Amazon to collect sales tax in Texas

[REWahoo]

There are a few companies that will do all this for you....

Sure, and the complexity of several hundred thousand taxing authorities in the US ensures this is very costly for the company whether done internally or outsourced. The end result is the customer pays twice - for the tax plus the cost built into the product to collect and remit the tax.

But you also forget about what is taxable and what is not...

No, I covered that complication as well:

- and what is exempted.

It's been somewhat of an unfair advantage for Amazon imho.

I agree.

My point isn't about unfairness to Amazon, it's that the current interstate sales tax structure is unnecessarily complex and costly for ALL retailers. Congressional action to standardize and simplify the process would appear to make sense. States are losing major tax revenue today so why not have them work with Congress to reach an agreement for an interstate sales tax policy?

But then we're talking about politicians, so all bets are off...

 

[Independent]

+1

The "excessive bookkeeping responsibilities on consumers" pales in comparison to the burden placed on the Amazons of the world to accurately collect and remit sales tax.

Think about it - for every single shipping address in the US the seller must know the correct state, city, county, metro transit district, etc. sales tax % - and what is exempted. Plus, the tax rates and taxing entities are constantly changing.

Sales tax collection and remittance is a huge burden for a company to implement and administer, capped by auditors from each of the 50 states who want to spend a couple of weeks each year bugging the finance staff to verify the company has been collecting and paying their fair share. Been there, done that and can attest that it is an onerous business responsibility.

Standardization of interstate sales taxes by Congress makes a lot of sense, which means it will not happen for many years to come...

Seems no worse than any other tax to me. B&M chains have websites. I can type in my address and they'll give me the addresses (with a map) of their closest stores. Retailers don't all write their own software to do this. They buy a service from some map utility that does it for them.

The same concept would work for online sales tax. Online retailers would buy a package that reads a shipping (or credit card) address and tells the website what tax to charge.

At remittance time, the service produces a summarized list. The tax service could send out the individual checks if the online retailer doesn't want to. 90% of the auditing is done once at the tax service.

 

[MichaelB]

Seems no worse than any other tax to me. B&M chains have websites. I can type in my address and they'll give me the addresses (with a map) of their closest stores. Retailers don't all write their own software to do this. They buy a service from some map utility that does it for them.

The same concept would work for online sales tax. Online retailers would buy a package that reads a shipping (or credit card) address and tells the website what tax to charge.

At remittance time, the service produces a summarized list. The tax service could send out the individual checks if the online retailer doesn't want to. 90% of the auditing is done once at the tax service.

This points the reasoning behind exempting online retailers from withholding sales tax. It differs around the country - there are more than 7400 different sales tax "areas", or different codes. A small B&M business needs only to deal with the local sales tax rules. A large B&M needs to know them all but also has the size and scale to afford the cost of doing so. The reasoning to exempt online retailers is that many are also small and would be disadvantaged buy having to now each different regulation, and many would close shop.

The point is valid, and is taken advantage of by businesses such as Amazon.

 

[MichaelB]

My point isn't about unfairness to Amazon, it's that the current interstate sales tax structure is unnecessarily complex and costly for ALL retailers. Congressional action to standardize and simplify the process would appear to make sense. States are losing major tax revenue today so why not have them work with Congress to reach an agreement for an interstate sales tax policy?

The States could do this without Federal involvement. There is an initiative, Streamlined Sales & Use Tax Agreement (SSUTA). Their progress can be tracked at their website here Streamlined sales tax

 

[TromboneAl]

This thread ignores the underlying problem: Many different tax paths: Income tax, property tax, sales tax, cigarette tax, boating license fees, alcohol tax, gasoline tax, car license tax, dog tax, corporate tax, carbon dax, inheritance tax, and so on.

There are some valid reasons for different taxes (to influence behavior, to selectively tax users of some product/service, or tax richer people more) but most of it is just a bother.

 

[REWahoo]

The States could do this without Federal involvement. There is an initiative, Streamlined Sales & Use Tax Agreement (SSUTA). Their progress can be tracked at their website here Streamlined sales tax

Great idea, and I wish them success. A bit disappointing to see this initiative appears to have been underway since 2005 but just under half the states seem to be on board.

 

[Texas Proud]

My point isn't about unfairness to Amazon, it's that the current interstate sales tax structure is unnecessarily complex and costly for ALL retailers. Congressional action to standardize and simplify the process would appear to make sense. States are losing major tax revenue today so why not have them work with Congress to reach an agreement for an interstate sales tax policy?

But then we're talking about politicians, so all bets are off...

It actually is not that costly... probably a few cents per transaction (maybe less with an Amazon)...

And big retailers are already doing it... if you buy something online at Wal-Mart, they have to figure out the correct tax for your address. I do not know of any state where there is not a Wal-Mart so I would assume they have nexus in all of them.


The technology is already out there... and it is pretty cheap...


As a note, the streamlined sales tax does not get rid of all the differences... they are just making them a bit less different... I do sales tax returns for 9 states and some are pretty easy and some of very difficult... even if in the group...

 

[REWahoo]

It actually is not that costly... probably a few cents per transaction (maybe less with an Amazon)...

And big retailers are already doing it... if you buy something online at Wal-Mart, they have to figure out the correct tax for your address. I do not know of any state where there is not a Wal-Mart so I would assume they have nexus in all of them.


The technology is already out there... and it is pretty cheap...


As a note, the streamlined sales tax does not get rid of all the differences... they are just making them a bit less different... I do sales tax returns for 9 states and some are pretty easy and some of very difficult... even if in the group...

OK, you win.

 

[DoingHomework]

According to its website, it already collects sales tax in five of the 50 states -- Kansas, Kentucky, New York, North Dakota and Washington -- on purchases made by people who live in those states.

Hmm, I live in Arizona and Amazon collects sales tax on me as well and has for a while. Plus, starting this year (applied to 2011), we have to report all things we buy online that we don't pay sales tax on. We then send the unpaid sales tax to the state when we pay our income taxes.

I'm sure compliance will be low...but I wonder if people realize that 10 years from now when company XYZ turns over their records to the state that there could be interest and penalties involved as well under threat of tax evasion charges. Chilling...!

This seems to me like a situation where Congress needs to act. States either need to be prevented charging sales tax for online purchases or we need a consistent framework for companies to follow. I'm not expecting this do-nothing Congress to tackle the issue though.

 

[Hamlet]

It makes more sense if you think of it as a tax the customer is paying rather than the retailer.

I'm on the fence on this. On one hand, it seems to give internet companies an 'unfair' advantage over brick & mortar stores. OTOH, an internet company with no B&M presence also isn't using any resources of the State, so why do state taxes need to be collected? The delivery companies operating within the state are paying taxes to the State - isn't that enough?
-ERD50

 

[Texas Proud]

OK, you win.

Didn't know it was a contest

 

[REWahoo]

Didn't know it was a contest

Don't worry, it only costs a few cents a transaction....

 

[ziggy29]

Congress did get involved. They passed a law exempting internet transactions from local/state sales taxes unless the internet company had a physical presence. The states came up with the idea of saying residents must "self-report" the sales taxes they "owe" by buying from internet companies without a physical presence in their state. I would think these laws are superceded by the Federal law since they are regulating interstate commerce. The states, IMHO, are attempting to tamper with the federal statute unconstitutionally.

The translation is that Congress mostly punted, though, and didn't really resolve the matter.

 

[ziggy29]

The States could do this without Federal involvement. There is an initiative, Streamlined Sales & Use Tax Agreement (SSUTA). Their progress can be tracked at their website here Streamlined sales tax

Frankly I'd like to see Congress pass some uniform sales tax on all interstate transactions, say 4-5% and that could be the end of it instead of every retailer negotiating (or being strongarmed by) every state that collects sales taxes. People from no sales tax states wouldn't like it, but they could lobby their own legislatures to reduce other taxes to compensate, or they can shop locally and pay no tax at all. States that charge more than that wouldn't be completely satisfied but they will be getting a lot more than they are getting now in most cases without having to fight with every major retailer.

Not perfect, but simple, Constitutional and I think a reasonable compromise.

 

[Texas Proud]

Frankly I'd like to see Congress pass some uniform sales tax on all interstate transactions, say 4-5% and that could be the end of it instead of every retailer negotiating (or being strongarmed by) every state that collects sales taxes. People from no sales tax states wouldn't like it, but they could lobby their own legislatures to reduce other taxes to compensate, or they can shop locally and pay no tax at all. States that charge more than that wouldn't be completely satisfied but they will be getting a lot more than they are getting now in most cases without having to fight with every major retailer.

Not perfect, but simple, Constitutional and I think a reasonable compromise.

I think that you are missing that this is a sales tax paid by the citizen of the state... it is not the retailer that is paying the tax, they only collect the tax and pass it on to the state... I do not see how they can pass a federal law to mandate what a state can charge on sales...

Also remember that the state requires you to pay the tax as a 'use' tax if a retailer does not collect it for them. So let's say you go to a store and they did not charge you sales tax for whatever reason. You are supposed to report this to the state and pay it yourself.

I would think that they could pass a law on the nexus question. The current 'law' is the decision in the Quill case... but as mentioned, states are getting a bit more aggressive in claiming that you have met that threshold by just showing up to their state... IOW, you have transacted business in our state, so you are required to withhold taxes.... and if you did not, then you have to pay it....

 

[ziggy29]

I think that you are missing that this is a sales tax paid by the citizen of the state... it is not the retailer that is paying the tax, they only collect the tax and pass it on to the state... I do not see how they can pass a federal law to mandate what a state can charge on sales...

I'm not missing that. But it's still interstate commerce. You live in state A and you buy (from a location in state A) something from a vendor in state B, that is interstate commerce plain and simple. Last time I checked, only Congress had the authority to regulate interstate commerce.

Federal law would trump state law here. Normally I don't like the feds meddling on state-level issues but this one is messy enough for everyone involved that I don't think it's unreasonable in this case. You have thousands of retailers, 50 states (45 or so that have a sales tax), and a lot of confusion and litigation for everyone involved -- not to mention the paperwork required for consumers to actually remit sales taxes to their state for untaxed out-of-state purchases.

There's nothing unconstitutional as far as I can tell to say that in-state commerce is *entirely* up to the state, but the tax rules for interstate commerce is not. The state can say it has sovereignty here because they only consider where the *buyer* lives, but I still feel like this is a crock (and an excuse to feel entitled to charge sales taxes) because if the *seller* is in another state, the state doesn't have the jurisdiction to regulate tax on the sale. It's interstate commerce. It's not a transaction entirely conducted within the boundaries of one state no matter how much the states want it to be so.

Alternatively the definition of a "nexus" should be tightened up. Does a single-person operating a sole proprietorship in Texas as an Amazon affiliate give Amazon a "nexus" in Texas? I don't think so. But a large in-state distribution center moving huge amounts of products daily (and employing many folks in-state)? Yes, I think so there. Somewhere in between, IMO, a line should be drawn as to the definition. I would think that any federally regulated "interstate commerce sales tax" would need to exempt sales where the seller has a clear nexus as defined by Congressional legislation, and where that occurs the taxation of the transaction would revert to state law.

 

[Texas Proud]

I'm not missing that. But it's still interstate commerce. You live in state A and you buy (from a location in state A) something from a vendor in state B, that is interstate commerce plain and simple. Last time I checked, only Congress had the authority to regulate interstate commerce.

Federal law would trump state law here. Normally I don't like the feds meddling on state-level issues but this one is messy enough for everyone involved that I don't think it's unreasonable in this case. You have thousands of retailers, 50 states (45 or so that have a sales tax), and a lot of confusion and litigation for everyone involved -- not to mention the paperwork required for consumers to actually remit sales taxes to their state for untaxed out-of-state purchases.

There's nothing unconstitutional as far as I can tell to say that in-state commerce is *entirely* up to the state, but the tax rules for interstate commerce is not. The state can say it has sovereignty here because they only consider where the *buyer* lives, but I still feel like this is a crock (and an excuse to feel entitled to charge sales taxes) because if the *seller* is in another state, the state doesn't have the jurisdiction to regulate tax on the sale. It's interstate commerce. It's not a transaction entirely conducted within the boundaries of one state no matter how much the states want it to be so.

Alternatively the definition of a "nexus" should be tightened up. Does a single-person operating a sole proprietorship in Texas as an Amazon affiliate give Amazon a "nexus" in Texas? I don't think so. But a large in-state distribution center moving huge amounts of products daily (and employing many folks in-state)? Yes, I think so there. Somewhere in between, IMO, a line should be drawn as to the definition. I would think that any federally regulated "interstate commerce sales tax" would need to exempt sales where the seller has a clear nexus as defined by Congressional legislation, and where that occurs the taxation of the transaction would revert to state law.

I see your point.... but let me pose something different for discussion purposes...

Using your example, the person who bought the product in State B paid the sales tax in State B.... so the only benefit is if State B has a lower sales tax.

Now, why should Amazon get a pass on paying sales tax in the state where they sell that item Now, it is because state law only taxes items sold in their state. Even if you have a B&M company and sell out of state, you do not charge sales tax on that item.

Well, time for me to get going... actually want to leave work!!! More later when I can think better...

 

[Independent]

This points the reasoning behind exempting online retailers from withholding sales tax. It differs around the country - there are more than 7400 different sales tax "areas", or different codes. A small B&M business needs only to deal with the local sales tax rules. A large B&M needs to know them all but also has the size and scale to afford the cost of doing so. The reasoning to exempt online retailers is that many are also small and would be disadvantaged buy having to now each different regulation, and many would close shop.

The point is valid, and is taken advantage of by businesses such as Amazon.

I'll agree that's a valid concern. I also note that we have multiple exceptions for "small" businesses. A federal law could exempt any business with less than $X of internet sales.

 

[clifp]

The original idea behind the Congressional action to exempt online (circa 1995/6 IIRC) from collecting sales taxes was to protect a new technology from having to comply with thousand of different taxing authority.

The internet has grown up a lot since then and there is no rational reason for maintaining the law. It certainly is the case that Congress should act, but of course what Congress should and what the will do are often very different.

Figuring out the sales tax laws for all of the states and locality isn't rocket science. It is certainly no harder than figuring out where you can ship wine and liquor which varies by county in many places in the country.

It is a very minor expense for the big internet companies. Plus when you consider that Ebay, Amazon, Yahoo, and think Google all offer E-Commerce servers for <$100/month all of the major will quickly offer affordable service that will add sales tax calculations, to credit card, pay bill and the shipping calculations that currently offer. The cost for collecting sales tax will be small for even small companies.

There are three reason whys this should happen. The first and obvious one is that state need the money. The second adding the sales tax to the cost will level the playing field for B&M retailers vs E-tailers which I think is generally a good thing. I suspect in my case it will still be significantly cheaper to buy online than local but in a few cases I my switch to buying local.

The final and least obvious one is will is making e-tailers collect sales tax will transform probably close to a hundred million Americans from tax cheats (including myself) into honest (or at least more honest) taxpayers. In the vast majority of states, it is the taxpayers obligation to pay sales tax on their out of states purchases. In some states like California they aggressively go after this (so for instance California residents who buy cars in Oregon (with no sales tax) still have to pay sales tax to CA.) While I imagine 5 or so years ago most people didn't know this I suspect that most people know this now.

I'm probably the only person in Ohio that actually computes and pays "use tax" every year on my state income tax. This is the sales tax for internet and mail order purchases. So, it wouldn't bother me for Amazon (and others) to charge it.

While I commend gindie for doing this, he is the only person I know who does. Even if the tax was only a $1, there is no way I'd have the inclination to go through my records (lousy as they are) to calculate the sales tax I owe for internet purchase, fill out the forms on quarterly or annual basis. Honestly, they'd have to start throwing people in jail for internet sales tax cheating before I'd behave differently.

One of the things I hope we learned from Prohibition, the 55 MPH speed limit, and the drug war is having unreasonable laws on the books cause people to not only ignore them but encourages them to start flouting other laws.

 

[2B]

I think that you are missing that this is a sales tax paid by the citizen of the state... it is not the retailer that is paying the tax, they only collect the tax and pass it on to the state... I do not see how they can pass a federal law to mandate what a state can charge on sales...

Also remember that the state requires you to pay the tax as a 'use' tax if a retailer does not collect it for them. So let's say you go to a store and they did not charge you sales tax for whatever reason. You are supposed to report this to the state and pay it yourself.

Several years ago I had a small business in Texas. I was to collect sales tax which I did. The Controller of the State of Texas decided I was far more successful than I was reporting and sent me a bill for thousands of dollars more than I collected and paid. With it came a threat of prosecution. I ended up resolving it fairly easily but it required me to send them my "books." I heard from others that it was not an unusual tactic.

The business was fairly marginal and that was the final straw. Texas lost one small business after that. I was then "billed" the year after I closed up shop and I simply sent them a letter saying the business had been shutdown and there were no sales. Charges may still be pending for all I know.

 

[Texas Proud]

Several years ago I had a small business in Texas. I was to collect sales tax which I did. The Controller of the State of Texas decided I was far more successful than I was reporting and sent me a bill for thousands of dollars more than I collected and paid. With it came a threat of prosecution. I ended up resolving it fairly easily but it required me to send them my "books." I heard from others that it was not an unusual tactic.

The business was fairly marginal and that was the final straw. Texas lost one small business after that. I was then "billed" the year after I closed up shop and I simply sent them a letter saying the business had been shutdown and there were no sales. Charges may still be pending for all I know.

Yes, the audits by the states can be a big hassle... I have been through a few by other states... some are hard a$$es... some are reasonable...

When I was at meag, Texas audited the books for Texas... and decided that they 'owed' over $20 million.... a lot of this was because of services (which were starting to be taxed at that time), but also included where the vendor just did not charge taxes and mega did nothing.

The state has the ability to get the tax from the person who owed the tax or the person who was supposed to collect it. And I know that sometimes they try to collect from both. However, if you can prove that it was paid by the other they do back off.

I do agree that some of the states being aggressive and the penalties they impose loses them more money than they make.

 

[zinger1457]

Hmm, I live in Arizona and Amazon collects sales tax on me as well and has for a while. Plus, starting this year (applied to 2011), we have to report all things we buy online that we don't pay sales tax on. We then send the unpaid sales tax to the state when we pay our income taxes.

I've lived in Arizona for 14 years and have never been charged a sales tax on any Amazon purchases, including two purchases I made today. There are some merchants on Amazon that will collect AZ sales taxes but I've never used them. Arizona sent Amazon a bill for $53M in February for uncollected sales taxes. Sounds like double dipping if they also collect sales taxes from the income tax forms. Would love to see the tax returns from our terrific state legislators to see how many of them pay back online sales taxes.