State sales tax on internet purchases is back on the table

[MichaelB]

Given the popularity of the "Last thing ordered at Amazon" and other threads about online shopping, this will be of interest to forum members. The US Supreme Court has agreed to take up the subject of state sales tax on online purchases.

This was last visited in 1992, and SCOTUS ruled that states could only tax internet purchases if the seller had a physical presence in that state. South Dakota passed a law requiring out of state vendors to collect tax on some purchases by state residents, then brought suit against some large companies for refusing to do so. The case, South Dakota v. Wayfair, Inc. has made it's way through the court system and on Jan 12, the US Supreme Court agreed to hear it.

A ruling in favor of the States wanting to collect could make our cost of living a bit higher, affect the competitiveness of e-commerce businesses, and give a boost to local brick and mortar retailers.

Background on South_Dakota_v._Wayfair https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc.
https://www.bloomberg.com/news/arti...ernet-tax-ruling-tees-issue-up-for-high-court

Article on US Supreme Court decision https://www.reuters.com/article/us-...-state-online-sales-tax-dispute-idUSKBN1F12JG

 

[skipro33]

This happened here in California with Amazon. I'm a big Amazon user because, at first, it saved me the sales tax even though I was 'supposed' to declare on my state income tax. When Amazon was forced to charge tax, I thought maybe the party was over. However, what I discovered is that Amazon decided to make some lemonaide out of this lemon and started building large warehouses and distribution centers in the state. These places are HUGE! I assume they employ a lot of people as well. Most recent facility was just opened near where I live, at the Sacramento International Airport. (Jokingly called the Sacramento Intergalactic Spaceport in mockery because the only international flights are to Mexico) It's the largest building at the airport now by far.
Since Amazon has made a significant presence in the state, I've been able to take advantage of some of the other features they offer. One is their 'Pantry'. I can order groceries (not taxed in California BTW) delivered to the house and set up recurring purchases through 'Subscribe and Save'. This knocks 5% off the price if I have 5 or more items. Shipping is free of course. Ever go to the grocery store and have a favorite item that they no longer stock? Isn't that a pain?! I hated that! Hasn't happened to me yet on Amazon. I order several items that my local grocer USED to stock but no longer does. My mail man HATES that I buy 6 12 packs of Propel Black Cherry beverage a month as they are quite heavy. But they are significantly cheaper than any store, including COSTCO, and are delivered right to my front porch. I don't need to even load 'em in the cart, the checkout, the car and into the house from the car. Ha! We eat gluten free and there's a huge presence for these products on Amazon as well. I probably do 80% of our household shopping now on Amazon and using their credit card gives me still another 5%.
All things considered, the sales tax aspect has been mitigated by their range of products, fast shipping, most times either overnight but never more than 2 days and that includes Sundays, the convenience, the time I save shopping at brick-n-mortar stores, the wear and tear on my car, etc..
The Amazon return policy is the best, better than COSTCO because I don't have to drive down there to return anything. Just go to the Amazon site, and within minutes I've printed the free return label. In most cases, I have my refund back on my credit card account when the shipping label is scanned by UPS at pick-up.
I'll still use COSTCO for meats and large ticket items like TV's because those are easier to return / replace as well as their extended warranty on electronics if you use their credit card.

 

[braumeister]

Since Amazon has a lot of warehouses in my state, I already pay sales tax on many online purchases. I don't mind a bit, because it's generally going to be much less than the cost of the gas I would have to burn to drive to a B&M store for the same purchase.

 

[pb4uski]

While we have enjoyed the benefit of no sales taxes on internet purchases for many years, I have no problem with forcing internet retailers to charge sales tax and remit on all purchases... it is a fair step towards leveling the playing field with local brick and mortar vendors and benefits my state and local governments reducing pressure to increase tax rates.

Amazon started assessing state sales taxes in my state last year.

 

[GrayHare]

Of course, purchasers buying from out of state are supposed to remit to their state the sales tax they would have paid in-state, but it's one of those laws most people ignore.

Forcing all sellers to collect and remit the tax of 50 states (taxing cities too?) will create a costly compliance matter for every vendor, the cost of which will ultimately be shifted to and borne by purchasers.

 

[powerplay]

A couple months ago I ordered a small item to be delivered to a friend in a sales tax state. There was never any sales tax charged although I expected it to be charged. I may have ordered it through a 3rd party with no physical presence in the sales tax state.

I do agree that charging sales tax for all sales made in or delivered to the state will start leveling the playing field. It will be interesting to see what SCOTUS does.

 

[gerntz]

I don't think folks should be able to dodge sales taxes by not reporting them. OTOH, I don't want the SC making up a required compliance by the vendors through some tortured construing of the Constitution. But between this & the limited SALT deductions, I think I'll start investigating which states have neither income nor sales taxes.

 

[pb4uski]

Of course, purchasers buying from out of state are supposed to remit to their state the sales tax they would have paid in-state, but it's one of those laws most people ignore.

Forcing all sellers to collect and remit the tax of 50 states (taxing cities too?) will create a costly compliance matter for every vendor, the cost of which will ultimately be shifted to and borne by purchasers.

A vendor isn't forced to collect and remit tax.... but if to want to do business and sell in a particular jurisdiction then along with that comes an obligation to collect and remit sales taxes.... brick and mortar stores seem to be able to do it as do many online vendors who do business nationwide and do it voluntarily.

At the extreme, an online vendor could simply decline sales to customers in zip codes with sales taxes... a business decision that they need to make.

 

[GrayHare]

Individuals aren't forced to pay income taxes either, yet for some reason most do.

Limiting small business sales is more likely to make them unable to compete with large businesses, which is the opposite of levelling the playing field.

Big businesses have economy of scale that permits them to track and remit sales taxes to many states. Small businesses do not have that luxury.

 

[cathy63]

I don't think folks should be able to dodge sales taxes by not reporting them. OTOH, I don't want the SC making up a required compliance by the vendors through some tortured construing of the Constitution. But between this & the limited SALT deductions, I think I'll start investigating which states have neither income nor sales taxes.

Let me help you with that list:
- Alaska

 

[pb4uski]

Then that is a decision that your "small' business will have to make... am I willing to accept collecting and remitting sales taxes in exchange for expanding sales nationally... if so, then go, otherwise don't expand. Besides, if sales taxes were required to be collected nationally I suspect that it would spawn expanded software services to ease the burden based on zip code and product codes.

I don't like the idea of shifting that burden on individuals... it doesn't work and is more onerous than putting the burden on vendors.

 

[pb4uski]

Let me help you with that list:
- Alaska

New Hampshire too.. but both are very cold.

 

[travelover]

We have to pay tax at Amazon for anything shipped to Washington, so we just have expensive stuff shipped to our friends in Oregon, just a few miles across the border. They will never take us alive.

 

[sengsational]

Calculating sales tax is horrifically complex. In my former life, the company I worked for paid a hefty subscription to a company who's sole purpose was to keep-up with sales taxes and make sure our system calculated these taxes correctly.

It's not just 52 rates. It can also depend on what county, and municipality. Different types of goods and services have different rates. Each state has written it's laws differently, and to accurately comply with all of those laws is quite a burden.

As mentioned above, it hits the little guy much harder than the big guy.

You know how they have "simplified Chinese"? Maybe they should come up with something similar in the sales tax arena for the little guy.

 

[easysurfer]

A few weeks before Amazon built a warehouse on the state I'm in, I went ahead and stocked up on stuff before getting hit with sales tax the following year.

Now, I've already been assimilated and not that much sticker shock.

 

[cathy63]

New Hampshire too.. but both are very cold.

Yeah, but NH does have an Interest & Dividends tax, which is based on the income from those sources, so it's a bit of wordplay to say they don't have any Income tax. It is a lot lower than a lot of other states though.

 

[grasshopper]

When we first moved to the boonies the Arizona Post Office was 15 miles away, but the New Mexico PO was a mere 5 miles away. Than AZ started charging online tax, but NM didn't until this year. NM sales tax is still cheaper than AZ. As it is USPS sends AZ packages to our NM PO anyway.

 

[braumeister]

New Hampshire too.. but both are very cold.

Also Oregon, Delaware, and Montana

 

[braumeister]

Calculating sales tax is horrifically complex.
...
It's not just 52 rates. It can also depend on what county, and municipality.

At our last house, our ZIP code was spread over parts of two counties, each having a different tax rate. So when I ordered things online, there was often an extra step after putting in my ZIP, to specify which county I lived in. Nothing is ever as easy as it first appears.

 

[MichaelB]

You know how they have "simplified Chinese"? Maybe they should come up with something similar in the sales tax arena for the little guy.

They're trying - or at least they say they are, with Streamlined Sales Tax initiative Streamlined sales tax

It shouldn't be that difficult, but state governance is a funny thing. A decision by SCOTUS allowing the states to collect sales tax might be just the motivation this initiative needs to move ahead.

 

[Montecfo]

Physical presence should be necessary. With no physical presence, the sales are in interstate commerce, which only Congress can regulate. States attempting to tax interstate sellers are making a land grab.

An interstate seller with no physical presence is not using any services in that state, so why should it be taxed there?

Hopefully, the Supremes affirm existing federal law.

 

[Senator]

I report and pay sales/use tax on my internet purchases. In MN, it's the law, especially for businesses. I paid $495 to the state for my 2017 purchases. I track whether the purchase included sales tax or not.

Even if you are an individual, you still have to pay use tax of 6.875%. I suspect many other states have a similar law.

Minnesota sales or use tax is due when you buy taxable items online or in another state and use them in Minnesota. If the seller does not collect Minnesota sales tax, you owe use tax.

Each calendar year, individuals can buy up to $770 worth of taxable items for personal use without paying use tax. If your purchases for the year total more than $770, you must pay use tax on the entire amount.

Internet and Out-of-State Purchases

 

[braumeister]

An interstate seller with no physical presence is not using any services in that state, so why should it be taxed there?

By that reasoning, shouldn't the buyer pay the applicable sales tax of the seller's location? Frankly, I've never understood why this break was ever allowed.

I remember buying a car in New York a long time ago, but intending to immediately drive it to Colorado to register it. The NY dealer did me a favor and wrote my Colorado address on the bill of sale so I wouldn't have to pay NY sales tax.

When I got to Colorado, the DMV said they didn't care where I paid sales tax as long as I paid it. So I paid the much lower CO sales tax and everyone was happy. I'm not sure what the NY dealer did was actually legal, but I was pinching pennies back then.

 

[jazz4cash]

By that reasoning, shouldn't the buyer pay the applicable sales tax of the seller's location? Frankly, I've never understood why this break was ever allowed.



I remember buying a car in New York a long time ago, but intending to immediately drive it to Colorado to register it. The NY dealer did me a favor and wrote my Colorado address on the bill of sale so I wouldn't have to pay NY sales tax.



When I got to Colorado, the DMV said they didn't care where I paid sales tax as long as I paid it. So I paid the much lower CO sales tax and everyone was happy. I'm not sure what the NY dealer did was actually legal, but I was pinching pennies back then.

I think that's pretty standard on autos except the state that you register in will insist on getting paid so I don't get the part about Colorado DMV not caring where you paid.

 

[Walt34]

Calculating sales tax is horrifically complex. In my former life, the company I worked for paid a hefty subscription to a company who's sole purpose was to keep-up with sales taxes and make sure our system calculated these taxes correctly.

It's not just 52 rates. It can also depend on what county, and municipality. Different types of goods and services have different rates. Each state has written it's laws differently, and to accurately comply with all of those laws is quite a burden.

That's my argument against it too. I've slowed my purchasing, but I've bought a lot of photography gear from a family-owned store in NYC that has one (maybe two) stores there. To make them calculate sales taxes for all the different states and counties and then send each one the sales tax is absurd, and I agree would place an unreasonable burden on them.

I remember buying a car in New York a long time ago, but intending to immediately drive it to Colorado to register it. The NY dealer did me a favor and wrote my Colorado address on the bill of sale so I wouldn't have to pay NY sales tax.

When I got to Colorado, the DMV said they didn't care where I paid sales tax as long as I paid it. So I paid the much lower CO sales tax and everyone was happy. I'm not sure what the NY dealer did was actually legal, but I was pinching pennies back then.

Whether it was legal depends on NY law at the time, it probably was legal. When we bought the Honda Accord a few years ago we bought it from a dealer in MD and we live in WV. We did not pay MD sales tax but we did pay it in WV when we registered the car.