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The Almighty Buck Government The Internet United States News

End of the Internet's Tax-Free Ride? 426 has a piece looking at renewed efforts by both state and federal lawmakers to subject Internet sales to state taxes. "Two bills are pending in Congress that would allow tax collectors to target out-of-state Internet and mail-order retailers, and their supporters are optimistic about their political prospects... Meanwhile, pro-tax states are trying their own ways to circumvent a long-standing rule saying a retailer must have physical presence before it can be forced to collect taxes. One effort came from New York state, where legislators recently approved a measure requiring Amazon and other online retailers (that lack a physical presence in the state) to collect sales tax on New Yorkers' purchases... This is not exactly a new debate... But now, with a Democratic Congress and a potentially Democratic administration next year, the arguments may gain more political traction."
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End of the Internet's Tax-Free Ride?

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  • by xLittleP ( 987772 ) on Tuesday April 15, 2008 @07:31PM (#23083858)
    I think John McCain wants to ban internet taxes. From his website [] (about halfway down the page):

    John McCain Will Ban Internet Taxes. John McCain has been a leader in keeping the Internet free of taxes. As President, he will seek a permanent ban on taxes that threaten this engine of economic growth and prosperity.
    Proceed to mod as flamebait...
  • by ijustam ( 1127015 ) on Tuesday April 15, 2008 @07:43PM (#23083990) Journal
    Probably not the best place to mention McCain, considering he opposes [] network [] neutrality []
  • Re:Fantastic (Score:4, Informative)

    by doktor-hladnjak ( 650513 ) on Tuesday April 15, 2008 @07:43PM (#23083998)
    For starters, this is about state sales taxes, not federal income taxes. Lowering or raising federal income tax doesn't directly affect state tax revenues.
  • Re:Fantastic (Score:5, Informative)

    by pjl5602 ( 150416 ) on Tuesday April 15, 2008 @07:44PM (#23084008) Homepage
    I get the feeling you don't run a business that collects sales tax then. PayPal may collect the sales tax, but the business is still on the hook for sending the tax into the state.
  • not quite.

    It's intent is for mail order items to residence.

    So if I am living in Ca, and buy 10.00 widget from acme widget co, located in BFE, mid-west I pay my 7%(whatever) to the state at the end of the year.
  • However, as I'm sure others will note, Democrats tend to support sales taxes. New York is highly Democrat, and you see 8.75% sales tax. I still don't see the purpose of this.
    Highly Republican Arizona isn't far behind, at 8.1%.
  • by doktor-hladnjak ( 650513 ) on Tuesday April 15, 2008 @07:49PM (#23084050)
    Federal internet taxes are not the same thing as paying state sales tax on purchases made over the internet. Internet taxes would be taxes on either personal/business connections or services or other infrastructure, similar to the federal taxes that currently show up on cell phone, landline and cable bills already.
  • by seriesrover ( 867969 ) <> on Tuesday April 15, 2008 @08:17PM (#23084298)
    Then you may want to read this : []

    Its pretty well established that "the Rich" pay an overwhelming proportion of the tax bill - the top 10% of people pay about in response to your statement, how exactly are you making the rich richer ?

    If you want to say that those with a soul must agree with you, you may want to get some facts straight first.

  • Re:Fantastic (Score:3, Informative)

    by MadnessASAP ( 1052274 ) <> on Tuesday April 15, 2008 @08:38PM (#23084462)
    Paypal behaves in some ways like a bank (They maintain monetary accounts for customers and allow the transfer to and from these accounts) but they are not classified as a bank and as such do not need to follow banking laws. This has led to Paypal doing things like locking a person or organizations account citing "suspicious behaviour" and offering no further explanation or directions as to how to get there account unfrozen forcing people to spend months of time and effort to get often times significant amounts of money back from Paypal.
  • by MBCook ( 132727 ) <> on Tuesday April 15, 2008 @08:41PM (#23084502) Homepage

    True, but the federal government has done this kind of thing before. Besides simply declaring that such taxes can't be passed (you could argue interstate-commerce clause), the feds can just fiddle with funding.

    "Violate our ban and you get no federal help for disasters, or maybe to help with police/etc, or road assistance, or health care (ouch), or something else." The states will run scared. It worked for getting the drinking age raised to 21.

  • Re:Tax and spend! (Score:4, Informative)

    by ppanon ( 16583 ) on Tuesday April 15, 2008 @08:58PM (#23084614) Homepage Journal

    So ask yourself, Is "Maverick" really THAT bad?
    He wants to continue getting blank cheques to continue a war that has a true cost for the current 5-year span estimated (once you count extra long-term healthcare costs for injured soldiers and replacement costs for equipment worn-out due to heavier war use) at 3 trillion dollars. And he's willing to continue it for up to 100 years if that's what it takes. That money's got to come from somewhere, and right now it's mainly being borrowed from the Chinese instead of being paid for by USA citizens. Even the Democrats can't waste money at anything close to that rate if they stop the war.

    Seriously, most of the federal deficits of the last 30 years have been under/due to spending under Republican administrations. How long do you think your $9 trillion debt can continue to increase before the world starts treating dollars as toilet paper? You think oil is expensive now?

    Yeah, he's that bad. He's less in touch with reality than Tom "Scientology" Cruise (that other "Maverick" pilot).
  • Re:Tax and spend! (Score:2, Informative)

    by Agarax ( 864558 ) on Tuesday April 15, 2008 @09:21PM (#23084786)
    Actually he said that he wanted to maintain a presence in Iraq for a 100 years if necessary, not keep fighting.

    Questioner: President Bush has talked about our staying in Iraq for fifty yearsâ¦

    McCain: Maybe a hundred. Make it one hundred. Weâ(TM)ve been in South Korea, weâ(TM)ve been in Japan for sixty years. Weâ(TM)ve been in South Korea for fifty years or so. Thatâ(TM)d be fine with me as long as Americans are not being injured or harmed or wounded or killed. Then itâ(TM)s fine with me. I would hope it would be fine with you if we maintain a presence in a very volatile part of the world where Al Qaeda is training, recruiting, equipping and motivating people every single day.
  • Re:Tax and spend! (Score:3, Informative)

    by keithjr ( 1091829 ) on Tuesday April 15, 2008 @09:38PM (#23084940)
    Yes. Maverick really is that bad. We can argue fiscal opinions and schools of thought until we're blue in the face. But that thought wearies me. I'd rather focus on hard evidence.

    We've proven that tax cuts are not a fiscally responsible way to balance a budget or stimulate an economy. We know this because any administration that's overseen one has overseen horrific national debt, and the latest has been the worst in history by orders of magnitude. This isn't opinion. It is cold, hard fact.

    The Democratic philosophy is one of higher tax responsibility, true. That's a tough pill to swallow, but the theory is that greater services are delivered as a result (again, this one can vary by implementation). Perhaps the next administration will be able to utilize an internet tax to help subsidize the rolling out improvements network infrastructure, fiber to the home and such. We can only hope. And vote.
  • Re:Fantastic (Score:5, Informative)

    by nmos ( 25822 ) on Tuesday April 15, 2008 @09:58PM (#23085132)
    It isn't that simple. There isn't a single "State" sales tax, at least in the states I've lived in. Often there is a base rate for the state + an additional rate for the county and another rate for each city. In addition different taxing authorities (city/state/county) have different ideas of what kinds of items are taxable and at what rates. For example, in a nearby city you wouldn't pay any tax on a hamburger patty and a bun from a supermarket but those same items purchased from a restarant are taxed, and at a much higher rate than other kinds of items. I wouldn't be at all surprised if the cost of complying with this mess ended up being more than the taxes themselves.

    The only real negative effect for internet businesses is that they've been evading sales tax for years

    That's just not true. Here in AZ at least, our "Sales Tax" (really a use tax) is considered a tax on the business rather than the consumer. What that means is that I already have to pay taxes to AZ on everything I sell no matter where the buyer is so in effect I'd be taxed twice if I had to pay again to the buyer's state as well. If anyone has been evading taxes it's the citizens that havn't been reporting their out of state purchases and paying the relivent taxes to their own state.
  • Re:No They Won't (Score:3, Informative)

    by petermgreen ( 876956 ) <plugwash @ p> on Tuesday April 15, 2008 @10:02PM (#23085168) Homepage
    moving offshore can work very well for small items.

    jersy is a classic for this. It is not part of the EU VAT system. It is also very close to britan (and to france too for that matter, I dunno if there are french companies who use the same trick).

    So small items which are under the threshold for import VAT are frequently shipped from there to UK customers hence avoiding the VAT on those items.
  • Re:Fantastic (Score:3, Informative)

    by StarvingSE ( 875139 ) on Tuesday April 15, 2008 @10:39PM (#23085460)
    If the try to make me pay Taxes because I live in Michigan, well what happens when I make a purchase but I am in Georgia at the time? Or maybe Texas? Whose tax do I pay then? Does my tax burden follow me around the nation?

    You pay taxes in Michigan, Georgia, and Texas. You think I'm kidding, try telecommuting from Michigan to a job in New York. You'll pay both New York and Michigan income tax. Check this [] and this []

    To tell you the truth, this is just another way to place a disproportionate amount of the tax burden on the poor and middle class. Sales taxes are a regressive tax, and any increase of a regressive tax during a recession is just plain idiotic.
  • by imamac ( 1083405 ) on Tuesday April 15, 2008 @10:50PM (#23085540)
    I would love to see the Fair Tax enacted and every other tax disappear. [] Read. Learn. This goes for everyone.
  • Re:Fantastic (Score:2, Informative)

    by theglassishalf ( 216497 ) on Tuesday April 15, 2008 @11:24PM (#23085756) Homepage

    How about the fact that federal receipts went up after the Bush tax cuts? It's called the Laffer curve.

    Liar []. Either that or grossly misinformed. The Laffer curve is right about one thing: at zero percent tax rate, the government collects no revenue. Other than that, it is a teaching tool for the law of diminishing returns. That's it. We don't know where the curve peaks, or even if it's a curve.

    Ack. I hope you either don't vote, or educate yourself before your next chance.

  • Re:Tax and spend! (Score:3, Informative)

    by Khaed ( 544779 ) on Wednesday April 16, 2008 @12:28AM (#23086104)
    And he's willing to continue it for up to 100 years if that's what it takes.

    You are either:
    a) Intentionally misrepresenting what McCain said, or
    b) You don't know what he actually said.

    What he said was that he wouldn't object to a presence (like the one in Korea, Japan, Germany, or France), for 100 years, so long as Americans aren't being killed. You can see the comment yourself: []

    Or you can just continue to believe the lie spit out by his opponents and happily go on distorting the truth.
  • by sudnshok ( 136477 ) * on Wednesday April 16, 2008 @12:35AM (#23086162)
    I posted this on CNET, but I might as well post it here as well:

    Is there anything better than sensational bogus statistics? Some politicians claim states would lose half a trillion dollars in tax by 2011? Do they think most Americans didn't make it past 2nd grade math? Let's examine that claim with real math and logic:

    Here are the e-commerce retail sales for the last 9 years:

    2007 $136B
    2006 $108B
    2005 $86B
    2004 $69B
    2003 $57B
    2002 $44
    2001 $34
    2000 $29
    1999 $15

    Source: []

    That's a total of $578 billion in revenue for 99-07.

    Now, if we assume an average of 7% sales tax, and we assume that ALL items are taxable (which in most states they are not, like food and clothing), you would need $7.14 trillion in revenue to accumulate sales tax of $500 billion (which is the claimed lost tax by 2011).

    That would mean that e-commerce would have to magically jump from $136B in revenue to an average of $1.6 trillion each year for 08-11. I mean, seriously, their figures are not even in the same ballpark as reality.
  • by Creepy ( 93888 ) on Wednesday April 16, 2008 @10:01AM (#23089678) Journal
    There is no way this will work without a unified sales tax system. State taxing is ridiculously complex and there is no easy way to automate it.

    First off, Internet businesses are not avoiding sales tax; they are exempt from collecting it in states they don't operate in because every state has a different law on how much to collect and when it needs to be paid, therefore it is left to the consumer to pay this tax.

    I'd say 90% of the people I know could currently be thrown in jail for tax evasion for failure to pay Use Tax [] (mentioned in TFA).

    This is non-trivial, and NOT solvable by changing a program on PayPal. Why? Take Minnesota, with a 6.5% Use Tax, but a threshold of $770 payable yearly on Tax Day (April 15). Until $770 is spent, purchasers don't need to pay tax on catalog or Internet sales - how does PayPal know when $770 is spent? It doesn't - it only knows what is spent on PayPal. Furthermore, this tax is paid separately using a different form (as it is in every state that has it, I believe), so prepaying and rebating it is giving the government a free loan on a purchaser's money (I certainly would take it to court on those grounds).

        Then there are the punishments for late payment - say you live in Vermont (due monthly on the 20th) and your PayPal account doesn't have enough cash on the 20th of the month. Suddenly you owe $50 more, 5% additional penalty per month + interest. Do you assess that on each purchased item, once for each purchase, or just once for the entire thing? The law isn't clear.

        What we need is uniform sale and use tax laws like the mentioned Streamlined Sales and Use Tax proposal, but some states don't want to concede because if the tax is, say, set at 5%, you piss off brick-and-mortar retailers in states where tax is greater than 5%. To be fair to all states you need to set the tax at the maximum tax used in any state, which is currently Tennessee's 9.4%. I have serious doubts states with no sales tax will agree to a 9.4% tax.

    I've covered a fraction of the states - now lets toss in counties, boroughs, and municipalities. Alaska, for instance, has no state sales tax, but 95% of boroughs issue one, so to be fair to retailers, you would also need to collect for the borough.

    So there you have it, all the issues involved (at least that I can think of) - got an easy solution? I certainly can't think of one.

Disks travel in packs.