Governments need to fund their operations, and allowing some businesses to dodge taxes because of arbitrary geographical differences is unfair and distorts markets.
One should note that its not the businesses that are dodging taxes, but rather citizens of the state that are dodging taxes (and not reporting them). From The Tax You Probably Forgot To Report ( https://www.forbes.com/sites/ashleaebeling/2013/04/15/the-ta... )
> Think you got a great deal not paying sales tax on your online purchases last year? In most states, there’s a pesky tax called “use tax” that you are supposed to pay in lieu of sales tax if you buy stuff out of state or online--and bring it in state. Theoretically, you’re supposed to root through all your receipts and credit card statements, calculate what you owe and report it on your state income tax return.
> Use tax is a tax imposed on the use of taxable items and services in a state when the sales tax has not been paid. For example, use tax would be due if taxable property is purchased from a seller located outside of New York, the property is used in New York, and sales tax was not paid on the purchase. With online platforms and sales being increasingly popular currently, this concept is significant. Remote retailers that make sales into a state but do not have any presence there (i.e. an office, store, storage, employees) may not be registered to collect sales tax in that state because of the lack of presence there. However, the use tax reporting requirement that has been recently implemented by a number of states requires remote retailers to notify their customers that they may owe use tax on their purchases.
The problem is not the general idea of paying sales tax. It's the complication of having ten thousand different sales tax jurisdictions. Complying with the law should not be such a nightmare you need to hire a middleman.
It is way more complicated than just 10,000 jurisdictions:
- mapping an address to one or more jurisdictions
- digital deliveries might not have a shipping address
- tax rates often depend on the type of product
- product types have different definitions in different jurisdictions
- some taxes are time dependent (back to school tax holidays)
- some buyers are exempt in some jurisdictions for some products
Yeah, and it makes a barrier to entry, so a lot of potential economic activity does not take place, or it takes place off the records, and generates no tax revenue.
If you don't start a business because of having to pay a SaaS provider to setup tax payment, then you weren't really serious at all. Note this is only required at over 100k in revenue...
I don't think the proper solution to that is to just declare that you don't have to pay taxes at all when you sell to someone far enough away. Simplify things if needed, but don't give a nonsensical advantage to certain businesses.
The proper solution is to put the onus on the payment networks. They're large enough to build out support for this issue without it being overly burdensome. Internet retailers should only be required to report what customers bought and whether taxes were collected. Then payment networks can report to the states who can send taxpayers a report of the use taxes they owe.
How about putting the onus on the party that wants to collect money off transactions between other parties. If a government wants a cut, they can make it reasonably easy to comply or they can get ignored.
Some state sales tax rates are destination-based and others are origin-based. Since sales tax was not designed to consider the internet, things get complicated fast.
