Posted on 12/14/2010 12:53:09 AM PST by Thebaddog
Edited on 12/14/2010 4:50:49 AM PST by Admin Moderator. [history]
This isnt’ the only tax that is self-reporting, to some degree or another. For example, while the federal government has claimed the right to force almost everybody you deal with to send them paperwork (1099s), the states do not have that power.
So on state income taxes, the state asks you to provide the federal information. However, if you made up your own state version of your federal taxes, the state would have no way to check that — they don’t have the right to your federal tax filings. So most everything other than your state W-2 forms that you report to your state income tax is “self-reported”.
Now, it is true that most other taxes are forcibly collected, or forcibly reported so that you will easily be caught if you ignore them.
However, and unfortunately, federal courts have made it impossible for states to collect information about things you buy from out-of-state companies if they have no presence in the state. Courts rules that a company selling something to a resident of a state is NOT sufficient to require that company to collect tax for the state, or to report purchases to the state.
This has left states in a difficult position as online purchases have increased. It has also set up a skewed market, where a few retailers, by studiously AVOIDING operating in most states in any direct way, can undercut the “price” of other retailers by avoiding sales tax collection.
Amazon is the king of this — they have almost no offices anywhere, they use contractor relationships with warehouses so the location of their storage doesn’t meet the “nexus” standard, and they move operations whenever a state tries to legislate to include them.
Now, Amazon would have no trouble collecting state taxes. They already COLLECT state taxes for lots of purchases, when those purchases are pass-through from other retailers with presense in states; also for states where Amazon has a physical presense. It’s a simple piece of computer programming, and could easily collect taxes for all states. But they make money by NOT doing so, and they spend money to keep it that way.
Meanwhile, the guy down the street from you trying to sell things to you has to collect sales tax. He is selling what you can buy online, you can touch it, he employs you and your neighbors, he pays local taxes. But he is at a competitive disadvantage to Amazon.
But it’s not just him. Barnes and Noble sells online books, just like Amazon. However, if you buy a book from BN, it is likely they will collect sales tax from you, because they happen to operate retail space in most states. So Amazon and BN, running exactly the same online business model, are disparately treated, with Amazon getting a competitive advantage because they don’t have to collect taxes.
But let’s go back to the state. The state does supposedly what it’s people want, the people elect representatives who vote. People want, and NEED, state government. They need roads maintained, they need police, they need fire and rescue, they need a court system, they probably need public transportation, public schools. They benefit from zoning regulations and enforcement, from building codes, from health regulations. People like having snowplows, they like the national guard to be available to help out when there are emergencies.
They probably like having public hospitals, and other public accomodations. Many like lots of other things they get from government, although we all draw the line of “reasonable government” at different points.
We need to pay for these services, so we need taxes. Conservatives most all think taxes are too high, and want to minimize what government does, but only “crazy” people want to see all taxes go away, and most conservatives understand that there is a level of taxation that is necessary and proper.
Further, most conservatives seems to favor a mix of income taxes and sales taxes as a way to fun government. (many also support property and other types of taxes, but not as universally).
My principle is that all taxes should be shared fairly and as evenly as possible among ALL the people who benefit from a government. Broad and shallow tax burdens are a conservative principle to me.
I think it is bad some people can avoid paying their “fair share” of taxes. Two people live next door to each other. One buys a big screen TV from amazon. Another buys a big screen TV online from Target. They pay the same for the TV, but one pays $50 in taxes, the other doesn’t.
And because the one doesn’t pay sales tax, every other citizen of the state pays slightly MORE in taxes to make up for it. The state has an interest both in collecting taxes due, and ALSO making some effort to ensure that the tax burden is spread fairly. And there is nothing particularly “fair” about favoring purchases from select vendors, especially when those venders favored are precisely the ones that contribute the LEAST to the state.
So most states have a “use tax” or some other named tax, requiring their residents to keep track of untaxed online purchases, and to report them at the end of each year.
In this case, Illinois is offering people who have NOT followed the law to pay up without penalty. It’s not the state’s fault that people didn’t collect the information and pay their tax each year (well, it is in the sense that the state did a lousy job of letting people know that they had an obligation to pay this tax — my state does a bad job of it as well, although it is clearly marked in the income tax forms).
My solution is for congress to act, and to pass a law to have online retailers above a certain level of sales to participate in a nationalized state tax collection. Each state would be required to set a common tax rate for all online purchases, that could not exceed the average sales tax rate within the state.
The tax would then be added and collected by the retailer. On a quarterly or yearly basis, the business would send the money to the state, which would then distribute it as necessary to the individual cities/counties, based on some formula.
The only way for this to happen is for the federal congress to act. States have no power over companies in other states, either to force them to collect taxes, or to report sales, or to ban residents from purchasing from them.
Spell check is for wienies. :-)
At least I didn’t use “presents”.
And spellcheck wouldn’t have cout my “NOT” in place of “NO”.
Extrapolating to the extremes is often the best way to illustrate a difficulty which isn’t easily perceived because of it’s minute nature.
For example, you might have a tire leak that is too slow to find, although every few weeks you have to blow up the tire. By overpressurizing the tire, you can find the leak more easily and fix it.
It will never be the case that ALL sales activity moves out of state. But it is clear that online sales are becoming more prevalent. iT is also clear that the sales tax collection burden placed on some online retailers but not others increases the financial incentives for those tax-collecting retailers to pull their operations out of states where they have low margins.
And as more sales escape the sales tax, the state will have to increase the sales tax rate to make up the loss of tax revenue; the higher the rates, the more financial incentive there is for people to buy online instead of at local stores. Stores with low margins are hurt when big-ticket items are purchased elsewhere; but big-ticket items are most likely to be purchased online since the sale tax savings are the greatest.
Local physical stores DO shut down because of competition with online retailers who can undercut their costs, AND also don’t have to collect sales tax.
That is not accurate. Sales tax is not a tax on the seller of merchandise -- it is a tax on the purchaser. The purchaser is a resident of the state, and courts have held that the state has a right to collect tax from it's residents for things they purchase.
The sticking point in the courts is that while states ALSO have the right to require companies with dealings in a state to COLLECT the sales tax from the residents, the courts have ruled that states have no power or authority to require companies with no connection to the state to collect their taxes.
Use taxes are legitimate taxes. The only difference between a use tax and a sales tax is that the state has to count on the law-abiding nature of its residents to collect the "use tax" -- it is easy to get away with breaking the law.
The men who founded this nation rebelled against far less taxation than what you even see as sales tax these days, much less the crushing burden that the government currently mandates upon us. Thinking such as you expressed would have us still living as an English colony.
The state collects taxes. If taxes are to high, that is a state issue, and citizens of the state should deal with that by electing representatives that set the tax rates "fairly" for the services that the state supplies.
So really, the amount of tax a state already collects is not a germaine issue in this discussion. This discussion is about how to collect WHATEVER taxes the state collects in a fair manner.
The state has determined that one way to "fairly" collect taxes is to tax each person in the state a proportion of what they spend (btw, this is the basis of the "fair tax" national proposal). It's sometimes considered a good conservative tax, because first, everybody pays, which means everybody who votes is hurt by it, and therefore won't vote to wildly increase it. Second, it is a tax you can "avoid" to some degree by not buying things.
If we assume that the state requires $X of sales tax revenue, then the tax rate would be set to collect $X. If 5% of the people stop paying sales tax by purchasing things online from companies that don't collect sales tax, that means the other 95% have to pay additional sales tax to make up the missing 5%.
This has the SAME RESULT as if those 5% of the people walked into the houses of the other 95% and took money off their kitchen table.
However, my statement wasn't about equating the two, although you can, it was about how your argument about "sticking it" was used by people who rob stores, banks, and commit other criminal acts.
And it is clear that our society is fast losing the moral compass that holds it together -- when a society only obeys laws at the point of the gun, society is finished. There are not nearly enough cops to enfore the law, nor can freedom exist where laws are enforced by the barrel of a gun.
Our freedom is predicated on the idea that only the abberant FEW would break a law, even if there was no chance of being caught. When most people obey the law, the police can go after people who have BROKEN the law, so as to offer deterence to others who might break the law. THe very notion of "deterence" indicates we don't have police to STOP people from breaking the law -- it's enforcement that does that, but only weakly.
Virtually everybody speeds. One day I decided to drive at exactly the speed limit. I sat in the right lane, set the cruise control, and rolled along. After a while, my kids started commenting on how many people were passing me, and how it seemed to be taking forever to get where we were going (in fact it didn't, only a couple minutes more than usual, but that's perception from seeing cars pass you). I then said "welcome to the speed limit".
People speed because speed limits seem set for the worst drivers; because enforcement is spotty at best; because everybody is doing it, so even harsh enforcement catches only a few people -- they can't pull us ALL over; and because the "penalty" is a civil fine/points, usually easily payable, indicating that the state itself doesn't consider the speed limit violation a REAL CRIME.
Tickets become a "payment" for the privilege of driving faster. Police tell you that 9mph over the limit will almost never get you a ticket. Limits are 10mph low, so that when you drive 11mph over the limit, they can give you a ticket you can't fight by saying "but I was not speeding, the radar gun must be off by 1mph". Then they let you plead down to a 1-9mph over the limit charge.
Sorry -- point is that people break laws they don't respect when they know they can get away with it; and what we see is that when a large group of ordinary citizens get together, like after a sports match, they commit wanton acts of violence and mayhem, because they know they won't get caught, and apparently the average person has no respect for ANY laws anymore.
If you think a "use tax" is invalid, you should fight to get your state legislature to repeal the law. Or you should publicly announce your intention to break the law, as a good act of "civil disobedience", and encourage others to do so, in order to pressure your legislature.
This society is way beyond that point - most people would not pay their Federal taxes, except for the fact that it is withheld by the company they are working for (lots of self-employed are adept at avoiding lots of taxes, hence the new 1099 requirement). The governments' guns have been aimed taxpayers way for many years now. Our government does not represent the people anymore - its officialdom is an obvious kleptocracy stealing everything coming its way, distributing to themselves, families, friends and the well connected corporations, while avoiding paying the very taxes they impose on the sheep (once in a while being discovered, and embarrassed for a few days, by record keeping errors, amnesty of course).
Note the recent brazen hold up of the taxpayers, our "representatives" indenturing us, our children, and their children, to unknown trillions of dollars of debt to make sure the banksters do not suffer loss of their billionaire estates or multi-million dollar annual bonuses after their imprudent binge at the tables.
This theft through the political class has been going on for a long time, and is reaching a crescendo that will bring down the whole society. Tea parties are a meek response to the entrenched kleptocracy.
This society is rotting from the head.
The problem is, what right does IL or any other state have to impose taxes on purchases from vendors from other states? If some one from Delaware visits Il or purchases things online from an Il vendor are their taxes waived? People in Delaware don’t pay a sales tax, so if they are using that product in Delaware then why should they be paying a tax on it?
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