

Democrats Push for Internet Sales Taxes - ojbyrne
http://news.cnet.com/8301-13578_3-20009603-38.html

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codingthewheel
As a freelance developer who sells software and services on the side, I can
say this would hurt. Badly.

First, the clerical and administrative requirements. It's tough enough to set
up e-commerce _as it is_ without also having to track purchases by whatever
state's perverse and Byzantine tax infrastructure. My God. But let's assume
the payment gateways handled this at their end. Fine.

Next: the $$$. I don't know about you, but I'm not a good enough marketer (or
developer) to overcome yet another 10% vig on my productivity. I already get
to keep less than 50% of what I earn. If margins are razor thin at the
equilibrium price point without taxes, then the addition of taxes simply
causes business to fail. Not everybody's margins are this thin, but small
businesses often are. And that's who this bill would ultimately hurt.

Not to mention geolocation issues. We already can't say with any certainty
where a particular IP address hails from. Oh we can get it 80% of the time.
But proxies, dynamic IPs, mobile connections, cloud the issue. What happens if
you're actually in California, but your cellphone is talking to a relay in
Nevada, and you live in Texas, but you're buying a product from a company
based in Florida, but of course the actual product's not in Florida, it's at
the warehouse in Missouri. The last person in the world I trust to make sense
out of this is a politician, or a politician's trained IT monkey.

Ranting aside though, I don't see any way to change this. The government will
have its due, and there's a notion of "implicit collusion" among corporations:
which is that incrementally and over time, competition can be squashed by
raising the barriers to entry through taxation and regulation.

The Internet threw a screwdriver into the gearworks, but rest assured, they'll
get you my pretty. And your little dog, too.

~~~
MichaelSalib
_Next: the $$$. I don't know about you, but I'm not a good enough marketer (or
developer) to overcome yet another 10% vig on my productivity._

Is this a general principle that you're willing to defend? I mean, there are
many marginal businesses that are not viable right now but that could be
viable if they didn't have to pay taxes. Do you believe that all of these
businesses should be forgiven from having to pay taxes?

 _Not to mention geolocation issues._

The article seemed to speak entirely about physical goods. And when you're
talking about physical goods, it seems that geolocation issues aren't really a
big deal: just tax based on the delivery state.

 _competition can be squashed by raising the barriers to entry through
taxation and regulation._

That's one way to look at it. Alternatively, one might simply say that
freeloading is bad and that internet retail allows some people to unfairly
reduce their tax rates without a corresponding reduction in their use of state
services. So, if young upper middle class folks buy lots of stuff on the
internet and save $500 of sales tax every year, then the fact that they've
come up with a clever way to screw over their fellow (older, not-so-upper-
middle-class citizens) isn't really a sufficient justification for the state
to preserve their little racket.

~~~
yummyfajitas
_Is this a general principle that you're willing to defend?_

I imagine (not being the original poster) that the general principle is that
the benefits of increased government revenue should be weighed against the
cost (to businesses and consumers) of increased taxation.

So yes, if the current level of taxation is preventing the creation of many
new businesses, we probably should reduce taxes.

By the way, purchasing an item from another state uses very little in the way
of state services, far less than purchasing from local retailers.

~~~
MichaelSalib
_I imagine (not being the original poster) that the general principle is that
the benefits of increased government revenue should be weighed against the
cost (to businesses and consumers) of increased taxation._

But we're talking about a situation where people used new technology to avoid
paying taxes. This seems very different from a world in which the government
introduced a radical new sales tax.

 _purchasing an item from another state uses very little in the way of state
services, far less than purchasing from local retailers_

Do you have a cite for this claim?

I see sales tax as an implicit headcount tax: everyone needs to buy a certain
amount of stuff every year to live so everyone ends up contributing a minimal
amount to the state government. If one group of people manage to get their
stuff without paying sales tax, that's a problem because their usage of state
services hasn't decreased significantly: they still send their kids to school,
they still use libraries and parks, they still benefit from state courts and
prisons and environmental regulators.

~~~
yummyfajitas
I don't have a cite for my claim that out of state purchases uses less state
services, but I do believe it is pretty obvious. My reasoning:

An in-state retailer uses police/fire protection for the entire time the item
is sitting on the shelf, local roads to move the item to the store,
police/fire protection at the production site if the item was made in-state,
and assorted local regulatory services depending on the specific business
(e.g., health inspectors).

An out of state retailer only uses local roads as the item is shipped to the
customer.

I don't see any plausible way that an out of state retailer could use anything
remotely close to the same amount of state services as an in state retailer.

~~~
MichaelSalib
_I do believe it is pretty obvious._

Your analysis ignores the fact that in-state retailers pay property taxes,
income taxes, user fees, and employ people within the state who in turn pay
taxes.

If you convert the traditional cost-benefit analysis into a cost analysis,
then you can prove that literally anything is a bad idea. But that's not a
serious way to argue a point.

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mudil
Ronald Reagan liked to describe the sequence of actions that government
typically takes toward private business:

"If it moves, tax it. If it keeps moving, regulate it. If it stops moving,
subsidize it."

[http://online.wsj.com/article/SB1000142405274870457530457529...](http://online.wsj.com/article/SB10001424052748704575304575296970648330714.html)

~~~
_delirium
Does this comment add anything to the topic under discussion, or is it just a
general "I hate taxes and love Ronald Reagan" political jab? Do we really want
DailyKos-quality political discussion here?

~~~
mudil
The comment is what exactly happens when gov't sticks its nose into private
enterprise. It is true regardless who says it.

~~~
_delirium
Isn't it kind of boring to just copy and paste a generic anti-tax quote,
though, with the only relationship being that this is a discussion involving
taxes? I could copy-and-paste some generic pro-government quote from JFK or
something, but it wouldn't be too useful either.

~~~
harold
"Lower rates of taxation will stimulate economic activity and so raise the
levels of personal and corporate income as to yield within a few years an
increased – not a reduced – flow of revenues to the federal government."

– John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress,
fiscal year 1964

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_delirium
It does make some sense to me to rationalize it somehow, though not
necessarily in this direction. It seems somewhat strange that if I sell stuff
to people near me, sales tax is collected, but if I sell stuff to people far
from me, sales tax isn't collected--- leads to perverse incentives against
buying things that are already near you, and instead encouraging you to buy
exactly the same thing from somewhere else where it has to be shipped to you.

~~~
itistoday
Yes, but how does this apply to intangible goods and services? I hope they're
not planning on taxing that.

It also seems like something that would be very difficult to implement and
enforce, you know, considering the whole no-boundaries thing.

~~~
mudil
You hope? You really hope for gov't to restraint itself? Good luck with that!

~~~
MichaelSalib
Sure. There is plenty of historical evidence to believe that restraint is
likely. Top marginal tax rates have declined significantly over the last half
century.

If you believe that the government cannot restrain itself, I think you'll have
difficulty accounting for that basic historical fact.

~~~
jquery
You say that governments restrain themselves and then say to look at history.
When I look at history, I see a massive graveyard of failed states and
empires. Even the surviving, "successful" states have had long, unpredictable
periods of tyranny and suffering.

Therefore I am concerned about government growth and encroachment, because it
takes decades and the blood of heroes to recover lost freedoms, and by then
I'll be old or dead. Better to be concerned now and look foolish than to
dismiss concerns and be proven naive.

~~~
_delirium
I guess to me, tax rates are _really low_ on the list of concerns. If
someone's agitating over free speech, over unreasonable searches and seizures,
etc., then I'll support them, but whether taxes are 5 or 10% this way or the
other way just doesn't seem to be that big an issue to me. It's not a totally
unimportant issue, but I wouldn't put it in my top-20.

The only way I could really see tax rates being a top-tier freedom issue is as
a restraint on government: the Grover Norquist theory that low taxes starves
the government of the ability to do things, so in turn reduces spending and
government involvement in everyone's lives. But I haven't seen that over
decades. We lowered taxes in the 1980s, and that didn't stop government
spending from more than doubling in that decade. We lowered taxes again in the
1990s and 2000s, so the government couldn't afford to invade Iraq or
Afghanistan, and we invaded both anyway, borrowing money we didn't have to
spend on the invasion (and we're still spending money we don't have on both),
and then we spent more money we didn't have on bailouts in late 2008.
Basically it seems over at least 70-80 years or so, tax revenue hasn't really
been a meaningful constraint on spending.

~~~
jquery
> I guess to me, tax rates are really low on the list of concerns. If
> someone's agitating over free speech, over unreasonable searches and
> seizures, etc., then I'll support them, but whether taxes are 5 or 10% this
> way or the other way just doesn't seem to be that big an issue to me. It's
> not a totally unimportant issue, but I wouldn't put it in my top-20.

I take tax-rates much more seriously. Taxes are a direct line to slavery--
obviously a 100% tax rate would be complete slavery. My current 1/3 tax rate
makes me 1/3 slave--maybe a fair trade for being 2/3 free, but a trade
nonetheless. Unfortunately, as you succinctly pointed out, tax rates of late
have had little relation to spending, but in the long-term input = output, so
as a young individual I see taxes and spending as two sides of the same coin.

To the extent our government has shown restraint, I think that is due to
people making their concerns known and visible, as well as some good old
fashioned American luck. Politicians will tend to acquire as much power as the
people let them.

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kungfooey
The title is somewhat misleading. It's not really a new tax, just a different
interpretation/application of an existing tax. I do love how these bills
always come under such monikers as the "Main Street Fairness Act."

Lack of regulation is one part of what makes internet-based commerce so great.
I wonder if services (ie: Basecamp, git, etc) would fall under the sales tax,
further complicating the legal landscape of 'net based tools.

In the state of Tennessee, software development services that I render to
local companies is already taxable under a 10% "use" tax (the state has no
income tax, and developing software is considered creating something of 'use,'
therefore, taxable).

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r0s
"online retailers should be forced to collect the same taxes that brick-and-
mortar retailers do."

Pretty sure all retailers are exempt from tax on out-of-state sales. But don't
let that stop the money grab.

I'm personally more concerned with closing tax loopholes for the largest
businesses and allocating funds from wasteful programs (DHS).

~~~
MichaelSalib
_Pretty sure all retailers are exempt from tax on out-of-state sales._

I don't think this is true in most states. If I as a resident of MA buy
something from a company in CA, the company doesn't have to collect the tax
and pay it to MA, but I am still responsible for doing that.

~~~
steadicat
You are responsible for doing that for Internet purchases as well. See orev's
comment above:

 _Everyone is required to pay sales tax for purchases made over the Internet,
there's just no way for the states to enforce it. That's why most state tax
forms now ask you what purchases you've made online so they can add that into
the tax. If you don't answer this question truthfully, then your liable for
tax evasion._

~~~
whyenot
I think it's more of a "Greek tax" -- you are supposed to pay it, but almost
nobody does. The current system is pretty unfair to local retails. I recently
bought a new camera. My local camera store, Keeble and Schuchat, had it for
$819. Amazon.com had it for $819. Santa Clara County sales tax adds an extra
$75. How many people are choosing Amazon over a local retailer in that kind of
situation -- I bet a lot do.

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SkyMarshal
What's ridiculous is that the financial industry just extorted a trillion
dollars out of the US Government, and now instead of increasing taxes on the
industry that makes money by moving money around, the government is looking to
squeeze productive enterprises to make up some of the shortfall.

There's absolutely no justification for even having this discussion in
Congress. Can we please have our Ghandi-esque civil disobedience revolt now?

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orev
The article (or at least the headline) frames this politically and that makes
the author (or editor) a bad journalist. Everyone is required to pay sales tax
for purchases made over the Internet, there's just no way for the states to
enforce it. That's why most state tax forms now ask you what purchases you've
made online so they can add that into the tax. If you don't answer this
question truthfully, then your liable for tax evasion.

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petercooper
Scrap sales taxes and replace them with a single, national synchronized VAT.
Say 10%. Sure, sure, it'll never happen because hundreds of thousands of
people make their living out of taxes being complicated and screwing every one
of you over, but hey, I'm a utopian.

~~~
jboydyhacker
Why do you believe a VAT is less complicated than a sales tax. If the issue is
conformity across jurisdictions, a 10% VAT made uniform us just as easy to do
as making all sales tax 10%. And a Vat is far more complicated to collect
since it has to be assessed at every stage of production.

In addition, a VAT discourages domestic production since it is not assessed on
foreign production, only U.S. production and "value added" is taxed which is
horrible if you want to promote U.S. manufacturing.

A sales tax is far better than a VAT. We don't need to copy Europe in every
single way do we?

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CRASCH
I hope if they must implement this that they turn it on its head.

The sale would take place in the state that the seller is located in, not the
buyer. At the very least it would be less work. One state tax code to deal
with instead of 50. The bonus is that most online retailers already have to
collect tax for in state purchases.

~~~
abalashov
What state is the "seller" located in, in the case of an online store? :-)

Is "location" defined by the jurisdiction where an incorporated entity of some
description is registered? Or where the business owner maintains residence?
What if there are multiple owners; then, which one? Is it about where the
servers are hosted?

All these attributes can be moved around; I live in Georgia but can register
my corporation in Delaware. I can host my servers in Norway. And so on...

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kqr2
Some states, such as California, already have a _use tax_. Although they
cannot directly tax out of state businesses, they can push that burden onto
its residents.

You are supposed to track all out of state purchases and pay the tax when you
file your normal income tax.

In fact, software such as Turbo Tax, will automatically prompt you for it.

<http://www.boe.ca.gov/sutax/faqusetax.htm>

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DanielBMarkham
The saddest part about this story is going to be the people who will
rationalize it, even though if it were 4 years ago and the opposite party,
they would be raising hell.

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dublinclontarf
Would this not simply mean that even more business would move outside the US?
OK for physical good's that won't happen but SaaS, why not relocate to ...
Ireland or even better, Iceland (I know for a fact tax in Ireland is much
lower, not sure about Iceland, that's an assumption based on something I
vaguely remember reading).

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TerminalDummy
Why does my own party make me hate them more, and more, and more ?

~~~
sabat
My thoughts exactly.

