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.
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.
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.
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.
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.
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.
Sales tax might have once been a convenient way to tax people by locale, but it meshes poorly with the internet. If there must be a per-sale tax on internet goods, it should probably be a new type of tax which reflects the fact that the internet isn't related to geography. If anything, it should be a flat tax.
Yes, however: (1) property taxes do not fund the entire school budget in most states and (2) states spend money on a great deal more than just schools.
If anything, it should be a flat tax.
Um, isn't sales tax already a flat tax? It sounds like you're describing the simplified internet sales tax agreement mentioned in the article...is that true?
Would it just be the state tax rate you have to worry about, or would it also include local taxes?
I'm in the state of Washington, and we have to collect sales tax on sales to Washington customers. The tax has to include local taxes. We've got a table from the state giving the rates for each location in the state.
There are 1.6 million rows in the table. The key is a thing called the "location", which is a state-assigned number. Fortunately, it turns out no zip+4 spans a location boundary, so we can use zip+4 to determine the rate. If the state's locations ever end up not being a superset of zip+4 places, then we'd have to go by the full address.
There is another huge table available from the state that lists every single address in the state and gives what location it is in. Of course, people don't always give their addresses in the canonical form that state uses. E.g., someone on "Martin Luther King Blvd" might enter "MLK Blvd", "ML King Blvd", and so on. Or they might say "st" instead of "blvd".
I'm sure a sufficiently clever and determined programmer could come up with heuristics to deal with that. E.g., if the state doesn't have an MLK street but does have MLK blvd, then it could guess that's what the user meant. If there are both, it might tell by street numbers if the ranges don't overlap, and of course there's a good chance those two roads would not be in the same zip code. So it is probably a tractable problem, but a pain in the ass that I sure don't want to deal with.
Now imagine having to do all this for all 50 states. Ugh.
Looking at the Streamlined Sales Tax Project, it doesn't seem very hard at all. It seems like you don't have to bother with any tables yourself; you just connect to a service provider to calculate the tax for you.
But still a cost, and taxation is still a vile form of theft.
Indeed, and that's why I long for the business paradise of Somalia, where no one ever has to pay any taxes.
The larger point should be clear to everyone though: people with money always end up paying a portion of it to those with power. If they're lucky, they pay a small portion that is used to benefit them in a democratic society. If they're not so lucky, the money is extorted to fund warlords and terrorists and they get nothing in return. The inability to differentiate these two scenarios is a principal indicator of political and economic ignorance.
Silly me. I interpreted "[...] Somalia, where no one ever has to pay any taxes" as indicating a belief that in Somalia, no one ever has to pay any taxes.
We all post in ignorance. Just say "oops, my mistake". You won't be kicked off HN for making a mistake, I would have been gone long ago if pg did that.
Nice job with the advertising.
"If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it."
– John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964
P.S. Please I want to see a quote from JFK or even Obama Himself on why it is good to strap an industry. But best place to find a quote like that would be in the Lenin Library.
It also seems like something that would be very difficult to implement and enforce, you know, considering the whole no-boundaries thing.
It's also logistically a bit easier to do it with physical goods, because you're necessarily shipping to an actual address.
If you believe that the government cannot restrain itself, I think you'll have difficulty accounting for that basic historical fact.
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.
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.
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.
What exactly does concern accomplish? Shouldn't you be "concerned" about space aliens invading Earth? Shouldn't you be concerned that your neighbor is a witch who has put a hex on you? I mean, it would much better to be "concerned" about that dire threat than to merely look foolish for ignoring it, right?
This rhetoric about "concern" troubles me because it comes from nowhere. It is not based on a factual analysis about the growth of government power in recent history; it is just ahistorical venting of misplaced anxiety.
The fact of the matter is that in the US, top marginal tax rates have declined significantly over the last half century. Government control of industrial policy has declined radically. Government commissions used to literally set prices for all kinds of goods. Airlines couldn't set their own routes and schedules while banks couldn't open branches in adjacent states. Now, all those regulations are not only gone but considered quaint and absurd. Does any of that history ameliorate your "concern" at all? Or is your concern resistant to facts?
To have my concerns about governmental encroachment on freedoms put on the same level as space aliens does put us on a different planet, philosophically.
The entire Bill of Rights is an example of government restraining itself. The Constitution is an example of that.
Our entire short history is a narrative of how the government erodes the Constitution and that basic idea at every opportunity. Hardly a model of restraint.
Let's not nit-pick, it's an exercise in futility. By permission I meant he's not going to be killed or tossed in jail for saying that, that should be obvious.
"Our entire short history is a narrative of how the government erodes the Constitution and that basic idea at every opportunity"
Selective memory? Let's just forget all the examples where basic rights have been expanded to people. How about the restraint shown when women won the right to vote? Or when black people became officially recognized as people? It was in fact the government that enforced these laws and sent in military personnel to protect black kids from the angry white masses during desegregation.
It has rules and procedures in place on what each branch of government can and cannot do. Etc. Sometimes they break these rules, yes, but that's getting back into the same nit-picking of whether mudil had "permission" to speak his mind. For the most part these rules are followed, and for the most part when they're broken there are consequences.
The government created laws and amendments that clearly demonstrated restraint. How could it do this? Because our government, while imperfect, isn't (yet at least) completely in the hands of some aristocracy, and it has over the years both limited and expanded its powers.
"The Government" is also not an individual entity with a single consciousness that's out to get you. It's a synecdoche that refers to a large group of _elected_ officials. If there's something wrong, the entire country shares the blame.
To view it through a monochromatic lens is to ignore history and to be cynical for cynicism's sake.
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).
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).
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.
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.
So the real question is should they continue to enjoy this oversight.
I suppose the eventual taxation of all online commerce is inevitable.
Seems to me that if the present conditions continued, eventually tax would be forwarded to carriers(UPS,FedEx,USPS). Maybe this is pessimistic but I see all online purchases being charged sales tax in the future. Of course, the bureaucrats will have to set up some system for that, which will take years if not decades.
There's absolutely no justification for even having this discussion in Congress. Can we please have our Ghandi-esque civil disobedience revolt now?
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?
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.
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...
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.
I mean, MA certainly has higher tax rates than some undeveloped backwoods rural states that have little intellectual or human capital to speak of. But it is precisely because MA has real human capital that companies like ITA Software reside there rather than in lower tax states like Mississippi.