A different lens on taxes

[kgtest]

What if a person looked at tax and valued that to themselves in terms of the efforts it takes to avoid..or pay the tax?

For instance, it's pretty easy to avoid sales tax, don't buy anything, or shop online where their is none...

But employment tax is a pretty tough one to avoid...and therefore is weighted heavier in terms of the effort it requires to pay off the tax.

Taxes are everywhere...along with fees surcharges and maintenance costs. To truly avoid them, at least in the US would mean no SSA, no traceable income and someone who doesn't drive, fly or generally utilize public transportation, grows their own food and generally lives in oblivious to modern society.

I try very hard to avoid all of this to help reach FI sooner...I also try to maximize free money, I feel both of those combined is another tick in the right direction.

What is some of the easiest paid tax you've had, and the toughest? Child support?

 

[Big_Hitter]

excise tax on the sale of some dirt last year in WA state

 

[pb4uski]

...For instance, it's pretty easy to avoid sales tax, don't buy anything, or shop online where their is none......

I predict that it is going to get more and more difficult to avoid sales taxes on online sales. In 2016, Vermont passed a law that required online retailers who did not collect sales tax to send annual letters to customers notifying them how much they need to pay in use taxes beginning in 2017. Amazon decided that it was easier to just collect sales tax and started doing so on Feb 1.

I actually don't have a problem with paying taxes on online sales as it levels the playing field of online retailers with bricks & mortar merchants.

https://vtdigger.org/2017/01/23/amazon-com-collect-vermont-sales-tax/

 

[jimbee]

I predict that it is going to get more and more difficult to avoid sales taxes on online sales. In 2016, Vermont passed a law that required online retailers who did not collect sales tax to send annual letters to customers notifying them how much they need to pay in use taxes beginning in 2017. Amazon decided that it was easier to just collect sales tax and started doing so on Feb 1.

I actually don't have a problem with paying taxes on online sales as it levels the playing field of online retailers with bricks & mortar merchants.

https://vtdigger.org/2017/01/23/amazon-com-collect-vermont-sales-tax/

And violates the U.S. Constitution if the online retailer doesn't have a physical presence in the state.

 

[pb4uski]

I doubt that Amazon would have voluntarily decided to agree to collect sales taxes on its Vermont online sales unless it concluded that it would not prevail if it did not comply with the new requirement to report to customers.

The second misperception is that the U.S. Constitution prohibits states from taxing Internet sales. States have the power to tax their residents who purchase goods or services on the Internet, even when the seller is located outside the state and has no real connection with it. However, if the seller does not have a constitutionally sufficient connection (“nexus”) to the state, then the seller is under no enforceable obligation to collect the tax and remit it to the state. In this situation, the purchaser is still generally responsible for paying the use tax, but few comply and the tax revenue goes uncollected. ....

https://fas.org/sgp/crs/misc/R42629.pdf

 

[jimbee]

I doubt that Amazon would have voluntarily decided to agree to collect sales taxes on its Vermont online sales unless it concluded that it would not prevail if it did not comply with the new requirement to report to customers.



https://fas.org/sgp/crs/misc/R42629.pdf

"Use Tax" is a weasel terminology/verbal gymnastic for the state to try and work around the restriction. And yes, if the federal government permits, the state can collect tax from outside their jurisdiction. Without a federal ruling, the states have bupkis.

 

[Sunset]

I think paying SS tax is a good thing for the vast majority of people, it gives them a baseline retirement income. I wish I had paid it for more years than I did, and I am very happy I hit the 10 year mark a while ago so I could collect something.

 

[COcheesehead]

I hate taxes. I get stuck with obscure ones like the 3.8% ACA tax. You're welcome to all the people who get a subsidy. I pay a small part of that. I also get hit with the AMT. It was only a few hundred bucks this year, but I still had to cough it up after already paying over $80k in taxes. I max out my 401k, my wife's 401k, contribute to an IRA. Make too much for a Roth. I buy Muni's. Bury money in a deferred annuity. Bury it in whole life (I know you all hate that, but it defers taxes and pays for my LTC), give it to charity, donate appreciated stock...I do everything I can because I am one of those folks who has to bend over at tax time.

 

[meierlde]

Re Amazon and sales taxes. Amazon started charging them because it wanted to create faster deliveries and thus required more distributed warehouses in more states (this is what happened in Tx for example ) Only small or lightly populated states are now left with no Sales Tax on purchases from Amazon (not necessarily from 3rd parties on amazon).

 

[Winemaker]

Just finished up with taxes (Ugh) and was pleasantly, but flat out surprised. While I know the Commonweath of PA does not tax SS, pensions or retirement distributions, I was expected to pay income tax on divvies, interest and rental income. Somehow, DW and I do not have enough taxable income as a couple to pay income tax. I am stunned.

 

[Hermit]

What if a person looked at tax and valued that to themselves in terms of the efforts it takes to avoid..or pay the tax?

For instance, it's pretty easy to avoid sales tax, don't buy anything, or shop online where their is none...

But employment tax is a pretty tough one to avoid...and therefore is weighted heavier in terms of the effort it requires to pay off the tax.

Taxes are everywhere...along with fees surcharges and maintenance costs. To truly avoid them, at least in the US would mean no SSA, no traceable income and someone who doesn't drive, fly or generally utilize public transportation, grows their own food and generally lives in oblivious to modern society.

I try very hard to avoid all of this to help reach FI sooner...I also try to maximize free money, I feel both of those combined is another tick in the right direction.

What is some of the easiest paid tax you've had, and the toughest? Child support?

There is a guy down the road a few miles that lives exactly like this! (You get a few somewhat "strange" thinking folks up here in these parts. - even a hermit or two!) He lives on barter. Has not had a W2 (according to him) for many years. He is mostly not on the government radar. Lives in a weird looking place. Spends a lot of time doing paramilitary stuff. He's ready for the big society melt-down! On the other hand, I doubt if he has given much thought to retirement.

 

[audreyh1]

I hate taxes. I get stuck with obscure ones like the 3.8% ACA tax. You're welcome to all the people who get a subsidy. I pay a small part of that. I also get hit with the AMT. It was only a few hundred bucks this year, but I still had to cough it up after already paying over $80k in taxes. I max out my 401k, my wife's 401k, contribute to an IRA. Make too much for a Roth. I buy Muni's. Bury money in a deferred annuity. Bury it in whole life (I know you all hate that, but it defers taxes and pays for my LTC), give it to charity, donate appreciated stock...I do everything I can because I am one of those folks who has to bend over at tax time.

Yeah, I know. High income drives AMT and 3.8% ACA tax. Make > $250,000 taxable, and/or high cap gains, and you're going to be paying a lot in extra taxes.

When you retire your tax burden will probably drop significantly.

 

[GrayHare]

Just finished up with taxes (Ugh) and was pleasantly, but flat out surprised. While I know the Commonweath of PA does not tax SS, pensions or retirement distributions, I was expected to pay income tax on divvies, interest and rental income. Somehow, DW and I do not have enough taxable income as a couple to pay income tax. I am stunned.

Shhh! We don't want _everyone_ retiring early.

 

[Montecfo]

I actually don't have a problem with paying taxes on online sales as it levels the playing field of online retailers with bricks & mortar merchants.

https://vtdigger.org/2017/01/23/amazon-com-collect-vermont-sales-tax/

Brick and mortar still have the advantage. They have the brick and mortar. You can go there, see and feel the merchandise. Pick it up. Take it home. Return it. While you are there, you may make impulse purchases. Advantage: the bricks.

If retailers have no physical presence in the states, they should not be enlisted as the state's use tax collectors. But states continue to try, and the law in this area is dynamic.

 

[braumeister]

There is a guy down the road a few miles that lives exactly like this! (You get a few somewhat "strange" thinking folks up here in these parts. - even a hermit or two!) He lives on barter. Has not had a W2 (according to him) for many years. He is mostly not on the government radar. Lives in a weird looking place. Spends a lot of time doing paramilitary stuff. He's ready for the big society melt-down! On the other hand, I doubt if he has given much thought to retirement.

Plenty of those folks everywhere.
One guy around here owns an old surplus halftrack and every once in a while drives it through town. He's always stopped, cited, and turned around of course, but he likes to exercise his "rights" regardless of damage to the pavement.

 

[pb4uski]

Brick and mortar still have the advantage. They have the brick and mortar. You can go there, see and feel the merchandise. Pick it up. Take it home. Return it. While you are there, you may make impulse purchases. Advantage: the bricks.

If retailers have no physical presence in the states, they should not be enlisted as the state's use tax collectors. But states continue to try, and the law in this area is dynamic.

While it is true that they have the advantage of brinks and mortar, there is a related disadvantage of the substantial cost of bricks and mortar... the have to either price that in or accept a lower return to compete with an online merchant that does not have to collect sales tax. They also have to put up with buyers who visit the store to see and feel the merchandise and then go home and order it online... and many people do. If bricks and mortar were such a big advantage then Amazon and others would be all over it. Barnes and Noble tried that and it didn't work out too great.

On the second part, I totally disagree with you. Sales taxes are assessed on buyers, not on merchants in most states. As a result, it makes zero sense for a merchant with nexus to be required to collect sales taxes and allow a merchant without nexus to avoid collecting sales taxes. All that does is move the unlevel playing field.

If residents reported and paid use tax then there would be no need to press for online merchants without nexus to collect sales tax... but non-compliance is rampant.

I have no problem with a state using pressure on online merchants to collect sales taxes for sales in the state given the rampant non-compliance of use tax... if an online merchant doesn't want to do it then just don't ship to addresses in that state... simple.

 

[ERD50]

...

I have no problem with a state using pressure on online merchants to collect sales taxes for sales in the state given the rampant non-compliance of use tax... if an online merchant doesn't want to do it then just don't ship to addresses in that state... simple.

Why should a company outside my State collect sales tax for my State?

My State isn't providing them Police or Fire protection. My State doesn't provide road, utility, or other infrastructure to them. They pay for those local things in their local property (or other) taxes.

But they are using local delivery services (UPS, FedEx), and those local businesses are paying local taxes.

I think it makes more sense for me to pay whatever State Tax the business would charge a local customer. Just like if I travel to another State and buy something, I pay any State Sales Tax rate at the cashier. They don't ask me for State ID to exempt me, or collect me my State's tax. Why should buying online be any different?

-ERD50

 

[pb4uski]

....I think it makes more sense for me to pay whatever State Tax the business would charge a local customer. Just like if I travel to another State and buy something, I pay any State Sales Tax rate at the cashier. They don't ask me for State ID to exempt me, or collect me my State's tax. Why should buying online be any different?

-ERD50

I think your first sentence describes the use tax in many states or alternatively, that online retailers would charge their customers the sales tax where the retailer is located (as if the customer drove to the online retailer and bought the item).

A company outside your state doesn't have to collect sales tax for your state... they only have to collect sales tax if they chose to make sales shipped to zip codes in you state.. they can easily avoid that responsibility by just not shipping to states that require them to collect sales tax if they prefer.

 

[Walt34]

In 2016, Vermont passed a law that required online retailers who did not collect sales tax to send annual letters to customers notifying them how much they need to pay in use taxes beginning in 2017.

I have to wonder how Vermont intends to enforce that. There are lots of small and medium-sized businesses in the other 49 states with an online presence but have a nexus in only one location. I'd think that upon getting notification from Vermont of this "requirement" the reaction of the business owner would be to say "Pound sand, Vermont" and throw the letter in the trash.

To my knowledge Vermont law is enforceable only in Vermont.

 

[meierlde]

I wonder how big an issue it really is in terms of state finances. Now that Amazon is collecting sales taxes on goods sold by Amazon LLC (because it wants to go to same day delivery it is building warehouses in most state), Wal-mart online has collected sales taxes in all states since the begining, as has Target in most states. One question occurs what percent of total e-commerce sales are already covered by sales taxes one way or the other?

 

[Starsky]

If you like to keep your taxes simple, just be glad you're not a Pro Athlete.

 

[gerntz]

Bury money in a deferred annuity. Bury it in whole life (I know you all hate that, but it defers taxes and pays for my LTC), give it to charity, donate appreciated stock.

Is the backyard is available? Good on the donations.

 

[pb4uski]

I have to wonder how Vermont intends to enforce that. There are lots of small and medium-sized businesses in the other 49 states with an online presence but have a nexus in only one location. I'd think that upon getting notification from Vermont of this "requirement" the reaction of the business owner would be to say "Pound sand, Vermont" and throw the letter in the trash.

To my knowledge Vermont law is enforceable only in Vermont.

I'm not sure how they would have enforced it or even if they could. Neither Amazon nor the state tax department said why Amazon decided to start collecting sales tax. Vermont is not the only state to have required reporting, it started in Colorado.

 

[meierlde]

I'm not sure how they would have enforced it or even if they could. Neither Amazon nor the state tax department said why Amazon decided to start collecting sales tax. Vermont is not the only state to have required reporting, it started in Colorado.

Actually according to this article Amazon LLC and Amazon Fullfillment will start collecting sales taxes in a number of states this year:Amazon to collect Vermont sales tax, February 2017
Other states with no presence that will have taxes collected are:As of January 1, 2017, Amazon is voluntarily collecting tax in Iowa, Louisiana, Nebraska, and Utah. It will collect South Dakota and Rhode Island sales and use tax beginning February 1, 2017, and Wyoming tax as of March 1.

 

[pb4uski]

Thanks... that by far the best article that I have seen on this subject.