Saw this letter (Scroll down)in last week's Southern from a reader complaining about the push to collect sales tax on internet purchases.
First, it is not a new tax. By state law, anytime you buy something in a state that collects a sales tax, you are supposed to pay the sales tax. There is a spot on your income tax form for you to record the tax due on any items that you purchased during the previous year that are subject to sales tax on which you did not pay the tax. Do people pay it? Usually just attorneys and tax accountants. The rest of us are scofflaws since it is too much trouble and expense for the Department of Revenue to chase each and every person down to collect the sales tax due. That still doesn't mean you are not legally required to pay sales tax on your internet purchases, just that almost all of us don't.
Secondly, the Federal government actually exempted online retailers from the requirement to collect sales tax, unless they had a physical presence in the state as it was perceived as too big a financial burden to require them to collect and remit the tax in the early days of internet sales. Today, however no-one can seriously argue that companies such as Amazon, Zapdos, Overstock, etc. still need financial support, especially since software has advanced to the point that collecting and remitting it could easily be automated. If Staples is able to collect sales tax from me for online purchases, I see no reason that Newegg.com cannot do the same thing.
First, it is not a new tax. By state law, anytime you buy something in a state that collects a sales tax, you are supposed to pay the sales tax. There is a spot on your income tax form for you to record the tax due on any items that you purchased during the previous year that are subject to sales tax on which you did not pay the tax. Do people pay it? Usually just attorneys and tax accountants. The rest of us are scofflaws since it is too much trouble and expense for the Department of Revenue to chase each and every person down to collect the sales tax due. That still doesn't mean you are not legally required to pay sales tax on your internet purchases, just that almost all of us don't.
Secondly, the Federal government actually exempted online retailers from the requirement to collect sales tax, unless they had a physical presence in the state as it was perceived as too big a financial burden to require them to collect and remit the tax in the early days of internet sales. Today, however no-one can seriously argue that companies such as Amazon, Zapdos, Overstock, etc. still need financial support, especially since software has advanced to the point that collecting and remitting it could easily be automated. If Staples is able to collect sales tax from me for online purchases, I see no reason that Newegg.com cannot do the same thing.
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ReplyDeleteThe thing about the Internet Sales Tax proposal is that it's going to be insanely complicated to figure and collect sales taxes from every jurisdiction. This is, indeed, something that Newegg.com can do, but what about smaller retailers? Yes, we can implement an exemption for them, but what about the folks that just barely miss the cutoff, or grow to a point where they're no longer exempt?
ReplyDeleteHow about a system where Internet businesses charge sales tax based on where the business is located? That way at least the businesses are benefitting from the services provided by those taxes.
Regardless, there's one good thing about this whole controversy: If Congress actually does pass some sort of Internet sales tax law, it will actually be Constitutional; this sort of thing is clearly a proper function under the Commerce Clause, unlike almost everything else done with it.
Would like to point out that you are using the wrong terminology. Businesses don't charge sales tax, they collect it.
ReplyDeleteAlso, the business does not keep the sales tax, it collects it and remits it to the state which then puts some of it into the state treasury and sends the rest to the jurisdiction where it was originally collected. The business location has nothing to do with it, rather it depends on the location of the customer as the sales taxes collected are to be used to provide services within that jurisdiction.
If I recall correctly, the proposal in Congress would exempt online businesses doing less than $1 million per year. It is relatively easy for larger businesses to automate sales tax collection and remission. Wal-mart, which has physical locations in every state, has had to collect and remit sales taxes from online purchases for years.