Supreme Court Declines Case On Making Online Retailers Collect Sales Taxes 293
thomst writes "Robert Barnes of the Washington Post reports that the US Supreme Court has declined to hear petitions from Amazon.com and Overstock.com requesting that a decision by the New York State Supreme Court permitting that state's 2008 law requiring sales taxes be collected on Internet sales, even if the seller has no 'business presence' in New York. The New York Court of Appeals ruled that Amazon's relationship with third-party affiliates in the state that receive commissions for sending Web traffic its way satisfied the 'substantial nexus' necessary to force the company to collect taxes, and New York's Supreme Court had affirmed the ruling. The Federal high court's refusal to hear the petitions leaves the state law in effect, even though it appears to conflict with the Court's 1993 decision in Quill v. North Dakota."
Mistake (Score:4, Informative)
There seems to be a mistake with which court ruled and which court affirmed.
The New York Court of Appeals is their highest court; the New York Supreme Court is its "appeals court." Hence, the NY district court ruled, NYSC then affirmed, whereby the high court (NY Court of Appeals) then affirmed once again. Counter-intuitive, I know; but that's the way it is.
Re:All your tax avoidance schemes are done (Score:5, Informative)
"Just a note, the UK is also going after tax avoiding, not just Italy, and the same goes for the US. ...
Nuff said."
No, NOT "nuff said". This is NOT ABOUT "avoiding taxes". It is about the sovereignty of states and their freedom from interference by other states. The U.S. is not the UK. Our government is organized very differently.
We have 50 independent States which have independent tax authority, and Point 1 here is that no State has authority to tax transactions that occur in another State. That would violate the latter State's sovereignty. Point 2 is that the Federal government has no authority to collect taxes on behalf of any State. We have 200 years of case law and prior legal decisions to back this up. (Which, I should add, the current Supreme Court seems to take pride in ignoring.)
In fact this was a hotly debated issue -- in court -- about 150 years ago, when mail-order businesses became popular. A person could send a check to somebody in another State, and that company would send the product to the buyer. When this happens, there is Point 3: the transaction is deemed to take place at the location of the business. That is the only workable way to do it: the transaction doesn't take place at the purchaser's location, because companies would have to keep track of tens of thousands of individual taxing districts throughout the country, and put up with tens of thousands of different sets of regulations concerning how to collect and distribute the taxes. That won't work. Even today, when computers could tell you what the taxes are, keeping track of how much tax to collect, and all the different reporting and payment requirements, would only be possible for giant corporations. Small companies would be out of business.
Point 4 is that Internet sales are mail order. The single difference is method of payment. Most people today buy via credit card rather than sending a check.
Point 5: The courts ruled that if the business has a "significant business nexus" within the purchaser's State (usually meaning a "physical presence" link a branch store or warehouse), the transaction can be deemed to take place in the purchaser's own state and is therefore subject to the sales taxes of that state. This is not unreasonable.
Point 5: To get around the "foreign transaction" problem, States came up with the idea of a "use tax". Since they have no authority to tax a transaction that takes place in another state, what they do is tax the purchaser for the use of the item they purchased elsewhere. The use tax is invariably the same amount as a sales tax would be, BUT it isn't a tax on the transaction, it is a tax on the use of the item within the resident's state. So it is legal.
Point 6: States must rely on people reporting their purchases in order to enforce the "use taxes", which many people do not do. In fact many people do not even know use taxes exist unless they purchase an automobile outside their state, in which case states pretty much know where you got it (because of licensing requirements) and will charge the use tax. However, that leads to
Point 7: Although States find it difficult to enforce use taxes on internet (mail order) purchases, difficulty of enforcing the law still does not change the fact that they have no authority to violate State sovereignty by taxing foreign transactions.
So that is a bit of history about how this actually works. The conclusion is Point 8: there is no lack of taxing power on internet (mail order) sales. It's just that the States find it difficult to enforce their use taxes. That is why they have been pushing for an (unconstitutional) "internet sales tax".
The very concept of an across-the-board "internet sales tax" is in fact a violation of our separation of powers. There is no legal basis for States to tax transactions that occur in other States. If they could do that, they could tax anything, anywhere. Texas could tax a transaction between an Ohio resident that occurs in Maryland. If that sounds ridiculous to you, that's because it is. There is simply no legal basis for any of this.
Re:Finally a flat playing ground (Score:5, Informative)
No, actually, Amazon has been fighting tooth and nail against sales tax for years.
Amazon has been fighting against having to collect individual sales tax, while endorsing a Federal framework [wsj.com] like The Marketplace Fairness Act [dailyfinance.com].
Re:Finally a flat playing ground (Score:3, Informative)
Well, that statement does NOT make sense.
Total prices = Cost of Item + Shipping + Sales Tax
So, yes, not paying sales tax quite often makes the large decision in where to purchase, when total sales tax buying locally is close to 10%, that is a significant cost.
I find that the actual prices at Amazon vs most B&M places local are pretty close, but the lack of sales tax and free shipping make the choice pretty easy for me.
Re:Finally a flat playing ground (Score:5, Informative)
It makes perfect sense. Prices are cheaper, and it's not due to that evil sales tax being forced on B&M stores.
Lets look at the SATA cable example.
Best Buy: Cost of Item: $25. Shipping: Free. Sales Tax (7.25%): 1.81 = Total: $26.81.
Amazon: Cost of item: $4. Shipping fee: $4.50 (yes more than 100% of the item's cost), Sales Tax (None) = Total: $8.50.
Which one gets the sale?
Now lets say sales tax is collected (If I live in a state with an Amazon hub): $4 + 4.50 + (0.29) = $8.79. Heck even if the shipping is taxed it's cheaper (+0.62).
Re:Shocking news (Score:5, Informative)
There is no SCOTUS ruling. SCOTUS let a (very bad) state decision stand. Why is it bad? Anything that even *leans* towards someone in state A having to pay taxes to, and which were legislated in, state B, is destructive to the very fabric of the states. Federal taxes are bad enough (for their over-reach and the incredible misuses the money is put to and the inability of the citizen to have actual effective representation in any tax matter) but add my state wanting new highways and taxing your purchase in your state to enable that, or any variation thereto... now you have well and truly screwed the pooch.
1. The taxes at issue here are YOUR STATE'S taxes. It's not you (as a resident of State A) being forced to pay State B's taxes. The question is under what circumstances a business can be forced to collect State A's taxes for purchases made by residents in State A. If you don't like State A's taxes, you can work to get them changed, or move to a state with lower taxes (I hear B is nice this time of year).
2. Technically, sales taxes are paid by the buyer, not the seller. The only issue here is under what circumstances State A can force Amazon to collect State A's taxes - in the absence of Amazon collecting them, you're supposed to submit them yourself.
Just give us one fucking sales tax rate already (Score:5, Informative)
Well, that is the current dream of many.. find ways to have all the benefits of operating in the US without paying for it. Taxes are something that it is in one's best interest to have other people paying.
I don't mind paying taxes, and wouldn't mind paying a standard VAT to sell anywhere in the US. But the local US sales tax laws are a complete clusterfuck. When I'm selling books [amazon.com] in various locations, I have to dig up the tax rate for that location It's a hassle, but doable, but some states are really fucked up.
New York is one of them.
Sales tax varies depending on which county, in some cases which city or which part of the city you're in. Tax rates coded to zip codes don't work...some zipcodes span localities with wildly varying sales tax rates. I'lliinois is better, but still, rates vary depending on whether you're in Chicago proper, one of the suburbs, or one of the localities downstate.
Multiply this complexity by 50 states and you begin to realize what a complete clusterfuck it is for any small online buisiness to try and cope with. Shipping a package to Bumblefuck, Nebraska? What's the sales tax? How about Buttfuck, New York? Good luck.
Impose a national VAT of x percent, and kick back some or all of it to the states, and ban local sales taxes of any kind. This needs to be vastly simplified. Even if it were 50 states and 50 different sales tax rates that would be doable, but with many dozens of different sales tax venues with varying rates in New York alone, and plenty of states like Illiinois with a few cities that impose their own surtax to the state rate, figuring this crap out is a nightmare on the best of days. If every state is allowed to impose its taxes on all online folks, only the big players like Amazon will be able to cope. The rest of us, and most new startups, will crumble under the burden.
Re:Finally a flat playing ground (Score:3, Informative)
There is no proof that reducing tax liability on business makes consumers pay less. Demand drives price. Tax has nothing to do with price.
Giving business tax breaks just puts more money in the pockets of business owners. They'll still charge the same and pay their workers the same because those costs have nothing to do with tax liability.
I suggest that if a business can't operate without handouts that it does not deserve to be in business. That is OK because other more efficient and innovative business that don't rely on handouts will take it's place.
See what I did there?