

What is Internet sales tax, and will it cripple e-commerce? - rbii
http://www.extremetech.com/computing/99509-what-is-internet-sales-tax-and-will-it-cripple-e-commerce

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dminor
I'll support this just as soon as B&M retailers are required to find out where
their customers live and collect sales taxes accordingly as well.

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mattmanser
Out of interest, what's a B&M retailer?

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nostrademons
B&M = Brick & Mortar, a reference to their physical stores.

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rick888
"Oh, that's a pretty silly comment then, it's where their store is. Given that
people have to supply a card and/or delivery address when buying it's not
going to be a massive pain for online retailers."

So why can't it apply the same way to online merchants? Where their business
is located?

You obviously don't run an online store. It's not as easy as just charging
them tax. There are so many different tax rates (that are constantly changing
btw) that it's going to be very difficult for any small retailer to keep this
up-to-date.

It would be much easier to just require the customer to claim it on their tax
forms (which I believe is already a requirement).

To claim this is "lost revenue" is about the same as when the RIAA claims
piracy is lost revenue.

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nitrogen
What about taxing delivery services instead? If states charged a flat tax on
UPS and Fedex, distributed proportionally to cities, would it be enough to
fill the gap in state and city budgets?

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rick888
The gap can be filled by customer being a little more honest about what they
purchase out of state.

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mattmanser
Don't be absurd, that's not going to work.

Do you go after 300 million people or do you go after 10s of thousands?

This is a problem with your states, not with the general idea that in the US
the internet retailers are getting away with helping people avoid sales tax at
the moment.

This was inevitable, if you didn't see it coming you're a fool.

Also this type of 'problem' is easily automated by computers, you're just
going to have to pay for it.

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joelhaus
I'm familiar with the inter-state sales tax compliance functions at a number
of firms and it is a _tremendous burden_. Not only most states, but numerous
municipalities impose sales tax as well. As the article mentions, the problem
is that Use tax[1] obligations are generally not paid by destination-state
customers. This actually makes a great argument for why the federal government
should collect a national sales tax, that is then distributed back to the
states.

Regarding the legality of states attempts to collect sales tax on inter-state
transactions, we can look to the commerce clause[2]. In the courts, one test
that has been used is to ask whether a tax creates an unfair advantage for in-
state commerce over inter-state commerce[3]. If you take into account the
compliance demands created by an inter-state sales tax, I think the answer is
almost always _YES_.

[1] <http://en.wikipedia.org/wiki/Sales_and_use_tax>

[2] <http://en.wikipedia.org/wiki/Commerce_Clause>

[3]
[http://law2.umkc.edu/faculty/projects/ftrials/conlaw/interst...](http://law2.umkc.edu/faculty/projects/ftrials/conlaw/interstatetax.htm)

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bxc
Now I don't really know how well it works in practice but the european model
for VAT (the rough equivalent of sales tax) is basically this: if you're a
small business, you don't have to collect VAT for the place you're sending the
goods; but if you don't, you have to collect it for your own location (rather
than collecting nothing). And over a certain business size, you _do_ have to
collect it for the destination.

The EU has fairly uniform VAT rates (around 20%), so then there isn't a huge
difference to where you charge the tax, and so end consumer prices don't vary
by a huge amount.

Maybe the much more variable rates in the US plus what seems to be more easier
ability to move jurisdictions would lead to sales tax jurisdiction shopping a
more than in europe.

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porterhaney
These laws certainly will not help e-commerce shops, sales will decrease (or
more likely continue to increase across the industry but not at such a rapid
rate) because the e-comms will now be on a level playing field with brick and
mortars.

All of this being said, the biggest problem will be simplicity. If there is
not a service to easily distill all of these rules and plug into the bulk of
shopping experiences (magento, atg, ep, shopify, etc) this will very much hurt
small, up&coming e-comms.

I'd imagine there is very good opportunity for a company to create an API of
all of this tax information and monetize it.

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nitrogen
_I'd imagine there is very good opportunity for a company to create an API of
all of this tax information and monetize it._

I hope that doesn't happen. If the government is imposing this burden, there
should be a free database available for everyone to allow compliance.

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camz
As a CPA with years of experience in specialized state and local tax issues. I
can tell you that sales and use tax is very complex and burdensome. But, at
the same time internet retailers have taken advantage of the the law's
inability to keep up with new business models, so internet retailers have had
an unfair advantage over brick and mortar companies.

Just giving the issue perspective from both sides.

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Semiapies
What's the "unfair advantage"? If I run a physical store in my town and
someone from out of state drives in and buys something, I'm not expected to
make sure the appropriate sales tax on that item gets to that person's state
or municipal government. I'm only responsible for whatever sales taxes (if
any) exist where I physically am.

On the other hand, online merchants with physical stores already have to
charge for sales taxes if their online customers are within those
jurisdictions.

Requiring online merchants to collect the correct sales taxes for every state
and town is either a stupid attempt to increase revenue or a straight attempt
to hobble online sales on behalf of physical retailers.

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subaruWRX55
I have two points:

1\. So the problem of calculating and distributing use tax is complex... That
sounds like a business opportunity for a new kind of web service.

2\. I think the issue just comes down to online retailers dragging their feet
because they want to enjoy their advantage as long as possible.

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stevedewald
"2. I think the issue just comes down to online retailers dragging their feet
because they want to enjoy their advantage as long as possible."

I wish it were that simple. This bill would have effectively shut down my
small business (we're an online retailer). The overhead of paying taxes across
many different states and municipalities is, frankly, impossible for smaller
teams / startups to deal with. Even if we could outsource this, it would
effectively reduce our margins to the point where we couldn't compete with
brick & mortar. We already collect taxes and pay them to the states we operate
in. This bill wouldn't cause us to pay more tax (we're based in California, so
we'd probably pay less taxes as a result), but instead seems like it's more a
result of anti-competitive lobbying efforts from B&M retailers.

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jellicle
The pretty obvious solution, which I expect the government will eventually
luck into, would be for the Federal government to collect a, say, 5% sales tax
on all inter-state commerce. Remit 2% to state A, 2% to state B, keep 1% for
itself, and everyone is happy. Easy to administer, easy to collect. Lucrative!

