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Thu Sept 14 2017 16:13:26

New Developments in Online Sales Tax Debate

By: Ina Steiner

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States looking to collect more revenue are frustrated by Congress' inaction on online sales tax legislation and are looking to make their case before the Supreme Court. They may soon get their wish. The issue is important to small online sellers who many say would find compliance with so many local and state governments burdensome.

"The South Dakota Supreme Court has ruled that the state cannot force out-of-state retailers to collect sales tax, setting up a possible appeal to the U.S. Supreme Court that will have national implications," according to the Argus Leader. 
 
The National Retail Federation (NRF) said that today's South Dakota Supreme Court ruling sets the stage for the US Supreme Court to revisit its 1992 decision, "Quill Corp v. North Dakota." But the trade organization prefers a legislative solution and said it was calling on Congress to act quickly to pass legislation allowing states to require online sellers to collect sales tax rather than leaving the issue in the hands of the courts.

Trade groups like the NRF and the Retail Industry Leaders Association (RILA) want online merchants to collect sales tax even if they don't have nexus (a physical presence) in the state of their customers. RILA called the Supreme Court's Quill decision "a loophole for online retailers to exploit at the expense of brick and mortar retailers" and said "overturning Quill would close the harmful loophole and treat all businesses equally, whether they are online or on Main Street."

Some like NetChoice point to the fact states have a way to collect taxes on purchases made by residents from out-of-state retailers - they require their own citizens to pay "use" tax for transactions in which out-of-state retailers don't collect the "sales" tax. 

(Just this month Vermont's Burlington Free Press reported that its state's Department of Taxes has sent letters to residents to inform them of their obligation to pay Vermont's 6 percent sales tax.)

NetChoice is a trade association of ecommerce businesses and writes on its website, "most states have done little to educate consumers about their use tax obligation or to provide them with an easy mechanism for compliance. This suggests there may not be enough revenue involved for the states to invest time and resources in its recovery."

NetChoice Executive Director Steve DelBianco said of today's developments:

"This ruling gives the state what it wanted all along - a case they could appeal to the US Supreme Court. If the high court takes this case, we will be ready to show that the perspective of a few large online retail defendants is only a small part of the story. In fact, many thousands of smaller businesses would bear disproportionate burdens and costs if they are forced to become tax collectors for 12,000 jurisdictions across 46 states."




Comments (21) | Permalink

Readers Comments

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

by: mcposty This user has validated their user name.

Thu Sep 14 19:43:59 2017

It's s8mple really..instead of online businesses collecting taxes for every state and jurisdiction..just have them collect taxes for their own state REGARDLESS OF who buys. If you are on Texas buying from cali..you don't have to collect tax.

But brick and mortars collect tax for the same Texas guy who visits cali.

Why is this so hard? They would have a better chance if they fought for this type of scenario instead of online collecting for every other state which brick and mortars FOR NOT DO..they collect only for their own state but collect regardless of who shows up to buy

I'll tell you why..they want online to be at a disadvantage.

They don't want equal they want advantage.

My way is the only right way. Whatever state you are in..collect tax for every transaction and submit it to your jurisdiction. End of story.

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

This user has validated their user name. by: RKTOYS

Thu Sep 14 21:17:28 2017

Agreed.  I have a vested interest in my state being able to fund its government.  While I realize it will make my prices less competitive relative to a state that chooses to gouge on income tax or property tax instead (red states aren't fooling anybody), the reality is that somebody worked up over $1 on a $20 purchase may be more trouble than their business is worth.

What's going to be a problem is having these venues, by way of commissions, eat a little deeper into our pockets.  Square, for instance, takes its fee on the entire transaction - the purchase _and_ the tax.  No doubt the greedy little Indians at Amazon and PreyPal will follow suit.  And that extra bite will make its way into prices, making online shopping, with its wait time and shipping costs, just a little less attractive compared the ChinaMart...

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

by: Snapped This user has validated their user name.

Fri Sep 15 03:20:29 2017

POS tax collection remitted to the state in which the business is transacted.  What a concept.

One would think eBay would be all over that.  'Free' shipping.  'Free' of taxes.  'Free' fee increase.  And...with freedom from SUT accounting, 'Free' tax reform.  

Only problem is, all the lawyers already billing their involvement would be 'free' of the argument then too.  So there's that...

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

by: angryllama This user has validated their user name.

Fri Sep 15 04:54:13 2017

I owned a REAL business in Louisiana for 20 years where we had A-List Refinery Chemical Pipeline PowerPlant and similar customers from one end of the state to the other.... including Offshore Oil Platforms.  This meant that we had to collect and remit sales tax not only to Louisiana, but also to the Parish (read county) of destination.  WORSE than that simple statement might sound MANY of those parishes had MULTIPLE different tax rates depending upon if the destination was INSIDE the limits of any given CITY.... or Flood Zone Taxing agency. As cumbersome as that sounds it was even WORSE as once any business Registered to collect and remit tax for ANY of the Dozens of Parishes they REQUIRED a formal filing of Tax Monies each month (or quarter in some cases) even if the entire report was... "Here is our TOTAL SALES for the period to ALL destinations and the amount we collected for YOU is ... $0.00".  

Now imagine multiplying that by 50 real states and something like 15 Territories like Guam USVI and Puerto Rico.....

Yes, I could definitely get behind the TAX rates and TAX collections being entirely predicated upon the LOCATION of the SELLER, but that is a pipe dream.  Why?  Because then the BRICK and MORTAR local businesses and LOCAL taxing authorities would be in an even bigger quagmire.  Imagine if AMAZON Target Best Buy and similar ALL found some Extremely LOW Sales Tax State/County/CITY combination location and ALL made that location their OFFICIAL shipping / sales locus.  CHAOS would ensue.    Need an example of how this sort of MIGRATION to a low-sales tax local could come to pass.
Look no further than..... SOUTH DAKOTA.   It happened YEARS ago when MAJOR BANKS who issue Credit Cards figured out that SOUTH DAKOTA of all places had the LAXEST  CHEAPEST Most  Customer-Adverse Loan and Interest Laws and they RACED to move their Credit departments to SOUTH DAKOTA.

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

This user has validated their user name. by: toolguy

Fri Sep 15 10:33:31 2017

The only way this would work is if they enact a federal sales tax that's the same everywhere. . .

Anything else becomes a burden on small sellers. . .

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

by: dander This user has validated their user name.

Fri Sep 15 18:04:27 2017

Brick and mortars crying foul and of course the states back them for the revenue. Could you imagine the software we will have to get to deal with this, and of course the threats of lawsuits. If the morons do this, then at least make it simple and only make us collect the state tax, and none of the other leaches I mean tax authorities.

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

by: Snapped This user has validated their user name.

Sat Sep 16 22:36:59 2017

''Need an example of how this sort of MIGRATION to a low-sales tax local could come to pass.''

It's easy to imagine how it COULD be possible for 'low or no state tax' states could benefit from attracting business because of that feature.  But is that not already the case?  And are ALL businesses thus inclined to relocate there?  Some are, to be sure.  That's natural.  That's the point, actually.  Want to attract business?  Lower taxes.  As true today as it was 3,000 years ago.

As for the potential for online fulfillment centers - which would be the sales 'location' for 'tax purposes' (it cant just be 'virtual') - to physically relocate', it seems unlikely they would uproot at this point just to possibly be competitive over a percentage point or two.   There are practical realities preventing such upheaval as well.  

Besides, it is not them who pays, but the buyer, so it's not really an 'expense' issue, rather one of 'marketing'.  And while true there are ppl who think it a good deal to save a dollar in tax by spending three in gas to drive over a state line, the ubiquitious nature of online acquisition is not going to change their habits in prioritizing WHAT they seek, instead of from where.  

NO tax is best of course, re: status quo.  Point is, if states insist on their cut of virtual pie, it is clearly way too cumbersome to expect a business to record, track, collect and remit to scores of potential juristictions nationwide.  Especially when the current POS tax collection process is already in place.  

And keep the fed's out of it.  They've enough issues 'taxing' them at the moment.

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

This user has validated their user name. by: The End

Sun Sep 17 10:55:57 2017

https://www.forbes.com/2008/05/13/amazonlaw-states-rights-oped-cx_scjw
_0514amazonlaw.html

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

This user has validated their user name. by: The End

Sun Sep 17 11:10:53 2017

They need to stop talking about it because the Us Constitution forbids taxation of items sold to places out of state. That's the way it is. It will not change. Ever.

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

by: Flying Childers This user has validated their user name.

Mon Sep 18 07:41:09 2017

I don't get it- most of the bigger websites charge sales tax already on a state by state basis, or haven't the greedy little Government trolls noticed?

No matter how much of our hard earned money they take, Government will never be happy till they get 100% of our income.

Americans pay more in taxes than we do for food, clothing and shelter combined.

The problem is not Ebay or Etsy- it is Big Government.  Talk to your congressman or woman and let them know how you feel about this issue.  I wonder how many of you even bother to vote in our elections.

If you don't participate in your government you lose the right to complain.

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

by: ewegolf This user has validated their user name.

Mon Sep 18 07:45:56 2017

Legislators in many states float pie-in-the-sky estimates of lost sales tax revenue from online sales.  They overlook the fact that online sales tax is collected by retailers who have a presence in their state.  They will continue to use these bloated estimates as they see a revenue stream with low costs as the compliance expense burden is placed on the retailer.

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

This user has validated their user name. by: VV

Mon Sep 18 08:10:25 2017

No.

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

by: Volvo351 This user has validated their user name.

Mon Sep 18 09:20:25 2017

The issue boils down to: WHERE is the 'sale' or the 'purchase' actually happening? At the seller's location, or at the buyer's? If it's happening at the seller's location, then he [and I use that pronoun in the non-gender specific context] collects one, consistent tax rate and pays it to that jurisdictions's revenue agency. If that's done, no one would sell out of NYC and other 'double-dip' [state AND local tax] jurisdictions.

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

by: Volvo351 This user has validated their user name.

Mon Sep 18 09:25:05 2017

@Snapped says: "...it's not them [sellers] who pays [sic] but the buyer...." Yeah, but when said buyer goes to check-out and sees state, county, and local sales taxes piled on, he just might not hit that 'confirm' button! Believe me, 'cuz it already happens with SHIPPING!

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

by: Whatever This user has validated their user name.

Mon Sep 18 10:21:17 2017

Let's see - they can't fix Obamacare - they can't fix the mess over at the IRS - in fact they can't fix much of anything over there in DC. Let's just say they do come up with some cockamaymee idea I wouldn't worry too much about it kids. I wouldn't pay a danged thing and just sit back and wait for them to come and find me. And their going to china to get the real offenders? Ridiculous idea

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

by: timeaftertime This user has validated their user name.

Mon Sep 18 10:38:45 2017

How anyone can think that it's cheaper to buy online and avoid paying your state's sales tax, is beyond me.

A customer buying online from a business in another state may not have to pay sales tax, but SHIPPING is usually far more !!! Not to mention that buying at a brick & mortar store means you have the item in hand, can inspect it on the spot and not buy if something isn't to your liking.  Then there is the chance of breakage or loss before it reaches you.

If anything, the ONLINE seller is the one who is at a disadvantage !!  

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

by: eBuster This user has validated their user name.

Mon Sep 18 10:53:42 2017

The proponents of these massive new requirements are the usual suspects: Big Boxes and the tax & spend burrocraps. If they want a National Sales Tax then let the debate begin -- but be sure to include equal reductions in other taxes, for all. As stated elsewhere, the common sense solution is Point Of Origin taxing, not at the buyer's far-flung address(es). Anything else is anti-competitive.

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

This user has validated their user name. by: RKTOYS

Mon Sep 18 11:03:26 2017

So misguided.  The problem isn't big government.  It's government controlled by the rich that don't want to pay for that government.  How much is wasted on wars that never end, VERO-style copyright bullying, bank bailout after bank bailout, corporate-demanded surveillance, suppression of competition, various insurance schemes, H1Bs shipped in to do work wrong over and over and over, and so on?  Every single expenditure of the government ends up in the pocket of special friends.  You think section 8 and food stamps are a giveaway to lazy poor people?  Think again.  Landlords and supermarkets.  So it goes with everything if you're smart enough to connect the dots.

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

This user has validated their user name. by: RKTOYS

Mon Sep 18 11:14:23 2017

Also anybody that suggests a national sales tax is stupid.  Any national sales tax will be levied ON TOP OF state sales tax.  That will just destroy alot of commerce altogether.  Your local stores, that already suck, thus spurring online storefronts, aren't going to improve or be helped by higher prices.  If sales tax has to fill in some holes, the least disruptive option is to have sellers collect their state's sale tax for out of state buyers.

Of course the real problem is that wages aren't keeping up with prices and spending is petering out.  That won't ever be addressed because the parasitical shareholder class has control of so many peoples' minds.

New Developments in Online Sales Tax Debate   New Developments in Online Sales Tax Debate

by: epuise This user has validated their user name.

Mon Sep 18 11:16:47 2017

I have had a Tax ID Number since 1977.
I COLLECT Sales Tax for the COUNTY I am selling IN.
I FORWARD that tax 4x a year FOR the buyer.
Buyer does not need to self-declare, I assist in their "compliance".
IF I pack my truck & DRIVE to a fair, set up, sell...
I COLLECT the RATE for THAT County...
On my tax form, THAT DAY'S tax goes to THAT County.
IF I sell ONLINE, the LOCATION is my residence.
I am here, the merch is here, item is packed/shipped from here.
If a NY resident (thru payment address) buys from me...
the Sales Tax assessed is as if they stood HERE, in front of ME.
I cannot afford to collect for more than one State...
PERIOD... forget it...
It will force me back to ONLY doing "live" (cash) venues.
Bag item, collect money, (no PayPal, no postage)...
Send in Tax 4x a YEAR...
NO RETURNS...
I don't need ADD'L expenses & work.
Sorry.

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