Supreme Court Sales Tax Ruling

[A26B]

Good discussion.

The Supreme Court ruling has the potential to make the sales tax issue much more difficult than it needs to be to accomplish the same end result. South Dakota is now entitled to perfect the judgement by collecting any monies owed, and/or enforce future collections. The ruling does not mean that South Dakota or any other State must assess & collect future sales taxes in the same manner.

The problem:
South Dakota & other states want the tax revenue from sale of goods purchased by its residents. Fair enough, but requiring internet businesses to collect & remit that tax has two major problems; (1) Is the law feasibly enforceable? Big targets, like Amazon, eBay, etc are easy enough to find & economically justifiable to litigate, but what about the hundreds of thousands of little guys that make a living selling on the internet? How does a state collect a judgement from a resident of another state? (2)Assuming the little guys follow each states tax collection laws, its going to drive up the cost or drive the businesses out of their state, or even out of existence.

So, bad solution.

The better solution:
The simpler method for states that decide to pursue some form of sales tax occurring from internet sales into their respective state, is to create a "use tax". Pass a state law requiring residents to pay state sales tax on all goods purchased out of state that were shipped to them. Failure to report & pay state "use tax" is collectable by existing state tax agencies, just like sales tax, property tax, income tax, etc & they have the means to collect without all the litigation.

"Use tax could also contain provisions for chain stores like Wal Mart. Buy from Wal Mart on the internet & IF they have a store in the customers state, applicable sales tax is charged by Wal Mart just as if you went to Wal Mart to make the purchase.

In summary, the Supreme Court only upheld South Dakota v MayFair, but did create the case law for other states to follow at their own prerogative. What needs to occur is for states to adopt a form of tax collection that is practical, enforceable & has the least impact on internet economy. Arguably, sales tax (or "use tax") in some form, is valid to make up the loss in revenue to the states and equalization with brick & mortar businesses. The internet is an evolution of business. Businesses must adapt to survive.

[bhedberg]

There are problems with states initiating a use tax. In Connecticut you get credit against the use tax for out of state purchases upon which you paid sales tax in another state. You are expected to keep track of purchases upon which you did not pay Connecticut sales tax, report the amount of use tax owed, and pay it with your annual income tax return. Only a very small percentage of tax payers report any use tax due at all. It would be a chore to keep track of all purchases, what tax was paid and at what rate to what state, and which purchases and in what amounts had no taxes paid. The use tax sometimes applies to un-taxed internet sales and equally applies when you buy something when you are outside your state that has no sales tax or has a sales tax at a lower rate than in your state (in my case Connecticut). All this record keeping is an unreasonable expectation by the law makers and tax collectors.

This spring I got a letter from the tax collectors saying I owed use tax on purchases I had made from newegg.com on-line over a 3 year period. The demand was to immediately pay 6.35% of the total purchases plus interest and they would forgive any penalty if paid within 30 days. The tax collectors failed to review my 3 previous years tax returns which reflected payment of use tax in excess of the amounts they were now demanding arising from the newegg purchases. In the end they caved in and agreed no use tax was due/delinquent.

For these reasons, I believe the best path is the legislative solution whereby only the state where the purchase is made can collect its sales tax. Internet sales would be fully taxed just like any other sale. Each state would lose some taxes from purchases made by their residents in other states but would likewise gain sales taxes from residents of other states now making purchases in the state foreign to them. You would expect the gains and losses for most states would be a wash. At least the burdens for the purchaser to keep track, self-report, and pay would be eliminated as well as the extreme burden on small business doing many sales out of state.

[efnfast]

NH has no sales tax, so there is no gain for us.

[bhedberg]

Correct. It would definitely be a wash for any state without a sales tax. Nothing to gain and nothing to lose for such a state by orienting tax at the point of sale rather than the residence of the purchaser. That is really how it was before the Supreme Court exempted internet sales from state taxation in 1992 (Quill Corporation vs. North Dakota ). It was only the explosive growth of on-line sales that drove states to lust after sales tax revenue and begin imposing use taxes and the like. Before that everyone was perfectly content to pay sales tax at the sellers location and tax rate.

[EvanZR1]

Originally Posted by A26B

Buy from Wal Mart on the internet & IF they have a store in the customers state, applicable sales tax is charged by Wal Mart just as if you went to Wal Mart to make the purchase.

This already happens today. Amazon, Walmart, Target, etc all collect sales tax for any state where they have a physical presence. In effect, we've been penalising large corporations and small businesses that don't do Internet sales. I get where the court is coming from on this, you've got to level the playing field. Do I as a consumer dislike paying sales tax? Sure, and if I can get out of it I will, but whether I pay it or not is not going to dissuade me from buying online. I buy online because of convenience of ordering whenever I want and having it delivered to my door. If small online businesses have to charge slightly more to cover overhead for collecting sales tax, I'm fine with that. Heck, I already pay slightly more sometimes to order off Amazon to get free shipping (not really free since I pay for Prime) and for the convenience of not having to create a different account at a new vendor.

[BlackSheepz]

I thought there was an exception in this law for if you had less than 200 transactions in a state, or did less than $100k in annual Sales you didn't have to collect the taxes as discussed?

Obviously, I hope the best for everyone (Especially selling ZR-1 Parts) but I can imagine there are probably a number of states that don't hit that 200 transaction threshold?

[A26B]

Originally Posted by BlackSheepz

I thought there was an exception in this law for if you had less than 200 transactions in a state, or did less than $100k in annual Sales you didn't have to collect the taxes as discussed?

Obviously, I hope the best for everyone (Especially selling ZR-1 Parts) but I can imagine there are probably a number of states that don't hit that 200 transaction threshold?

Bear in mind that the subject Supreme Court ruling is not legislated law. It is only an appellate (highest) court ruling that overturned lower court rulings on a specific civil suit. It established Supreme Court "case law" which lays the groundwork for others to follow, IF they choose.

Each state makes its own sales tax laws. Consequently the laws vary from state to state. As such, the 200 transaction/less than $100,000 annual sales may only apply to one specific state. For instance, Oklahoma has a "casual" sales tax law that applies to garage sales & such, maybe 3 or 4 times/year, but the seller still has to charge/collect/pay state sales tax to the state, plus county & city if applicable. All other businesses must obtain an Oklahoma sales tax permit & submit monthly sales tax reports on sales to Oklahoma customers only.

For Oklahoma, if you buy personal items via internet from another state, an individual is required to pay 4.5% "use tax" on those purchases. If you buy business items via internet from another state (say Ohio), the Oklahoma business has to obtain a sales tax permit, & send it to the Ohio internet seller to avoid paying any sales tax to Ohio, if the Ohio internet seller even collects sales tax on out of state sales.

The whole concept of collecting sales tax on internet sales becomes an inconsistent, jumbled up mess, trying to comply with 50 different state sales tax laws. As mentioned earlier

This already happens today. Amazon, Walmart, Target, etc all collect sales tax for any state where they have a physical presence.

, This is feasible. However, I don't sympathize with companies, big or small, that don't do internet sales. Businesses must be dynamic and change with the times to survive. Maybe they need to, "to level the playing field" so to speak instead of wanting small internet businesses to have to pay more. Look back 50 years & watch the big box stores wipe out the little mom & pop businesses who could no longer compete. Change is here and more change is comin', you can count on that.

[spork2367]

Originally Posted by A26B

No panic..... Calculating the tax is no big deal. Accounting & Remitting tax to 50 different states is.

It's not sales tax that hinders equal competition with internet sales, its the cost of a brick & mortar storefront.

Having been self employed for the major portion of my 45+ year career, I have a pretty good handle on business.

This. It will be a full time job for a "medium to large" small business to record and remit taxes. And it will be enough of a hassle for "small" small businesses to make them just close up.

Originally Posted by Ronstar

would be easier to make seller collect and pay tax to their own state just like any other business. No matter where a person who walks into my business lives I charge him Michigan sales tax. If one buys something over the internet where does the sale “take place”? My opinion it takes place in the sellers home state.
I am not a fan of the government or taxes but seems unfair if I have to pay sales tax on a hammer I buy at the local hardware but one doesn’t if they buy online.

You're likely violating the law (at least prior to this ruling) by charging sales tax on non taxable out of state sales. Unless you're just marking up items in general by a certain percentage and never referring to the markup as "tax."

Originally Posted by DRM500RUBYZR-1

Charging, collecting, accounting for, and paying federal, state and local taxes, wherever applicable, are simply part of doing business, regardless of size or location.
While admittedly a burden, I prefer a level playing field where we all get blessed or beaten the same as each other, regardless of size or domicile.
A sale is a sale.
Matters not if it is over the counter or over the internet.
In each case something was purchased, and value exchanged, therefore a taxable event.


Marty

That is a historically inaccurate short cited view of an incredibly complex matter.

If I live in a state that doesn't charge sales tax, then that isn't part of doing business. Taxes vary wildly by state, and it absolutely is a violation of a states sovereignty for the federal government to tell them how or when to collect taxes.

Unless every state were identical, there is no such thing as a level playing field for this and there never will be.

Originally Posted by efnfast

Marty, when you sell a car to a person from ?, do you figure out what their home state tax is, collect it, report it and pay it to that State?

Originally Posted by DRM500RUBYZR-1

New Jersey does not require an automobile dealer to collect and pay tax for any jurisdiction other than the state that the sale takes place in.
Tax collection on the sale of an automobile goes hand in hand with the titling and registration process.
We have title companies that would be happy to perform this service for us, for a fee of course, but we are not, required to collect the tax due from the purchaser.
We must issue a 20 day "non-resident" tag that upon it's expiration requires the purchaser to title and pay the tax to the titling state. If the purchaser fails to do so, then, once discovered, must pay the tax and any penalties due, to the state where the vehicle is titled.
States want to make certain that they get what is due them on the purchase, and the best way for that to be enforced is by making it part of the titling process by their own hand.
It would make little to no difference to me to collect and forward it to the titling company, as it would actually save me a step. We spend quite a bit of time at motor vehicle, just dropping off and picking up.
I would have no objection to outsourcing that entire activity to a general agency that would handle all states.
I am currently required to complete and file a detailed affidavit completed by the out of state purchaser, sending same to New Jersey with a copy of the sales agreement.
Marty

So to shorten that whole thing....no. You really don't deal with that at all.

Originally Posted by EvanZR1

This already happens today. Amazon, Walmart, Target, etc all collect sales tax for any state where they have a physical presence. In effect, we've been penalising large corporations and small businesses that don't do Internet sales.

No, we haven't been penalizing large corporations, we have been rewarding small businesses by giving them a break. Which is how it should be. Large corporations get all sorts of tax breaks that small companies don't, so why shouldn't a small company get the advantage in an area? If anything, the law before this ruling leveled the playing field. And it's not like the small business is getting out of paying taxes, they are just getting out of huge administrative overhead.

The reality is, large corporations were cheating the system by having warehouses in a state, but transacting the sale from another state to skirt sales tax.

[DRM500RUBYZR-1]

Originally Posted by spork2367

This. It will be a full time job for a "medium to large" small business to record and remit taxes. And it will be enough of a hassle for "small" small businesses to make them just close up.



You're likely violating the law (at least prior to this ruling) by charging sales tax on non taxable out of state sales. Unless you're just marking up items in general by a certain percentage and never referring to the markup as "tax."



That is a historically inaccurate short cited view of an incredibly complex matter.

If I live in a state that doesn't charge sales tax, then that isn't part of doing business. Taxes vary wildly by state, and it absolutely is a violation of a states sovereignty for the federal government to tell them how or when to collect taxes.

Unless every state were identical, there is no such thing as a level playing field for this and there never will be.





So to shorten that whole thing....no. You really don't deal with that at all.




No, we haven't been penalizing large corporations, we have been rewarding small businesses by giving them a break. Which is how it should be. Large corporations get all sorts of tax breaks that small companies don't, so why shouldn't a small company get the advantage in an area? If anything, the law before this ruling leveled the playing field. And it's not like the small business is getting out of paying taxes, they are just getting out of huge administrative overhead.

The reality is, large corporations were cheating the system by having warehouses in a state, but transacting the sale from another state to skirt sales tax.

By the way, you likely meant short -sighted.


Fifty years ago; Is that long enough for you?
Fifty years ago, the majority of your purchases were made very close to your home.
You paid sales tax on those purchases to your state.
States then used those collections to provide the infrastructure and services that we require.


Along comes the internet.
Out of state sales begin to siphon off that needed tax revenue.
Forget big or small, the size of the company does not matter.
Internet sales surely began to dry up the revenue that states truly needed to provide you and I with essential services that we demand.

Most states were slow to react to this phenomenon.
States began experiencing significant revenue shortfalls.
Pick your poison.
How do you restore the needed revenue?
An out of state merchant should not aid and abet the non payment of tax that ordinarily would have, in days gone by, been paid upon the purchase.



Further, as to the "I don't deal with it at all", yes, because as I stated, no state requires payment of sales tax on a vehicle upon the sale, it occurs upon titling.
If I had to collect it, as stated, I would simply utilize the services of a third party and pay their cost, like I do with all of my other Federal, state, and local regulations and payments.


The level playing field that I spoke of had to do with if one merchant is required to collect and pay tax, then all should have to do the same. No one gets a free pass.


New Jersey, and many other states, have insufficient revenues to just pay their routine expenses, surely the missing tax revenue is a contributing factor.



You feel free to wrestle with your state's rights versus the federal government, I have no dog in that hunt.



People want infrastructure and services, but then wish to pick and choose how to pay for them. You seem to think it fair to make "big" corporations pay, and give breaks to small guys. I am a small guy, but that sure does not seem fair to me.
My 401k is filled with stocks of big corporations, as is yours most likely, so you pay one way or the other. The corporation pays tax on their profit, and the stockholder is then taxed on the dividend. That's fair?
You want that we should pay more?
Capitalism is a wonderful thing. It rewards those that can profit from taking a risk. Big, small, no difference, except the size of the risk.
Every company, regardless of size, should be treated the same way.

[spork2367]

Originally Posted by DRM500RUBYZR-1

By the way, you likely meant short -sighted.

I'm at the mercy of autocorrect on my phone.

Fifty years ago; Is that long enough for you?
Fifty years ago, the majority of your purchases were made very close to your home.
You paid sales tax on those purchases to your state.
States then used those collections to provide the infrastructure and services that we require.

105 years ago we didn't have income tax. Yet we had roads, bridges, infrastructure...

Fifty years ago people bought a fraction of the crap they buy now. They mostly bought necessities. This money just supports bloated government.

Along comes the internet.
Out of state sales begin to siphon off that needed tax revenue.
Forget big or small, the size of the company does not matter.
Internet sales surely began to dry up the revenue that states truly needed to provide you and I with essential services that we demand.

Big vs. small does matter. If I'm a big business I get huge tax breaks to put my business in your state. A little business gets virtually no tax breaks. So the big business can bear the burden of significant administrative overhead because they are already getting out of millions in taxes. The small business can't. And the states who are complaining the most about this are the states driving business out with their liberal agendas and horrible spending habits.

Most states were slow to react to this phenomenon.
States began experiencing significant revenue shortfalls.
Pick your poison.
How do you restore the needed revenue?
An out of state merchant should not aid and abet the non payment of tax that ordinarily would have, in days gone by, been paid upon the purchase.

The major expenses a family has are still almost all paying taxes to the state. Cars, houses, food, gas, alcohol, cigarettes...etc. The additional revenue from internet sales may be large, but it still isn't even remotely the bread and butter that keeps a state budget running.

You phrase it like it was a way to skirt the law. It was just how the laws were written. Now who is going to enforce the law when it is rewritten? Are the feds going to enforce state law? One state can't enforce it's laws in another...

Further, as to the "I don't deal with it at all", yes, because as I stated, no state requires payment of sales tax on a vehicle upon the sale, it occurs upon titling.
If I had to collect it, as stated, I would simply utilize the services of a third party and pay their cost, like I do with all of my other Federal, state, and local regulations and payments.

I think what was being pointed out was that it's easy for you to be cavalier about the whole issue because it won't affect your business.

The level playing field that I spoke of had to do with if one merchant is required to collect and pay tax, then all should have to do the same. No one gets a free pass.

But why, as a resident of PA should I have the burden of collecting New Jersey's sales tax? Why shouldn't it be like automobiles, where they purchaser, who resides in New Jersey should pay and remit the taxes? As it is in many states now. It's sounds like you're a bit hypocritical about things.

New Jersey, and many other states, have insufficient revenues to just pay their routine expenses, surely the missing tax revenue is a contributing factor.

That's from people working in New Jersey and living in PA or other states. Because New Jersey is a crap hole. That's not an internet sales problem.

You feel free to wrestle with your state's rights versus the federal government, I have no dog in that hunt.

Yes, you do. Everyone does.

People want infrastructure and services, but then wish to pick and choose how to pay for them. You seem to think it fair to make "big" corporations pay, and give breaks to small guys. I am a small guy, but that sure does not seem fair to me.
My 401k is filled with stocks of big corporations, as is yours most likely, so you pay one way or the other. The corporation pays tax on their profit, and the stockholder is then taxed on the dividend. That's fair?
You want that we should pay more?
Capitalism is a wonderful thing. It rewards those that can profit from taking a risk. Big, small, no difference, except the size of the risk.
Every company, regardless of size, should be treated the same way.


So you're going to take away tax breaks for large corporations? Some move into a state and pay virtually no state or local taxes for years.


The stockholder isn't taxed on the dividend until he/she receives it. So if that dividend is held in a retirement account, it can collect interest and be reinvested and you don't pay taxes until it's withdrawn. It's fair because they are two separate revenue streams one is the company's and one is yours.


And I guess you should be collecting sales tax on cars and remitting that to the states yourself...hopefully that law changes as well. Although don't be upset when all the car dealerships in a state with a lower tax rate put yours out of business.

Just my .02.