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Ask HN: Congress is Passing an Internet Sales Tax: Why Doesn't HN Care?
128 points by wikiburner on Apr 23, 2013 | hide | past | web | favorite | 113 comments
This seems like a pretty big deal for a lot of startups. The compliance requirements alone sound like a nightmare. I'm curious why none of the recent articles submitted to HN (from very legit sources like NYT and WSJ) are getting upvotes. Also, it's not like this is a hypothetical - it looks like it's going to be railroaded through very quickly.

EDIT: Here are some links:

http://www.nytimes.com/2013/04/23/technology/internet-sales-tax-gains-ground-in-senate.html

http://online.wsj.com/article_email/SB10001424127887324493704578432961601644942-lMyQjAxMTAzMDIwMTEyNDEyWj.html

http://thehill.com/blogs/hillicon-valley/technology/295431-internet-sales-tax-advances-after-obama-endorsement-

http://www.realclearpolitics.com/video/2013/04/22/carney_internet_sales_tax_is_simply_about_leveling_the_playing_field.html




It's been a very busy news week. Reid picked just the right time to slide this in -- the air has been sucked out of the room by other stories.

Congress had a hands-off approach to the internet for some time, and it took off like wildfire because of it. All that's changing now, it seems.

I'm disappointed that there's so many avenues of attack for legislators that it's effectively impossible to cover all of our bases. With big players like WalMart and the states involved, it's a wonder common sense has held out as long as it has.

For those of you buying into the "level the playing field" bullshit, I don't want a level playing field. This isn't kid's soccer where nobody keeps score and everybody gets a prize. I want goods and services delivered to me as efficiently as possible. Used to be this was the corner store, then the big box store, then the internet store. Might be something completely new in 20 years. Can I pay it? Sure? Will it bother me? Not a lot, really. The only thing this is going to do is screw poor people over who were getting goods a few percentage points below what they used to get them at. It's terribly regressive -- the very opposite of a "level playing field"

Big players coming in and screwing over the poor? It should be a scandal.


> it's a wonder common sense has held out as long as it has.

> I don't want a level playing field.

If you explicitly advocate that some businesses should be treated more favorably than others with respect to taxation, even if they are selling the same goods to the same customers, fine.

But the opposite point of view is surely not "bullshit".


The bullshit part is trying to apply a geographic model of governance and taxation onto a technology that is location-independent. It has nothing to do with treating businesses one way or the other.

Politicians want to view economic data as somehow being "owned" by a county, state, or country. So they make policies that are supposed to manage (for lack of a better word) commerce inside those boundaries.

But we don't live in that world any more. The problem here isn't a lack of taxes for some businesses. The problem is an attitude that somehow you can sit above it all and pick and chose who to favor and who not to. It's 20th-century thinking applied to a 21st-century world. The only thing this will accomplish is 1) hurting the poor, and 2) creating a bunch of nonsense paperwork. Commerce will still happen without taxes; it's just the disadvantaged and new businesses that will have extra inertia to deal with.

Yes, if you frame it in terms of "what's fair to business" then sure, the argument works in favor of taxation. My problem is that the argument itself is stated in outdated terms.

The beauty of Congress leaving the net alone wasn't that it was laissez faire. It was that nobody understood exactly what the net meant to the future. Seems like this is still the case, but politicians have decided they've waited around long enough. It's time for their piece of the action.


"The bullshit part is trying to apply a geographic model of governance and taxation onto a technology that is location-independent."

What kind of government is not "location based"? People who live in a place are bound by the laws of that place. That hasn't somehow changed in the 21st century.

You argue that Internet sales tax hurts the poor. That's true because it's a sales tax (a consumption tax), but it has nothing to do with the Internet part. If you think that sales tax is a bad idea that's one thing, but it looks here like you're arguing that taxing face-to-face transactions is fine but taxing transactions over the Internet is unfair. I don't get how the technology justifies the tax exemption.


Many of the customers stubbornly remain location-based.


And over half of the US states have Use Taxes as part of their body of law, where if you make a purchase from another state, you're required to pay the sales tax yourself.

Where this gets interesting is the impact on/by the 10th Amendment to the US Constitution, which gets to the heart of federalism by reserving non-delegated powers to the states and to the people, and how that intersects with the Commerce Clause, which says Congress has the ability to regulate commerce between the states, foreign nations, and Indian tribes.

Which brings up an interesting point - will there be an exemption for foreign sales?


I strongly disagree with your argument that internet sales taxes fall disproportionately on the poor. I suspect that it's inaccurate, and even if it is accurate, it seems fair to impose the same sales taxes on the same goods, without regard to how they are sold.

However, you do make several valid and important points here, which you neglected to make in your original post.

HN is a well-trafficked website. It is not out of the question that legislators, or at least business owners in their district, read the commentary here. Imagine that a legislator read your top comment that "I don't care about a level playing field", dismissing the idea as if it were obviously stupid. Would this legislator conclude that we are rational and sensible people, who understand the issues involved and are proposing something reasonable and fair for all parties?

He or she would probably conclude that we are just another selfish special interest group, defending our unfair special treatment because... because... um, I guess, because taking it away is "bullshit"?


...The bullshit part is trying to apply a geographic model of governance...

You could use a VAT, but that won't appease the state constituencies looking for more revenues. Taxes are hard, full of unintended consequences and conflicting stakeholders.


I don't understand this line of thinking. People already pay sales taxes in big box stores, so in this case, it's more like the Government is artificially encouraging online businesses and penalizing physical stores. Both kinds of businesses being subject to the same rules is a good thing surely?


Problem is that my business is in VA, and I'm now subject to complying with taxing authorities in, say, California, where I don't have representation or a physical presence. It is unconstitutional in principle.


You need to brush up on your understanding of constitutionality.

That you pay taxes for engaging in interstate commerce is in no way, in practice or principle, unconstitutional. Please, rid yourself of the notion that taxation without representation applies to interstate commerce. It does not.

The founders worked the commerce issue(s) out after learning the Articles of Confederation's approach was woefully inadequate for the establishment and governance of a nation. There is a very long legislative and juridical history you can dive into to fully understand exactly how the commerce powers have been worked out over the last couple hundred years.


In what way? The constitution gives the Federal government the right to regulate inter-state commerce. If Congress passes a law says that states can tax inter-state purchases, isn't that simply exercising Congress's authority?


> Problem is that my business is in VA, and I'm now subject to complying with taxing authorities in, say, California, where I don't have representation or a physical presence. It is unconstitutional in principle.

It is not "unconstitutional in principle" for Congress to regulate interstate commerce in general, nor is it "unconstitutional in principle" for it to do so in a way which permits States to tax foreign businesses selling into the State the same way as local businesses selling in the State in particular.

Unless "unconstitutional in principle" is just a fancy way of saying "something newbie12 doesn't like".


> I want goods and services delivered to me as efficiently as possible.

You know what makes deliveries more efficient? State funded infrastructure.

now, how could we finance such a thing...


No national sales tax currently exists, to my knowledge. So this is a new precedent. And to answer your question, we could finance such things by avoiding wars, shutting down needless agencies, and so on.

People are already struggling, burdening them with a tax that will generate revenue that is peanuts compared to what we're spending on our wars. Doesn't make sense to me.


> No national sales tax currently exists, to my knowledge. So this is a new precedent.

No, because, despite the media calling the Marketplace Fairness Act an "Internet Sales Tax", the bill is not a national (or any other) tax. It is a bill which conditionally lifts existing barriers to states extending their sales taxes to cover online retailers selling goods to people in the state.

If the bill passes, then states with sales taxes would have to choose whether or not to meet the conditions set in order to extend those taxes to internet retailers selling into the state. No tax is created directly by the bill, and any tax enabled by the bill would be a state tax, not a national tax.

> People are already struggling, burdening them with a tax that will generate revenue that is peanuts compared to what we're spending on our wars.

Most states aren't using any of the taxes they collect to fund wars, and the central purpose of this isn't so much to raise new revenues (though it will enable states to do some of that) as to eliminate the tax incentives that currently exist which favor out-of-state internet-based retailers over in-state retailers (internet-based or brick-and-mortar) due to the inability of states to levy the same taxes on the former as the latter.


This is not a national sales tax. This is existing state sales tax being applied to an additional category of sales.

In the US much of the infrastructure -like roads and bridges- is ostensibly state funded so decreasing the federal deficit wouldn't necessarily have any effect.


State funded infrastructure? If only they'd actually spend tax dollars on that instead of lying to get the taxes and then spending the money elsewhere.

They're collecting record taxes at the state level, and our infrastructure is in the worst shape it has been in since pre-interstate highway system days, so now what?

Raise taxes some more, so they can make more empty promises and redirect funds to pet projects instead of infrastructure? How in the world does this band of criminals deserve any trust such that they should get more money to spend, before they prove they can actually work with the $6.x trillion they already get to spend (nearly the size of China's entire economy, and we can't even fix bridges or upgrade our electrical grid).


Actually, it's infrastructure that makes deliveries efficient. State funding is only one avenue for creating it. Many would argue state funding is inefficient.


> Congress had a hands-off approach to the internet for some time, and it took off like wildfire because of it. All that's changing now, it seems.

The internet would've taken off regardless of Congress's level of involvement with it.


I wholeheartedly disagree.

Even if they wanted to regulate it at the time, they would have no idea where to start. The legislative body is, even to this day, not exactly comprised of technologically savvy individuals. Rather, these are people who are very good at acquiring and wielding power, crushing any opposition, and pandering to their core demographics.

So if you told them that, oh, a 'series of electronic tubes' sprang into existence, they would just look at you, scratch their heads, and ask 'but can we tax it?' Oh wait...

In all seriousness, though, the Internet would not be the same if there were meddlesome regulations imposed on it from the very beginning. Openness, freedom and sharing of information, innovation, and experimentation are intricately woven into the DNA of the web; this would simply not be the case with any sort of stifling draconian policies. Entrepreneurs would have little incentive to take the leaps of faith that have since turned the Internet into, at least in Congress' eyes, the economic powerhouse that it is today.

It truly is a wonder that, just now, they are coming around to restricting its freedom (CISPA) and taxing it (the perhaps unintentionally Randian-sounding 'Marketplace Fairness Act'). Not to get all Negative Nancy, but I predict that we are nearing the end of 'The Golden Age of Internet Openness.' Never again will we have this much unfettered and almost-free-as-in-beer access to content and information. Of course I hope this is not the case, but whenever governments get involved and try to 'fix' an industry, it does not bode well for its future.


> Openness, freedom and sharing of information, innovation, and experimentation are intricately woven into the DNA of the web; this would simply not be the case with any sort of stifling draconian policies.

How does taxing meat-space purchases that happen to be done over the internet affect any of these things?

> Entrepreneurs would have little incentive to take the leaps of faith that have since turned the Internet into, at least in Congress' eyes, the economic powerhouse that it is today.

Yes, regulation has eviscerated America's drug industry, its financial industry, its content industry, its defense industry, its rail freight industry, its agricultural industry, etc. Oh wait, no, all of those are preeminent in the world. But it does kill innovation, right? Well no, one of the most innovative companies in the history of the world, that built the world's preeminent telecommunications network of the time, was a de-facto government-sanctioned monopoly (AT&T).


from the NYT article: "The bill would allow states to require all Internet sellers to collect sales taxes for the state and local governments of the buyers. State governments would be required to provide software free to Internet retailers to calculate sales taxes. Online retailers with out-of-state sales of less than $1 million a year would be exempt."

Internet Sales Tax wouldn't be bad if it were uniformly imposed country wide (what amazon has pushed for). This specific bill, on the other hand, sounds like a nightmare.

The only saving grace being that at least states would be required to provide "software" - I can only hope that translates to APIs - to calculate taxes. That would make the problem significantly more manageable but it would still drastically increase the complexity of billing solutions for a lot of SMBs. The million dollar threshold is just too low for this to be anything but crushing for small businesses.


The next two paragraphs after the one you mentioned were possibly more relevant:

Opponents predict a bookkeeping nightmare. Online retailers would have to keep track of more than 9,000 sales-tax regimes. Internet companies in states with no sales taxes — Montana, New Hampshire, Oregon and Delaware — would have to build a collection apparatus from scratch.

Senator Ron Wyden, Democrat of Oregon, called the legislation “a targeted strike against the Internet and a targeted strike against the digital economy.”


Look at this as a SaaS opportunity. Create a clearinghouse to manage all of the "software". Fairly simple API, you give me the State of the person, perhaps ZIP to find County level taxes and out comes a {"state":".08", "cityX":".01"}. Leave it to the client to handle exact cost calculation.

As for the states that don't have sales tax, they can pay the clearing to provide a {"state":"0"} for all requests.


A little more difficult than that. I grew up in Pennsylvania. My zip code was for the town next to the township I lived in. There were taxes for stores in the town that weren't levied on the township (two different local gov'ts). Also, PA doesn't tax clothing while Maryland a few miles away does. So every item you sell would have to be categorized in some way (and maybe differently in different areas). So, every delivery address would have to be accurately mapped to multiple, overlapping taxing authorities (state, county, local, school district, etc.) and every item you sell would have to be mapped to multiple tax categories (clothes and shoes not taxed in A, clothes (but not shoes) taxed in B, shoes (but not work boots) taxed in C, etc.)


To get the most precise taxation possible you would need to get the customer's address and calculate their zip+4.

This is ignoring the fact that exemptions would be a nightmare.

The only thing I could think of that would be worse than needing to manage that massive API would be if I was a business owner who had to access multiple APIs for DC plus all the states with sales tax.


> The only thing I could think of that would be worse than needing to manage that massive API would be if I was a business owner who had to access multiple APIs for DC plus all the states with sales tax.

So you're saying that putting together that SAAS would be a slog and its very existence would be a moat to other people who don't want to slog through.

I.e., a great biz opportunity. :)


You're probably right on that one. There is a comment elsewhere in this thread that mentions a SaaS company that handles sales tax automation and reporting, so clearly there is some money to be made.


It seems to me that this is something that a state law permitting Internet sales tax could (and would have to) work around. E.g. charge a 0.5% lower "Internet sales tax" but have it apply to absolutely everything for ease of bookkeeping.


So in general it's more complex than I opined in the three minutes it took to post, but it doesn't seem to be impossible. If anything it's complexity merits a service. This would require a few people and sme coordination, but should be doable.

Who's with me? New start up.


Service for this == middleman effectively increasing the burden of any tax and wasting resources.


That's like saying "e-commerce == middleman effectively increasing the burden of any purchase and wasting resources"


That kafkaesk mess just makes the business case more compelling.


In my area, there are state, county, and city sale taxes. You would need a full address and a database of addresses within city limits in order to determine the proper sales tax.


There are many rural areas in the US where the physical address is not in the USPS database and as such "does not exist" (the USPS only has PO Boxes). That makes using any address neigh impossible for accurate tax calculations.


Are there multiple sales tax regimes operating within the span of one PO Box? Doubtful than anyone on either side will worry about that case


I'm not sure if any of them have nice JSON interfaces yet, but there are certainly 3rd-party services where you can query geographically detailed information on sales taxes, down to exactly which SKUs are taxed at which rates (e.g. what qualifies for a "grocery" exemption).

Example: http://tax.cchgroup.com/sales-tax-data/default.htm?cookie_te...


I don't know how common it is, but I do some some areas have a maximum on sales tax. The Kenai Peninsula Borough in AK had one when I lived there. I can't remember the details, but I know with the truck I bought the tax bill was $35 as that was the cap.


> The only saving grace being that at least states would be required to provide "software" - I can only hope that translates to APIs - to calculate taxes.

You're talking about the government. They'll put it out for bid which will end up costing 3x as much as it should and be an ActiveX control that no one can use.


Reminds me of the 1099 fiasco a few years back [1]. I think this has to be just as silly if not worse.

[1] - http://www.thetechgap.com/2010/12/who-to-blame-for-the-1099-...


For now I don't care because (1) I'm already paying sales tax and (2) This is a US centric thing, if anything it levels the playingfield / is an advantage depending on where you are.

The fact that there was a time when you did not have to pay sales tax should be seen as a gift, if there is one thing that seems to be a certainty over the long run it is that if there is a flow of money sooner or later it will be taxed.


Yes, it definitely does level the playing field between brick & mortar business and online businesses, and to a certain extent amongst states. What would have been really interesting is if the taxes revenues went to the state that the business was operating out of. Unfortunately, that'd probably just mean more tax revenue for either Delaware or the existing tech hubs of America. I think it's because of this fact that a more complex system is necessary. It's much more fair to the states.


How does this level the field between brick & mortar and online business?

I manage operations for a small brand that operates both as an online business (recent venture) and brick & mortar (2 stores, 2 different states). It seems that this would help us by taxing us more and increasing our IT costs in terms of implementation? If you are operating a small business (retailers,service provider) in this day and age - it is almost a necessity to have some online presence.

With the existence of simple ecommerce tools like shopify and bigcommerce at the hands of traditional businesses making entry simple - added restrictions may deter these brick & mortar businesses from entering the online space at all.


If goods are taxed more businesses raise their prices. Businesses aren't being taxed. Consumers are. The only cost businesses have to pay is the cost of implementing the system, which is a fixed cost that you'll pay off over time.

Also, you're kindof proving my point by stating that these new policies may deter brick & mortar businesses from entering the online space. A brick & mortar business by definition doesn't have an e-commerce presence. Ones that do have a hybrid business model. For those, there's an interesting dynamic that management will face that's a close reflection of what the greater market will have to deal with, i.e., which side of the business to invest in. But anyways, if you admit that brick & mortar businesses will be deterred from moving to e-commerce, then you're admitting that the brick & mortal model is more competitive under the new tax regime.


> If goods are taxed more businesses raise their prices. Businesses aren't being taxed. Consumers are.

This is entirely dependent on which part of the supply chain has the fiercest competition. Sometimes consumers get the economic profit and pay cost (commodities) and sometimes the producers do (monopolies, who already charge what the market will bear)


> Yes, it definitely does level the playing field between brick & mortar business and online businesses, and to a certain extent amongst states.

Which is the source of much of the opposition: Reps from sales tax-free states oppose it because the current regime encourages internet-based retailers to locate operations in those states, an incentive which will be removed if states with sales taxes can apply them to sales from vendors in sales-tax-free states.


Sales tax should go to the state where the buyer is, since the buyer is almost always the human person in the transaction. The only reason that it goes to the seller is that sellers are easier to regulate than individual buyers. With modern IT, that's not an issue anymore.


I honestly don't care if retailers have to collect income tax: But municipalities/states SHOULD have to pick off a menu of plans from the federal government for internet tax for their boundaries, and should have to register their boundaries with a federal agency.

The burden of dealing with every crazy tax situation and variety in every municipality in the country is the issue. Not the tax itself.


Is the argument that there should be no sales tax, or that online businesses should be exempt from it? Alternatively, is there some specific compliance issue or formulation in the proposed legislation that is poorly thought out?

I'm genuinely curious, as (in principle) the fact that online businesses have been exempt from sales tax largely strikes me as an anomaly and not some new standard.


Mail-order catalog businesses, which have existed for decades?

You only pay tax in jurisdictions in which you're physically based (for an internet startup, this would be wherever you're incorporated). This axiom has held in US tax policy for about as long as there has been US tax policy.

Kinda ties in with that whole 'no taxation without representation' thing.

Edit: for clarity.


> You only pay tax in jurisdictions in which you're physically based (for an internet startup, this would be wherever you're incorporated). This axiom has held in US tax policy for about as long as there has been US tax policy.

No, it hasn't. You have to have a business nexus to be subject to taxation, but both physical operations and incorporation (which are often different states) form a nexus, as do certain other activities.

Before, even with mail order, remote operations choosing to actively solicit business in a state without physical presence were never a large volume of retail; with the internet, that's changed, and it makes sales taxes create a perverse incentive to avoid locating in the states where most of the business originates.


Sales tax is applied to the buyer, not the seller


Right. Companies with a physical presence in a state are required to collect sales taxes from buyers for all sales in the state. Businesses are not required to collect sales taxes for states where they have no presence (aka nexus); this is based on the Quill v North Dakota interpretation of the Commerce Clause of the US Constitution.

The problem with the proposed legislation is that counties, cities, and towns can each set their own tax rates. So the compliance costs are high because of the thousands of different rates. You cannot use something simple like state or zip code to determine tax rate; you have to use geolocation to get the exact jurisdiction. And governments typically levy penalties if you get your sales tax collection wrong. So who is responsible for paying the penalties if the third party tax collection service makes a mistake?

The way this was supposed to go down is that states were supposed to simplify the number of different tax rates before requiring out-of-state businesses to collect their sales taxes. You shouldn't need to subscribe to a sales tax compliance service to do business in the United States.


> Companies with a physical presence in a state are required to collect sales taxes from buyers for all sales in the state. Businesses are not required to collect sales taxes for states where they have no presence (aka nexus); this is based on the Quill v North Dakota interpretation of the Commerce Clause of the US Constitution.

Specifically, its based on a Dormant Commerce Clause interpretation, to-wit, that States cannot require such taxation of businesses without the kind of nexus specified in Quill without Congress taking specific action to permit the state to do so.

What you see going on right now is Congress taking specific action to permit states, under certain conditions to apply the kind of taxes that they may not be permitted to apply without Congressional permission.

> The problem with the proposed legislation is that counties, cities, and towns can each set their own tax rates. So the compliance costs are high because of the thousands of different rates.

The proposed legislation sets conditions for the states if they want to have access to the privilege Congress is granting with regard to taxation, one of which is that they must provide free-of-cost software for internet retailers to handle the calculations for their states.

> And governments typically levy penalties if you get your sales tax collection wrong. So who is responsible for paying the penalties if the third party tax collection service makes a mistake?

If you are the responsible party for collecting the taxes under the law, you pay the government; if you've paid someone else to do it for you, presumably you've made sure the terms of that contract make them responsible to you for any errors they make, so that they pay both the penalties and any additional costs you face as a result of the error.

> The way this was supposed to go down is that states were supposed to simplify the number of different tax rates before requiring out-of-state businesses to collect their sales taxes.

"Supposed to" based on what? Or are you just puffing up your personal preference for government policy as the way things objectively ought to be?


Only commenting on the last point. He's referring to the previous proposal from the final years of the Bush administration wherein Congress would have passed an internet sales tax if the various states (mostly meaning Cali and NY) would have agreed to simplify their taxation structures ahead of such legislation. The idea was that states would set their sales tax at one of several fixed rates (i.e., 5%, 7.5%, 10% etc) subsuming county/city sales taxes into the state tax rate. Counties and cities would receive their proportionate shares (though the mechanism for determining shares was never discussed in depth).

The proposal actually received a lot of discussion among policy makers, but then got dropped when it became clear that state legislatures wouldn't go through the trouble of reforming their sales taxes without Congress first passing the legislation.


> this is based on the Quill v North Dakota interpretation of the Commerce Clause of the US Constitution.

Note that this is a very old reading, and any modern court would likely wash that out, as everything related to human existence is considered interstate commerce by the modern court.


Maybe, but Quill is the law of the land today.


I'd be against this if the U.S. had a progressive tax code to begin with, but we don't. Sure, if you look at federal income taxes only there appears to be a progressive tax system but taxes on capital gains is pretty much "flat tax" loop hole for the ultra rich.

Then you look at States who almost all implement regressive taxes, many through sales taxes, and see how States' fiscal woes are self-inflicted. Here's one such examination: http://www.chicagomag.com/Chicago-Magazine/The-312/January-2...

In Tennessee, where I have to endure this regressive insanity, asking for a progressive income tax has become a third-rail issue for any local politician. So we have zero income tax and an effective sales tax of 9.25%

Why then am I favorable to internet sales tax when I've derided sales taxes as regressive just above? In this case I believe, mainly through intuition, untaxed internet sales are just one more vehicle for the affluent to avoid paying taxes. This makes regular retail sales tax that much more burdensome for the poor who receive fewer services because overall State tax revenue suffers.

Until the regressive tax leanings of the states is abated, which I doubt will happen in the next decade, I see this as a necessary evil.


1) There probably should be a sales tax, more and more of the economy is moving onto the Internet, and local state coffers are hurting for it

2) Figuring out local sales tax is hideously difficult, it opens lots of great opportunities for new startups as payment processors who "do taxes right"

3) Other bigger stories have consumed the media


Figuring out local sales tax is hideously difficult

The legislation specifically addresses this point by requiring states to use a simplified sales tax code. The article wasn't clear on the all the details but it made it sound like a single tax rate for the whole state so that merchants don't have to know the individual city/county tax rates.


So, it American companies are imposed sales tax burdens no matter which state they're selling to, wouldn't that just encourage companies like Amazon to move outside of the United States? They could avoid collecting sales taxes altogether, coming in lower than the competition, and that would also deprive the US of collecting revenue taxes on income, etc.

If the economy is moving to the internet, what incentive is there for these companies to stay in the US, especially if doing business in the US becomes disadvantageous for their gross sales?


> So, it American companies are imposed sales tax burdens no matter which state they're selling to

They aren't even if this bill passes; this bill allows states to tax sales into the state no matter which state they are selling from.

> wouldn't that just encourage companies like Amazon to move outside of the United States?

Amazon has already reached the point where its given up trying to relocate outside of individual states to avoid sales taxes, because the efficiency it gets from having facilities close to customers is worth more than sales tax avoidance.

So I doubt very much it would try to move out of the US for sales tax avoidance reasons.


I think that if they do this, they should require all states and localities to commit to updating an online clearing house of tax rates for their locality based on location and product type. If you fail to do so, merchants are under no obligation to collect your tax. The reason why this loophole has existed so long is that it is very difficult to tax according to 1000s of laws nationwide.

I do not think people should be really against this. If you are against paying sales tax, lobby your local government to stop sales tax.


Because I run a physical item e-commerce store, I am against this because I do not trust the states to come up with a reasonable solution. Handling the issue in our home state and city requires two accountants. I shudder at the thought of 50 state compliance.


If I were to venture a guess, I'd say it's because we are mostly all too young to remember a small government and too time-poor to do much about it.


To address a couple of concerns raised here.

There is a Small Seller Exemption. If you have less than $1,000,000 in remote sales during the preceding calendar year you are exempt from collection.

There are six certified service providers, including one free one, which can be used to calculate the required sales tax. The states certify these providers and agree to indemnify users against liability if the case of an error by the service provider.

Before a state can require collection they must change their code to be in compliance with the requirements of the Marketplace Fairness Act. Currently 24 states are compliant and could begin requiring collection if the bill passes.

For more information go to http://www.marketplacefairness.org/


Companies like Avalara http://www.avalara.com must be drooling right now


This kind of thing is an opportunity as much as a danger.


Because HN readers aren't idiots. We know that it is good and right for sales tax to be charged on sales. And, that the sale occurring on the internet does not make it an essentially different thing than any other purchase of a good or service. I think that, for HN readers, is very important: the internet is a different marketplace, not a different reality, and to treat it differently in some aspects can lead to legal problems and credibility issues down the road.

In terms of the nightmare that is implementation, that is another story.


This is absurd. First you assume you speak for all of HN. Then you imply you're an idiot if you don't think it's "good and right for sales tax to be charged on sales."


I don't think we know that - I'm pretty sure more than 0 of us suspect that sales tax shouldn't exist at all.


Then go ahead and make that argument, if you believe it. But it has little to do with the status quo, which is that sales tax exists but is only collected from offline businesses. In other words, arguing for the continuance of the status quo isn't arguing that sales tax is immoral, it's arguing that online businesses somehow deserve a free ride offline ones don't.


Theoretically, I am OK with the government not giving a wink and a nod to certain classes of business. I am also theoretically OK with not allowing vast amounts of money to pass around without taxation.

Practically, of course, implementing these ideas could be very nastily done and make no one happy but certain privileged people who attempt to squash competition.


Existing players are probably fine with Internet sales tax. It's another barrier to entry.


The complexities go far beyond just knowing the rates for each jurisdiction and arranging for payment.

Naturally there's going to be a call for some kind of compliance testing. How are you going to catch the cheaters when you don't have access to their financial records, as you would if the business was in your state?

Even just the rates themselves can get complicated. Minnesota for example doesn't tax clothing or food, but the specifics of what's included aren't clear - candy bars for example aren't considered food and are taxed. How is somebody from another state supposed to figure this out even with software help?


> Naturally there's going to be a call for some kind of compliance testing. How are you going to catch the cheaters when you don't have access to their financial records, as you would if the business was in your state?

The law allows for an audit by the levying state (but requires that it be a single audit, even if multiple taxes from multiple jurisdictions in the state are included in the consolidated tax collected on remote transactions.)


So what happens when the stars align against you and 25 states decide to audit you at once?


Disclaimer: Canadian, so I don't know all the rules.

I think that a law like this is inevitable and in part fair. States like California have tons of tech companies which are contributing a huge amount of tax dollars to the states coffers. But they are selling goods and services to citizens in other states. Why shouldn't these other states get a grab at the revenue made from the citizens purchasing goods and services while in their state? While the internet is location-independent the purchaser of any item is not.


What is wrong with an internet sales tax? If you live in the US and buy something there is a sales tax associated with that purchase.

Why is buying via the internet any different?


This may be a silly question, but does this sales tax also apply to SaaS products that you might sell? Or is this only for physical products a la Amazon?


It depends on the state. Some states tax services (eg Ohio), while most states only tax physical goods.


So it would depend on the state that your SaaS company is located in, or where your customer is accessing it from?


The latter. If you are a SaaS business in a state that taxes services, you only have to collect sales tax for customers in your state today. Under the new legislation, all SaaS businesses in the US would have to collect sales tax for any jurisdiction that taxes services.

The simplest way around this would be to set up your SaaS business in Canada.


Does anyone have any idea how this could affect any startups selling software online?

This could have huge ramifications, but as usual it's Congress mucking things up.


> Does anyone have any idea how this could affect any startups selling software online?

Directly, this law would have no effect on anyone except state policymakers if it passes.

What effects particular state policies electing to make use of the authority Congress is allowing states under this law would have depends on the exact policies adopted by individual states (which would affect what goods are covered by the states internet sales tax regime and what variables are needed to calculate the rates, and what, within the requirements of the law, form the free-of-charge tax calculation software supplied by the state takes.)


As far as I can understand this isn't a new tax, it's just a law which makes it easier for tax which is owed anyway to be collected. Nobody likes paying tax but governments need money to provide services. Perhaps I'm a bit blase about this because I don't live in America so this doesn't affect me, but unless you want to not pay tax which you legally should, I don't see the problem.


What is wrong with paying sales tax over things that we buy over the internet again? Isn't the real problem the fact that we have to pay sales tax in general, and/or the sales tax rate? Sales tax income goes to your state. There are states which can sustain without a sales tax (or even income tax); they certainly get that money from somewhere though.


Does anyone know if this would apply to SaaS stuff or only to physically shipped products? Also, the $1 million threshold exemption is good, but could it create scenarios where your product/service takes off and then all of a sudden you gotta figure out if you need to start sticking sales tax in there?


> Also, the $1 million threshold exemption is good, but could it create scenarios where your product/service takes off and then all of a sudden you gotta figure out if you need to start sticking sales tax in there?

Its based on the preceding calendar year, so the only time that is remotely possible is if you have an unexpected spike at the end of a calendar year such that you have to little time to comply for the beginning of the next year.

Sensible planning would just set a threshold substantially lower than $1 million in projected calendar year sales at which you make it a priority to incorporate functionality to handle sales tax collection for the next year.


I would guess the simplest thing to do would be to build the backend to support sales tax and only implement that piece if necessary.


I noticed the $1 million exemption for small businesses. How will that work? If you sell for 11 months without collecting taxes then find yourself going viral around Christmastime and crossing the $1 million mark unexpectedly, are you suddenly liable for all those prior sales?


> I noticed the $1 million exemption for small businesses. How will that work? If you sell for 11 months without collecting taxes then find yourself going viral around Christmastime and crossing the $1 million mark unexpectedly, are you suddenly liable for all those prior sales?

No, the $1 million is for total remote sales in the preceding calendar year. So up until the first year you make remote sales of $1 million, you are exempt; once you reach that threshhold, you are not exempt in subsequent years until the first year after the first year in which you fail to make $1 million in remote sales.


It probably would be that the first $1 million is free then after that the tax. I don't want to even guess at how much harder that would be to track on top of everything else.

edit: Looks like someone else has a better grasp of it. Still would suck all around.


My senator Ron Wyden (D-OR) is vehemently against this tax. Oregon doesn't have a sales tax so I'm not really sure why he's against this proposal so much. Maybe he thinks we already have a "level playing field" and OR has nothing to gain since we wouldn't collect anything?


> My senator Ron Wyden (D-OR) is vehemently against this tax. Oregon doesn't have a sales tax so I'm not really sure why he's against this proposal so much.

Probably because "Oregon doesn't have a sales tax" is an incentive for internet-based retail business to locate facilities in Oregon under the current regime where sales tax only applies to transactions where, approximately, (1) the state levying the sales tax is one in which you are incorporated or have physical presence, and at the same time, (2) the recipient is located in the state levying the tax.

Note that the incentive to locate in Oregon or other no-sales-tax state over a state with a sales tax goes away under a model where the first condition is removed and only the second condition applies.


Oregon has a strong tech scene, at least in Portland. That ecosystem will be hurt by the compliance costs.


So will we see VPNs in Delaware spike from this? It's not clear to me if this is just extending already existing state sales taxes to the Internet, or if these are new, additional taxes.


I believe your tax would be based on billing address, so vpns wouldn't help. And no, this isn't a new tax, just one that virtually no one pays. When you buy stuff online from a company with no physical presents in your state they aren't required to collect a sales tax. You're still suppose to self report it and pay it when you do your taxes at the end of the year, but very few people do.


> It's not clear to me if this is just extending already existing state sales taxes to the Internet, or if these are new, additional taxes.

It is Congress allowing states the option to extend, under certain conditions designed to ease compliance burdens, existing sales and use taxes to be collected as sales taxes from internet-based vendors selling into the state.


Not unless you're getting your products shipped to Delaware


I was thinking of services I use, not necessarily physical products, but you're right.

That was just tongue-in-cheek though. I'd still like clarification on the second part.


Services are generally (a hedge I only add as maybe one state out there is doing something insane) not subject to sales tax, only "goods". As an example, it is typically the case that software will transition from an untaxed service to a taxed property when it is no longer "custom", and instead made once and sold to multiple people, or in hilarious cases (California) the second you make the mistake of providing it on physical media.


the government can create all the money it needs to fund itself. It does not need to take it from taxpayers. The entire purpose of the tax code is not to raise money but to control the wage slaves.

http://www.naturalnews.com/040027_financial_slavery_money_in...


This is an insult to actual slaves.


Because it is inevitable?

Ebay is one of the few large entities fighting it, I think they are trying to get a small sales exemption.


> Ebay is one of the few large entities fighting it, I think they are trying to get a small sales exemption.

There is already small sellers exemption: "-A State is authorized to require a remote seller to collect sales and use taxes under this Act only if the remote seller has gross annual receipts in total remote sales in the United States in the preceding calendar year exceeding $1,000,000. For purposes of determining whether the threshold in this sub­section is met". From Section 2(c) of the act: http://www.marketplacefairness.org/bill-text/


Because we're already obligated to pay sales tax, and they're just attempting to collect it better?


because participating in a hopelessly corrupted system is demoralizing. "activism" brings at the very best a delay followed by a shady deal as soon as your back is turned.

viva btc


This is going to be great for Europe!


I expect it to die in the House.


Bitcoin Anyone?


The best result that could come of this Internet/Sales Tax issue is that Sales tax is abolished in favor of income tax.




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