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The Courts The Internet Businesses Government The Almighty Buck United States

US Supreme Court Will Revisit Ruling On Collecting Internet Sales Tax (theverge.com) 177

An anonymous reader quotes a report from Bloomberg: The U.S. Supreme Court will consider freeing state and local governments to collect billions of dollars in sales taxes from online retailers, agreeing to revisit a 26-year-old ruling that has made much of the internet a tax-free zone. Heeding calls from traditional retailers and dozens of states, the justices said they'll hear South Dakota's contention that the 1992 ruling is obsolete in the e-commerce era and should be overturned. State and local governments could have collected up to $13 billion more in 2017 if they'd been allowed to require sales tax payments from online merchants and other remote sellers, according to a report from the Government Accountability Office, Congress's non-partisan audit and research agency. Other estimates are even higher. All but five states impose sales taxes.

The high court's 1992 Quill v. North Dakota ruling, which involved a mail-order company, said retailers can be forced to collect taxes only in states where the company has a "physical presence." The court invoked the so-called dormant commerce clause, a judge-created legal doctrine that bars states from interfering with interstate commerce unless authorized by Congress. South Dakota passed its law in 2016 with an eye toward overturning the Quill decision. It requires retailers with more than $100,000 in annual sales in the state to pay a 4.5 percent tax on purchases. Soon after enacting the law, the state filed suit and asked the courts to declare the measure constitutional.

US Supreme Court Will Revisit Ruling On Collecting Internet Sales Tax

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  • Didn't this already happen years ago?

    • Nope...only if there is a physical presence as the OP states. That can be anything from a warehouse or a sales office. I wonder how this will work out if it gets changed. Some states have no sales tax, others have around 4% while others have more than double that. Plus, counties and municipalities often have their own sales taxes as well. It also does not solve the question where an online trade takes place. In the state where the seller has the central office? In the state where the warehouse is? In the st
  • by Frobnicator ( 565869 ) on Friday January 12, 2018 @04:02PM (#55917509) Journal

    The earlier ruling was made because there was no law on the books either way.

    Normally if people or states think it was wrong, they should petition their congress-critters to pass a new law. New laws generally give new structure for the courts to follow. In this situation a new law would have allowed it.

    The lower courts have already said that there is no law in effect, and without a law the prior judgement of requiring an in-state presence applies. I don't think that should change. If people or states want it added, craft and pass a law to that effect.

    • Re: (Score:3, Informative)

      by Anonymous Coward

      >"The earlier ruling was made because there was no law on the books either way. "

      The US constitution prohibits states from taxing interstate commerce. That is the historical basis for states not taxing goods that are sold in other states and brought into the state in question.

      • by Uberbah ( 647458 )

        The US constitution prohibits states from taxing interstate commerce.

        South Dakota isn't looking to regulate commerce between Minnesota and Iowa. It's looking to tax products shipped to South Dakota residents - so what's the anti-tax argument again? If you're in SD and order some crap from Amazon and don't want to pay taxes - feel free to drive to the nearest Amazon warehouse and try to pick it up.

        • What part of no internal tariffs don't you understand? SD can try a use tax, but a retailer in another state has no obligation to report transactions.

    • by phantomfive ( 622387 ) on Friday January 12, 2018 @04:22PM (#55917719) Journal
      All the same, it's hard to see the legal argument for taxing someone who doesn't do anything in your state. If I send a package to Sri Lanka (for example), I'm not subject to Sri Lanka law. They can confiscate the package or something, but they can't make me pay taxes.
      • All the same, it's hard to see the legal argument for taxing someone who doesn't do anything in your state.

        If a company is shipping purchases to customers, it hardly "doesn't do anything" in the state in which the customers live.

        If I send a package to Sri Lanka (for example), I'm not subject to Sri Lanka law. They can confiscate the package or something, but they can't make me pay taxes.

        Countries can and do have customs fees and tariffs that must be paid before importing products. If those fees aren't paid, the package isn't let in.

      • It is sales tax, not VAT. They are taxing the customer; the merchant is “merely” responsible for collecting and reporting it.

      • by AmiMoJo ( 196126 )

        In cases like that they usually require the recipient to pay the tax.

        The EU requires all members to have sales tax within a certain bracket (around 20%) and it is always paid.

        • Yeah, that's the law in many states in America, too. For example, in California, if I buy something mail-order or online, I am required to report it on my taxes. It is mostly not enforced, though.
    • The thing is, unless you've got a business presence in that State, they don't have any jurisdiction to assess a tax.

      It is no different than if the State of Florida passed a law that said everybody in the State of New York had to pay them a thousand dollars a year, for whatever reason they made up. The courts aren't going to look at the reason, they're going to say no, the laws of Florida don't apply in New York so they aren't allowed to tax them.

      • by hawk ( 1151 )

        I am a lawyer, but this isn't legal advice. I charge for that.

        No, it isn't comparable to that at all.

        All or nearly all states have a "use tax" in the same amount as their "sales tax." Almost everywhere, both of these taxes are on on the purchaser, not the seller. In the sales tax case, the vendor is required to collect that tax on the buyer for the state and hold it in trust. (The only exception I know is California, for which the tax is on the seller. The only practical difference is if the merchant la

        • You spend a lot of words blathering really simple stuff that you'd know I know if you had noticed I made an informed comment already. And you were replying to it to disagree, but you don't have any disagreement in your text. You simply purport to disagree because I used common English and it befuddled you.

          My advice, look it up to see if what I said was true. You said a bunch of stuff that is true, but you're simply wrong in claiming that it contradicts anything I said. You may be a lawyer, but you're also k

          • by hawk ( 1151 )

            > That isn't self-consistent.

            No, you missed everything. That is simply what the law is right now, despite your attempt to impose your own structure on it.

            >but your word game is about something different than what I said.

            My "word game" is explaining that what you wrote just isn't the issue here, but rather a common misconception.

            Texas cannot pass a tax on a New York Merchant.

            But no such tax is involved when Texas imposes a use tax on a Texan for a purchase from a New York merchant. The issue is that

            • Of course they're intrepretting in absense of legislation when they're in absence of legislation, pointing that out just underlines why you've failed to communicate; you're just talking without reading what you're responding to. You can't even tell what parts you actually disagree with, and what parts I used different words that you, because all you know is the patterns of words you were trained to use; you don't actually understand the legal meaning, so when I talk about the legal meaning using plain Engli

  • The commerce clause has been anything but dormant since 1942. The courts have consistently ruled that Congress can regulate pretty much anything and everything because of the commerce clause.

    https://en.wikipedia.org/wiki/... [wikipedia.org]

    • Re: (Score:2, Informative)

      by Anonymous Coward

      Wickard_v._Filburn emasculated states' rights and the 10th amendment.

      • People fall into two groups on the 10th Amendment:
        Those who think it doesn't mean anything,
        and those who can't agree what they think it means.

    • by uncqual ( 836337 ) on Friday January 12, 2018 @04:23PM (#55917735)

      The term "Dormant Commerce Clause" refers to a rather specific doctrine that the courts have imposed on the states. The "Dormant Commerce Clause" doesn't exist in the text of the Constitution and it is a limit on the power of states rather than an additional power of Congress "found" in the penumbras of the Constitution by the courts.

      This doctrine holds that since Congress has the power to regulate interstate commerce (a power given to them by the "Commerce Clause" in Article I, Section 8 of the US Constitution: "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;"), it has that right exclusively and individual states are prohibited from doing so. For example, California can't impose a tariff on oranges imported from Florida - although they could put a tax on all oranges sold regardless of their origin.

      (Hmm... In spite of the Dormant Commerce Clause, as of a week or so ago, California has made it illegal to import ammunition purchased in another state without going through a California dealer. Sounds like it's time to invoke the Dormant Commerce Clause!)

      • Though it's referred to as a dormant clause I'd disagree that the constitution doesn't say the states can't regulate interstate commerce. I believe the constitution and the discussion that lead to it were quite clear that they didn't want individual states interfering with commerce between the states. This was one of the "mistakes" of the articles of confederation that the second constitutional convention sought to fix as states had imposed tariffs on other states goods during the confederation creating an

  • by Scareduck ( 177470 ) on Friday January 12, 2018 @04:04PM (#55917535) Homepage Journal

    Quill invoked the Commerce Clause because the United States is set up as a free trade zone. If the states could regulate interstate commerce, they would start engaging in tariff wars -- as they did under the Articles of Confederation. To say this is "judge-created" is to express some rather deep ignorance about the Founders' intentions.

  • OK. I admit that, with the increase in online sales, a full-blown internet sales tax will almost certainly happen one day. However, my wife owns an Internet business. Will she have to file paperwork in all 50 states? How about county and city taxes?

    For this to actually be feasible, we need some sort of government web site where you list sales by zip code. They give you an amount and you pay it. That site distributes the money to the various cities and states. Otherwise, the paperwork will drown a smal

    • Don't you think this is the end goal....big business wants to kill out the small guy?
    • by Jonathan C. Patschke ( 8016 ) on Friday January 12, 2018 @04:18PM (#55917685) Homepage

      It's worse than that.

      Texas, for instance, has state, county, and local sales taxes (usually just the city). The state rate is constant (with exceptions for differing types of goods, some of which are totally exempt and some of which have a portion of the price exempt). The county and local tax rates are usually—but not required by statute to be—constant within those counties and localities, but cities sometimes stretch across county lines, and then there are addresses with a city associated (because of the nearest post office) but that are actually outside the boundaries of the local taxing jurisdiction. Very little of this can be determined by ZIP code because those are allocated to the servicing Post Office rather than political subdivisions.

      The other states with sales taxes probably aren't much saner.

      No, if taxes must be collected based on destination, this is going to be another rent-seeking cottage-industry that exists entirely because some government goons disconnected from reality decided that something that was easy-to-write-down couldn't possibly be a complete pain in the ass to comply with. Square or PayPal or whatever will collect the taxes plus some compliance overhead fee and distribute it on your behalf. Compliance would be a completely unreasonable burden for small businesses to undertake themselves.

      • by Anonymous Coward

        And, actually, it's worse than this. For a while in my state, if you were a plumber, and bought supplies for new construction, you paid the tax, and didn't charge the end users. If the supplies were for an improvement, you didn't pay the tax, and the end user did.

        Oh, and if you create a document in Microsoft Word, and save it as a word document, you don't charge sales tax. If you save it in HTML format, it's considered programming, and you do charge sales tax. Like that isn't fucked up.

        • Oh yeah, I'd forgotten about that. Texas has dumb things about "data processing" versus "programming," where 20% of one is exempt and the other is (AFAIK) non-taxable unless it was part of the task of generating a report (web sites are included in this definition of "report," so front-end programming is always taxable), so writing a program for a client and getting them to run it for you can actually save them some tax if you're playing to the letter of the law.

          And then there's nonsense about whether or no

      • The worst I've heard of is Lousianna where there are more than 1000 separate taxing districts and the taxes rates are different for different items, as an example milk may have no tax in one district and 1% in another district. So not only are there separate districts but the rates and even which items have which tax are different, it creates a table with millionths of possibilities for only a single state. On top of that the rates and items generally change every single year.

        It's problems like this that m

      • this is why we need the federal CONgress critters to pass a simple bill to deal with this:
        1) have the shipping company collect 10% tax on the item.
        2) they are to keep 1% for doing the work and remit 9% to the feds
        3) the feds keep 2% and then forwards 7% to the state in which the item was delivered (not the billing).
        4) the state then decides how to deal with that 7%.

        With this approach, it is simple for everyone; the seller, the buyer, the shipper, the feds and the state. The only issue is would all
    • by Attila Dimedici ( 1036002 ) on Friday January 12, 2018 @04:58PM (#55918045)
      Sales by zip code will not work, because zip codes do not follow municipal lines. The U.S. Post Office determines the zip code for a particular address based on the particular post office which they believe it will be most convenient to deliver the mail from. This has no relationship to what local municipality that address is in. In order for this to work it would be necessary for there to be a database which contains the taxing jurisdiction for EVERY address in the United States.
      • by harrkev ( 623093 )

        Crap. The story just keeps getting worse.

        Still, it remains to be seen if the taxes collected will just be by state, or if it will include counties and cities.

        It might not come this year, but I am 99% certain that this tax loohole will be closed in the next decade.

        • Technically, it is not a loophole. As far as I know, every state which has sales tax also has use tax which is the same except that the individual is responsible to pay it directly to the state rather than the merchant being required to collect it.
      • by hawk ( 1151 )

        >Sales by zip code will not work, because zip codes do not follow municipal lines.

        That's just too bad.

        Zip code already exists in all transactions.

        The five digit sips can be changed, or the localities or states can solve the division for the zip code.

        Using zip is the least burdensome way to deal with distribution, and those jurisdictions unwilling to accept that can just not opt in and try to collect the tax themselves . . .

        hawk

    • However, my wife owns an Internet business. Will she have to file paperwork in all 50 states? How about county and city taxes?

      Whyever do you think taxation will be limited to the USA, and not include every country in the world (all of which want your money paid in taxes)?

  • Because Amazon has a physical presence in my state (AZ) and I do a lot of my online shopping there first before venturing elsewhere, I already pay an (admittedly annoying) sales taxes on many of my purchases.

    This issue (sales taxes) also seems like they can more easily be enforced now than back in 1992. Back then, the idea of tracking where purchases are made seemed like a daunting task to do accurately. Nowadays, my browser knows generally where I'm at within a few miles, and with cell phone purchases your

  • I can't recall what ancient civilization declared it, but they said taxation over 20% was slavery (not that they thought slavery was bad, just how they defined it). If we're going to be taxed for our money both coming and going we are in the same boat. There needs to taxes on either income, or expendatures, not both. The USA has not been free in almost 100 years since the income tax was implemented.

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      Haha. We're not just being taxed on income and expenditures.

      We're being taxed on income, expenditures, property, debts, exercising Constitutionally recognized rights, and refunds from cases of admitted over-withholdings.

      On top of all that, the income tax law alone has grown from a few sentences to an enormous library of vaguely written cross-references. Everyone is guilty of tax evasion by some defensible interpretation of that horrid tangle.

    • The USA has not been free in almost 100 years since the income tax was implemented.

      Try almost 157 years. Abe Lincoln implemented the country's first Federal income tax [wikipedia.org] in August 1861 to fund the American Civil War.

    • Taxation is theft. Regardless of whether or not you agree with taxes, they are compulsory. Your agreement is irrelevant. And if you neglect or refuse to pay them, then someone with a gun is going to come along, eventually, and force you to part with the product of your labor. And if you resist this robbery, and are effective enough in your resistance, you will be summarily murdered without trial. It does not matter that you enjoy occasional kick-backs from your robber. That does not make taxation any
    • by kqs ( 1038910 )

      Your quote sounds like something that was made up to (badly) prove a point...

      But I don't really understand the hatred for multiple forms of taxation. Let's say a state needs to raise $30 billion in taxes to fulfill the budget. They could set income taxes such that they raise $30B or sales taxes for $30B or property taxes for $30B. Or they could raise $10B from each of income/sales/property taxes. How is that last one worse than the others?

      In fact, if you get 100% of your tax income in one area, that mak

      • But you're suggesting different systems in different parts of the USA. I'm saying do one or the other, not a mix.

        • by kqs ( 1038910 )

          Huh? No, I said the exact opposite:

          Let's say a state needs to raise $30 billion in taxes to fulfill the budget. They could set income taxes such that they raise $30B or sales taxes for $30B or property taxes for $30B. Or they could raise $10B from each of income/sales/property taxes. How is that last one worse than the others?

          And I said that a mix was probably better for stopping tax cheats, if that is a goal. So what is wrong with a mix? I mean, I like steak, I like potatoes, and I like green beans. A small portion of each sounds like a good meal. Only a two-pound steak or only three potatos or only a bushel of beans sounds like a terrible meal to me, though tastes differ.

          • I disagree. The more types there are, the more lawyers get used to circumvent a complex system. If we have an income tax, make it a flat rate across the board with limits on deductions. When I was brand new in the Air Force I paid $127 federal tax and got a return over $9000 (Dragonball reference!). I obviously took it, but found the system to be messed up. That's without having a tax-free deployment like I'm on now even. But I'd prefer eliminating income tax, and only have tax taken as you spend.

            • by kqs ( 1038910 )

              I assume you hate the recent tax bill, then, since it adds lots of deductions. It's odd that politicians who talk about flat taxes and getting rid of loopholes and deductions always vote to add more deductions, and voters still vote for them.

              I agree that the tax code is messed up, but of the roughly 70000 pages of tax code, maybe 50 cover the tax brackets while the other 69950 cover the various loopholes, deductions, and credits. A flat tax would remove about 40 pages; removing loopholes would remove a LO

              • Yeah, recent tax bill is, as expected, more convoluted than what we had before. If we got rid of income tax it would fix almost all the deductions.

    • I can't recall what ancient civilization declared it, but they said taxation over 20% was slavery (not that they thought slavery was bad, just how they defined it).

      It was Egypt. The tax was imposed by Joseph, circa 1900 BC. It was still enforced until at least 1950 AD.

  • You are supposed to report uncollected sales tax from out of state purchases on your PA income tax form. It has a line item, but of course almost no one does that. The tax is really on your purchase and not the sellers sale (yea I know it's called a SALES tax), it's just a convenience for the state since individuals will almost never bother to report it themselves.

    Putting the burden on out of state sellers doesn't seem right either, but I dunno.

    • I think that's the rule for every state with sales tax, so 45 of the 50 states. If you didn't pay sales tax to the state and you use it in the state, there's a "use tax" that applies instead of a sales tax. Effectively it is the same thing, just different groups sending in the money.

      I think the lower courts already got this right, there is no need for the SCOTUS to review the decision.

      The first time it came up there was no law on the books, so the courts ruled that they need a presence in the state. Ot

  • Charge an extra $0.10 cents for a particular counties sales tax and then spend $20 in administrative time trying to mail that $0.10 to them? A small business that might sell under $20 a year to all of North Dakota would likely just say, fuck it, we don't ship there, get a postal box in Manitoba, Canada.

    Further the tax rules are a mess in most places. Shoes, taxable, children's shoes no tax. Food under x dollars one rate, over another rate....
    • by kqs ( 1038910 )

      You seem to have no faith in the free market. If this becomes law, I'm quite certain that the same companies which handle credit card transactions will happily start handling sales taxes too. They'll just pull the sales taxes out of their payments to each merchant, and will send each municipality one payment with the taxes from all of their merchants. And keeping track of what should be taxed at which rate is hard, but it seems like the sort of thing that a computer should be able to do easily enough.

      • You seem to have no faith in the free market.

        Yea that tends to happen when people use logical reasoning, since the closest thing to a "free market" that exists today would be the economy of Somalia.

        I don't know anyone who thinks Somalian economics is a good idea.

        • by kqs ( 1038910 )

          I agree, but we don't need the whole free market for this. We only need the part where people want to take your money in return for doing something you cannot. Handling sales tax to every municipality is beyond the abilities of most small or medium businesses, but any large business could handle it easily and could charge for the service. Sure, it's another opportunity to rent-seek and to disadvantage small businesses, but if we want to stop THAT then this is the wrong place to start.

  • I distinctly remember a row a few years back where people panicked Congress might not renew a ban on states taxing Internet commerce. Then they renewed it.

    So wht the heck is all this then?

  • Less than LAST year :(
  • If I take money from people all over the country and put things in the US mail to those people, you can totally make an argument that I should be paying my share of taxes, sure. I can't deny that. But I should be filing 50 tax forms in 50 states? Fuck that, I'd just stop trying to run an interstate business.

    If SCOTUS rules for the 50 state taxes, then I think that immediately creates an emergency where Congress needs to pre-empt all that, and boom: we'll have a national sales tax. (And probably some twiste

  • the justices said they'll hear South Dakota's contention that the 1992 ruling is obsolete in the e-commerce era and should be overturned.

    Ah, good! Too many old laws cutting into profit margins these days!

    Next, after the precedent is set, they can go after that pesky First Amendment; after all, the Founding Fathers couldn't have possibly envisioned a world where we can communicate with anyone, anywhere instantaneously, so obviously the antiquated belief that people actually have a right to communicate freely needs to be eliminated.

    Be careful what you wish for - you just might get it.

  • Will every Mom and Pop online store have to be aware of and process Sales taxes for each and every one of the 9000+ individual taxing districts in the us each Qtr.

    Amazon is all for this!!!, because they want to close down and force these businesses in to Amazon Stores. Where Amazon skims the top 8-15% off every invoice total they process !. For their own profit.

    The margins are not big, Amazon gets theirs either way. This will happen! And it will destroy small online sales.

    But that is Amazons goal, one
  • . . . . Amazon already has market share . . .
  • The jurisdictions with sales taxes should get together and create an internet sales tax clearinghouse. Set it up so the seller can send the necessary information to the clearinghouse at the time of sale and it returns the amount of sales tax delivered based on the address of delivery and the kind of item being bought. The seller adds it to the bill and sends the tax payments it receives to the clearinghouse that then distributes it to the proper jurisdictions. All it would require is a big database of th

    • by Agripa ( 139780 )

      The jurisdictions with sales taxes should get together and create an internet sales tax clearinghouse. Set it up so the seller can send the necessary information to the clearinghouse at the time of sale and it returns the amount of sales tax delivered based on the address of delivery and the kind of item being bought.

      It is a great idea but there is nothing in it for The States. If they had to make a true accounting of the costs of maintaining such an operation, it would undermine placing this burden on others.

      • It might cost something to get it set up but once they get it going how much would it cost? I think maybe 5% of what they collect. They could take that out of what they collect as overhead and they still come out ahead.

  • Well now that all those business got a nice big tax cut, the state and local governments are turning to consumers to pay for the shortfall in tax income. So we get to look forward to cuts in federal programs AND increased prices through taxation on the state and local levels... Thank goodness for those few extra pennies in my paycheck! WHEW!
  • Ideally, you would pay sales tax to the state where the retailer (or e-tailer) is located. I consider it to be exactly like buying an item when you're on vacation. You pay tax on the item in the store where you bought it. You carry it home in your own car instead of shipping it by UPS.

    My own home state is so greedy that they expect you to pay sales taxes even on items you bought on vacation! Screw that! They didn't invest anything in the sale.

    States with low or no sales taxes would have an advantage over st
  • Why do we even have a purchase tax? I already pay my income taxes, why do I need to pay a second tax off already taxed money? Wouldn't it be easier to simply abolish the purchase tax?
  • In states where sales tax is collected, they all must have the exact same rates and rules on every level.

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