
Beware: State tax laws could nail your startup - ableal
http://pando.com/2014/02/15/beware-state-tax-laws-could-nail-your-startup/
======
shiftpgdn
This article is utter horse shit and I hope nobody believes it. If you start a
business in Texas you only pay sales taxes to customers in Texas. The same
applies for any of the other 49 states of the union. Interstate taxes like
described in this article are unconstitutional and have been held up in court:
[http://taxfoundation.org/article/amazon-tax-
unconstitutional...](http://taxfoundation.org/article/amazon-tax-
unconstitutional-and-unwise)

Edit: This piece of trash article was written by a sack of shit with a stake
in getting start-ups to spend money trying to be tax complaint. [1][2]
Pandodaily would be wise to remove this article and revoke the authors posting
privileges.

[1][http://pando.com/authors/jonathan-
barsade/](http://pando.com/authors/jonathan-barsade/)
[2][http://www.exactor.com/](http://www.exactor.com/)

~~~
gamblor956
_This article is utter horse shit and I hope nobody believes it._

This article is not utter HS. It's an important warning to startups not to
ignore one of the most basic principles of law in the US legal system (local
regulation and taxation).

By the way, the Tax Foundation article is 4.5 years old. The legal landscape
has changed significantly since then.

Most importantly, Amazon settled these cases after it became clear that the
weight of jurisprudence was tilting toward overturning _Quill_ (the catalog-
sales case which created the substantial nexus doctrine for state sales
taxes). Primarily, the major factors in the _Quill_ decision--the
impossibility of tracking the multitude of state and local taxes and the
miniscule size of the catalog market--are no longer relevant today. Computer
software and services make tracking state and local taxes effectively
painless, and internet retailers like Amazon routinely outsell their brick &
mortar counterparts.

 _This piece of trash article was written by a sack of shit with a stake in
getting start-ups to spend money trying to be tax complaint. [1][2] Pandodaily
would be wise to remove this article and revoke the authors posting
privileges._

Watch your mouth. This is not reddit. And in the US, we have a federal system
by design. Originally, all taxes were levied at the state and local levels--as
these jurisdictions are the most affected by businesses operating withing
their jurisdictions and thus have the right to regulate and tax such activity.

 _If you start a business in Texas you only pay sales taxes to customers in
Texas._

Get your facts straight. No business pays sales taxes to customers. Customers
owe sales taxes, which the business collects from the customer and remits on
their behalf.

------
Frozenlock
From an outsider point of view, this looks insane.

If one of your costumers is in another jurisdiction, _you_ have to comply with
its rules?

Shouldn't the jurisdiction impose its rules on its inhabitants, rather than
everyone else?

~~~
shiftpgdn
That IS the way it is as far as sales tax code is concerned. The article is
completely wrong:

[http://taxfoundation.org/article/amazon-tax-
unconstitutional...](http://taxfoundation.org/article/amazon-tax-
unconstitutional-and-unwise) [http://netchoice.org/library/sales-tax-
collection-myth-vs-re...](http://netchoice.org/library/sales-tax-collection-
myth-vs-reality/) [http://salestaxguy.blogspot.com/2010/06/golden-rule-there-
is...](http://salestaxguy.blogspot.com/2010/06/golden-rule-there-is-no-sales-
tax-on.html)
[http://law2.umkc.edu/faculty/projects/ftrials/conlaw/interst...](http://law2.umkc.edu/faculty/projects/ftrials/conlaw/interstatetax.htm)

~~~
gamblor956
Stop citing outdated articles. Sales tax law has changed in the 4-5 years
since these articles were written.

Several states already do levy sales taxes on online stores selling to their
residents, and lawsuits challenging those taxes were dropped or settled
because it became clear that they would either lose or instigate the passage
of a federal law allowing states to tax internet commerce.

------
tzs
There are companies who can help with dealing with state sales taxes. E.g.,
[http://www.avalara.com](http://www.avalara.com) [1]

[1] I'm just offering this as an example, not as a recommendation, as I've not
used them. I know of them because they are local and there were a story about
them in a local business newspaper.

------
ableal
I was a bit startled by this snippet: _" in Colorado State, for instance, a
single zip code can contain five different tax jurisdictions and rates ranging
from 2.25 percent to 8 percent"_

I understand that U.S. sales tax is the result of state and city rates, but
that one, probably extreme, case is still curious. I also understand that, in
the absence of "nexus", it falls to the buyer the theoretical obligation of
self-collecting tax.

Just for information, in the E.U. VAT is charged at national rates with some
regional exceptions - for instance, insular territories may have more
favourable rates. Sellers such as Amazon charge buyers according to the VAT
for the delivery location. For instance: the UK has no tax on books, Portugal
has 6%, amazon.co.uk duly collects 6% VAT on books shipped to Portugal.

~~~
hga
That's not at all unique. I live in a Missouri zip code with at least 3, maybe
4: most of it is in one city with a base rate added to the state's, I live in
a part that's not in any city, and the city has districts with additional
sales taxes where that money goes for improvements to the district, or to pay
back ones that were made. The plot of land on which the building I reside in
has some small strips that are in another smaller city; I don't think they
have their own sales tax, but they could. We also have the option of being
hooked to the first city's sewer system (which for historical reasons now
boils down to changing two valves and informing the city); that's not
associated with any special tax, but I know other places use taxing for that,
although probably few if any use sales taxes.

So it's much less an extreme case than you think, and trying to force every
Internet retailer to pay the right sales tax would be an absolute nightmare,
pretty much requiring them to pay a hefty sum to a 3rd party that has to spend
a _lot_ of money to keep track of the multitude of differences. It would be
freaking difficult for such a company to get _my_ rate correct.

And of course the state has two or three base rates, at least, perhaps 0 for
some stuff, and two rates on food and perhaps essentials of certain sorts and
another for everything else. That makes a variation of about a factor of 2,
then the city and its special districts are under 2% as I recall.

~~~
wj
The number of cities in St. Louis county is mind-boggling to me.

------
bigd
A valid Taxes specialist, Doctor and Attorney, are the first thing to find
when you move to a new town. It should be the same for startups, as is even
more important. I cannot believe this common sense get overlooked.

~~~
tptacek
It is a little crazy to run a startup without having an accountant, if only
because your personal taxes are going to get complicated, and you're now
solely responsible for dealing with them.

------
fredgrott
a question about US states sales taxes.

IN a sale of virtual software whereas the client is downloading from an app
store...why is there no nexus formed by the owner of the app store but just
the independent dev selling the software? For example, why is the only nexus
formed my state of Indiana(ie my location) and not Google's app store
location?

~~~
dangrossman
The location of the developer should be irrelevant and have no bearing on
where the app stores collect taxes. The developer is not a party to the
transactions between Apple/Google and the device owners buying apps.
Apple/Google do collect and remit sales tax from customers in states they have
nexus in that have a tax on digital goods (almost half of them).

~~~
rbritton
I don't have a source, but I remember reading that Apple's App Store revenue
is classified as a commission to developers. As part of their 30% cut they
have to deal with all of the sales tax.

------
xux
If you start a startup in New York, you can forgo business taxes for 10 years.

------
coin
What is it with text based websites like this disabling pinchzoom?

------
bnolsen
the US system is ruthlessly hostile towards small business. politicians seem
to talk about "small business" but do nothing, only use it as a political tool
only.

~~~
tptacek
Where by "ruthlessly hostile towards" you mean "unusually hospitable to", for
instance by providing contract liability limitation that you can get over the
Internet for less than 100 bucks, at-will employment in virtually every state,
special income tax breaks for small business owners, a very straightforward
bankruptcy mechanism, contract enforceability that is accessible enough for
small accredited investors to fund companies with boilerplate documents, and
so on?

~~~
walshemj
Having to deal with Federal, 52 states and local taxes certainty looks insane
from outside compare the UK all a business needs to handle tax is deal with
VAT (sales tax) NI (SS tax) and Income tax.

~~~
_delirium
If you think of doing business in the EU, though, rather than just the UK
(which is a bit more geographically/population comparable with the U.S.), then
you do have the same multi-jurisdiction thing over the large number of VAT
rates that differ according to the customer's location. For example if you are
a UK bookseller shipping to a customer in the UK, you don't charge VAT (the UK
exempts books). But if you are a UK bookseller shipping to a customer in
Denmark, you charge 25% VAT (Denmark doesn't exempt books, and its rate is
different also).

I think businesses under a certain revenue threshold, though, are exempt from
calculating destination-based VAT, so it doesn't hit small businesses.

~~~
rahimnathwani
Correct. The thresholds are here:
[http://ec.europa.eu/taxation_customs/resources/documents/tax...](http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/traders/vat_community/vat_in_ec_annexi.pdf)

For reference, the threshold for Denmark is about 38k Euros, so you (the UK-
based bookseller) wouldn't deal with this until your sales _to Denmark_ topped
that amount annually.

