SCOTUS rules states can collect sales tax on Internet purchases

[RonBoyd]

If only it were 50... there are something like 16000 different sales jurisdictions in the US (not just states, but some counties and cities).

And online sellers need to register, and then file (on different schedules with different jurisdictions). Some of these require you to file every period even if you have zero to collect. Oh, and of course, state DoR's have crappy websites already, very manual and old-school setups to begin with.

Yeah, It's been a couple years since I visited Denver's Tax site but it was not very "modern" in any sense of the word. This is what Denver Tax Rates look like:



OT: Notice the OPT. If you live and work in Denver, you are taxed on that privilege.

 

[Cobra9777]

I think we'll find the federal government lacks the authority to tell states how to run their tax collection systems. They could try an end run (e.g. block some federal money unless states comply with a policy/set of standards). More promising would be a set of common procedures/data formats, etc agreed to by the states. States have an interest in getting the dough, making a common standard will help them get it.

Here is a comparison of two recently-proposed federal laws, both of which include small business exemptions and requirements for simplification and standardization of collection processes.

 

[samclem]

Here is a comparison of two recently-proposed federal laws, both of which include small business exemptions and requirements for simplification and standardization of collection processes.

Thanks very much. Apparently it is the interstate-commerce angle that gives the federal government an opening. From the linked site:

Creating a federal law to increase use tax compliance is not a new idea. As far back as the famous Quill case, the Supreme Court stated, “Congress is now free to decide whether, when, and to what extent States may burden interstate mail-order concerns with a duty to collect use taxes” (Quill Corp. v. North Dakota, 504 U.S. 298, 318 (1992)).

 

[Aerides]

Amazon already collects and pays (on behalf of their 3rd party sellers and themselves) in PA and WA. It's largely assumed they'll extend this to all states for 3rd party sellers on the platform.

expect eBay, Etsy, and any other large online portal to do the same, or risk the vendors closing shop.

The third party services that do this (for a fee) are cost prohibitive to a lot of small retailers, and/or mean the cost gets added to the products they sell - (ie, consumer pays more).

There is absolutely zero chance the federal gov will implement a national oversight or process for this, certainly not inside of any timeframe that would sound reasonable to a seller.

Most of us operated under Quill safely for years, now it will be...who wants to find out the hard way which state will ding you first? Large or small, it's gonna be complicated and more expensive than today.

 

[Clone]

I could see a system where Congress passes a law that requires organizations that sell greater than $Y threshold to send a 1099 type document to each customer that orders greater than $Z. The copy of the data file goes to the Fed, which can then be mined by whatever qualified taxing authorities feel it is advantageous to run the numbers.



Of course, I could also see Congress enacting a X% VAT type tax at the same time, thus generating the revenue to almost cover the bureaucracy required to poorly manage the process!

 

[easysurfer]

Maybe the death of stores at malls are premature after all.

 

[joeea]

Maybe the death of stores at malls are premature after all.

This ruling seems extremely unlikely to change that trend at all.

I doubt that sales tax had anything to do with malls losing customers (otherwise the malls in no-tax states would be booming, and they aren't).

 

[GrayHare]

Maybe the death of stores at malls are premature after all.

Hmm, a storefront is not impacted. For example, it would seem a New Hampshire store that sells to someone visiting from New York does not have to charge the customer NY sales tax. Then there's the hybrid transaction in which the NY customer orders online then picks up the goods in NH.

 

[joeea]

Hmm, a storefront is not impacted.

Not yet.

For example, it would seem a New Hampshire store that sells to someone visiting from New York does not have to charge the customer NY sales tax.

That has always been the case with few exceptions. (There are a few furniture stores on the New Hampshire border that collect sales tax from Massachusetts customers when the item is delivered to MA).

Then there's the hybrid transaction in which the NY customer orders online then picks up the goods in NH.

If you order it online, then New York will be able to require that sales taxes are charged without regard to the pickup location. It would be better to have your friend in New Hampshire order it for you, then reimburse them.

 

[Texas Proud]

Hmm, a storefront is not impacted. For example, it would seem a New Hampshire store that sells to someone visiting from New York does not have to charge the customer NY sales tax. Then there's the hybrid transaction in which the NY customer orders online then picks up the goods in NH.

I know that if you do you are still supposed to pay the use tax in NY for that purchase... when I was there in the early 2000s there was some rich person who got into trouble because he bought a expensive painting (many millions of $$$s) in NJ but had it moved to NY (not sure if his home or office)... got caught not paying his NY taxes...


I know that Oregon does not charge sales tax... and if you go to Washington who does all you have to do is show your drivers license and they do not charge sales tax... I never tried it with my Texas license as my sister bought everything....

 

[W2R]

Amazon started charging sales tax for Louisiana customers a while back, maybe 2-3 years ago.

Much to my surprise, I am happier with it this way. Before, we had a choice of spending time figuring it out when doing the state income tax return, or else ignoring it and hoping not to be noticed. Now, Amazon takes care of it all.

Amazon only charges sales tax for the State of Louisiana, not for our Parish (=county), and third party out of state vendors on Amazon don't charge sales tax. Despite that I generally tend to pass over third party vendors when possible, especially those that do not have a strong track record.

 

[GrayHare]

As always there will be loopholes in whatever law is written. For example, if a person orders via phone, is that an online purchase? If not, big online retailers might set up large offshore (cheap labor) groups, or automated voice recognition, to take orders via phone.

 

[capjak]

Interesting I heard on the radio that Amazon already charges taxes in all 50 states and has done so for awhile regardless of each individual state law.

The ruling also stated as long as compliance is not overly burden the company (i.e. small number of transactions $$).

The South Dakota law acording to spokesperson which is where the ruling came from states that seller less than $100,000 to S.Dakota or less than some number can not remember do not have to collect the tax.

 

[karen1972]

Reminds me of my dad who had a small truck cap business and he started selling and had to track everyone who bought and it wasn't that big of a business with maybe 20 customers a year. It was annoying, but cost of doing business.

I think there will be solutions out there, I know we were already looking at shopify for some other business stuff we were looking to do. They have a "default" US tax code which can be overridden if needed vs. solutions like squarespace provide only manual setup.. these types of differences could make a big change in the "winners" in e-commerce

 

[Chuckanut]

Not that it matters, but I'm not sure "fair" works here.

If I buy from an on-line place, and they don't have a presence in my community, they aren't using the fire dept, or police dept, or other social services that my local taxes pay for. So why should they have to go through the hassle of collecting (and I like that term better than "charging") a tax for the thousands of places they sell to? I'm subject to about a half-dozen (that I know of) different taxing bodies, and I think 3 actually are applied to most of my sales tax (State, Local, and transportation body).

You make a good point. Though I suppose one could argue that if there were no good roads for the delivery trucks to travel, and no descent police force to prevent delivered goods from being stolen, etc. etc. etc. nobody would be around to order the goods. But, that would apply to both types of sellers so maybe it's not a good argument.

IMHO, the easiest way to collect the sales tax would be for each state to set one sales tax rate for items shipped into it, and distribute that money to the various cities and counties, pro-rated by their chunk of the population and using agreed to percentages to divvy up the dollars. So I buy an item with a sales tax of $10, and $5 goes to the state, $3 to the city I live in and $4 to the county and $1 to the the local transit districts and other bodies authorized to collect sales taxes. But. what about this, that and the other thing? Yeah I can see the problems.

Greater heads than mine will have to figure this out. I don't have to worry about it, I'm retired.

 

[Chuckanut]

I predict some Internet business that proudly brag they do not collect sales tax for shipments out of state, will see a huge increase in sales over the next few weeks and months, especially on the higher prices items.

 

[ShokWaveRider]

I have a little on-line business that grosses about $40k per year. A hobby really. If Florida implements this I will shut it down as I cannot (Do not want to) deal with sales tax for 50 states, it will not be worth the effort.

 

[capjak]

I have a little on-line business that grosses about $40k per year. A hobby really. If Florida implements this I will shut it down as I cannot (Do not want to) deal with sales tax for 50 states, it will not be worth the effort.

You should be fine, the ruling (per the radio experts) implies that for small business the requirement to collect the tax upfront would not be upheld by the court as it would put an undue stress on compliance for small transactions.

I expect congress would....nevermind....

 

[meierlde]

I have a little on-line business that grosses about $40k per year. A hobby really. If Florida implements this I will shut it down as I cannot (Do not want to) deal with sales tax for 50 states, it will not be worth the effort.

Of course one way to handle it is to affiliate with Amazon or Wal-Mart, they have most the the infrastructure to handle this now for their direct sales and will add it for their third party sellers. I believe there are other services that also do this you just plug a link to their software into your checkout process and it calculates the tax. It may make things cost more but the services will do the filing as well. Or as stated somewhere eBay will likley do this as a service for a fee if you sell on eBay also. Or alternativly one could see UPS or Fed EX provide the service just have to provide the total before tax to them. BTW note that part of the key is the zip+4 which does get granular enough to handle jurisdiction boundaries. BTW amazon charges 2.9% of the sales tax for the service. It appears that some of the payroll services also do this such as Paycheckx, and adp. So its just a question if the business can afford to exist under the new rules, ADP also says it will pay the state sales taxes and file the forms.

 

[Aerides]

I have a little on-line business that grosses about $40k per year. A hobby really. If Florida implements this I will shut it down as I cannot (Do not want to) deal with sales tax for 50 states, it will not be worth the effort.

The SD case in the ruling allowed for under 100k/200 transactions, per rolling 12 month, to be exempt. So, it may be ok for little businesses (like mine also). However, it remains to be seen what other states will decide for thresholds.

So that piece of info at this time makes me feel a bit better...for now.

 

[523HRR]

If only it were 50... there are something like 16000 different sales jurisdictions in the US (not just states, but some counties and cities.

Precisely. Imagine every on-line retailer now being subject to audit by each of those 16000 jurisdictions. Chilling.

 

[harley]

The SD case in the ruling allowed for under 100k/200 transactions, per rolling 12 month, to be exempt. So, it may be ok for little businesses (like mine also). However, it remains to be seen what other states will decide for thresholds.

So that piece of info at this time makes me feel a bit better...for now.

Me too. I had already started thinking about shutting down my company, but if that exemption is carried across the boards I can probably stay in business.

 

[Texas Proud]

Precisely. Imagine every on-line retailer now being subject to audit by each of those 16000 jurisdictions. Chilling.

This is false thinking.... they will not...



They do not just do willy nilly audits on everybody.... they want to be able to get something out of it... they are time consuming and expensive for the state to do.... I do not think any local jurisdiction does them, but I could be wrong... I just never had it happen... but did a few state audits...


Think about it... you are a $40K online retailer and sell $5K to some local place... at 1% that is a whopping $50... nobody in gvmt is going to authorize an audit in order to get $50... which is one reason why the states do not go after people who do not file a use tax return.... just not enough money... unless you are buying some big ticket item that is....

 

[mrfeh]

No sales tax? I always pay my online purchases on my state return.

+1

If this results in tax cheats paying up, I'm all for it.

 

[CRLLS]

So couldn't someone setup several related businesses with one website? Once orders approach the allowed dollar sales volume, the order automatically is placed with the next "business"? Or just rotate orders between each of the businesses...…

In Illinois, I already pay a sales tax on my out of state purchases for "use" in Illinois. They call it a "Use Tax". I either pay a fixed amount on my state tax form based on my taxable income or I can itemize if I have kept records. I just pay the fixed amount. Currently, I can also deduct any sales tax paid out of state.