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Tue June 28 2011 23:06:25

Online Sellers Debate Fairness of Online Sales Tax Collection

By: Ina Steiner

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Many online sellers already collect sales tax for the states in which they operate, but more than half said they would stop selling online if required to collect sales tax for every jurisdiction in the U.S., according to a survey of AuctionBytes readers. (See survey results here.)

Respondents said it is already complicated to collect sales tax in their own state, and many said because of the small size of their businesses, they would be unable to deal with the logistics of collecting sales tax for every jurisdiction.

More than half (56%) of the respondents said they would buyer fewer items online if they had to pay sales tax on online purchases. However, many respondents said they comparison shopped based on the total price, including any shipping or sales tax charges, and would buy from the cheapest source, online or offline.

In a previous blog about sales tax issues, readers debated whether fairness was (or should be) a factor, and one seller raised an interesting point.

"I always cringe when I hear the proponents of online tax collection whine about "fairness." How is it fair to have to work for free for the government of another state in which you have no presence and receive no benefits (roads, police, fire service, schools, etc.)? The bricks and mortar merchants supporting this complain that they have expenses we online sellers do not and while that may be true, we also have expenses they do not, like shipping, packing, packaging and such."




Comments (55) | Permalink

Readers Comments

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

This user has validated their user name. by: Ming the Merciless

Tue Jun 28 23:51:54 2011

IMO, the only viable solution is to collect sales tax based on where the seller lives.

Alternatively have sites like ebafia, Bonanza, Amazon etc. figure it automatically based on zipcoded sales tax rate tables furnished by the states on each sale and then have them remit the sales tax OR furnish the seller each quarter with the exact amount to remit to each applicable state.

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: Moonwishes
Web Site

Wed Jun 29 00:15:43 2011

I know we would have to close our store if we had to collect sales tax for all the states and counties. The paperwork alone would undoubtedly take more time and effort than the sales and maintaining our store. Something we just don't have the time or physical energy to do. What these sales tax folks are missing is that if half the sellers quit then that is a massive amount of money that is not going into anyone tax basis including the US governments. Our store helps us with the very essentials of keeping a roof over our head and food in the cupboard and the very necessary medications we take. Without it not only would our taxes dissolve to near zero we would also be eligible for many 'welfare' type programs, and that is more money out of the government economy. We want to work to take care of ourselves, but this tax nonsense would have the opposite trickle down effect than what the politicians would expect. Too many of us are selling to make ends meet and if it were taken away the welfare roles WILL increase.

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: swcitizen

Wed Jun 29 00:21:19 2011

California is the third largest economy on the planet. Like so many other states they find themselves in an economic crisis due to the fact that residents continue to want education, health care and services they cherish, but not desire to pay for it. Simply, sales tax is due to be remitted on individual state tax returns on Internet purchases where the retailer failed to do so. Internet sales are not legally tax-free even though everyone maintains entitlement issues misapplying tax-free status. Just imagine if residents had remitted the sales taxes legally due over the past 10 years. Back in the 90s when we all enjoyed prosperity and a balanced budget there was no argument over sales tax. Internet shopping was in its infancy and still a majority of shoppers were content paying a small percentage of sales tax on each purchase. However, with the explosive growth of internet shopping, the graph has flipped eliminating billions of dollars from state budgets that fund public universities, libraries, police, infrastructure, health care, etc.

Many have latched onto the argument that calculation, collection and remittance of sales tax for the thousands of tax jurisdictions is too cumbersome and costly. STOP! I am a small business owner in NY State with less than 50K in annual sales who has voluntarily subscribed to an online service that transparently integrates with my web page and shopping cart allowing me to calculate, collect and remit sales taxes in any jurisdiction FREE of charge. After 20 minutes of administrative effort signing up for TaxCloud.net, my company now enjoys savings and greater efficiency. All my tax calculation, collection, remittance and filling is now handled FREE of charge.

Individual state Nexus legislation is definitely the wrong approach to resolving the uncollected tax due issue as it make the process more complicated instead of streamlined. For almost 20 years the Streamlines Sales and Use Tax Governing Board has been diligently working simplifying tax definitions and reporting standards while maintaining State's Constitutional taxing autonomy. There are now 23 full member states with many of the rest working toward the same goals. Unfortunately, one of the major hurdles standing in the way of Federal legislation is the misconceived notion of "Internet Tax" and sales tax due being referred to as a "New Tax."

States are not attempting to tax in any way the Internet, or its access. The issue is the lawful collection sales tax due on goods purchased. The goods to be taxed are the very same tools, televisions and jewelry sales tax is collected on at local brick and mortar retailers. As discussed earlier the sales tax due is already required by law to be remitted by the retailer or consumer on all taxable goods purchased. States are attempting to collect tax we all continually vote to support. I do not ever remember any one group or individual politician pledging to abolish sales tax in its entirety on every good purchased. The Republicans simply signed a pledge not to enact any new taxes. The passage of Federal Legislation known as the Mainstreet Fairness Act simply is a states rights issue empowering the collection of an existing tax already legally due.

I have also heard arguments reflecting merchant’s objection to paying tax to a jurisdiction in which does not maintain nexus. Wrong! Sales tax is calculated according to the destination goods will be shipped and used. Sales tax are assessed the consumer purchasing goods, and remitted to the jurisdiction where the consumer resides paying for the schools, services, health care, etc. directly benefitting the consumer. Businesses do not subsidize sales tax. The retailers simply act as agents calculating, collecting and remitting the tax due to benefit consumers.

It's now easier for my company to calculate, collect and remit sales taxes than shipping in most cases. Until recently I would agree there were hurdles in the way of multijurisdictional tax collection and remittance. However, the only obstacle standing in the way of Federal legislation is misinformation. States are insisting upon putting an end to the need for harmful individual state nexus affiliation legislation requesting the passage of The Mainstreet Fairness Act. Amazon's CEO Jeff Bezos openly supports Federal Legislation as the solution. As an observer, and citizen, I see no reason why each and every business should not calculate, collect and remit sales tax due. Why should Amazon be the only one required to do so? If my business with less than $50K in annual sales easily engages in the lawful calculation, collection and remittance of sales tax due so can any business.

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: pete

Wed Jun 29 00:21:28 2011

Tax is the Politicians and Elites Favourite word, it is estimated almost 80% of every cent earned is taxed either by direct or indirect taxation.
Taxation is actually destroying the World and basically enslaves people.

It is about time a completely new system was used as clearly this system does not ..take a look at Greece today

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: Keith Yockey
Web Site

Wed Jun 29 00:37:23 2011

The best solution is to have the merchant accounts (PayPal, MC, Visa, Authorize.net, etc.) collect the use tax at Point Of Sale, and remit directly to the States (States pay related fees)  The advantages are a win win for all concerned:
~ States get instant funds
~ Less paperwork
~ no privacy issues
~ requires minimal law to make it work
~ system would work for B&Ms too, and wold save sellers $$ on fees MAs collect on Sales Tax now.

The Streamlined Sales Tax Initiative has 24 current member States.  If congress passes the Main Street Fairness Act, many more States will join.  To force online to collect Sales (Use Tax) the first requirement would be minimum gross sales of the sellers.  That alone would exempt most eBay sellers.  And what of the consumers who buy from low income sellers?  They still owe Use Tax, and the problem remains of uncollected tax.  What States plan now still leave a lot of fruit on the tax tree, and is confusing to buyers, as they would be charged Sales Tax here and not there.  Is the seller breaking the law by not collecting sales tax, or is the buyer breaking the law bu not paying Use Tax?  My solution would grab most of that revenue, and would be painless and paperwork free for both sellers and merchants.

The 'fairness' issue lawmakers and B&Ms whine about is a MYTH.
~ B&Ms make the same claim when a WalMart/Target moves in next door.
~ Online does not share the same tax burden on a community that a B&M need, as less fire, police and sanitation is needed, nor does online need to goto city fathers for a bond issue to build a 6 lane highway to goto the mall.
~ Even if online collected tax, they can still outprice a B&M bc of lower overhead.
~ Don't believe a lawmaker when they say fairness.  Here in S.C. lawmakers cut a deal w Amazon for nexus exemption in exchange for tax breaks and 2000 jobs with a warehouse.  They effectively threw SC online and B&M retail under the bus.
I still contend that this is a consumer issue, not one for online retail, but as an alternative, having Merchant Accounts collect Use Tax is the simplest answer.  Too bad lawmakers don't know the word SIMPLE.

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

This user has validated their user name. by: Ming the Merciless

Wed Jun 29 01:02:15 2011

During a previous discussuion of this subject, at least one blogger stated that the minimum threshold for sellers would be $5 million in sales annually.

I did some checking. I believe the threshold is $500,000 so it could affect not only some ebafia Platinum powersellers but the Diamonds as well :-)

This might give the rest of us a fighting chance in this legislation increases their cost of doing business but isn't applicable to most of us.

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: nobody

Wed Jun 29 01:38:02 2011

I live in a sales tax free state and people from all surrounding states come here to shop simply because they do not have to pay sales tax. The state I live in makes up for it in other taxes paid by residents, such as enormous wage and property taxes, so it's more cost effective to live outside of this state and come here only to shop.

The economy is of course terrible here as well, so if you had to show resident ID with every purchase made, and the people who travel here were forced to start paying sales tax, they would stop and it would bury the state for sure.

Year before last the powers that be imposed another enormous tax on businesses, and the worst part? It went retro for a year back, so it literally cost friends of mine millions in costs they had not been able to prepare for and budget in to their proposals, etc. So what did they do? They closed down, packed up their businesses and moved across state lines, causing enormous job loss and hurled the economy even further into a tailspin.

Typical idiot politicians.

Way to go, geniuses.

Love paying those tax dollars that pay the salary, perks, retirement and benefits of these imbeciles. Not.

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: Joe

Wed Jun 29 01:44:27 2011

This is hogwash! 53% would stop selling? I don't believe that for a second. My guess? The reality would be more like 2% tops.

Am I the only seller that believes that if we have to have a sales tax at all (it IS double taxation after all), then ALL sales to all states should be taxable by online sellers? Preferably a flat national sales tax. If a brick & mortar has to deal with it, why shouldn't an online seller? Why do I pay (almost 10% where we are) sales tax on that Wii system at Best Buy, but not Amazon? It's insanity.

I am in California which has one of the most convoluted sales tax regulations anywhere. I also pay tax based on the individual counties, districts, districts within a district, and mass transit special funds, etc. It takes me 15 frigging minutes and I do it every quarter using a simple Excel sheet.

I can't believe what I'm reading!

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: tantalizingstitches This user has validated their user name.
Web Site

Wed Jun 29 01:44:36 2011

I think it is entirely fair to collect sales tax. However, the collection shouldn't require the store owner to spend hours and hours to calculate and submit.

The idea I have is to have all the states work together and form an organization that collects all the taxes for the various states. Then, they will divy it up to the states.

swcitizen suggests a website that will calculate your sales tax. However, its not so easy to get this type of service incorporated into every site you sell on (ebay, etsy, etc.) since the site itself has to add it on.

Right now, the way most sites are handled, you have to type in every single tax rate and zip code or state. In California, you have to type in every zip code in your district.

If the government will make it easy then I'm all for it. However, I have a feeling that the big box companies are pushing this hard to get the little businesses off the market.

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: Keith Yockey
Web Site

Wed Jun 29 02:27:39 2011

@ Joe ... buy on Amazon, you still owe Use Tax to your State.  It's the Law

@ tantalizing
That's what Streamline Tax (SSTI) is all about, a unifided tax code that makes it easier to collect. Cost is minimal, states subsidize fess involved, and there is cloud computing to integrate w your website.

And yes, its still a mess.

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: Mary Jasso

Wed Jun 29 03:14:09 2011

It is my opinion that one or two people here are in favor of taxes because they are hoping to sell online tax service or software. Remove them from the equation and then take 50 states and 50 to possibly 1000 different tax rates and figure on filling out 50 pieces paperwork or 50 online forms, quarterly, semi-annually or yearly.

Will it cause disruption of online sellers? That remains to be seen. Will it hurt sales? Undoubtedly, as items will increase in cost and one has to remember that Paypal or any other credit card payment processor adds their fee to the total sale and I imagine Ebay will too. Sounds like a few pennies here and there, but when you add it up, it comes to a lot of money. I am a small seller, but still the added costs will be in dollars, not in pennies. The buyers will pay more and the sellers will pay in time (lots of time) and frustration or they might choose the more costly way of paying an  online processing services to handle the tax figures, which will add a hefty percentage to the cost of collecting taxes. Here again, prices on merchandise will have to be raised to cover the added costs, which adds more to the cost of the item. It is kind of like the dog eating its own tail. It isn't going to take very long before it feels the pain.

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

This user has validated their user name. by: Tula

Wed Jun 29 08:29:27 2011

I've read that there are ~8000 separate tax jurisdictions in the US. And it's not just the varying tax rates you have to worry about. Different jurisdictions tax different items at different rates. For example, in Massachusetts, clothing items under $250 are tax free. However in Washington state, they are taxed. Multiply these various exceptions and rules times the number of tax jurisdictions and you quickly end up with a complex web of tax rules just to calculate the correct tax rates. Every single item in your inventory would have to be categorized as a particular type of item in order to apply that correct tax rules to it, regardless of whether or not you use a third party service to calculate tax. Add to that all the reporting requirements and costs will quickly become unmanageable.

Many of us are "one man bands", so to speak, and simply don't have the manpower resources to devote to such an effort. As far as swcitizen's commercial for TaxCloud goes, many of us have also been burned in the past by third-party services wanting a piece of our revenue. They may be free for now, but I doubt they'd stay that way. Additionally, we shouldn't be forced to depend on such services to run our businesses. My customers and data belong to my business and I don't need third parties sniffing around and adding more complexity to an already complex checkout process. Not to mention the performance hit the process may take by needing to query a third party before checkout can happen. How can I guarantee customer privacy with a third party having it's hands on my data?

Sales and use taxes are the buyer's responsibility. The poor fiscal management of states where I and my business don't reside are not my responsibility. Why should I have to work for another state's department of revenue, doing the job of its tax collectors, without being compensated for my time? It's a nice racket to be able to foist all the effort and cost onto private businesses who don't even get to see the benefit of this free work they're doing.

The bricks and mortar businesses who support this would love to see all of us online businesses have to raise prices to cover the costs of sales tax collection. I'm sure they'd be happy if they could do away with the slim pricing advantages we may have due to lower overhead and reduced web performance. They know that online purchasing is easy and convenient for the buyer. Don't forget that we do have overhead, like computer resources, internet service, and warehousing for goods, so the perceived advantages are not as great as they'd have you believe.

A single small online tax rate might be manageable, but what of those whose businesses reside in tax-free states? Would we again hear cries of "unfair" for not having to collect tax for that state? If a business has set up shop in such a place, they're likely paying higher taxes in other areas to make up for the lack of sales tax (income or property taxes, most likely) so online tax collection will have a greater impact on them than on others who are dealing with lower overall tax burdens. This issue is nowhere near as black and white as some would have you believe. And I'll restate that there's absolutely nothing "fair" about this Main Street Fairness Act. "Fair" is just a word being used to camouflage the efforts of some to handicap the businesses of others whose success they envy.

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: Patricia This user has validated their user name.

Wed Jun 29 11:08:26 2011

I have always collected sales tax for sales within my state...but I find it totally unfair to ask sellers to go through that for every jurisdiction in the U.S.!  I don't get a lot of Calif. buyers and I know the sales tax bothers them (I've even been challenged a couple of times on whether or not I'm really reporting the tax or am I just pocketing that money) and each time I send them my sales tax ID number.  Also, in addition to sales tax they are also paying SHIPPING!  To force this on everyone because of the greed of the states involved would put a serious crimp in online sales!

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: empty pockets

Wed Jun 29 11:28:23 2011

@swcitizen

California is the third largest economy on the planet. Like so many other states they find themselves in an economic crisis due to the fact that residents continue to want education, health care and services they cherish, but not desire to pay for it.




I live in California and pay plenty of tax, just as everyone who lives here. It has nothing to do with wanting everything for nothing. It has to do with huge gifts in the form of lavish unfunded pensions to ''public servants'' from the politicians to get votes. Dems And Repubs alike.
The average taxpayer in California makes less that the ''Servants''
It used to be that the benefit of public service was job security. Now it's lavish retirement benefits.
It stinks.
We also have an influx of poverty from other countries that we have to support while they integrate into society. We should be given credit for that.

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: Y.D.D.D

Wed Jun 29 11:48:27 2011

@MING

Hope your right about the being under $500,000 mark being exempt

I am the small to medium seller, don't even come close to $500,000 in gross sales

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

This user has validated their user name. by: Ed Gadfly

Wed Jun 29 12:15:09 2011

What are the taxes going for?

More great service like you get from eBaal?

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: comer para perder
Web Site

Wed Jun 29 12:17:51 2011

While copper taxes just do not see the problem, the problem enpieza the abuse of state with the citizens, it is possible that people who survive selling online have to pay taxes that are abusive, there are many people who live daily with this that happen to these people, solutions not problems, politicians act for the people

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: JohnGermaine

Wed Jun 29 12:38:28 2011

I live and sell in California and collect only one tax rate. According to the BOE, the ones who run the tax collection here, my house where my computer resides is my store, and it is where my point of sale is. Those in California who said they have many different tax rates to collect, you may want to check to see that you are doing what you should be. I was told that if I go out and do fairs or flea markets, then I must charge tax for that neighborhood because that location IS the point of sale.

I'll be watching to see how this all shakes out, and not looking forward to collecting for over 8000 jurisdictions!

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: buck efay

Wed Jun 29 13:22:50 2011

As noted the laws are already in place. It's called USE tax and the politicians don't want to piss off their constituents by enforcing the law as written. So they are trying to pass the buck onto us which is not right & will open a legal can of worms for them. My home state is breaking out use tax as a line item this year, more states should do the same and ENFORCE ALREADY WRITTEN LAW instead of trying to pass new badly conceived ones!

Online Sellers Debate Fairness of Online Sales Tax Collection   Online Sellers Debate Fairness of Online Sales Tax Collection

by: VDUDE

Wed Jun 29 13:37:01 2011

I don't have a huge problem with online sellers paying sales tax in their own state.  collecting and paying sales tax in other states is out of the question.  It is simply not my problem.  At the very least, if I did collect sales tax, it should go to MY state.  If it went to the state in which the  buyer resides it sound to me like taxation without representation. They get the tax and I get NO benefit. The internet was and still is to a certain extent ''the undiscovered country'' and frankly any and all governments need to keep their noses and hands out of it.  All new taxes do is hurt people.  Just like our ''Dear Leader'' is talking about taxing the rich and their ''jets'' he fails to realize that there are middle class people building, flying and maintaining those ''jets''.  Go ahead tax everyone and watch the jobs disappear.

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