Buying on Web to avoid sales taxes could end soon

AP via Breitbart.com ^ | 01/12/09 | RACHEL METZ

[DFG]

Shopping online can be a way to find bargains while steering clear of crowds—and sales taxes. But those tax breaks are starting to erode. With the recession pummeling states' budgets, their governments increasingly want to fill the gaps by collecting taxes on Internet sales, which are growing even as the economy shudders.

And that is sparking conflict with companies that do business online only and have enjoyed being able to offer sales-tax free shopping.

[copaliscrossing]

I had to write the software that integrated our system to a web based streamlined sales tax software provider. This “service” costs our company A LOT of money per year to “subscribe” to the service. This is the hidden cost of taxation that takes $$$ straight off the bottom line.

We send this service our invoice information including the address of the customer and what they bought and the service returns the amount of tax for each line item and the type of tax (use vs. sales). The service then keeps track of which states & municipalities we owe tax dollars to and how much. They also keep track of the tax rates nationwide.

Here’s the BIG problem. Small business. I heard a lady on a radio program that has a small business making hand-made jewelry and shipping in-state and out of state. She said it is absolutely crippling her to keep track of her where her sales are going, the tax rate for that destination, and reporting it accurately to the state. She cannot afford to pay a “service” to do what our company pays to have done. She probably will end up either folding or going underground and waiting for some compliance officer to throw her in jail. What a liberal paradise.....

[A message]

Let’s see-—— With your theory, the customer is looking at the actual item in a brick and mortor store, and then going to the internet and paying for shipping, just to avoid the sales taxes. That doesn’t add up, IMO.

This is exactly what is happening but it is not so much the sales tax they are avoiding it is also the discount advantages from Internet retailers offering 20% - 30% or more off the same product. Amazon.com is a prime example. People in my current industry are using the B&M as a showcase and then going on the Internet to buy the product.

The brick and mortar mom and pop store is getting killed in this environment. The B&M has significant more fixed costs in overhead and other fixed costs than the Internet only retailer and between discounts and no sales tax this puts the B&M at a decided disadvantage.

Now if we want a bunch of shopping areas with no physical stores then nothing should be done to level the disparity between Internet and B&M stores because eventually that is what will happen as entrepreneurs consider the Internet as a more viable business idea than opening a B&M.Personally I consider the mom and pop B&M business the back bone of the country producing jobs and capital and believe there should be some leveling on the playing field vs the Internet retailer.

And yes, people will stupidly spend more for a perceived savings than they'll actually get. My dad had a mom and pop drugstore in the 60s-90s and as the the big chain discount drugstores proliferated people would travel 10 miles past his store to save 10 cents on a bottle of aspirin despite my dad having a nice store with great service.

[DesScorp]

“Just another example of the further e-rosion of our civil liberties...”

I detest taxes as much as anyone, but they’re necessary. And if people stop going to brick and mortar stores for online venues, then either you have to apply a sales tax to them, or enact a higher state income tax. The money has to come from somewhere. Personally, I like having cops, firemen, and state troopers.

[CharlesWayneCT]

Actually, there really hasn’t been a “tax-free” internet. Most states require a tax to be paid by citizens whenever they buy something, no matter what state they buy it in.

But most people simply ignore that obligation — a good example of how we teach our citizens that they only have to obey laws that are strictly enforced.

[CharlesWayneCT]

Actually, you don’t “voluntarily file”, you are required by law to file.

It’s just that, since the companies cannot be required by law to REPORT their sales to you (since they are out-of-state and have no business within the state for the state to harass), the state has to depend on the ethics and morality of the citizens.

And as you demonstrate, morality isn’t really in play any more. It’s whatever you can get away with these days. If they can’t catch you, break the law. Nor moral or ethical, but it seems to be popular enough.

[CharlesWayneCT]

There are two categories of people who obey ANY law — first, those who are afraid of being caught, and the consequences, and second, those who have ethical standards, believe in morality, and follow the law because it is what you are supposed to do.

[Republic of Texas]

EVERYTHING that is not taxed now will be taxed soon, not just internet shopping.

[snowboarding conservative]

I’ve had the misfortune to be in Hong Kong for three years. While the tax rate is low, they get their money though the renting of land. Nobody owns the land under their house in HK. The cost of living in Hong Kong is about 25% more than NYC.

HK’s advantage is because it is an English speaking port city following the rule with perfect integration of a corporate-state next door. The Cheap Sh*t from Shenzhen has to go through the HK Ports.

And while we’re at it, Hong Kong has a state provided universal health care system. Are you proposing we should adopt that as well?

[CharlesWayneCT]

If the company collected sales tax from you, it means they have a business presense in the state of PA. They will report your sale to PA and will pay the tax to your state.

The companies that don’t collect sales tax are companies that don’t do business in your state. Your state most likely has a law that requires you to report the sale and pay the tax directly on your income tax. You probably don’t know about the law, and skip that part in your income tax book.

So far, the fight on the internet has been to keep states from being allowed to force companies that “do business” in the state ONLY because they offer online sales from having to collect sales tax for every state and locality in the country.

That is what I think they are talking about here — setting up a system to require every online company to collect sales tax for each state.

Hopefully, they will at least require the states to set up the systems to make it easy for the companies to do so, rather than make the companies upgrade their own software.

At one point there was a discussion of just requiring state sales tax, but not local taxes, because that would only require 50 different charges.

But note that any online company that also has brick-and-mortar around the country already has to handle most of the state sales taxes. So the current system discriminates against companies that have a physical presence in the state, against those who don’t.

That doesn’t seem to be reasonable. Why should Barnes and Noble.com have to collect sales tax for a book I buy, but Amazon.com doesn’t? It gives Amazon an unfair business advantage — and the state if anything should be prefering the company that actually pays property taxes in our state.

[CharlesWayneCT]

The reason Sears Catalog had to collect sales tax is because Sears had retail stores in every state.

Lands End for a long time didn’t have to collect sales taxes because they didn’t have stores except in a couple of states. As they opened outlets around the country, they had to keep adding states for which they collected sales tax.

Virginia was often one of the first because we have two large outlet malls which attract the national catalog companies like LL Bean, Lands End, Lillian Vernon, and others.

On the other hand, people from Virginia often drove to North Carolina to buy furniture, so they wouldn’t have to pay sales tax (you could avoid sales tax by showing your driver’s license). Of course, Virginia requires people to fill out a use-tax form for those purchases, but lots of people cheat on their income taxes.

[WayneS]

Please see Comment #15, above.

[CharlesWayneCT]

That’s the income tax. Frankly, I’d rather just have an income tax, or JUST have a sales tax, then have both.

[x_plus_one]

Missouri randomly audits businesses for use taxes and if no evidence of payment is shown there are fines, penalties and interest due.

[Question_Assumptions]

I actually pay "use tax" on my tax returns. Why? I worked for my state's taxation department and know how they can find out what you've ordered out of state (they talk to other states and share audit information about mail order firms and who they ship big ticket items to) and know what they can do to you if you don't pay (penalties, interest, interest on the penalties -- it all adds up quite quickly). I'd rather not risk it.

[meyer]

Why should Barnes and Noble.com have to collect sales tax for a book I buy, but Amazon.com doesn’t? It gives Amazon an unfair business advantage — and the state if anything should be prefering the company that actually pays property taxes in our state.

The correct solution isn't to raise the misery on people that shop at Amazon - rather, it is to decrease the misery for people shopping at Barnes and Nobles. In other words, don't increase the misery by raising taxes on some shoppers - increase the pleasure instead by lowering taxes on some shoppers.

The less money the government can steal from the people, the better off we all are.

[Question_Assumptions]

I will never volunteer to give money to any government. Screw them.

They do have ways of finding out that you've purchased big ticket items out of state and can go after you if they think there is enough money in it. Repeat after me: "Penalties. Interest. Interest on the Penalties." It doesn't take long for the few hundred dollars you own on a big ticket purchase to turn into thousands of dollars that your state can take from any refunds you are owned or garnish from your wages if you refuse to pay. The odds of getting caught are low put the pain if you do is potentially quite high.

[CharlesWayneCT]

IF the woman just operates in one state, she has no obligation to collect sales tax for any other state, and no other state has the legal ability to go after her for the sales taxes.

So if she is spending money doing so, she probably had bad business advice from someone who operated physically in more than one state.

Of course, if she travels to other states to do trade shows, that would obligate her to collect sales tax for those states — but that is her choice to do business directly in those states, it has nothing to do with her selling things on the internet.

[Question_Assumptions]

I'm in a third category. I've worked for my state's taxation department and know how they can enforce use tax and what they can do to you if they really decide to go after you. I also can't claim ignorance. But, trust me, nothing makes a state taxation department go hunting or change in the sofa like the massive budget shortfalls that are about to hit many states. As I mentioned in two other replies, if they catch you it's not just the taxes you owe but interest on those taxes, penalties for not paying them, and even interest on the penalties back to when you owed the taxes.

[CharlesWayneCT]

If you don’t like sales taxes, go to your representatives in your state and get them to repeal the sales taxes.

But government does need SOME money to operate, and they have to get it from the citizens somehow. If not a sales tax, then an income tax, or a property tax, or a gas tax, or some other tax.

If there is going to be a sales tax, it should apply to like goods no matter where they are purchased, otherwise there is a disparity in misery.

[copaliscrossing]

All I know is what she shared on the air and the task of keeping track of all her sales “destinations”. She shared that it was overwhelming.

Since she was in Washington State and Washington is now a “Streamlined Sales Tax” participating state, she has to keep separate track of every city, county, state, and special taxing district tax rate and amount collected for every sale in the State of Washington and any other state she does business in. Quite a daunting task.