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Wed July 25 2012 09:23:28

What Do You Think of Impending Online Sales Tax?

By: Julia Wilkinson

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Online buyers may soon lose the advantage of not having to pay state sales taxes when purchasing items online, just as e-sellers may lose their edge over bricks and mortar retailers in not having to collect the tax.

(Currently, in states that have sales tax, online buyers are required to pay a "use tax" for items upon which no sales tax has been paid, but sellers often don’t enforce it or buyers are not aware of the requirement).

But a new bill, the Marketplace Fairness Act, which would give states the right to collect sales taxes for online purchases, is getting bipartisan support in the Senate, and some lawmakers hope to have it passed both houses by the end of the year. Some media outlets are reporting the impending tax as if it's inevitable, but it's not a done deal yet.

The measure is gaining bipartisan support in the Senate as a way to help cash-strapped states; who figure they are losing more than $20 billion a year, according to estimates by Nashville-based advocacy group Streamlined Sales Tax, as reported in the Wall Street Journal. It remains to be seen, of course, if the bill does become law, how it will end up looking on online venues. There will likely be a separate field for this tax in the checkout process.

In the past, eBay and Amazon have been on opposite sides of this issue.

But will this new tax curtail your online buying behavior? And as an online seller, how much do you think this tax will hurt you, if at all?

In the early years of the Internet, e-tailers were struggling, and that is the context in which the last Supreme Court ruling came, in 1992, when it said online retailers were only required to charge sales tax if they had a “substantial nexus” or physical presence in the state. Now the e-tail sector is booming and is at some $200 billion a year.

What do you think of this potential tax on the horizon? Are bricks-and-mortar sellers right to cry foul that they are being used for "showrooming" and bypassed for purchases, especially of bigger ticket items? Is this issue even on your radar screen as an online seller, and/or buyer? Post a comment here!




Comments (35) | Permalink

Readers Comments

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: JustTheFacts This user has validated their user name.

Wed Jul 25 10:33:44 2012

The ENTIRE online tax Scheme is nothing more than a way for GREEDY politicans to create ANOTEHR piggy bank for them to EXPLOIT!

If states would CONTROL their MASSIVE overspending on PORK projects for their BUDDIES they would not need to be SHAKING DOWN the little guys of their MILK MONEY.

As for how much money states are CLAIMING they are losing, oh please, they ALWAYS HYPE up the numbers to make it look like a HUGE problem in order to get support for their SCHEMES.

Make the general public THINK that if they collect sales tax from online sellers that THEIR tax burden will go down so that they will support it, then when they do implement the SCHEME and the public realizes they get NO benefit from it, well good luck ever seeing them stop taking it.The politicans now have a new CASH COW and they will NEVER give it up!

Of course when the people realize that they are now going to PAY MORE for their purchases because they now have to ADD THE TAX, well then they want to cry fowl but it is too late.

The genral public needs to say NO to the CASH COW the greedy and CORRUPT politicans want, and FORCE them to STOP WASTING all of the money they are STEALING from the people already!

online sellers need to e reminding the public that they will only HURT THEMSELVES if they allow this to happen.

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: TaxCLoud This user has validated their user name.
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Wed Jul 25 10:38:42 2012

Brief clarification: The bill is called the Marketplace Fairness Act, S.1832. More information is available at http://marketplacefairness.org

This is not a ''new tax'' and there will be no new separate field in the checkout process. Sales tax is already due on ALL internet purchases in 45 states, but usually retailers don't collect it - leaving the consumer with the legal obligation to self-report and remit to their state. Not surprisingly, most people do not do this.

This legislation is good for consumers, state and local governments, and businesses. Opponents (primarily eBay) claim it will hurt businesses, but their argument ignores the actual substance of the proposed legislation. The Marketplace Fairness Act REQUIRES that states simplify and standardize their sales tax systems AND they MUST provide the software (or services) for retailers to easily comply.

Finally, we are interested in this legislation because our company (FedTax) provides a FREE service (TaxCloud) which easily manages sales tax compliance for every address in the United States. TaxCloud also handles reporting, remittance, exemptions, and even provides indemnification and audit defense - again, all for free. TaxCloud is paid for by the states so no retailers are burdened by cost or complexity.

Thank you for covering this important issue, and we look forward to Congress finally resolving this issue and providing guidance and certainty for multi-state multi-channel retailers.

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: mylifeisgood This user has validated their user name.

Wed Jul 25 11:13:37 2012

If this means that the tax dodger sellers will finally have to anti up I'm all for it as we have collected sales tax since the beginning...

Just like the laws requiring Paypal to report your income this is also needed...

When adults act like children then rules will be passed..Make the children pay up.

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: Wire This user has validated their user name.

Wed Jul 25 13:03:58 2012

I don’t like any more taxes than we already have. Uncle Sam needs to slim down his overhead. How come I have to run a balanced budget but not the government? Where is the fairness in that?  My other problem with this is the collection and paying to each and every two bit local government their due taxes that I collect.

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: Mr. Me This user has validated their user name.

Wed Jul 25 13:14:35 2012

New items, no problem ... used items.. no tax , as tax had already paid for original purchase.......

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

This user has validated their user name. by: permacrisis

Wed Jul 25 14:42:23 2012

Mr. Me brings up an interesting point. The disposition of an item may well determine that item's taxable status.

Here our Department Of Revenue conducts surprise tax raids on flea markets, so I doubt they would observe any such distinction.

Sure do wish they would all just form a nationwide pool and charge a single % rate, however. California and their 9 percent seem to be what's holding the rest of us up.

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: RCL This user has validated their user name.

Wed Jul 25 15:21:19 2012

TaxCloud, what will be the effect on small sellers of the Small Seller Exception- A State shall be authorized to require a remote seller, or a single or consolidated provider acting on behalf of a remote seller, to collect sales or use tax under this Act if the remote seller has gross annual receipts in total remote sales in the United States in the preceding calendar year exceeding $500,000. For purposes of determining whether the threshold in this subsection is met, the sales of all persons related within the meaning of subsections (b) and (c) of section 267 or section 707(b)(1) of the Internal Revenue Code of 1986 shall be aggregated

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: Digmen1 This user has validated their user name.
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Wed Jul 25 16:21:28 2012

This, and the continuing rise in postage costs for everyone except Chinese sellers will be another slow down on online sales.

But I agree that large sellers of new items should pay taxes, its only fair.



What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: RCL This user has validated their user name.

Wed Jul 25 17:17:16 2012

I agree about the Pay Pal monthly sales reconciliation. I found it helpful and I was pretty close to their figures! If it gets sellers claiming their income, good enough.

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: CFM This user has validated their user name.
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Wed Jul 25 17:32:39 2012

Imposing tax on ebay items is another way to keep the small business person from getting ahead.  Ebay is One big online Garage Sale of Used Items.  Are they going to start taxing people who have garage sales, church sales next.  GREEDY.  It's very upsetting...

Thank you for letting me have this forum.  

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: mylifeisgood This user has validated their user name.

Wed Jul 25 20:16:36 2012

@CFM

I would seriously doubt Fleabag is one big garage sale of used items.. Mostly new items yes,,used no..

As for the sales tax on used..When was the last time you bought a USED CAR..You will pay sales tax on it..Or a used travel trailer, yep sales tax, Or buy anything from goodwill, yep sales tax again, Or a used book at the book store, yep sales tax again.

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: TaxCLoud This user has validated their user name.
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Wed Jul 25 21:26:59 2012

@RCL what are you asking? Thr effect on  "small sellers" would be based upon the definition of "small seller." Naturally we feel there is no need for a "small seller" exception because such ideas are rellics of days-gone-by, long before there was a totally free service (like TaxCloud), not part of any state legislatures' efforts. Outside of ecommerce, a sale is a sale, and it is subject to tax in most states.

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: JohnGermaine This user has validated their user name.

Wed Jul 25 22:16:59 2012

I've been collecting and sending in my state sales tax since day one. No biggie, it's programmed into PayPal to fetch it for me and all of my listings let folks know to expect to pay it. What's with all the fuss?  I certainly don't pay it out of my own pocket!

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: BonzSeller This user has validated their user name.

Wed Jul 25 22:26:02 2012

Personally I'm against this as I agree with most here and it's just another or continued tax that greedy states are howling about. The ones it's going to hurt are the small individual sellers.

But wait, we're already screwed by Google so never mind. I doubt many small sellers will stay selling once Google becomes mafia king and those that don't pay, can't play.

I'm looking for a "real world" job and to heck with on line sales. Not going to see very many of them anymore.

As to collecting taxes I refuse to do it. I live in a state with no sales tax and I'm NOT working for some other state to collect theirs unless they want to pony up some wages for me to work as their tax collector for them !!!

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: dmg61 This user has validated their user name.

Wed Jul 25 22:30:57 2012

More tax. More pork. Figures. I've been collecting sales tax in my state from day one, but it's unfair for small sellers to collect from all 50 states. They should at least raise the minimum sales to $5 million a year so real small businesses will not have to endure this trash.

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: dmg61 This user has validated their user name.

Wed Jul 25 22:32:02 2012

...and while they're at it, they should make international sellers collect sales tax...namely the big Chinese sellers........level the playing field a bit more.

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: teddychan This user has validated their user name.
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Wed Jul 25 22:43:04 2012

If you aren't collecting and remitting sales tax on orders shipped to your own state, and your state has sales tax, you are a tax evader, and you are unfairly competing with online and brick and mortar sellers in your state who are collecting.

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

This user has validated their user name. by: Tula

Wed Jul 25 22:43:41 2012

Politicians love to use the word "fairness." Yet, this is going to add huge expense to businesses. Why should businesses have to use a third-party service like TaxCloud? What if TaxCloud's service has poor responsiveness and costs the sellers sales due to shopping cart abandonement? What about the data privacy of the seller?

Many of the responses here seem to imply that it's the sellers who aren't paying tax when in reality, it's the consumers not paying their proper taxes to their own states.Why should a small business have to collect taxes for a state from which they derive no benefit of said taxes?

Bricks and mortar business are claiming unfairness, but really, any perceived advantage online sellers might have goes out the window once you account for packageing and shipping costs, which the physical retailers don't have. With "free and fast" shipping being more and more in demand, businesses are only seeing ncreses in those costs. Last I checked, USPS, UPS, and Fedex don't deliver for free.

And that doesn't take into account how much it will cost to manage all this tax collection and reporting. I did some work for Amazon in their financial software group and I've seen first hand what it takes to manage that much data and deal with audits and tax reporting. It's not a negligible expense. You have personnel and computer systems, software, and security issues to take into account. Throw in 8000+ tax jurisdictions and all the variations and changeability within them and you have a nightmare for any online business. A company like Amazon is not about to lose control over their sales data by using a third-party service to manage this. No business should have to do that in order to comply with regulations.

I suppose we should expect this from politicians who know nothing about what it takes to run a business.


What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: teddychan This user has validated their user name.
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Wed Jul 25 23:01:31 2012

Collecting in every state that has sales tax IS an unfair burden for small sellers. I am more concerned about the 90% of my competitors who aren't collecting on sales WITHIN California. eBay is fighting this because it knows a large percentage of its sellers are sales and/or income tax evaders, and cracking down on them will hurt their bottom line. Tough crap.

What Do You Think of Impending Online Sales Tax?   What Do You Think of Impending Online Sales Tax?

by: expertbenefits This user has validated their user name.

Wed Jul 25 23:20:48 2012

Collecting sales tax for our own state is one thing if we are small but for every state and each and every product classification that are taxed differently by each state it would be best to have one tax rate, perhaps paying the tax where the item is purchased just like when someone from out of state buys in a brick and mortar store in your  jurisdiction or  are traveling in your state, they don't pay the tax rate in their own state' they pay the tax rate where that store is located. Taxcloud is paid by the states to collect because it is a hassle for states to do it and it will be a hassle for sellers as well. Or maybe a national sales tax rate for online purchase or "Cloud" purchases. Some states have very complicated tax rates and tax cloud doesn't collect for all states though they do it for free for us which is great. The states don't pay us but they pay them. I think ebay would charge us & when you add that to free shipping it will be a burden but people are used to buying online and saving gas & having seller pay it through shipping. I buy online even if I have to pay sales tax. There is not much inventory in stores these days. Overstock came out with this opinion in the WSJ but as someone commented it is too late Amazon blew it for us all so they could have warehouses in NJ!
http://online.wsj.com/article/SB10000872396390444873204577537192964218
160.html?KEYWORDS=overstock+ceo+internet+sales+tax

Although
Walmart and all the big boys have systems that are capable of doing this, it will be an added burden to those under 2 million a year in revenue. Many will hang it up or figure out something. I collect California sales tax and pay taxes state and federal. The issue is collecting it for all 50  minus the few that don't have sales tax but it is also a lot more complicated than that. Read the article...Hopefully they will put it off until at least 7.2013 or 2014 and iron out and try to resolve the issues unless all the small guys keep quiet. Make noise about it. Call and write your senators and definitely your congress reps as well. ONly ones that will make money are accountants as usual well the CPAs...anyway. They snuck in some new legislation about confidentiality on tax returns only if CPAs do your returns effective in 2013...gee how did that get through...lobby lobby.
   

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