Posted on 06/21/2018 9:54:25 AM PDT by Poison Pill
Online shoppers could find costs going up after the Supreme Court did away Thursday with a decades-old precedent limiting the ability of states to collect sales tax on certain out-of-state Internet purchases.
The 5-4 ruling called the current rules “unsound and incorrect.”
(Excerpt) Read more at foxnews.com ...
His fair trade policy is to violate the constitution?
At which ip address does the transaction take place? If the transaction is deemed to happen at the ip address of the seller, then the constitutional reference applies. If the transaction is deemed to occur at the ip address of the buyer, then the transaction is subject to sales tax.
If the transaction is only viewed from the standpoint of the goods physically changing hands, then the delivery man is acting as an agent for the seller and the exchange of goods is completed within the jurisdiction of the local sales tax. Again, no violation of the constitution.
I'm not a constitutional lawyer so I'm not prepared to argue any of these positions, they just serve to illustrate the complexity of the issue if you wish to apply the constitutional argument. It would appear that the Supreme Court has ruled in favor of the transaction having occurred at the location of the buyer. I am not prepared to dispute that, nor do I have any desire to. Personally, I believe the ruling is in line with the principal of fair trade.
If you live in California, you already pay sales tax on Amazon purchases, because Amazon has a physical presence in California.
"The cases the court overturned said that if a business was shipping a customer’s purchase to a state where the business didn’t have a physical presence such as a warehouse or office, the business didn’t have to collect the state’s sales tax. Customers were generally responsible for paying the sales tax to the state themselves if they weren’t charged it, but most didn’t realize they owed it and few paid."
https://apnews.com/332abb7455cb4b60b2effc0852ff3c89/High-Court:-Online-shoppers-can-be-forced-to-pay-sales-tax
But they’ll collect the tax and what state will get it?
Not really. The cost will be added to each sale and passed along to the end customer. Same thing happened when they realized they were going to have to pay more for using the USPS which was actually losing money when delivering for Amazon.
If you mean it will cause some people to shop locally rather than order online due to the savings of not paying taxes on the products then I very much agree with you.
Not really. The cost will be added to each sale and passed along to the end customer. Same thing happened when they realized they were going to have to pay more for using the USPS which was actually losing money when delivering for Amazon.
If you mean it will cause some people to shop locally rather than order online due to the savings of not paying taxes on the products then I very much agree with you.
It will hurt the UPS and other shippers though.
Be interest then to see how it’ll all play out. But the SCOTUS just killed the internet IMHO.
How exactly?
True enough. Thanks for the correction. The clause I cited was a Federal tax issue.
But the following IS a state tax issue.
“No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it’s inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Control of the Congress.”
U.S. Const., Art. I Sec. 10, Cl. 2.
If Congress has not passed a laws regarding internet taxation between states, SCOTUS is on shaky ground.
Not only that, the SCOTUS decision even if constitutional, only applies to the parties of the case and any other case with the same questions of laws and fact. Congress and ONLY Congress, not SCOTUS, is authorized by the Constitution to make national law.
I am an online small business in Virginia. When my customer is in VA, I collect sales tax and file them monthly in VA. All other customers pay no sales tax. Currently, Washington and Pennsylvania also require me to collect and remit sales. So now, I guess I need to file 50 state tax forms every month? Agree to the ruling or not, this is a hefty burden.
What I understand is that sales taxes arise where the ownership of the merchandise changes hands occurs. Most products sold online are shipped FOB (Free on Board) Shipping Point meaning that the buyers ownership takes place at the sellers shipping dock. The alternative to that is FOB Destination in which case the seller retains ownership until delivered to the buyer’s dock.
The state in which the ownership transfer takes place is the place where any sales tax can be assessed (usually FOB Shipping Point these days). It only makes sense. Imagine the paperwork SNAFU if a seller ships FOB Destination! He’d have to keep track of taxes for all fifty states (57?), collect them, and then remit them to the buyer’s state (quarterly???) What a nightmare!
I’ll try to cut through the crap and explain: In most states that have a sales tax, the obligation to pay the tax is on the buyer, not the seller. Most of these states recognize that the buyer is not going to voluntarily pay the tax and therefore they enact laws that require the seller to collect the tax from the buyer and then remit the tax to the state. (Many states also give the seller a small credit for collecting the tax for the state, but that’s another issue).
Upon until today, a seller had no obligation to collect sales tax from a buyer on behalf of the taxing state unless the seller was actually “doing business” in the taxing state, which, under the substantive due process clause, required a physical presence in that state and/or incorporation under the laws of that state.
As of today, “doing business” no longer requires a physical presence in the state, and as a result, the taxing state where the buyer resides can force the seller, no matter where the seller is physically located, to collect sales tax from the buyer on behalf of the taxing state. Thus, even if the seller is physically located in a state that does not impose a sales tax, the state where the buyer resides now force the seller to collect the sales tax for the state where the buyer resides.
Although the SCOTUS ruled that “doing business” in a state no longer requires a physical presence, due process still requires a nexus of some sort between the seller and the taxing state such as an internet presence or or the mailing of catalogs into the state. If an internet seller does not want to collect sales tax on behalf on a particular state, than it can simply deny internet sales to residents of that particular state.
NOTE that the SCOTUS opinion does not specifically decide whether the North Dakota law at issue imposed an impermissible and unconstitutional burden on interstate commerce in violation of the “dormant commerce clause” because that issue was not before the court; rather the court’s opinion is limited to whether a state can require a seller with no physical presence within the state to collect a sales tax from a buyer on behalf of that state. As to that issue, the court ruled in the affirmative.
Appreciate the reply, but as an issue its still confusing.
I get that a state wants its local citizens to pay state sales tax for purchases in state. But if I go out of state and make a purchase, my home state has no in state purchase to tax. I am equating physically going out of state with virtually going out of state by purchasing online. If the state cant tax what I bought when I was physically in another state, how can they do so when I buy online from another state? Up til now they could not.
I admit this is a consumer tax loop hole (and as a consumer I like it), but if a state wants to collect taxes for its citizen buyers on their online purchases from out of state sellers, then it seems like they will have to create expensive enforcement mechanisms to track transactions and then bill the buyer in state, or somehow bar the out of state seller from taking orders online from the buyers state. They could try to bill the out of state seller, but if I was the out of state seller and another state told me I had to collect tax for them, I think I would tell them to pound sand.
Now as I write this, I guess if both buyer and seller states got together and created pact and laws to force collection on each other, then the seller is stuck collecting as if the buyer physically purchased locally. But this would be a thing coordinated between states, kind of like reciprocating on drivers licenses, or CC permits?
Actually, it is currently charged FOB destination.
When I buy off Amazon, I pay KY sales tax. But they have a KY presence. I suppose with this new law, that would still apply, but for those that don’t have a KY address, if they have to pay their state’s sales tax, I suspect a lot of them would move to states like Oregon, which have no sales tax.
I suspect, because the SD law was FOB destination, this applies to FOB destination.
And it’s not just fifty states if ALL sales taxes apply. Cities, and counties charge a part of the sales tax, and there are even tax surcharges for some rally successful “tax districts” which could include a single shopping mall or strip mall.
Governments get pretty creative in getting their protection money.
What is imported into one state is an export from another state.
Oregon has a personal income tax. So although there may be a benefit to be a shopper there, taxpayers still get hit on the other end.
I think New Hampshire has neither a sales tax nor personal income tax. Same is true I believe of Alaska.
What is imported into one state is an export from another state.
i.e. the state cant tax what leaves its border, but a state can tax what enters its border.
What is imported into one state is an export from another state.
i.e. the state cant tax what leaves its border, but a state can tax what enters its border.
This is a horrible decision. I work in IT and I used to work for a company that had sales tax nexus in 20-odd states. There are two big players in the sales tax calculation space - Vertex and Alavara(sp?)- and I am sure they are licking their chops in anticipation of changes.
Collecting the tax is part of the problem. To get full compliance you really need to look at where the order is being accepted, where the order is being shipped from, and where the order will be shipped to. Zip Codes and tax boundaries do not always line up, so the software usually has to look at the actual address and figure out where they line up on a map - you have to account for instances where special tax district lines do not line up with traditional municipal borders. Then you have to look at the actual items sold (using generic keywords that may not be in the product name) and reference those to determine the tax due. The sum of the sales tax may go to as many as 4 different government agencies. But it’s important to note the amounts because....
You also have to file sales tax returns for the jurisdictions that you collected tax for. Most are monthly, some are quarterly. Some states collect tax for all of their jurisdictions (like New York) but there are a couple of states out west that would require us to file county-level returns. Oh, and those states can audit you. We were based in Manhattan but were audited by IL while I worked there.
Vertex used to be a cool $20,000+ for us each year for calculating taxes and preparing returns. They had great APIs 20 years ago and sent out monthly rate updates that we would use to update our system before they put it all online. Little competition and high barriers of entry will keep their prices high for the foreseeable future.
I would strongly encourage Congress to get involved. To comply in a manner consistent with the SCOTUS ruling you’re going to place a strong burden on small internet-based businesses, forcing them to close shop and sell on platforms that can afford this level of compliance (like Amazon, Etsy, EBay..)
I am an avid consumer of online goods. I NEVER buy anything that is taxed and buy only with free shipping if possible. Some businesses will do just fine and others are completely screwed.
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