

US Senate approves proposed Internet Sales Tax - Shenglong
http://techcrunch.com/2013/03/23/u-s-senate-approves-proposed-internet-sales-tax/

======
rayiner
This is misleading: A score of Internet lobbies, such as Netchoice,
representing Facebook, Yahoo, and (TechCrunch’s parent company) Aol, argue
that the senate’s bill “does nothing to address what the Supreme Court says
was an unreasonable burden on interstate commerce,” explains Steve Delbianco
of Netchoice.

"Undue burden on interstate commerce" comes from the negative implications of
the Commerce Clause, which gives Congress power over interstate commerce and
prevents states from putting an undue burden on interstate commerce in an area
where Congress has not legislated. If states impose sales tax pursuant to an
act of Congress, then there is no Commerce Clause concern since Congress does
have the authority to regulate interstate commerce.

~~~
kyrra
Had to look this up. Looks like there was an earlier ruling in 1969 about
sales tax on mail orders. The 1992 case seems later further refine the ruling.

[http://en.wikipedia.org/wiki/National_Bellas_Hess_v._Illinoi...](http://en.wikipedia.org/wiki/National_Bellas_Hess_v._Illinois)

[http://www.infoplease.com/cig/supreme-court/sales-taxes-
mail...](http://www.infoplease.com/cig/supreme-court/sales-taxes-mail-
orders.html)

~~~
rayiner
Basically in Bellas Hess, the appellant claimed that the tax was
unconstitutional on Commerce Clause and Due Process grounds. Specifically,
that states imposing a tax on mail orders infringed on Congress's power to
regulate interstate commerce and alternative that it violated appellant's
rights under the 14th amendment to equal protection under the laws. In Bellas
Hess, the Court agreed with appellant without justifying the decision
explicitly on due process grounds. In Quill, the Supreme Court clarified that
it was deciding on Commerce Clause grounds.

The relevant distinction is that Congress cannot pass legislation to allow the
states to violate the 14th amendment. It can, however, pass legislation that
allows the states to burden interstate commerce since if Congress has
sanctioned it than any such state legislation doesn't infringe on Congress's
power.

------
coin
"There are some exceptions: Amazon currently charges California residents
sales tax"

I hate this incorrect terminology. Amazon merely collects sales tax on behalf
of the state. The state is the one charging the sales tax.

~~~
greenyoda
Amazon has also been collecting NY State sales tax for quite some time now.
Does anyone know if Amazon has any physical presence in NY State? I've never
received anything from Amazon that has been shipped from NY.

I noticed that items that are sold by Amazon always incur NY tax, but items
sold by independent retailers who sell through Amazon's site often don't incur
tax.

~~~
_delirium
NY argues that Amazon's relationship with NY-based affiliates constitutes a
NY-based Amazon marketing force that produces a sufficient nexus with the
state to make them subject to NY law on collecting sales tax. It's currently
being litigated [1].

I recall reading [2] that Amazon actually supports the federal legislation
though, because they're slowly moving towards having a 50-state presence
anyway, as things like grocery delivery and same-day delivery become a bigger
part of their strategy.

[1] [http://www.reuters.com/article/2013/02/06/us-tax-amazon-
cour...](http://www.reuters.com/article/2013/02/06/us-tax-amazon-court-
idUSBRE9151C720130206)

[2]
[http://www.slate.com/articles/business/small_business/2012/0...](http://www.slate.com/articles/business/small_business/2012/07/amazon_same_day_delivery_how_the_e_commerce_giant_will_destroy_local_retail_.html)

~~~
andrewpi
Didn't Amazon drop affiliates in other states when those states tried to use
the affiliate rationale to charge sales tax? Why is NY different?

~~~
_delirium
That was their initial "scorched-earth" strategy, but they quickly dropped it.
In recent disputes, e.g. with Texas and New York, they haven't terminated
affiliates, and have instead opted for a mixture of negotiations and legal
battles.

------
brokentone
Playing devil's advocate here. No one pays "use tax" -- the tax you already
owe your state for things you purchase online/on the phone etc and do not
currently pay sales tax on. This is already an illegal activity that I'd
hazard nearly 100% of the US is in on.

If I wanted to come into compliance here, I'd have to save all of my reciepts
from every time I shop online, and probably hire an accountant to figure out
all the extra tax I owe. This doesn't sound interesting to me, or enforceable
by the government. However, online stores collecting this for me could be a
value add in some ways.

Let's take a look at the free market though (although I get that issues of tax
law cannot be fully free as they start in a non-free place). What if online
retailers _offered_ to collect the tax for me, with the note that you owe it
either way and they're trusting you to pay it on your own otherwise? I would
likely opt-in much more often. Similar to suggested tips increasing tipping in
NYC cabs, this might move the needle in the right direction.

~~~
jmharvey
I pay use tax. I've also been audited several times. It's easy to say, "oh,
everybody ignores x tax, it's completely unenforceable," but if you get
audited, yeah, the state can look through your bank and credit card records
and get a pretty good idea of what you owe.

~~~
brokentone
Honest question, what sort of process does it look like for you to total
everything up? Do you keep running totals or do it at the end of the year? Do
you have an accountant? Would you prefer that online stores collected for you?

~~~
jmharvey
Usually I'd use a combination of my Mint records (which had convenient totals
for each online merchant, of which I really only used 5 or 6 in a typical
year) and the Massachusetts safe harbor law (which essentially allowed me to
assume that I spent 1% of my AGI on untaxed purchases less than $1000, and pay
use tax based on that number). If I bought anything online or out-of-state
that cost more than $1000, I'd add that in separately, but that happened
rarely enough that it was pretty hard to forget how much I spent on those
items.

What we have right now is a situation where some stores collect taxes in some
states. As a consumer, I would prefer it if all stores collected taxes for all
states, for three reasons. First, I wouldn't have to figure out which stores
already collected taxes, so it would save me time. Second, because I like
seeing how much I'm going to pay for something, taxes included, at the time of
purchase. And third, because I believe that taxes should be levied fairly and
consistently, and that would put online stores on the same footing as brick-
and-mortar stores, and honest taxpayers on the same footing as people who are
inclined to see what they can get away with.

As a startup founder, however, I'm less enthusiastic. The process of filing
taxes in all 50 states would be a huge burden. If a national sales-tax
clearinghouse existed, it would be a different story, but under the status
quo, it's just too much paperwork for a small company to handle.

~~~
piggity
Sales Tax Clearing House as a Service!

~~~
gamblor956
Amazon and others already offer this as a service, though they tend to be on
the expensive side as far as these things go.

------
jabits
About time, on many fronts. Sales tax is the most economically beneficial tax
(from a long-term viewpoint), encouraging savings, reducing consumption, and
is taxpayer controllable. And it captures gray/black market transactions as
well. No reason any electronic retail transactions should escape. Modern tech
removes any "burden" claims.

~~~
SoftwareMaven
It's also incredibly regressive, targeting poor people with a higher
percentage of their net income than rich people.

~~~
ig1
Poor people are disproportionately likely to shop in-store rather than online
because they're vastly more likely to be unbanked (i.e. no credit card) and be
low-education.

I'd hazard an educated guess that the percentage of income spent by the poor
online is tiny. Both because the above factors and also because the majority
of spending for those group is going on rent, groceries, vice (cigarettes and
alcohol) and transport which aren't commonly bought online in any case.

~~~
potatolicious
> _"because they're vastly more likely to be unbanked"_

This is not true in the US, where your debit/bank card is also a
VISA/MasterCard fully usable online. Even people with zero credit can _easily_
spend money online. If you have a bank account in the US, there are
effectively no barriers to spending the money in it, online.

~~~
ig1
If you're unbanked you don't have a bank account, hence no debit/credit card.
Between 18-24% of the US population fall into that category.

~~~
protomyth
Walmart and K-Mart are "fixing" this with free payroll check cashing and
rechargeable debit cards. One uses MasterCard and the other uses American
Express.

------
joonix
I don't think any new tax will pass in the House.

~~~
adestefan
It's not a new tax. It's to allow states to collect taxes that are already on
the books.

------
andyl
If I were King: eliminate sales and employment taxes, replace them with carbon
taxes.

~~~
darkchasma
This would only penalize the poor, as the rich could afford back yards full of
solar panels and wind turbines, and drive Tesla cars... And since the rich are
such a small percent, this would have virtually no impact on the environment.

I love the idea, but I do not believe this is a better solution to sales and
employment tax.

~~~
Xcelerate
I think a consumption tax is the best solution. Basic necessities like food,
housing, etc.. are not taxed (or are minimally taxed). Luxury items like
televisions, cell phones, etc. should be taxed though. This wouldn't penalize
the poor, but the government would get the money they're looking for.

Can anyone think of any downsides to this?

EDIT: Yikes, I leave for half an hour and come back to a maelstrom of
comments. So, to acknowledge one of your points, it could be difficult to
categorize what is or isn't a luxury item. But, c'mon, is a $90,000 car really
a _necessity_? I think it's easy to tell which items definitely aren't
necessities.

~~~
charliepark
One solution that a number of people have been working on is called the "Fair
Tax." [1]

The general idea (and I'm probably missing some of the significant points, but
this is a rough outline) is that there would be no income tax at all — all
taxes would be on consumption. Rather than trying to regulate what is taxed
and what isn't, _everything_ would be taxed at the same rate.

To fight any regressiveness involved in that, _everyone_ would get a set
amount of money every year, which is equal to the consumption tax you'd be
paying on the first, say, $30K of purchases a year. So if the consumption tax
rate is 25%, you'd be given $7,500 a year. (The term they use is "prebate.")
That way, everyone's first $30K of expenses is a wash. After that point,
you're only taxed on the money you spend beyond it. The more you buy, the more
tax you pay.

A number of Republicans have been in favor of the Fair Tax, and it was one of
the planks of Gary Johnson's presidential campaign last year. But it gets
support from Democrats as well, and was one of the main components of Mike
Gravel's campaign in 2008.

I'm sure others will point out downsides to it, but one that I know of is that
current retirees, who have already paid income tax on some of their savings,
would have much less purchasing power under the new plan. That is, they'd be
double-taxed on the money used to buy goods under a Fair Tax plan. I believe
there's also been skepticism from opponents that the numbers actually work out
well enough that a Fair Tax system would bring in enough money (as compared
with current tax revenues). [Edit: the double-taxation wouldn't be limited to
retirees; they're just the group that's often mentioned as being significantly
affected.]

(I'm not an apologist for a Fair Tax approach; just wanted to mention it as
one theory for introducing a consumption-based tax in the US, in case you're
interested / want to learn more.)

1\. <http://www.fairtax.org/>

~~~
jader201
One seemingly obvious problem to this (at least the way you describe it, maybe
not the way it's actually proposed - I didn't read it) is that this would
disincentivize spending, and incentivize saving. So it would seem[1] that this
would cause the economy to take a big hit.

I just remember a few years back when the economy was at the worst we've seen
in a while, the government seemed to really push spending and investing in
stocks over saving. So if there was no penalty for earning money, only
spending it, we'd be back in the same boat.

[1] Disclaimer: I'm certainly not an expert in economics.

~~~
adventured
The US economy is in such dire straights because of consumption, not due to
the lack of it. The Keynesian economics fraud of the last few decades (see:
Japan, half of Europe, the US), which has been pushed 24/7 at every level of
government and media, is massively to blame.

Ask yourself one simple question: how does higher consumer spending help the
US economy when all that money flows back to eg China? Right now the US is
merely a middleman, with service workers that take a small cut for
distribution.

China as you'll have noticed is getting wildly rich, at breakneck speed,
without the need to constantly push over consumption (their savings rate is
doing just fine).

America needs a lot more savings, capital investment, and production, and a
lot less spending. We had this algorithm decades ago, and we were
extraordinarily rich accordingly, and were far better off with a lot less
consumer spending as a ratio of our economy.

To paraphrase Warren Buffett: you get rich producing things, and you get poor
buying things.

China figured out how it works. Their economy more closely resembles the US
economy of the early 20th century, in terms of production vs consumption. The
arguments being made for China to consume more, are arguments in favor of
China handicapping itself to allow others to compete more easily.

------
pragone
Can anyone find the text of the resolution? This seems to link to a blog that
links to a blog that links to a blog...

~~~
adestefan
It's S 336. <http://hdl.loc.gov/loc.uscongress/legislation.113s336>

HR 684 is the corresponding bill in the House.
<http://hdl.loc.gov/loc.uscongress/legislation.113hr684>

edit: replaced with permlinks

~~~
_delirium
Looking at the sponsors is interesting. The main sponsor, Mike Enzi, is a
conservative Republican, who you might not normally expect to be sponsoring
tax bills. But he represents Wyoming, a state that heavily depends on sales
taxes, because they've made the decision not to tax personal or corporate
income, leaving sales/use taxes as one of the major revenue sources
(responsible for ~40% [1] of the state budget).

[1] See the pie chart on pg. 4 here:
[http://eadiv.state.wy.us/s&utax/Report_FY11.pdf](http://eadiv.state.wy.us/s&utax/Report_FY11.pdf)

~~~
lilsunnybee
Its not too unusual for a republican to be in favor of a sales tax. Income,
capital gains, property, and inheritance taxes are another story.

------
jacoblyles
Please note that BOTH California Senators voted in favor[1]. They also both
voted for PIPA.

Dear internet - we fail at politics.

[1][http://www.senate.gov/legislative/LIS/roll_call_lists/roll_c...](http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=113&session=1&vote=00062)

------
svenkatesh
These were not the tax loopholes people wanted to be closed!

On the other hand, this will benefit brick and mortar stores.

~~~
twoodfin
Just so you know: Every current rule that could potentially reduce your tax
burden is now called a "loophole". For example: Limiting deductions for high
earners (but not exactly the same deductions for low earners) is now routinely
described by politicians and the media as "closing loopholes".

------
protomyth
At this point I wish the Federal Government would pass a straight 5% sales tax
for goods crossing state lines. Vendor pays the Fed quarterly with report of
zip codes bought from. Fed pays the origin state and the destination state 2%
each and keeps 1%. Fed tell states no other taxing of items bought online.

~~~
maratd
Yes, let's introduce another federal tax. Because we don't pay enough in
federal income taxes, duties on imports, state income taxes, state sales
taxes, county sales taxes, local sales taxes, and local property taxes. Let's
add another tax. I'm sure I missed a few.

~~~
protomyth
I'm normally in the same belief, but the cost of each state getting to tax
what is sold online differently will cost more than this. I figure it is a
replacement for 50+ taxes with weird rules for one streamlined tax. I'll take
that.

------
dreamdu5t
Another tax increase without any corresponding budget relief. So more taxes
and and the same debt.

~~~
adestefan
This has nothing to do with the Federal government. This bill only allows
states to collect taxes.

~~~
dreamdu5t
I'm aware of that. California does not need to tax people more for the exact
same reasons.

Competition between brick and mortar stores and Amazon _is a smokescreen_. Tax
deals are given to big box stores all the time, to this day. The whole
"protecting small business from online competition" angle is a ruse.

~~~
adestefan
They're not taxing you more. You already need to report and pay any sales tax
that you didn't not pay on items purchases over the Internet. The so called
Internet tax moratorium was not an actual ban on taxes, instead it did not
allow states to force Internet entities to collect sales tax. This removes
that barrier.

------
tocomment
Don't all tax bills have to start in the house?

~~~
mpyne
This isn't a true Federal tax/spending bill as much as it's a change in policy
regarding how the states may enforce their own powers to tax.

~~~
tocomment
Isn't a tax a tax though?

------
juniatian
So does this mean that the United States government will now accept bitcoins?

------
Evbn
Interesting that no one ever talked about the alternative to Internet sales
tax, to solve the competition problem: removing sales tax, and replacing it
with use/income/property/head/etc tax.

~~~
curt
Sales Taxes are the least economically destructive of all taxes. If a
government's goal to optimize economic growth they should eliminate income,
property, capital, etc taxes are replace them with a sales/consumption tax.
Bobby Jindal proposed this in Louisiana.

~~~
Retric
Sales Taxes are vary economically destructive as unlike income tax they
artificially shift the economy from real goods to services. The only way to
avoid this is to tax all spending and gift giving which ends up being just
another income tax.

~~~
vbuterin
> from real goods to services

Hence inventions like Canada's "goods and services" tax.

