State sales tax on internet purchases is back on the table

[pb4uski]

.... Hopefully, the Supremes affirm existing federal law.

I'm highly confident that they will affirm existing federal law.... whether their decision will coincide with your view of existing federal law is a totally different question.

 

[Montecfo]

I'm highly confident that they will affirm existing federal law.... whether their decision will coincide with your view of existing federal law is a totally different question.

Cute.

 

[Brat]

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.

My former neighbor on Bainbridge Island was one of the founders of Avalara, Scott McFarlane.

There is a lot of detail required even to just keep up on the various taxing districts even in Washington - counties, cities who seem to change their rates on a whim. The buyer's home zip code is not determinative as a zip code could include more than one taxing district. It isn't simple to administer.

https://www1.avalara.com/us/en/prod...iance&ef_id=WX_hEgAAAGhrOV5z:20180115002017:s

 

[SecondCor521]

Also Oregon, Delaware, and Montana

All three have income taxes. The original list was states that had neither income nor sales taxes.

Idaho has both, so don't come live here, because it's super expensive.

 

[Cobra9777]

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.

+1 ...I think that's the whole point.

Proposed legislation in recent years has always exempted small online businesses... with various definitions of "small," but generally less than $1M sales in the taxing state. It also requires states to simplify their sales tax laws and collection processes prior to requiring interstate sellers to start collecting tax. Of course, none of these proposals have made it through our dysfunctional Congress.

So it seems to me, if the Supreme Court reverses the 1992 decision, it could be a complete disaster for small online businesses until Congress can pass something with small-business exemptions and tax simplification requirements. Here's a comparison of two recent proposals.

 

[meierlde]

One question is is zip +4 determinative of location. Supposedly it goes down to the individual cluster mailbox. Anyway today calculating sales tax is a service a merchant can buy, input the zip+4 and it tells you. For the Amazon Affiliates that can be one service amazon provides for a slight fee. The main issue might be integration in an online environment which could take some IT work. (Note that the same issues apply to the wal-mart associates program as Wal-Mart already has that capability.) Since it appears it is now a cloud based service, size of the business should not be an issue, just raises costs a bit more than just the sales tax.

 

[alaska55]

Also Oregon, Delaware, and Montana

So when did Oregon stop having a income Tax. I'll have to check with my sons. Oregon has one of the highest income taxes.

 

[travelover]

......... Oregon has one of the highest income taxes.

Yes, it does. That's why I live across the river from Portland.

 

[Brat]

Ah but you pay another tax: traffic jams on the I-5 bridge over the Columbia.

Many Clark county residents shop in Portland metro, I have heard that the Costco store just south of the I-205 bridge over the Columbia has the greatest sales per sq foot in the corporation. For political reasons Costco also built a store in Vancouver. Odds are that store's highest sales are in food, pharmacy, glasses and hearing aids (all non-taxed). WA residents are supposed to pay sales tax on purchases in Oregon but few do.

 

[travelover]

Ah but you pay another tax: traffic jams on the I-5 bridge over the Columbia.

I'm retired and avoid the area during rush hours.

Many Clark county residents shop in Portland metro, I have heard that the Costco store just south of the I-205 bridge over the Columbia has the greatest sales per sq foot in the corporation. For political reasons Costco also built a store in Vancouver. Odds are that store's highest sales are in food, pharmacy, glasses and hearing aids (all non-taxed).

Yup, and the Ikea store does a pretty good business, too.

WA residents are supposed to pay sales tax on purchases in Oregon but few do.

 

[mrfeh]

Didn't read the entire thread, but I would hope folks are paying their state sales tax when they file their taxes, even if the vendor doesn't charge the tax directly...

 

[Senator]

Didn't read the entire thread, but I would hope folks are paying their state sales tax when they file their taxes, even if the vendor doesn't charge the tax directly...

Exactly. That is the law in MN, although I have heard it has a 1% compliance rate.

I did post the MN law in my post above. In MN, we get a $770 exemption, unless you exceed it, then you pay sales/use tax on the entire amount.

I paid $495 for 2017.

 

[gindie]

Didn't read the entire thread, but I would hope folks are paying their state sales tax when they file their taxes, even if the vendor doesn't charge the tax directly...

I do in Ohio and get laughed at by my work colleagues when I tell them!

 

[Big_Hitter]

we already pay sales tax on amazon purchases

 

[sengsational]

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.

Thanks for that bit of wisdom.

When "simplified" is 200 pages, that indicates the complexity of the current system. It looks like they didn't want to tackle vending machines or marajua, lol!

 

[Chuckanut]

Just a few weeks ago I was having coffee with a few friends and the sales tax issue came up. Most agreed that the current situation is unfair to local businesses. If we want to have the jobs and benefits of local business in our state, then they need a level playing field to compete.

But....

Somebody brought up that recent tax increases have pushed the sales tax in my area to double digits (10%), along with nearly doubling car tabs and an increase in property taxes. He added that for the first time, he now checks out of state businesses to see if he can avoid the tax on more expensive items. Recently, he bought some camera gear from a place in NY and avoided almost $50 in sales tax.

At some point people, even fair minded people, just start saying 'No'.

 

[mrfeh]

Somebody brought up that recent tax increases have pushed the sales tax in my area to double digits (10%), along with nearly doubling car tabs and an increase in property taxes. He added that for the first time, he now checks out of state businesses to see if he can avoid the tax on more expensive items. Recently, he bought some camera gear from a place in NY and avoided almost $50 in sales tax.

Except he really didn't avoid the tax. He simply is choosing not to pay it. In other words, he's a tax cheat.

 

[Sue J]

I do in Ohio and get laughed at by my work colleagues when I tell them!

My son keeps track of all of his online purchases and he pays any sales tax due with his taxes. I told him that it is so rare for a taxpayer to comply that when his return is processed a bell rings and a state tax agent gets his wings.

But we all know he’s doing the right thing.

 

[Chuckanut]

Except he really didn't avoid the tax. He simply is choosing not to pay it. In other words, he's a tax cheat.

Yes, he is supposed to declare the stuff and pay the tax. But, there is no mechanism to enforce it.

I have my own idea about how it can be enforced. Let each state have an Interstate sales tax, which the state collects and then distributes to the various cities and counties based upon the zip code used for delivery. Merchants only have to worry about the sales tax for 50 states and not a zillion various combinations.

 

[powerplay]

So when did Oregon stop having a income Tax. I'll have to check with my sons. Oregon has one of the highest income taxes.

I wish I knew about that! I pay lots to Oregon so as far as I know the OR State income tax is still here.

 

[Clone]

I could see the development of a 1099 type form that the sellers send to any shipping address with $500 or more in sales, and a copy to the state taxing authority. Information only, each individual can do with it what they wish. And each taxing authority can do what they wish.

Or develop a "Zipcode plus SALT" address. That along with an analysis of every line item to determine taxability. And a VAT to cover the cost of developing the system. Analytics powered by Google, now with 'Tinfoil Technology!'

 

[pb4uski]

Last summer, our state tax department sent letters to 18,000 taxpayers "reminding" them that they are liable for use tax on purchases made via the internet and made in neighboring New Hampshire, which does not have a sales tax. Our governor got one as well.

It was a bit of an item for discussion over the summer... I didn't get one but some friends did. We discussed what one would need to do if one wanted to comply.. get the details on any online purchases where sales tax was not assessed or out-of-state purchases, determine whether use tax applies (no sales tax on food or clothing in our state), prepare amended returns and reply to the tax department.

In the end, about 2,600 taxpayers responded (14%) and remitted about $900,000.

As part of the process the local TV station had a piece on the issue and an interview with a CPA who indicated that he was advising clients not to respond. The governor was in the majoirty that did not respond.

Vermont nets $900,000 through use tax letters

Letter:
https://media2.fdncms.com/sevendaysvt/imager/u/blog/7724730/sales_tax_letter.jpg?cb=1504188143

 

[braumeister]

My state has a "use tax" for things bought from out of state. You're supposed to pay 6% if you didn't pay that to the other state.

But they make it easy on the state income tax return. If you don't have receipts for your online purchases (and I imagine very few of us keep them), then you just use a table based on your income and the state is happy with those estimated amounts. Hardly an onerous amount.

 

[Aerides]

As someone who runs a small e-commerce business, the idea of collecting and remitting for all 45+ states that have sales tax, not to mention those that have multiple tax jurisdictions, is a nightmare. (Interacting with state revenue websites is like a bad visit back in time to late 90's internet speed, function, and navigation...)

Just gathering together the data for my own state to file each quarter takes about a half an hour. This is just me, a very small part time business/hobby, so yes there are probably better costlier solutions to do this for me, somewhat automatically.

But just registering, and then keeping track of, all the jurisdictions alone would be hours and hours of work.

It will hit the smaller online seller far harder than the big ones. And it will cause a lot of small sellers to severely limit those states they will do business with. I would look at selling only to states are most profitable to me, vs. the cost of tracking and filing those 1 or 2 sales a year to say, Idaho or something. (sorry idaho). If that one $50 sale to Idaho comes with an extra 20 mins of work, vs. those 12 California sales with the same amount of work... it makes sense.

This year, Amazon started collecting and remitting ST for all purchases in Washington state, including those from small 3rd party sellers. But for independent sellers outside of selling on amazon, they need to make their own solutions.

 

[Tadpole]

I just looked at the spreadsheet download from Amazon. I occasionally send gifts to TN and, for those purchases, the tax is at the rate in the city in TN I send the gift to. For the ones delivered to me, the tax is at my city's rate. I thought Amazon charged tax on everything sent to me since they are WA state too but I see some exceptions where no tax was paid. They have columns that seem to be for assessing the taxability of the item but all three tax exemption columns are empty. I bought some food and food should be exempt in WA but the columns were empty for these too. (Maybe the columns were provided for the buyer to fill out.) I'd be willing to bet that, if I checked it, the items taxed are those that are linked to Amazon's "fulfillment center" for returns since they are the main trackers of the merchandise.