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The End of Tax-Free Internet Shopping? 784

Posted by timothy
from the awaiting-a-60-cent-refund-check dept.
Mordok-DestroyerOfWo writes "If a little-known but influential alliance of state politicians, large retailers, and tax collectors have their way, the days of tax-free Internet shopping may be nearly over. A bill expected to be introduced in the US Congress as early as Monday would rewrite the ground rules for mail order and Internet sales by eliminating what its supporters view as a 'loophole' that, in many cases, allows Americans to shop over the Internet without paying sales taxes."
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The End of Tax-Free Internet Shopping?

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  • Use tax (Score:4, Informative)

    by DoofusOfDeath (636671) on Thursday April 16, 2009 @12:59PM (#27600179)

    Here in Rhode Island we have a "use tax", which basically says if you buy something from out-of-state you need to pay a tax on it which, concidentally, is the same rate as our state sales tax.

    I pay it, but one thing bothers me. I thought only the federal government is allowed to tax interstate commerce. Isn't a state "use tax" like the one in Rhode Island doing that very thing, even though they claim they're not? Has this kind of "use tax" been challenged in court on Constitutional grounds?

  • Re:which state(s)? (Score:5, Informative)

    by aoteoroa (596031) on Thursday April 16, 2009 @01:05PM (#27600245)
    Here in Canada we have always had to pay sales tax on internet purchases. The tax is based on the purchaser's province.
  • by Buelldozer (713671) <cliff@@@gindulis...net> on Thursday April 16, 2009 @01:06PM (#27600263)

    I may be confused but I thought the regulation of INTERstate trade was one of the powers specifically enumerated as belonging to the Federal Government?

  • by Anonymous Coward on Thursday April 16, 2009 @01:14PM (#27600385)

    That's how it's done in the EU. Advantage: Truth in advertising. You know what it's going to cost you. Disadvantage: The sales tax is hidden, so there's less opposition to sales tax hikes. Sales tax is comparatively high in the EU.

  • Re:which state(s)? (Score:5, Informative)

    by NeverVotedBush (1041088) on Thursday April 16, 2009 @01:15PM (#27600399)
    And it's not just state taxes. There are city/local taxes as well. And since these vary widely, either some database will have to be compiled and maintained or the tax levies will have to be made uniform. Or state taxes will be made uniform and there won't be local taxes. Or it will end up being governed by the state the business operates in - but then imagine states wheeling and dealing with tax rates to get certain businesses to locate in them. Or, you could make the buyer responsible for local taxes - maybe through reporting all mail order / internet sales to the government along with descriptions of what is bought since some locales don't tax food or prescription items.

    Or, maybe they could do like what the RIAA and MPAA do and get some kind of royalty built into every item sold that then gets divvied up later however the states decide to divide the spoils.

    Yep, the possibilities are endless!
  • Re:Use tax (Score:4, Informative)

    by idontgno (624372) on Thursday April 16, 2009 @01:16PM (#27600429) Journal

    But it's not a tax on commerce. It's a tax on use. "Use" and "Commerce" look nothing alike. They aren't pronounced the same at all. "Use" taxation is on the basis that you use that thing you brought across state lines. And how do we valuate that property that you're using? Hmm... maybe, what it sells for. A percentage of the sales price in the state you brought it in from. And since you bought it there, you even have the receipt that tells you what the basis of taxation will be!

    Yes, the reasoning is specious, fatuous, and bogus. But the shallowest of rationalizations seem to work out just fine in matters of taxation, as long as the government is the one doing the rationalizing.

    I wonder what happens if you buy a thing in one state and never use it in your state of residence. Will they charge non-use tax?

  • by davidwr (791652) on Thursday April 16, 2009 @01:18PM (#27600451) Homepage Journal

    For more than half of the years of my adult life, my out-of-state purchases excluding hotel rooms, restaurants, and other things used out of state were either zero or so close to zero as to be not worth the paperwork.

    Most states that have use taxes exclude small items you personally carry into the state such as trip souvenirs and all or almost all exclude items used out of state such as meals or lodging.

    The "out of state" sales tax problem has been around as long as there has been both the sales tax and catalog-only sales companies. I wonder if your grandmother bothered to pay use taxes on her mail-order seeds and other domestic items she bought from mail-order-only companies?

    When your parents bought their "Greatest hits from the 1950s 8-Track $19.95 TV Offer" tunes 35 years ago, did they bother to declare it and pay taxes? Most people did not.

    This is nothing new.

  • by mkettler (6309) on Thursday April 16, 2009 @01:22PM (#27600513)

    I'd have to suspect that the case being referred to is:

    NELSON V. SEARS, ROEBUCK & CO., 312 U. S. 359 (1941)

    This case basically established the way sales taxes for "out of state" orders are handled now. (taxes collected if any in-state branch exists, otherwise not)

    This law would appear to contradict the interpretation of constitutional limits on the power of states made in this case.

  • Re:which state(s)? (Score:5, Informative)

    by Mr. DOS (1276020) on Thursday April 16, 2009 @01:30PM (#27600675)

    Interesting: I'm in Ontario, and if I buy stuff from DirectCanada [directcanada.com], who are based in BC, but ship some stuff from Toronto, I only ever pay GST (5%). And yes, this applies even if stuff is being shipped from the Ontario location.

    Maybe PST rules vary from province to province?

          --- Mr. DOS

  • by jtownatpunk.net (245670) on Thursday April 16, 2009 @01:39PM (#27600833)

    They get taxes from the fuel used to transport the goods. They get money from the vehicle registrations. They get money from the vehicle purchases. They get taxes from the goods purchased to maintain the transportation vehicles. They get taxes from the corporations that sell the goods and the ones that transport the goods. They get taxes from the employees of both of those groups. THE GOVERNMENTS (local, state, and federal) GET PLENTY OF FUCKING MONEY OUT OF INTERSTATE COMMERCE!!!

  • Re:which state(s)? (Score:2, Informative)

    by Krneki (1192201) on Thursday April 16, 2009 @01:41PM (#27600881)

    The taxes are always paid in the country/state the buyer is from.

    The loophole will always work until the vendor starts to send the receive information to the country the buyer is from. Once the Tax office has a proof of an acquisition they can demand the tax from their citizens.

    To be completely fair you have the right to buy at tax-free any product in a foreign country / state and then pay the full tax at home.

    I live near the border and using this loophole we were able to buy almost anything tax free, until they made an agreement and now all they buying information gets passed to the Tax office.

  • Re:which state(s)? (Score:3, Informative)

    by mweather (1089505) on Thursday April 16, 2009 @01:45PM (#27600949)
    They have lower income taxes, though. All taxes considered, they pay about the same as us. But they can avoid a lot more taxation by saving their money than we can.
  • by ArcherB (796902) on Thursday April 16, 2009 @01:48PM (#27601025) Journal

    So you are also suggesting that if you've been cheating on your federal income tax for the last few years, his statement means the IRS can't come after you?

    Thought so.

    That's tax evasion. This is NOT tax evasion. From TFA:

    A bill expected to be introduced in the U.S. Congress as early as Monday would rewrite the ground rules for mail order and Internet sales by eliminating what its supporters view as a "loophole" that, in many cases, allows Americans to shop over the Internet without paying sales taxes.

    If the law stated that I had to pay sales tax on interstate goods, why does it need to be RE-written???

    Also from TFA:

    ...the U.S. Supreme Court ruled that out-of-state retailers generally couldn't be obligated to collect sales taxes unless Congress changes the law.

    So, was your argument a strawman?

    Thought so.

  • by networkBoy (774728) on Thursday April 16, 2009 @01:51PM (#27601075) Homepage Journal

    Seller is not obligated to collect tax in CA...
    According to my seller permit, I can notify the customer that I do no collect the state sales tax, and that they are obligated to pay the use tax.

    Sellers that do this, however, I suspect get audited very very frequently.
    -nB

  • Re:which state(s)? (Score:2, Informative)

    by kokojie (915449) on Thursday April 16, 2009 @01:53PM (#27601123) Journal
    Absolutely not true. You have to pay sales tax regardless whether if the seller operate in your state. It is just that if the seller is operating in your state, they are obligated by law to collect the sales tax. If the seller is out of state, you have the obligation to report and pay the sales tax on your state tax return. Of course almost no one reports it, it is tax evasion and it is illegal.
  • by swillden (191260) <shawn-ds@willden.org> on Thursday April 16, 2009 @02:08PM (#27601415) Homepage Journal

    So, you don't want any more transportation projects? How are you supposed to travel anywhere if no road work is ever completed? Just from weather damage, many roads would be impassable after only a few years.

    Roads are primarily built and maintained by the states, counties and cities. The federal government doesn't really need to be involved. However, road construction is within Congress' constitutional power.

    Clearly, like most Americans, you have never read the Constitution.

  • by KiahZero (610862) on Thursday April 16, 2009 @02:09PM (#27601423)

    This is a federal bill that allows states to collect taxes which are already owed. Individual tax liability will not increase. Instead, individuals will simply be forced to pay (by online retailers) the sales tax they already owe.

  • Re:Not a problem (Score:5, Informative)

    by MarkRose (820682) on Thursday April 16, 2009 @02:33PM (#27601809) Homepage
    Libertarians don't promote "freedom-only-for-the-rich". Libertarians support the freedom for everyone to become rich. Taxes like the income tax ensure those working for a living will have a difficult time getting ahead. It's the current regime of excessive taxation on the little guy that keeps the little guy down. Libertarians want to keep no one down.
  • Re:which state(s)? (Score:3, Informative)

    by future assassin (639396) on Thursday April 16, 2009 @02:58PM (#27602271) Homepage
    In Canada you pay GST and PST/HST if your shipping address is in the province you are ordering from. Also you have to charge your customers from the same province, say BC, PST/GST on shipping other wise its just GST on shipping.
  • by MarkGriz (520778) on Thursday April 16, 2009 @03:08PM (#27602477)
    I always wondered why they call it a value "added" tax. Seems more like value subtracting to me.
  • by Anonymous Coward on Thursday April 16, 2009 @03:37PM (#27602931)

    Perhaps you should read before you post:

    0-35% (federal)
    0-10.3% (state)

    So, in just federal and state income tax, it's up to 45.3%.

    Toss in property tax, sales tax, SSI, etc etc etc...

  • Re:which state(s)? (Score:5, Informative)

    by Registered Coward v2 (447531) on Thursday April 16, 2009 @04:04PM (#27603445)

    So what? I'm pretty sure any online merchant system can handle a thousand numbers.

    That's not the problem - it's that a sale may be taxed differently even within a state. For example, one county may have a "Local Option sales tax" that adds to the state tax - so if you live within that county you would need to pay it. However, unless the seller knows what county you are in there's no way to know what tax to actually collect. ZIP codes alone won't do it. Add city sales tax and it gets even more complex.

    Then there's the issue of what is taxable. As the article pointed out two similar things - versions of Milky Way Bars - may be treated differently. What about tax Holidays - vendors should not collect taxes on those days but then again what is and isn't taxed varies greatly.

    States could enforce use taxes but won't - the political fallout would be enormous and no state politician wants to start that fight. Instead they go after an easier target - internet retailers.

  • by AndersOSU (873247) on Thursday April 16, 2009 @04:11PM (#27603559)

    A couple of things. The federal sales tax is currently a uniform 0%.

    SCOTUS could easily rule that Monday is Polka day, but I'm not sure how they'd couch that in the constitution or in case law.

    The constitution gives congress the power to regulate interstate trade - not intra state trade - the 10th Ammendment therefore means that the states have the right to impose their own sales taxes.

    Of course SCOTUS could also pull some tortured logic [wikipedia.org] to argue that buisness entirely within a state is actually interstate commerce - and stop paying lip service to the 10th amendment all together.

  • Re:which state(s)? (Score:3, Informative)

    by TheRaven64 (641858) on Thursday April 16, 2009 @04:18PM (#27603675) Journal

    We also had NY make us pay sales tax because we DROVE THROUGH NY to delivery products ourselves to PA.

    Isn't that unconstitutional? I thought only the Federal government was allowed to regulate interstate commerce. A tax like this - on objects travelling through, not being bought or sold in a given state - is an import / export duty, not a sales tax.

  • by JesseMcDonald (536341) on Thursday April 16, 2009 @09:16PM (#27606691) Homepage

    There's no such thing as "under taxed". Anyway, just how much more do you think they could raise taxes without suffering a decrease in their ill-gotten revenues? Total taxes are already at or above 50% for many individuals; there's not much slack left. Even if they did happen to see an increase you know they'd just spend it; having displayed no tendency toward financial solvency in the past, there's no reason to expect them to change any time soon.

    If Congress had the will to balance the budget they could do at the current tax levels. For that matter, they could do it at the tax levels we had a century ago, which were less than half of what they are now. They have clearly demonstrated that they lack the will to curtail spending, and as such one would have to be certifiably insane to suggest trusting them with yet more funding.

  • Fair Tax (Score:2, Informative)

    by usacomp2k3 (972768) on Thursday April 16, 2009 @09:26PM (#27606759)
    This would solve all of the problems. You buy online or in the store, and you pay the same amount in taxes, and incidently, less overall than you would now.
  • by DanJ_UK (980165) * on Thursday April 16, 2009 @11:53PM (#27607703) Homepage
    Not every person is a greedy money grabbing bastard, there are and always will be those of us who would just like to be able to survive comfortably.

    You can't blame people for desiring a better life, that is human nature. In the 'first' world, a better life might be that new flat screen tv, or it could be off the drugs and off the streets, in the 'third' world it could be as simple as getting water / food for your family.

    It's all relative, money is just the modern world's necessity to survive, I'm not greedy because I want to pay a bit more to live in a home that's comfortable for me.

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