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Mon May 20 2013 18:53:35

Survey Shows Online Sellers Worry about Internet Tax Creep

By: Julia Wilkinson

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We heard from a lot of you in our recent survey about the "Internet Sales Tax," formally known as the "Marketplace Fairness Act." Comments were optional, but implementation problems and "tax creep" were mostly on the minds of online sellers who left them.

Here is a small sampling of comments of those who felt the tax would be gradually lowered and affect more and more sellers over time:

- "It is only a matter of time before they lower the minimum sales requirement to affect Mom & Pop entities and 'garage sale' sellers."

-  "...we all know what will happen if the law is passed. The one million limit that helped pass it, will suddenly start decreasing until any amount is taxed."

-  "...It wouldn't be long til it does effect all who sell on the internet. Give an inch, they take a mile."

-  "But once they start, they never stop, so it will affect me as a seller eventually, but certainly as a consumer

-  "Not in that present form [would the seller be affected], but, fully expect the rate to be lowered to include everyone."

A few folks said that they thought people shopped online for convenience, and a tax wouldn't deter them from doing so:  "I will buy wherever I find the right price, it doesn't matter if I pay taxes on it at the time of purchase or not."

Some sellers raised a point I hadn't thought of: some types of items aren't taxable, at least in some places:

- "My sales are less than $1 Million and I [sell] coffee, a food product, which is not taxable."

-  "We sell a mix of products, bullion (non-taxable), toys (taxable). It's going to depend on the wording, whether it's one million in taxable sales or one million in sales."

Quite a few suggested that if there had to be a tax, that it be a flat tax that is easier to administrate, and easier for the sellers to calculate. And some felt the tax should be limited to the sellers "local district/town/state not foreign states --- just like B&M stores."

Do you agree that the tax threshold of $1 million dollars would probably be lowered gradually? Were there any points that were not made in the survey that you feel should have been? Post a comment here!




Comments (20) | Permalink

Readers Comments

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: pace306 This user has validated their user name.

Tue May 21 09:36:00 2013

The REAL question is - if the Quill decision is current law - and there is to be a new set of laws - why do small merchants get to be another states UNPAID tax collector?

I am in NY - if I have to collect taxes for California - do they pay me a salary to do THIER job? I get to work for THEM for free! I do the work, they get to keep the money.

If eBay or Amazon wants to keep sales records and do a data dump to the states every yr - then fine - let the states go after the deadbeats. Since when is it MY responsibility?

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

This user has validated their user name. by: iheartjacksparrow

Tue May 21 12:47:38 2013

I am one who responded it wouldn't affect me because of the $1 million threshold. I hadn't even thought about that being lowered. But when the law is passed, and the states find they aren't instantly pulling in a gazillion dollars from online sales, I can definitely see the amount going down, probably $500,000.00 first, and then continuing downward until the states can say it is a worthwhile law. Since PayPal, etc., send out the IRS form for sales of $20,000.00 and above, it wouldn't surprise me that the threshold will eventually end up at that amount.

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: Xander This user has validated their user name.

Wed May 22 00:11:46 2013

This whole MPFA tax issue is insane. Everyone knows this has nothing to do with fairness but more so to force merchants to collect taxes for another state for free like we already do for our resident state.

The only way to reduce the burden would be to make the payment processor collect and submit these taxes, not the merchant.

Since electronic payments are now used for 100% of online sales, why not just get paypal and the credit card processors to deal with all the sales tax?

I am totally against donating any of our time for any more tax collection. Collecting it for our home state is enough.

Will the minimum drop over time? You can count on that to happening, more is never enough until it reaches all. (Bureaucratic thinking 101)

If you think the economy is bad now, wait until this tax measure goes into affect then take note of the reduced sales.

Taxation is just another price increase which is the last thing we need with go along with our run away inflation.

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: PowerSeller2007 This user has validated their user name.

Wed May 22 03:41:22 2013

Hello, Ina.
   How will foreigh seller pay their tax?  Will this add sales tax to American and No Tax to foreign sellers.  Can you explain that part? Anyone? Thanks.

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: FREDDY This user has validated their user name.

Wed May 22 09:59:09 2013

The million dollar figure will be lowered. Common Sense. As said previously,(jacksparrow) will probably be dropped to the 20,000 figure.
If the Feds or another party is required to do the tax work, filing etc. who is going to pay for that? I think the states, counties receiving should pay out of their end. After all they claim it is money they normally do not get - so pay to have it collected. If it is up to Paypal-they will definitely charge you for that.ebay will throw that in for the FVF.  Same with MC Visa, Amazon etc.
As I have said before, Brick & Mortar are not suffering due to this tax thing. It will not bring on a level playing field. Sales have been down all over-result of countries financial meltdown. I for one do not buy online to save the tax. The shipping more than makes up for that. It's more that I do not want to drive 20 miles to find something. I'm too old for that type of activity - plus the cost of gas????????

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: oropuro This user has validated their user name.

Wed May 22 10:22:04 2013

It is obvious from reading these comments and those on the internet in general that most people are not knowledgeable about this issue.  Read the bill passed by the senate.  It's short and easy to read.  www.marketplacefairness.org
B&M businesses have suffered from the unlevel playing field for years even before the internet.  I have owned a B&M for 35 years and have had an internet site for 8 years.  I will be required to collect the tax on my site and don't mind doing it.  it is long overdue.  Worrying about lowering the 1 million exemption is like worrying about the personal income tax rate going to 50% or 60%.  Anything can happen depending on how you vote.  The house will never let this bill surface in this session but it will be back without a doubt.  We should have a level playing field.


Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: Moonwishes This user has validated their user name.
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Wed May 22 11:01:24 2013

There is one easy option for this sales tax nonsense and it is what the state of PA is already doing. On our state income tax form, we have to declare any out of state internet purchases that we made that weren't taxed and then pay taxes on them. If the state doesn't think the person is being honest they can audit the individual. Who will be responsible for auditing internet sellers, say if the state of Arizona thinks we collected more (or should have collected more) than what we reported and paid. Can Arizona come after someone in PA, and then they can take on 100 NY sellers, etc. They put something like this into effect, then they have to put watchdogs on it as that is the government way. I'm currently below the million mark, but I go along with others in thinking that will come down and come down quick as someone will find that they are holding the bag for paying for their watchdogs and the money that they thought would come in hasn't and they can't make payroll. So who will they go after? The people in their states or elsewhere? It is a crazy business.

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: trigon This user has validated their user name.

Wed May 22 11:02:54 2013

My guess would be that this goes to the Supreme Court and gets tossed. Forcing some seller in Idaho to collect taxes for New York is the very essence of Taxation Without Representation. What makes it worse is New York's (and most every other state's) failure to even attempt to enforce their own Use Tax system.

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: timeaftertime This user has validated their user name.

Wed May 22 11:28:53 2013

While Amazon correctly is charging sales tax on purchases in my state, I have discovered they WRONGLY charged me for sales tax on a specifically EXEMPTED ITEM. (I am ''guessing'' they simply tax every purchase made by my state residents.) I seldom use Amazon, unless I can't find something I want more locally.

After I realized they had charged sales tax on this item, I used the online chat, sent them a link to the state web page list of sales tax exempt food and related items, and requested that they refund the $2.49 sales tax charge they wrongly collected on my food/seasoning purchase.

The rep I chatted with first gave me a hard time about having to pay because of my state. Once I sent the Tax Dept's website link, he did change his tune and promised to refund to my CC. If it does not show up I will be rethinking my actions.

Check your bills, folks, to see if you are wrongly billed for sales tax on items that are tax exempt per your state law!!  

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: timeaftertime This user has validated their user name.

Wed May 22 11:32:46 2013

Just an observation, re: a level playing field.  I always rather thought that shipping charges essentially offset taxes charged at brick & mortar locations.

Now, with internet retailers charging both sales taxes and shipping (often exorbitant?), how is the playing field leveled?  

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: papergoy This user has validated their user name.

Wed May 22 12:43:39 2013

Of course they'll lower the threshold.  I hope to be retired by then.  As to the overall question- in most states, there's a requirement for the end user to pay use tax if sales tax has not been collected.  I do so (New York offers a way to do so when you pay your income tax).  If someone in Illinois doesn't do so...isn't it the responsibility of the Illinois government to educate its citizens and then collect the money (how about random audits on anyone with an internet presence who doesn't pay use tax?)  Why am I doing their job for them?  Or here's another crazy idea- make the laws simple enough that the people of Illinois follow them?  In New York State, if I were to follow the law (which I do by virtue of the Income Tax add-on), if I am at Mt Rushmore and buy salt and pepper shakers with 5% sales tax- I am obligated to pay 3% use tax to NYS (as my jurisdiction charges 8% but I get a credit on the amount I paid).  I am sure very few people do this- so let's get rid of the law as setting up laws that no one follows takes down the overall respect for all laws.  For fun, google New York State Sales Tax Bagels (tax is charged at a Starbucks if a bagel is sliced as the slicing of it makes it a prepared food).  This kind of idiocy prevails- and makes eBay seem sensible with its rules!

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: xcergy This user has validated their user name.

Wed May 22 13:52:04 2013

@ oropuro

So you think filing taxes to over 600 tax authorities is a level playing field when you as a B&M owner only file one return?

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: Ed This user has validated their user name.

Wed May 22 17:10:04 2013

I am not for the sale tax law but on the other side of it I don't think ebay will let any small seller get to large before they break things up some so other seller can get a piece of the business. ebay makes more money of a number of small sellers than the ones doing over $100,000

I couldn't trust ebay if we had to have the inventory to sell a million dollars. The power could go to their head or they would want a larger piece of the pie. ebay wants to much control and if you fight it you will be down sized at least 80% - 90% of your sales.

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: Cloud This user has validated their user name.

Wed May 22 21:03:17 2013

If we look at the way brick and mortar taxes are handled for out of state buyers the buyer pays whatever the sales tax is for the area they purchased the item in. In most cases that item is going to be traveling back home to where that buyer lives. Is the state where they reside going to receive the tax? No! The tax on that item is going to the state/locality in which it is purchased.
So why not create the same circumstances for online purchases? If I'm located in Indiana then I collect a 7% sales tax on all purchases. Indiana gets every penny of that regardless of where the buyer is located. If I have locations in Indiana & Kentucky which have two different rates then the rate that applies would be the location the item will ship from. Simple and on power with brick & mortar taxation. It also means every professional online seller would be required to collect taxes instead of just those that sell over a certain $ amount. The states would make up for whatever revenue MIGHT be lost by this taxation method over the proposed one due to the increase in revenue from the smaller mom & pop operations that the current proposal won't be hitting. If you are operating for profit you should already be collecting for your state so it wouldn't be that much more of a hardship then you are already subjected to. In fact, it might even prove easier since you wouldn't have to ferret out which sales are affected by the tax since they all would be.  

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: pace306 This user has validated their user name.

Wed May 22 21:06:56 2013

@oropuro

We in other states shouldnt be required to collect tax for any other state besides ours. We dont work for free.

If you cant convert your customers into buyers thats not our fault. Big stores like BB etc get PLENTY of tax credits, plenty of state freebies, union consessions and more. We in other states dont get transportation vouchers or ANY other thing that most state give out for free.

Lets also talk about the other NOT MENTIONED issue. Try going to CES and asking about a line. First question "got a store"? No store = no good lines - ask Sony, Panasonic, JVC, Pioneer, Alpine, Monster, Polk and the rest. That makes the rest of us that dont have a store 2nd class. The point isnt that its your fault - the point is - its NEVER a "level playing field". Each side has its pluses and minuses (just like with returns where you can walk into a Macys or Walmart and play the return game. They can afford it, small dealers cant.

Its never "level" but forcing people you never met to collect tax for places theyve never been is just wrong.

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: ClassEutax This user has validated their user name.
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Wed May 22 22:45:35 2013

Hi All:  The US Constitution VERY clearly says NO to any interstate [and interstate internet] taxes in Article 1 Section 9:  ''No Tax or Duty shall be laid on Articles exported from any State.''

Even I can understand this....  Its clearly unconstitutional to tax ANY interstate internet sales.

 

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: Henry This user has validated their user name.

Thu May 23 11:55:48 2013

How about this for a novel idea. Let the payment processor send notices to buyers summarizing by state their online purchases. Then the taxpayer pays his state the tax owed.

That is the current law.

We all know this is not about taxes but about tax collecting. What makes the lawmakers believe a small business can do what they can't - collect the taxes owed.

It is my belief that it is not the mom-and-pop brick-and-mortar business but the big box retailers who would like to see small internet businesses go away.

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

This user has validated their user name. by: Tula

Thu May 23 16:20:46 2013

@timeaftertime makes some very good points. What most of the pro-tax people tend to gloss over is that the tax rules vary so widely that tracking all of that will be a nightmare. You'll have to have every item in your inventory tagged for every tax jurisdiction and rules and rates. So if you sell a widget that is taxed in one state, but not in another, or only taxed if it costs over, say, $250, you'll have to have all of that info for every state and every widget. That's going to be a very large database. My favorite example: clothing. Clothing is taxed in WA, but is not in MA, unless the item costs over $250. Other states have their own variations on this. You have to determine what constitutes clothing (ex: is a baseball hat clothing or is it sporting goods?) and then know the rules and rates for every one of the 8000+ tax jurisdictions in the US.

Some claim there will be tables or services available to look up this info, but you will still have to do this to every single item you sell and that takes a whole lot of time, effort, and resources (like computers and a database to track it all). And anyone who believes the government won't lower the threshold is a fool. Look at our current administration's failure to uphold their promise not to raise taxes on those making less than $200K. That one didn't last long, so I seriously doubt that anything targeted at businesses (who are currently one of the biggest whipping boys to our government) won't be lowered to affect more of them. Our government never met a pocket it didn't want to pick.

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: Ed This user has validated their user name.

Sun May 26 08:41:11 2013

The problem is ebay is not a fixed location retail store and the people that sell there do not work on the same discounts margins.

ebay has a market place that fights to lowest prices to save its buyers money so they can spend more it the states they live.

Sellers on ebay gets the life sucked out of them due to hidden fees like being forced to change listing several times a year. Excess fraud due to ebay not having any trust in it's sellers run up the cost of doing business.

Tula makes a great point who is going to pay to file all this extra sale tax. small sellers are getting tired of hearing its another cost of doing business.

ebay wants all the small sellers that do a few thousands in sales to spend time to help them so they won't lose money from large sellers. Do you really think ebay is fighting this for the small sellers doing less than 1 million dollars or seller that sell a couple thousand dollars a month.

This is just another thing that ebay want to use us to help them make more money. If we were employees we would get paid. We are sellers so its just another cost of doing business. It great to work for free!    

Survey Shows Online Sellers Worry about Internet Tax Creep   Survey Shows Online Sellers Worry about Internet Tax Creep

by: LAbay This user has validated their user name.

Fri May 31 20:21:53 2013

Many shoppers are going to shop locally again if they have to pay sales tax online. Internet shopping will loose its main advantage.



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