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The Almighty Buck Government The Internet United States News

End of the Internet's Tax-Free Ride? 426

News.com 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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  • Fantastic (Score:5, Interesting)

    by Lost+Found ( 844289 ) on Tuesday April 15, 2008 @07:24PM (#23083772)
    More taxes... I'm sure everyone feels a lot of sympathy for them with it being tax season and everything. I'm sure it will be a lot of fun for small mom and pop retailers to deal with filing paperwork and collecting tax in 50 states just in order to sell trinkets off a small business website.
  • Standing (Score:3, Interesting)

    by HaeMaker ( 221642 ) on Tuesday April 15, 2008 @07:26PM (#23083786) Homepage
    It will be interesting because they probably don't have standing to collect. They would either have to collect from the customer or setup a customs system when the goods enter (are imported?) to the state.
  • See (Score:2, Interesting)

    by BigJClark ( 1226554 ) on Tuesday April 15, 2008 @07:38PM (#23083934)

    This doesn't bother me, not in the least. I can remember a day, when any use of the Internet to sell anything was abhorent. Advertising of any matter was viewed with disgust.

    Now, due to the greedy bureaucratic fatcats who wish to tax the little guy to the bitter end, we might see a drop in pointless port 80 communication. (Present company excluded, of course).

    I say bring it, lets clean the fat off the bone.
  • THIS IS ASININE! (Score:5, Interesting)

    by Jane Q. Public ( 1010737 ) on Tuesday April 15, 2008 @07:41PM (#23083968)
    There are ALREADY laws and taxes in place! A state does not have legal authority to impose taxes on a sale made in another state. That is, it cannot force an Oklahoma retailer to collect California sales taxes for a sale made to a Californian.

    However, as far as I am aware ALL 50 STATES have "use taxes" in place, that are supposed to be paid for out-of-state purchases. In most cases the amount of use tax is identical to what the sales tax would have been if the sale had been local. The difference is that the purchaser, not the seller, is responsible for paying the tax. This is the way it MUST be... neither the individual States nor the Federal government have the Constitutional authority to force a business to collect taxes for the other 49 states. And even if they could, it would be an excessive burden... trying to keep track of tax rates for different kinds of products in 50 individual states is beyond the reasonable capabilities of most small businesses, which even today are still the backbone of our economy. Further, the Federal government also does not have the authority to collect State taxes on their behalf.

    The taxes are already there. The laws are already in place. If they don't like the way that works... too bad. They just do not have the Constitutional authority to do this. And there is nothing new here, either... people have been buying by mail-order for at least a couple of centuries now, and this debate has been going on all that time. DO NOT let them try to tell you that eBay is forcing their hands. Hogwash.
  • by Ucklak ( 755284 ) on Tuesday April 15, 2008 @08:04PM (#23084174)
    Normally, brick and mortar taxes are supposed to pay for police, fire, and whatnot.
    This internet tax doesn't use any of that. The fees we pay for shipping and handling cover the road fees required to bring the product to our door.

    I already pay tax on my internet service.
  • Re:Fantastic (Score:1, Interesting)

    by Anonymous Coward on Tuesday April 15, 2008 @08:14PM (#23084260)
    Yeah, but what about those businesses that can't take paypal. Because Paypal is owned by ebay, paypal doesn't allow transactions for things not allowed by ebay.

    Legitimate items... like say... oh, antique firearms. Should these and other such niche businesses have to bend over backward for every state/county/township in the US?

    Having just done my taxes, I can say - please, no more taxes. I heard about the 1% rule - all transactions get taxed 1% with no exceptions (no other rules or taxes) -- please, please, please! Make this a reality! No more forms, and schedules, and loopholes. I just look at a tax form with checkmarks pertaining to the "Paperwork Reduction Act". I had to laugh at the irony.
  • Re:Fantastic (Score:4, Interesting)

    by Anonymous Coward on Tuesday April 15, 2008 @08:16PM (#23084290)
    Yeah, but it's going to hurt online retailers. They will have to offer alot more free shipping. The only reason to shop online in my case was because it was cheaper to pay shipping than sales tax, which netted more money in my pocket. If I have to pay sales tax and shipping, then I'm just going to wal-mart to buy what I need. It's more convenient and cheaper in the long run. Plus I don't have to wait three days to play with my new toys. :)
  • Re:Fantastic (Score:3, Interesting)

    by larry bagina ( 561269 ) on Tuesday April 15, 2008 @08:28PM (#23084384) Journal
    some states have a "use tax" where you list the amount of tax-free out-of-state purchases you made and pay sales tax on them when you file your state income taxes. (Of course, most people don't). I am aware of some states nailing people over that, though.
  • Re:Fantastic (Score:2, Interesting)

    by theeddie55 ( 982783 ) on Tuesday April 15, 2008 @08:40PM (#23084486)
    Do mom and pop annually take over $10,000 from New York State alone. If not then this doesn't apply.
  • Re:Fantastic (Score:3, Interesting)

    by PPH ( 736903 ) on Tuesday April 15, 2008 @08:58PM (#23084604)

    The business may be on the hook, but that doesn't mean PayPal can't implement a simple automatic click-through system so you basically just need to print out and sign some automatically-generated forms at the end of the year.

    Yeah. That's the same form we fill out to report (and pay state B&O tax) our companie's gross reciepts. Gross reciepts from sales in any state or country. I don't know how many other states have this kind of tax structure, but if even a fraction of the 50 did, there would be nothing left for the company.

    Trust me. You don't want the Washington State Dept. of Revenue to know that you exist.

  • by urcreepyneighbor ( 1171755 ) on Tuesday April 15, 2008 @09:09PM (#23084690)

    Woooo, the evil Democrats are going to tax my intarnets!!
    Yes, the Dems love to tax the fuck out of every thing they possibly can.

    Deal with it.

    It's reality.

    Reality is a heartless, cruel bitch.
  • Re:Tax and spend! (Score:3, Interesting)

    by Reziac ( 43301 ) * on Tuesday April 15, 2008 @09:09PM (#23084692) Homepage Journal
    An AC speculates,

    "Other, more likely solutions exist. Most notably, strong financial cryptography that makes secure currency transfers possible. They can't tax what they can't track."

    This is only feasible with individual-to-individual transactions, which are a trivial minority of internet sales. The moment you become a business, you are already tracked in numerous ways, not least of which is income tax. Your sales, and any sales tax due therefrom, are concomitantly tracked via your declaring and paying taxes on your income, which as a business you will do, so the gov't doesn't socially rehabilitate you.

    Likewise sales in a public forum like eBay, which by their very existence declare to the tax board that income has occurred at one end or the other of the transaction, and therefore needs taxing.

  • by ccmay ( 116316 ) on Tuesday April 15, 2008 @09:14PM (#23084734)
    do you want to be an American who wants to cheat your government deliberately?"

    I want my government reduced to 1890 levels, and armies of government useless eaters forced to find honest work.

  • Re:Fantastic (Score:5, Interesting)

    by LynnwoodRooster ( 966895 ) on Tuesday April 15, 2008 @09:22PM (#23084794) Journal
    Additionally, at least in the State of Washington, the State gets to decide if your resale certs on file are valid. If they are not - regardless of a sworn statement from the business/entity that supplied the resale cert - you, the seller, are on the hook for any sales taxes that should have been collected.

    In essence, the only way you can be sure you are collecting the proper amount of sales tax is to collect tax on EVERYTHING, regardless of the actual legal resale or charitable tax status of the buyer. And the buyer's statement is not enough proof to show otherwise.

    Trust me, I've gone through a WA State DOR "audit" and extortion (pay us $10,000 and we'll just forgive that other $4,500 - never mind that our own directions and documentation we provided at your request 4 years ago caused you to underreport and misclassify your business as a manufacturing, not engineering/design company).

    Bottom line for this "Internet Tax" issue: if it doesn't apply to catalog sales, it shouldn't apply to Internet sales. Sales out of state are sales out of state, regardless of the means of delivery of the sale.

  • Re:Double taxation (Score:2, Interesting)

    by pyrogator ( 973414 ) on Tuesday April 15, 2008 @09:48PM (#23085026)
    Maine does something similar. I moved there in Oct 2005 and had to pay Maine state income tax on what I made before I moved there. Then, when I moved back to Florida in 2006, I still had to pay Maine on what I made AFTER I moved out of the state.
  • Re:Double taxation (Score:3, Interesting)

    by tompaulco ( 629533 ) on Tuesday April 15, 2008 @10:19PM (#23085314) Homepage Journal
    Wisconsin is similar. I got double taxed one year because I was out of work and earned $0.00 in Wisconsin, and I moved to Oklahoma almost exactly in the middle of the year and earned about $20k in Oklahoma. Well, according to Oklahoma tax law, I owe income tax on the income I earned in the state, and according to Wisconsin tax law, I owe income on 1/2 the income I earned in that year because I lived there for half the year. So I was out of work half the year AND had to pay more than my fair share of taxes.
  • Re:Fantastic (Score:3, Interesting)

    by tompaulco ( 629533 ) on Tuesday April 15, 2008 @11:02PM (#23085628) Homepage Journal
    The only real negative effect for internet businesses is that they've been evading sales tax for years, and now their customers will have to pay more.
    Internet businesses have not been evading sales tax. They are not required to collect or pay sales tax. Rather it is the consumer in most states who has been evading paying the "USE TAX" aka Sales Tax on items bought out of state.
    What the New York government is trying to do is get some of that money which New Yorkers owe the government, but instead of collecting it themselves, they want to use someone else's labor to do it.
    I want to know, if I am going to expend all this effort to collect their taxes for them, what's my cut? Oklahoma gives me some negligible amount for my trouble. Something like 4 or 5 bucks for $7500 worth of retail. Considering the time spent organizing and filing the paperwork, that is less than minimum wage.
    I think it should be higher. In my best Fat Tony impression. "We are your business partners. And as such, we are entitled to a percentage of your profits. Something in the area of - 100 percent?"
  • by 0111 1110 ( 518466 ) on Tuesday April 15, 2008 @11:22PM (#23085746)
    The usual lament about mod points. Well said. Exactly right. There is no justification for this tax. How about cutting spending instead. The government is way bigger than it needs to be. And I can't decide which party is worse. After all the DMCA was put in place under Clinton's watch, no? Are we going to have corporate welfare like that *and* all kinds of fucking ridiculous new taxes. If this passes I will definitely be ordering more computer parts from Canada. Canadian internet retailers are going to love this. And for anyone who thinks that this tax can just easily be passed onto the consumer, you are in dreamland. Aint gonna happen. Look up the term "elasticity" in a microeconomics textbook. Most stuff that places like Amazon or Newegg sell are not exactly necessities in life. If stuff costs more people will buy less of it. Doesn't matter if the cost is profit for the gov't or for the business.
  • Re:Tax and spend! (Score:3, Interesting)

    by Solandri ( 704621 ) on Wednesday April 16, 2008 @03:05AM (#23086928)

    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.
    You do realize Social Security and Medicare are headed for $30+ trillion deficits in the same time used to arrive at that $3 trillion figure, right?
  • Good! (Score:2, Interesting)

    by David Greene ( 463 ) on Wednesday April 16, 2008 @12:29PM (#23092224)

    The end of the internet tax subsidy is long overdue. Why should local businesses be at a disadvantage to mail-order companies that have zero commitment in the local community? These local businesses (most of them small businesses) provide the vast majority of jobs in a particular region. Exempting mail-order houses from certain responsibilities essentially encourages outsourcing of jobs.

    It's not true that the mail order industry pays for what it uses through fuel taxes and other fees. Sales taxes are an important resource for local units of government. Roads get built with them. Transit gets built and operated. Services get provided.

    Taxes are the way we invest in our community and our common future. Why should some companies be exempted from their civic responsibility?

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

    by JavaLord ( 680960 ) on Wednesday April 16, 2008 @01:37PM (#23093182) Journal
    I hate to say this, but Americans are very undertaxed relative to govt spending. The only thing worse than heavy taxes and heavy spending is light taxes and heavy spending (i.e. what we have now), because it WILL have to be repaid... with interest! Our deficit spending is killing the dollar, sending gas prices (and all imports) sky high.

    What is killing the dollar is that its losing its place as the reserve currency of the world. This has a little bit to do with spending, but more to do with oil being traded in different denominations now.

    At the risk of getting burned at the stake, I do see a problem with the mentality that it's "our money" implying we deserve to pay no taxes. We drive on the roads, we expect the fire dept and police to show up if necessary, we cheer on the troops - then we expect it all to be free.

    With the exception of the troops and interstate highways, those are local issues. They don't excuse the high federal taxes. Yes we do 'drive on roads', but you should pay for that via a usage tax, (ie tolls) so that the people who use the roads pay for the maintenance. Yes, local people want local police and fire departments. That has nothing to do with federal taxes. The argument that we get all these 'great services' from the government in the US is shortsighted since most of the services we care about are handled, or best handled on a local level.

    Could we disband public education and save a few bucks in tax money?

    Again, you have to think about federal vs state in the US. The Dept of Education gets 68.6 billion dollars. 8% of that actually goes to schools. Now, the federal government sometimes does pass decent laws (NCLB was a mixed bag) that help, but not EVERY tax dollar you spend on education is used efficiently.

    Sure, in the short run, but about 20 years later the GDP would fall by many times the amount "saved."

    There is no proof of this. The reality is, if you disbanded public schools, you'd end up with a private system. Most kids probably would get a better education, but the poor would likely be left behind.

    Sometimes taxing and spending is worthwhile.

    That isn't a good excuse for overspending.

    I think we need a balanced budget amendment to the Constitution. This idea has come and gone many times, such as Grahm/Rudman, and later Ross Perot advocated it. Our current course, especially since Reagan, is nothing short of robbing our children and grandchildren.

    I think it's a good idea. I don't think Reagan 'robbed our grandchildren', and I do think the military spending was justified at the time. I don't think it is now.

    Whether the deficit is resolved by cutting spending or increasing taxes, at least it would force us to be honest. We have proven beyond doubt that we're not capable of using the good times to repay deficits incurred during slowdowns.

    I don't see how we'll ever repay the deficit. If it ever comes to that, expect a 'do over'.

    I do agree that some taxation is needed for services on the local level. I can even live with the federal government taxing for interstate highways, the military, and possibly some income redistribution. I really think a balanced budget amendment and a 'war tax' would go a long way. The main philosophical problem I have with high federal taxes is that they're hard to get changed. At least when it comes to state and local taxes your voice can be heard, when something gets passed on a federal level, the odds of your congressional representative giving a shit about your point of view are slim.

I tell them to turn to the study of mathematics, for it is only there that they might escape the lusts of the flesh. -- Thomas Mann, "The Magic Mountain"

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