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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.




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.

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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.

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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.

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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.

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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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I believe property taxes make up much of the school, etc. budgets in most states.

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.

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I believe property taxes make up much of the school, etc. budgets in most states.

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?

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Sales tax is a flat tax within a state, but it's wildly variable from state to state - Delaware has none, Maryland has ~6%, NY has over 8%. I think a percentage agreed upon by all states is probably the agreement they mentioned, but I don't think they had enough detail to confirm it.

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"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."

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.

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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.

http://en.wikipedia.org/wiki/Streamlined_Sales_Tax_Project

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Pointing out Avalara's avatax. Solutions to this problem are not quite as expensive as you point out.

http://www.avalara.com/Sales-Tax-Web-Services

But still a cost, and taxation is still a vile form of theft.

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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.

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...Somalia, where no one ever has to pay any taxes.

Wrong.

http://allafrica.com/stories/201004190409.html

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If you think that I'm not aware of the fact that warlords and terrorists extract protection money from anyone they can, then, um, you're very confused.

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.

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If you think that I'm not aware of the fact that warlords and terrorists extract protection money from anyone they can, then, um, you're very confused.

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.

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I think the point is that those aren't taxes; those are fees demanded by private-sector entities. That's what tends to happen in anarcho-capitalism: without a government wielding ultimate power, private-sector entities with sufficient power can demand payments with offers you might find difficult to refuse.

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"by avalara 3 minutes ago"

Nice job with the advertising.

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