't the tax go to Idaho since that's where the sale originated? Why would VA get the tax money?

    'Cuz it's the law. A well-known example is a car. If I walk into a car dealership in Texas, buy a Cadillac, and drive it home to New York, it's the New York sales tax that should be paid on the transaction.

    The most famous example was clothing taxes. For a while, there was tax in NY on clothing and so such tax in NJ. New Yorkers would drive to NJ to shop for clothing. Technically, if they brought said clothing back to New York they would owe New York sales tax on it, but no-one lined up to pay it. The state of NY used to send people over to NJ to photograph NY license plates in NJ malls.

    "That is ridiculously overcomplicated," you may say. Well, true. That's a usage tax for you. I just came back from England, where there is a Value-Added Tax. Joe Seller pays based on the difference between what he bought it for and what he sold it for. Doesn't matter where the buyer lives, unless the buyer lives overseas. Even then, it's not Joe Seller's concern.

    My daughter and I bought clothes in England. The seller collected the VAT, as required by law. We kept the receipts and gave them to the British government, which reimbursed the VAT to us when we left the country with those goods (we actually had to show both pairs of shoes).

    Then we get to America, with its use tax. We had to declare the purchases to Customs and pay tax on any amount over an initial allowance. But as far as Joe Seller in London was concerned, he collected the VAT and gave it to the Crown. Much simpler.
    April 12, 2011 7:31:42 PM

    How about getting rid of the sales tax all together? i.e. Stamp Act, Townsend Act, etc. etc. etc. Make it go the way of the dodo, that would be much better IMO. :) 
    April 12, 2011 7:33:47 PM

    Oldmangamer_73 said:
    How about getting rid of the sales tax all together? i.e. Stamp Act, Townsend Act, etc. etc. etc. Make it go the way of the dodo, that would be much better IMO. :) 

    Where would govt get money to pay for roads, police, wars in foreign countries, wiretaps? Income tax is characterized by being cheated on far and wide.
    April 12, 2011 7:38:00 PM

    Ok, then keep the sales tax and get rid of income taxes. They are uncontitutional anyway. We are taxed enough. Perhaps they can raise the tax on any one of these?

    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
    April 12, 2011 8:02:27 PM

    More for it than against. But do disagree with some the rationale.

    (1) Adding to sales tax for ALL on line purchases will not help Mom-pop stores, At least not in electronic an jewelry related sales - Sales tax is ONLY 5.5% (in Va), Big deal when the cost of the item can be as low as 1/2 of local cost. And unless shipping is free which is a 50/50 proposition at best), offsets the difference. Not Mom & Pop, but look at bestbuy and military BX (No tax is charged @ BX) the core price is no way compareable. Only if need that day would I or BIG sale price would I buy from Best Buy, and although I can buy at the BX, I do not as they are overpriced and in many cases outdated. Many buy from bestbuy and BX simply because they do not realize how over priced they are, or too lazy to find out, can not spell internet or google - What kind of bird is a google. (From England – bird = lady)

    My wife buys a lot off of the shopping channels - QVC charges sales tax, HSN does not. She buys because the prices are so much lower!! She may buy jewelry locally, if it is MARKed down 50% and on top of that she has a 20/30% off coupon.

    (2) The reason, and where the big push is from, the state levels, which at the state wide level are big bucks in lost revenue. It means they have to cut or raise tax. Personally they need to CUT state and local bloat, but on the other hand fair is fair.

    Added: I'm in Va. If I go and buy a new, or used, car out of state and pay sales tax there. When I get back to Va, If that tax were lower, I then pay Va the difference.
    April 12, 2011 8:57:44 PM

    My issue is two fold. Double taxation should not exist. If you tax a man when he makes money, you should not then tax him when he spends that money. Pick one or the other.

    Secondly, new taxes, particularly ones that deter purchasing of goods, are damaging to the economy. Part of the reason the economy is hurting today is that the wealthy are not utilizing the stockpiles of money they have. The amount of money everyone has is irrelevant in the economic model, it's the speed at which that money changes hands. If all money were changing hands at an infinite speed, everyone would be infinitely wealthy. Consequently, anything that slows down the speed at which money changes hands is damaging to the economy as a whole.
    April 12, 2011 9:05:33 PM

    Oldmangamer_73 said:
    The language in the law doesn't allow for electronic sales. I think that's the controversy. The laws were written at a time when online retailers didn't exist. I'm no law expert though, just speculating here.

    Also, If Newegg has there volume significantly cut by only "selling to mostly californians" they very well could go out of business. Name a retailer that can afford a 50-70% (guess) drop in sales volume. I think they and other online retailers are probably lobbying hard NOT to enforce the tax collection because that is their ace in the hole and they know it.


    Yeah but what your not understanding is millions of people in CA are buying from TigerDirect in FL so they don't have to pay taxes. Seeing my point now?
    April 12, 2011 10:00:49 PM

    geekapproved said:
    Yeah but what your not understanding is millions of people in CA are buying from TigerDirect in FL so they don't have to pay taxes. Seeing my point now?


    So if they buy from Newegg they pay sales tax, but not from Tigerdirect? That's funny considering Florida only has a sales tax and no income tax.
    April 12, 2011 10:03:54 PM

    Genny said:
    My issue is two fold. Double taxation should not exist. If you tax a man when he makes money, you should not then tax him when he spends that money. Pick one or the other.

    Secondly, new taxes, particularly ones that deter purchasing of goods, are damaging to the economy. Part of the reason the economy is hurting today is that the wealthy are not utilizing the stockpiles of money they have. The amount of money everyone has is irrelevant in the economic model, it's the speed at which that money changes hands. If all money were changing hands at an infinite speed, everyone would be infinitely wealthy. Consequently, anything that slows down the speed at which money changes hands is damaging to the economy as a whole.



    The "wealthy" do not have a vault or stockpile of cash just laying around. The wealthy don't pay income taxes for his reason. They pay capital gains because all the "wealth" is tied up in investments and other assets and they pay taxes on those dividends.

    Another reason the progressive income tax is patently unfair. But try telling the unwashed masses this truth. They won't accept it.
    April 12, 2011 10:17:47 PM

    Oldmangamer_73 said:
    The "wealthy" do not have a vault or stockpile of cash just laying around. The wealthy don't pay income taxes for his reason. They pay capital gains because all the "wealth" is tied up in investments and other assets and they pay taxes on those dividends.

    Another reason the progressive income tax is patently unfair. But try telling the unwashed masses this truth. They won't accept it.


    Generally speaking, you're correct. However, as of the last few years the wealthy have been hesitant to invest their money due to volatility and are 'sitting' on it so to speak. I agree with you on the progressive income tax.
    April 13, 2011 3:26:09 AM

    So let me get this straight. You guys want to pay more taxes like were not taxed enough? Im in Washington State I already pay 9.8% sales tax and they wanted to tax us on plastic bags.

    I couldnt care less about ma and pa shops period. Its not our fault that they picked a business model that has not and will never change with the times. Thats the problem here. You want me to feel sorry for a brick and mortar that jacks up the prices and charges sales tax and cannot hold a candle to the inventory of a Newegg or Tiger Direct. Id rather go to frys any day but what stops me is the astronamical prices they charge and want sales tax on top of that. I avoid Amazon.com because they are based in my state of Washington.

    You want us to pay more taxes to the same people that let the bottom fall out of the economy. Their greedy ways "pinchin" off the top is what put us in this recession and your fully ok with supporting the cleanup of it. Sorry but I work too hard for my family to have what they have and NO im not just gonna give it up to fix a problem that people at the top created.

    All Newegg and Tiger direct will do is pick up and move out the country to hide from taxes anyways. Then all those people will be outta jobs and on unemployment further putting this country into the hole. All for what? The survival of ma and pop stores?

    This was just a general rant and was directed at no specific person but I touched on things I read.

    April 13, 2011 3:49:59 AM

    Who is stopping the mom and pops stores from selling online? Nobody is, so they can do the same as the other online resellers. I'm sure those who support the mom and pop stores had never purchased from an online reseller because that would make them a hypocrite.
    April 13, 2011 3:50:46 AM

    Genny said:
    My issue is two fold. Double taxation should not exist. If you tax a man when he makes money, you should not then tax him when he spends that money. Pick one or the other.

    Why would I want to be taxed double on one or the other because you think you're taxed twice. You're taxed once on when you earn it and never again unless you decide to spend it. If you find a better deal or live in a state without tax, then you're not taxed again.

    Genny said:
    Secondly, new taxes, particularly ones that deter purchasing of goods, are damaging to the economy. Part of the reason the economy is hurting today is that the wealthy are not utilizing the stockpiles of money they have. The amount of money everyone has is irrelevant in the economic model, it's the speed at which that money changes hands. If all money were changing hands at an infinite speed, everyone would be infinitely wealthy. Consequently, anything that slows down the speed at which money changes hands is damaging to the economy as a whole.

    The richest people don't purchase near enough to out weigh the middle class purchases. What they do provide is opportunities by taking a chance with their money by opening businesses and providing jobs. They should rightly be able to benefit from their risks taken. Our economy is messed up by the over spending of people in general. When house values went up people took out HELOC's to cover their spending habits and when the real estate market crashed, either foreclosures occurred, or the spending stopped because the lines of credit had been maxed.

    We don't have a debt problem in America, we have a spending problem.
    April 13, 2011 5:45:09 AM

    brentkhack said:
    Who is stopping the mom and pops stores from selling online? Nobody is, so they can do the same as the other online resellers. I'm sure those who support the mom and pop stores had never purchased from an online reseller because that would make them a hypocrite.


    Exactly. The ma and pa generation is stuck in the past and has never caught up with reality. I talk about buying stuff online and how much money I save to the elders in my family and they look at me sideways. People stuck in the past get left behind. Brick and Mortars are a thing of the past and this is just the governments piss poor way to cash in.

    They only reason that some drugs arent legal is because the government hasnt found a bulletproof way to tax that crap also.

    Adapt, migrate, or die.
    April 13, 2011 7:39:49 AM

    jakesty said:

    The richest people don't purchase near enough to out weigh the middle class purchases. What they do provide is opportunities by taking a chance with their money by opening businesses and providing jobs. They should rightly be able to benefit from their risks taken. Our economy is messed up by the over spending of people in general. When house values went up people took out HELOC's to cover their spending habits and when the real estate market crashed, either foreclosures occurred, or the spending stopped because the lines of credit had been maxed.

    We don't have a debt problem in America, we have a spending problem.


    The wealthy rarely start businesses. They invest in companies that then use the money to purchase equipment, payroll, etc. (which they aren't doing right now) You also have to remember that the majority of the money in the US is held by the top 10%. Eventually the money should end up in the hands of the less wealthy. Take welfare, for example; the economic reason for welfare isn't to be nice to the poor, it's to increase the speed at which money changes hands and thus saves jobs and keeps businesses going. Money changing hands is ultimately all that matters, but that doesn't necessarily mean spending all of your money.
    April 13, 2011 5:17:52 PM

    The law that is actually is there to help pay for the toll on local resources and infrastructure used by the business (Roads and such). That is why the law requires "nexus" and if you are not local you do not pay the tax because you are not using the resources. However, most states do require you to report your purchases you did not pay taxes on when you file your return. The fact that this is never enforced is not relevant.

    Personally I think they do need to find a way to tax online sales. Not because I enjoy paying taxes, none of us do, but because if they do not have revenue coming in it will effect the communities you live in and thus those communities and states will then start relying on the Federal government more. It is up to you to decide if that is good or bad individually, but as a whole I believe that would be bad. Regardless, I believe this is a vote for the people of the US to approve, not the bought and paid for representatives we have in congress.

    What I think they should do is assign everyone a tax ID like they do when you open a business. That TAX ID is registered to where you live and all required tax information is in the database. Then when you make a purchase, regardless of location, that ID is used and the appropriate tax is collected centrally. Then the administrator of that collection can allocate it to the proper state / locality on a weekly / monthly basis.

    Another thing I believe they need to do on a national level is to make it 100% out right illegal in every way shape and form to allocate any money collected for X program, X law, X bond, X whatever to anything other than that project. If a state passes a bill to allow riverboat gambling with taxes going toward that states education program, then 100% of that money goes towards that program and this can't be changed with amendments that are not approved by the same voters that approved it the first time.

    Making the taxes so they are accounted for and allocated properly is the only way we as a voting society can have the proper checks and balances to make sure it is not being wasted and that we are not being charged more than we should be.
    September 12, 2011 2:28:27 PM

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