U.S. Internet Sales Tax Underway

Source Title:
Internet sales tax project gets underway
Story Text:

18 U.S. states will begin the "Streamlined Sales Tax Project" Internet Tax today. The WSJ story has all the details, and you'll have to judge for yourself as US tax laws escape me somewhat, in fact anything to do with financials escape me somewhat :)

For years, states and online retailers have bickered over whether the retailers should -- and, if so, could -- collect local and state sales taxes on purchases made over the Internet. The states have said they should and could. The retailers have argued that the complexity of different tax rates and categories among states and localities made it very difficult to do so.

Hoping to put an end to that argument, 18 states tomorrow will implement a long-planned move to remove obstacles that the retailers have cited. Architects of the Streamlined Sales Tax Project are devising a computer program that tracks the tax rates of the 18 states and their localities and automatically adds that rate to the bill of every online purchase. The states will also entice online retailers to collect state and local sales taxes by offering amnesty on taxes the retailers haven't collected in the years since the Internet retail boom began.


Gah! My state is on the

Gah! My state is on the list, the wankers! It's really going to put the crush on online sales if you have to pay shipping AND sales tax. Might give the local big box store an edge.

OTOH the big online retailers like Amazon are more likely to be forced to adopt this, and that might give small online retailers flying beneath the radar and not collecting this an edge.

Nick, each US State can charge a retail sales tax on all goods sold. I think my state is up to 6% now. But each state has a different rate and in some states, municipalities can opt to tack on their own tax. Plus different items are may be considered exempt from sales tax (like in my state grocery foods are exempt cos taxing that would impact the poor too much.) So it is a complicated patchwork which works fine for bricks and mortar stores but becomes complicated for online purchases.

PPC included?

A brief look at the 99 page .pdf gave me the impression that PPC will soon become taxable. Of course, I'm assuming the worst and it may be excluded.

I do know at one time there was an excemption if you were grossing under $1 million US dollars. In the lastest version I see $500 million is a threshold, but it's just to long of a document for me to read with any clarity. I don't have any law background so I'd need to get my lawyer to read it over.

For the sake of discussion, though, if there is an excemption of under $500 million (or $1 million), that does not include affiliates. Affiliates are under the parent company. Meaning that if you are an Amazon affiliate, for example, your customers are going to be taxed because the parent company, Amazon, is over the threshhold.

The whole thing just makes me mad. If most people knew what is being done, they'd be upset also. Quite simply, if you live in the US, then your own state is asking another state to force you to collect the tax. They are colluding to do what they already have the power to do, but not the stomach. If they were at least up front about it and collected the tax on their own people then it would get a fair hearing. But since they don't want to "look" like they are trying to get taxes from their own people, then they can blame it on another state.


We've had a harmonized cross

We've had a harmonized cross border VAT tax in the EU for years. It doesn't cause many problems. In fact it is better because it makes it easier to reclaim VAT on something you by from another EU state which used to be nearly impossible before.

505 U.S. 214 (1992)

My understanding is that is the U.S Supreme Court ruling against states being able to collect income tax from businesses that don't have a physical presence in that state.

The amnesty offering by the participating states in the Streamlined Sales Tax Project seems like a rotten scare tactic. It would appear that the states will need a Federal law change in order to collect internet sales tax.

From BusinessWeekOnline -

They hope to persuade federal lawmakers to pass a new law to overcome the Supreme Court ruling and allow states to take the next step -- demanding online companies levy the taxes.

I have a hard time beliveing a new law will be enacted that will impose back taxes on companies and individuals going back to the beginning of eCommerce.

Use tax is supposed to cover this

A business operating in one state doesn't have to collect sales tax from customers in other states. Customers in those other states, however, are supposed to file something called "Use Tax," which is a quarterly tax return that you are required by law to file. Basically you pay your state its sales tax amount for all purchases you made from merchants in other states and didn't pay tax on. Supposedly this evens out and all the states get what they "deserve." However, most people don't pay Use Tax or even know it exists, and those who do know it exists largely ignore it.

Fortunately, I'm in a service-related business, which is non-taxable anyway. So this has very little immediate impact to me, although I guess I should read up on it all just to be prepared.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.