# Internet Sales Tax



## Monty (Apr 26, 2013)

Received an email this morning from EBay concerning the proposed legislation for an internet sales tax. If you are against this, please take a minute and look at this page and let your elected officials know. 
If you think that this will not affect you, than OK. But if you have a web site selling your pens, that it will because you will need to collect sales tax on all sales in the US.


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## lyonsacc (Apr 26, 2013)

You would only have to do this if your sales are over $1 million. So probably not much of a problem for pen sellers (especially me!).

Wouldn't mind seeing the limit raised to 2 or 3 million.  Hopefully they will index the amount for inflation as well.  The states would be required (at this point - since the legislation can always get changed) to have electronic payment systems to make the process easier.


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## sbell111 (Apr 26, 2013)

lyonsacc said:


> You would only have to do this if your sales are over $1 million.  So probably not much of a problem for pen sellers.



Of course, many of our vendors will have to collect sales tax on our purchases, so it will quickly become our problem.


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## sbell111 (Apr 26, 2013)

Monty said:


> Received an email this morning from EBay concerning the proposed legislation for an internet sales tax. If you are against this, please take a minute and look at this page and let your elected officials know.
> If you think that this will not affect you, than OK. But if you have a web site selling your pens, that it will because you will need to collect sales tax on all sales in the US.


Your link has too many 'http's, so it doesn't work.

Here is the correct link:  linkerooski


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## lyonsacc (Apr 26, 2013)

Of course, many of our vendors will have to collect sales tax on our purchases, so it will quickly become our problem.[/quote]

If you are purchasing your kits/blanks to resell, then you should be able to get an exemption certificate and not be charged sales tax by the vendor (assuming the vendor will be able/willing to handle it). 

If you are purchasing kits/blanks for personal use or gifts then you should likely already be paying a sales or "use" tax to your state - although very few people do this.


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## panamag8or (Apr 26, 2013)

I doubt anyone here is selling a million dollars worth of pens per year.


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## RichB (Apr 26, 2013)

Next will be, if you buy something in another state, like you buy on the internet, they will be at the border collecting taxes on anything you bought on your trip.  This is totally wrong.  I feel if you buy something in another state on the internet they should charge you their state tax just if you went on a trip.  You pay there state tax when you buy something.  Am I missing something??


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## alphageek (Apr 26, 2013)

Just a reminder folks....  As a discussion on sales tax, this directly relates to pen making and/or sales.   

Beyond that, political discussion is not allowed - please refrain from political commentary.

Dean
Asst Mod


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## Smitty37 (Apr 26, 2013)

lyonsacc said:


> *You would only have to do this if your sales are over $1 million. So probably not much of a problem for pen sellers (especially me!).*
> 
> Wouldn't mind seeing the limit raised to 2 or 3 million.  Hopefully they will index the amount for inflation as well.  The states would be required (at this point - since the legislation can always get changed) to have electronic payment systems to make the process easier.


 I can see this as causing a *lot* of heartburn to small internet businesses and being a administrative nightmare to a lot of us.  It will really cause problems for businesses who 'border' on the edge of $1,000,000 sales. 

It is particularily bad for those of us who live in one of the 'no sales tax' states like Delaware.  We would have force on us - collecting sales tax for other states but not the state our business is in. 

Amazon favors it because they've found a way to make money off it.  They charge a fee for collecting the tax for businesses who sell through Amazon.  

Ebay will no doubt start doing something similar to people who sell on eBay. There is no doubt in my mind that most of the US people are opposed to this - their costs will go up.  

Those who favor this (as near as I can tell that would only be politicians wanting to get more of your money) are trying to sell it as a way to help "level the playing field" for *small* box stores but I have not been able to figure out how they will benefit at all - it isn't going to increase traffic to them a bit.  Small box stores are not losing business to the internet - many of them already have internet sales themselves or sell products not condusive to internet sales.


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## lyonsacc (Apr 26, 2013)

RichB said:


> Next will be, if you buy something in another state, like you buy on the internet, they will be at the border collecting taxes on anything you bought on your trip. This is totally wrong. I feel if you buy something in another state on the internet they should charge you their state tax just if you went on a trip. You pay there state tax when you buy something. Am I missing something??


 
Rich - I'll take a stab at answering this.  I believe states cannot create laws that would tax activity in other states.  

Most current sales/use tax laws can only tax activity within the state.  Thus, internet sales to nonresidents are not taxed because the location of the sale takes place outside of the state.  

Technically if you go on a trip and buy something in another state (and pay sales tax of 1% on that purchase) and then return to your state (which has a 5% sales tax) you are supposed to pay your state a "use" tax of 4% (the difference between what you paid and what your state charges).  Keep in mind this almost never gets paid.

Depending on the state this additional "use" tax is paid either with your income tax or as a separate form.

Yes - it isn't the most sensible thing.  

State's generally aren't interested in auditing people for this because the cost would usually far outweigh the benefit.


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## jj9ball (Apr 26, 2013)

I don't know about you guys but I buy most of my equipment online just for that reason.  If the boss ever lets me get a better table saw the extra tax could be in the neighborhood of $200 extra (assuming I actully get to spend $3000).  It may never affect pen sales for most of us, but for the equipment side of things it certainly does suck.


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## lyonsacc (Apr 26, 2013)

Smitty37 said:


> lyonsacc said:
> 
> 
> > *You would only have to do this if your sales are over $1 million. So probably not much of a problem for pen sellers (especially me!).*
> ...


 

I agree Smitty - The cost of dealing with collecting the sales tax can burdensome.  We have a handful of clients that collect sales tax for multiple states.  It can sometimes cost them more in our fees to prepare the sales tax returns (and keep them compliant) than they end up owing that state.

I think a cap of at least $2 or $3 million (indexed for inflation) would be an big improvement.


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## Smitty37 (Apr 26, 2013)

RichB said:


> Next will be, if you buy something in another state, like you buy on the internet, they will be at the border collecting taxes on anything you bought on your trip.  This is totally wrong.  I feel if you buy something in another state on the internet they should charge you their state tax just if you went on a trip.  You pay there state tax when you buy something.  Am I missing something??


 If you go to another state and buy something and have it shipped or delivered in your state - the store making the sale does not have to collect sales tax in most cases.  You are usually responsible to pay the 'use' tax in your state.  On some major items such as cars, boats, mobile homes and RVs almost all states have things set up so they will collect the tax when you register the title.

On the border between PA and NY it was not uncommon for people to buy most appliances and furniture in the state they didn't live in and have it delivered.  The stores were not required to collect their states tax on items delivered to out of state addresses.

Many people don't realize that catalog sales don't have to collect sales tax on sales out of state either.


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## Russianwolf (Apr 26, 2013)

I decided when I started my business that the state would get tax on every sale. Just as if I set up shop downtown and sold things out of a store front.

I put the pricing on my website with the little click button and when they pressed it it was added to their cart at a reduced price and tax was added to get it back up to the advertised price. $106 click button = $100 in cart price + $6 tax.

Never had a complaint.

State got their 6% and I slept fine at night.

State pays for the roadwork, police, water supply, etc. It isn't free. I do my part.


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## PaulDoug (Apr 26, 2013)

My concern, this is only opening the door.  You know government, once they get started with this it will spread, the threshold will be lowered and lowered and more control well be added.

Washington state has sales tax, Oregon does not.  When Oregon people come to Washington they are exempt from paying Washington sales tax.  They just have to show they are Oregon residents at the cash register.  Fact a lot of clerks ask if you are an Oregon resident when they start to ring you up.  It always kind of bothered me that Oregon residents could come to our state, use our facilities, roads, parks, etc., and not have to help pay for them, but hey, what do I know.


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## Smitty37 (Apr 26, 2013)

Russianwolf said:


> I decided when I started my business that the state would get tax on every sale. Just as if I set up shop downtown and sold things out of a store front.
> 
> I put the pricing on my website with the little click button and when they pressed it it was added to their cart at a reduced price and tax was added to get it back up to the advertised price. $106 click button = $100 in cart price + $6 tax.
> 
> ...


Couldn't charging your state sales tax to out of state buyers on the internet under existing law be unlawful itself?


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## Smitty37 (Apr 26, 2013)

PaulDoug said:


> My concern, this is only opening the door.  You know government, once they get started with this it will spread, the threshold will be lowered and lowered and more control well be added.
> 
> Washington state has sales tax, Oregon does not.  When Oregon people come to Washington they are exempt from paying Washington sales tax.  They just have to show they are Oregon residents at the cash register.  Fact a lot of clerks ask if you are an Oregon resident when they start to ring you up.  *It always kind of bothered me that Oregon residents could come to our state, use our facilities, roads, parks, etc., and not have to help pay for them,* but hey, what do I know.


Why should that bother you - since they have no sales tax you have that same benefit when you go there. 

btw they don't charge Oregon residents the sales tax to eliminate a disadvantage to retailers near the borders where Washington residents can cross the border and buy without paying sales tax.  Every year when it is time for folks to be buying school clothes NY State has a "sales tax holiday" in counties that are bordering PA because PA has no sales tax on clothes and NY stores were losing tons of sales at that time of year.


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## Carl Fisher (Apr 26, 2013)

I was pretty certain that I read this will only effect business who do more than $1M in sales per year.  I haven't read any deeper but the articles I saw was that they were not trying to burden small business like ours.


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## Russianwolf (Apr 26, 2013)

Smitty37 said:


> Russianwolf said:
> 
> 
> > I decided when I started my business that the state would get tax on every sale. Just as if I set up shop downtown and sold things out of a store front.
> ...



I'm confident there is no such law. The bill being proposed gives power to the states to collect taxes from out of state. There currently is no federal law on state sales taxes. And No state would make a law saying they wouldn't collect sales tax on online sales if they collect them from brick and mortar.


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## Carl Fisher (Apr 26, 2013)

The pain in the rear is the states have different rules for when and how to pay your taxes.  I'm on the border of NC and SC.  In SC I have to pay my taxes by the 20th of the following month while NC requires a sales and use tax that is submitted once a quarter.  It's hard enough to track who I pay, how much, and when for just the 2 states.  Plus having to maintain our business registration and tax numbers for both states.

And we have to file a $0 return even if we don't sell anything or else we get a nasty note from the state.


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## BSea (Apr 26, 2013)

Russianwolf said:


> Smitty37 said:
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> > Russianwolf said:
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I doubt it would be illegal under the current system.   What state is going to object to getting more tax than they are due?  But under the new law (assuming $1,000,000 in sales), you'd have to report tax to each state where you had a sale.  So your 6% option won't work for the new law.  

My only problem with the new law, is that down the road, the $1,000,000 will probably change to $100,000, then $10,000 until there is no limit.  Then it affects all of us.  Both buyer, and seller.


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## Russianwolf (Apr 26, 2013)

BSea said:


> Russianwolf said:
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> > Smitty37 said:
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 I would imagine that if it becomes that prevalent that the shopping cart people will integrate it into their systems and you will be able to print the forms as you need them. Each month, press a button and your forms print. You attach a check and mail. Could be as simple as that.


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## Smitty37 (Apr 26, 2013)

Russianwolf said:


> Smitty37 said:
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> > Russianwolf said:
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I'm not certain but I think I've read that there is a federal law on the books prohibiting states from collecting their state sales tax on out of state internet sales.  Technically, the person buying on the internet owes a "use" tax to their state for internet purchases (albeit that most folks don't pay it) and if they are following the law they are getting taxed twice

I do know that when I made purchases in PA and carried them with me I paid the tax, if I had them delivered to my home in NY I did not pay the tax *unless* the store where I bought them also had a store in NY in which case they collected the NY tax.

I'll do a little more checking on that to be certain, you could be right.


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## avbill (Apr 26, 2013)

beside the sales tax people  there is a small paragraph adding a national sales tax !


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## Russianwolf (Apr 26, 2013)

avbill said:


> beside the sales tax people  there is a small paragraph adding a national sales tax !



Proof?

And I mean a link to the bill that says that.


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## Smitty37 (Apr 26, 2013)

BSea said:


> Russianwolf said:
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> 
> > Smitty37 said:
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 I think it would be a nightmare....for instance NY State allows counties and cdrtain cities to have a sales tax as well as the state...so you would have to know the county or city where the delivery was going to collect the proper tax.  Most states I've been involved with it's not a simple matter of paying on gross sales because different states exempt different items...most clothing, for instance, is exempt in PA but not NY or NJ.  Most but not all food items are exempt when bought at the grocery store and some items exempt in one state are not exempt in another.  So we would not only have to know what the tax is for every jurisdiction but also what items are exempt.

Two of the five states which don't have a state sales tax allow localities and counties to have them.   Many small internet businesses will be forced to either get smaller (what a great thing that would be) or close their doors.

Also impacted, and overlooked in the discussions I've seen are the many small box stores who also sell on the internet...there goes their access to out of state buyers (who buy to avoid in state sales tax) who augment their local sales.

This is not a trivial thing they are talking about doing.


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## lyonsacc (Apr 26, 2013)

Not sure how they will resolve the issue that each state, for the most part, has different rules as to what is subject to sales tax.  Will be interesting to watch (Give me some slack, I'm an accountant so these things can get interesting).

Not related to pen turning, but in some states black coffee is not sales taxed but coffee with sugar is taxed (the logic being that is that drinks with sugar added are more for pleasure and not needed for nutritional intake and drinks without sugar are in the usual nutritional diet).  Sorry - but I don't remember what state that is in.

Is your morning coffee taxed?  I'm a tea drinker . . .


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## Russianwolf (Apr 26, 2013)

Here's the proposed bill. http://www.gpo.gov/fdsys/pkg/BILLS-113s743pcs/pdf/BILLS-113s743pcs.pdf

One thing I find interesting and may be calming to others. To participate the states have to simplify their sale/use tax code. 

There will be one jurisdiction in the state and local codes don't apply. So no City or County add on tax as was mentioned earlier.

Also they must give you:



> (ii) software free of charge for remote sellers that calculates sales and use taxes due on each transaction at the time the transaction is completed, that files sales and use tax returns, and that is updated to reflect rate changes as described in sub-paragraph (H)



The bill is only 5 pages, so have a read through. And No, there is no provision for a Federal Sales Tax mentioned as far ass I can see.


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## ed4copies (Apr 26, 2013)

Interesting reading.

Wonder who these "software providers" will be and what will be their motivation to provide you "complying software at no charge".

I see no provision for "exempt" transactions (like for resale).


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## Smitty37 (Apr 26, 2013)

Russianwolf said:


> Here's the proposed bill. http://www.gpo.gov/fdsys/pkg/BILLS-113s743pcs/pdf/BILLS-113s743pcs.pdf
> 
> One thing I find interesting and may be calming to others. To participate the states have to simplify their sale/use tax code.
> 
> ...


Without seeing the bill as proposed (it is subject to change as neither house has passed it yet) I'd agree that it won't add a federal sales tax - that would be doa in the house of representatives right now.

I've read that it also omits compensation for non resident businesses acting as the states tax collector as it now stands.  Free software doesn't pay for the businesses time, effort and accounting expense to comply.


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## Chasper (Apr 26, 2013)

We collect and remit sales tax in 14 states where we attend shows.  Visiting a state for the purpose of selling merchandise which is delivered at the point of sale, has been long established as pseudo nexus, i.e., sales tax must be collected and remitted.  However, it does not amount to true nexus and therefore is not subject to state income or property tax on the earnings or inventory.

Selling online through our own web site adds a significant complication.  Since we have a presence in the state by virtue of attending a show in that state, then we are required to collect and remit sales tax on internet sales, no matter how small the amount.  For that reason we don't solicit online sales direct, but we do ship the orders and pay the tax when they occur. 

Pain in the A$$?  Yes, absolutely.  
Fair?  Yes, also absolutely.

If you are going to do business in any state, then you should be required to play by the rules of that state, without an unfair advantage over local merchants.  I spent most of the last 45 years working for catalogs and online businesses, we always legally avoided state and local sales taxes in many states.  It has been a sweet deal, but that doesn't make it right.  I support sales tax on internet sales and any other type of direct sales that occur across state borders.


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## Smitty37 (Apr 26, 2013)

ed4copies said:


> Interesting reading.
> 
> Wonder who these "software providers" will be and what will be their motivation to provide you "complying software at no charge".
> 
> I see no provision for "exempt" transactions (like for resale).



I think the complying providers refers to shopping carts and their software is generally not free.  

Probably you would have to be able to recognize the exemption numbers issued by the states for the 'resale' or exempted use provisions.  Which also differ in each state.  

It will be a nightmare if enacted....and as someone else pointed out many people will have to spend more to file the returns than they collect for the state.   The 1,000,000 (or whatever they settle on) should have a 2nd tier of maybe 100,000 or 200,000 within a state to apply.


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## Kretzky (Apr 26, 2013)

Already happens here in Canada.
Up to about 4 years ago in BC & Ontario we had two taxes Federal (GST-5%) & Provincial (PST-7%) that rate varied from Prov. to Province, when I bought something online from from (say) Ontario & had it shipped to BC. I only had to pay the Federal (GST) part of Tax. (item being shipped out of Province) I also only paid Fed GST on the shipping.
Soon after the last Provincial election the BC & Ontario Provincial gov'ts decided to combine these two taxes & call it Harmonised sales Tax (HST-12%) a "value added tax".
BC residents protested; a referendum was held & HST was finally repealed & replaced with the old GST/PST (5%/ 7%) taxes again. In Ontario however they stayed with HST.
But, if I now buy from an Ontario supplier I still get charged their HST, (ie Federal & Provincial Taxes which are 5% & 8%) I'm also charged their HST on the postage/ shipping/ handling fees.


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## PR_Princess (Apr 26, 2013)

If memory servers, a similar US internet sales tax law last year was attempted last year - but it failed because the threshold for exemption was half a million in sales. This year it was raised one million on the bill. (I believe the IRS defines a small business cap at like $20 million...but I could be wrong!) Thus I would not expect that this sales tax exemption threshold to stay in place for long. Should this pass (which it looks like it will do) be prepared no matter what amount you sell on line.

  Currently, there are something like over 9,600 separate tax reporting locations (state, local, city etc) that the tax software would have to accommodate and keep current on. That means filing reports to 40 states involving these (and writing checks as it applies) every month - whether you had a sale in those states or not. I expect that this  number will also grow as time goes on.

This new tax software will need to be integrated (seamlessly?) into whatever of the dozens of different types shopping carts you may use. And, I do not expect that software firms will keeping doing this free forever. An additional fee of $1.50 per transaction is being bandied about now. This would be in addition to the higher cost of CC fees that most small internet sellers already pay over B&M stores. For the small independent mom and pop on line store, these costs will have to be reflected somewhere (BTW - not so much for Amazon). And that means higher costs to you.

As an additional aside, I have read a couple of retailer blog/discussions groups on this topic recently. Many firms are posting that would be currently over the $1 million threshold (this does NOT include Exotics BTW!!). Many are stating that they will either cut their business or close their locations in the US ( ie firing their US employees), and moving their business off shore. Their primary concern seems to be not with the tax per se, but with headache implementing it and with the cross boarder power it gives 40+ states. (Make no mistake, as a seller if there is a mistake YOU are responsible.) 

Paraphrasing one on line retailer of luxury watches.."I have no desire to deal with 40 state auditors at my door one day should the add on tax software have a glitch." He stated he plans to let all of his US employees go and move his multi million dollar on line business from Miami to the Cayman Islands.


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## Scruffy (Apr 26, 2013)

*People who line in a state..*

at least have the opportunity to vote for/against those wanting to have a sales tax.  Those who do not live in that state have no such opportunities.  If you want to buy something from a state where tax will be charged and do not like the total price, I guess the best thing to do is not buy it.  

Look some where else where the price is acceptable.


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## alphageek (Apr 26, 2013)

Scruffy said:


> at least have the opportunity to vote for/against those wanting to have a sales tax.  Those who do not live in that state have no such opportunities.  If you want to buy something from a state where tax will be charged and do not like the total price, I guess the best thing to do is not buy it.
> 
> Look some where else where the price is acceptable.



I think you are reading it wrong.   The idea is that tax will be collected and turned in if you make a purchase over the internet based on the tax rate that the purchase is delivered to.   Ie you will pay the same amount of tax on a internet order as the amount of state tax you would pay if you bought it locally.

In short, this extends the existing laws to internet retailers that don't have a presence in a state.  Any that already have a presence in the state have to collect this even if ordered via the internet today.


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## ed4copies (Apr 26, 2013)

Just as a "point of information":  This bill would NOT apply to Exotics---we are too small.  So, it would provide us with a competitive advantage over Penn State, CSUSA, Berea and, probably Arizona Silhouette, and even Ernie.

In spite of all that, we still oppose making it more difficult for "small" businesses to operate.  And I certainly see logical reasons for those affected to flee the USA.  

Just amazing how they can legislate, completely ignoring the "unintended consequences"!!


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## Smitty37 (Apr 26, 2013)

PR_Princess said:


> If memory servers, a similar US internet sales tax law last year was attempted last year - but it failed because the threshold for exemption was half a million in sales. This year it was raised one million on the bill (I believe the IRS defines a small business cap at like $20 million...but I could be wrong!). Thus I would not expect that any sales tax exemption threshold to stay for long. So should this pass (which it looks like it will do) be prepared no matter what amount you sell on line.
> 
> Currently, there are something like over 9,600 separate tax reporting locations (state, local, city etc) that the tax software would have to accommodate and keep current on. That means filing reports to 40 states involving these (and writing checks as it applies) every month - whether you had in those sale in those states or not. I also expect that this  number will also grow as time goes on.
> 
> ...


I would also note that it is not difficult today to have a business located in the Cayman Islands without you being there.  It will also be completely possible to have the business in the Caymans and do the shipping from the USA.  Hence the sale is completed off shore, but the shipping is from a "warehouse" located in say Delaware.  Goods are ordered from suppliers by someone in the Caymans and delivered to their warehouse(which they do not own or lease) and shipped to their customers from there.  UPS and others already offer this service your stock can be held in their warehouse and they will pack and ship all of your orders....You wouldn't have to collect the tax because you're a foreign corporation with no business place in the USA and UPS would not have to collect the tax because the point of sale is where the money is collected and they didn't collect the money.


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## Smitty37 (Apr 26, 2013)

Chasper said:


> We collect and remit sales tax in 14 states where we attend shows.  Visiting a state for the purpose of selling merchandise which is delivered at the point of sale, has been long established as pseudo nexus, i.e., sales tax must be collected and remitted.  However, it does not amount to true nexus and therefore is not subject to state income or property tax on the earnings or inventory.
> 
> Selling online through our own web site adds a significant complication.  Since we have a presence in the state by virtue of attending a show in that state, then we are required to collect and remit sales tax on internet sales, no matter how small the amount.  For that reason we don't solicit online sales direct, but we do ship the orders and pay the tax when they occur.
> 
> ...


This is different from internet sales...your point of sale is in that state and if they collect sales taxes from local sellers sales at those shows it is fair that they collect them from your sales also.  

With Internet sales the point of sale is in your home state. Sellers in the other states delivering to your state don't have to collect tax on their sales to residents of your state so the current system is fair.

What we are talking about is making me responsible for collecting taxes in the state of Hawaii, 5000 or so miles away and where I've never been in my life.  I think Hawaii should find a better way to make their citizens obey their tax laws.


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## ed4copies (Apr 26, 2013)

I would expect more creativity from you, Smitty!!

COLLECT the tax for Hawaii!!  Over a year or so, that might amount to $20-$50!!!!

THEN, schedule a trip TO Hawaii.   Make sure to list the PURPOSE of your trip to deliver the money you owe them!!

Now, your $5000 trip should be TAX DEDUCTIBLE business expense!!  You save at least a grand in income tax!!


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## Chasper (Apr 26, 2013)

Smitty37 said:


> Chasper said:
> 
> 
> > Visiting a state for the purpose of selling merchandise which is delivered at the point of sale, has been long established as pseudo nexus, i.e., sales tax must be collected and remitted.
> ...



The point was that we established a presence in 14 states by virtue of attending an art fair in those states.  Because of this presence we are already required to remit sales tax on all sales to these state, including internet sales, and our sales are nowhere near $1,000,000.  It is a inconvenience to comply, but it is the law and we do comply.  

Much of what has been said about remitting sales tax to all states is exaggerated.  I know, we already remit in 14 states.  There are several options for software systems that automate the process.  I sell one of them.


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## Smitty37 (Apr 26, 2013)

ed4copies said:


> I would expect more creativity from you, Smitty!!
> 
> COLLECT the tax for Hawaii!!  Over a year or so, that might amount to $20-$50!!!!
> 
> ...


Ed, that sounds very tempting.....


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## Russianwolf (Apr 26, 2013)

PR_Princess said:


> Currently, there are something like over 9,600 separate tax reporting locations (state, local, city etc) that the tax software would have to accommodate and keep current on. That means filing reports to 40 states involving these (and writing checks as it applies) every month - whether you had a sale in those states or not. I expect that this  number will also grow as time goes on.



The legislation as proposed actually solves this by saying to participate, the state must establish a single sales/use tax department. local and city taxes would not apply.

So if all states go in, there would be a maximum of 50 checks to write if your business was selling to all 50 states.

And if your states decides not to opt in, then the current rules apply.


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## Smitty37 (Apr 26, 2013)

Chasper said:


> Smitty37 said:
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 No doubt to cover your costs of collecting sales tax for 14 states:biggrin:

My point is that I have no business presence in the state where you live - your state provides me with no services so why should I be asked to collect tax that *you owe* to your state if you purchase something from me, and without compensation for doing it at that..


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## sbell111 (Apr 26, 2013)

Russianwolf said:


> I decided when I started my business that the state would get tax on every sale. Just as if I set up shop downtown and sold things out of a store front.
> 
> I put the pricing on my website with the little click button and when they pressed it it was added to their cart at a reduced price and tax was added to get it back up to the advertised price. $106 click button = $100 in cart price + $6 tax.
> 
> ...


If you sell something to me, you won't be required to collect WV sales tax.  You will be required to collect Tennessee sales tax.  Then you'll complete paperwork related to that tax and send it and a check to the Great State of Tennessee.  Then you'll do the same for every other state that you sell to.


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## sbell111 (Apr 26, 2013)

Carl Fisher said:


> The pain in the rear is the states have different rules for when and how to pay your taxes.  I'm on the border of NC and SC.  In SC I have to pay my taxes by the 20th of the following month while NC requires a sales and use tax that is submitted once a quarter.  It's hard enough to track who I pay, how much, and when for just the 2 states.  Plus having to maintain our business registration and tax numbers for both states.
> 
> And we have to file a $0 return even if we don't sell anything or else we get a nasty note from the state.


It should also be noted that sales tax isn't even the same within a single state.  Are we supposed to know that the sales tax in one county is 0.25% higher than other places in the state?

Edited to mention that this issue is reflected in the bill, as someone smartly pointed out.


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## sbell111 (Apr 26, 2013)

ed4copies said:


> Just amazing how they can legislate, completely ignoring the "unintended consequences"!!


Sadly, it seems that these are actually the *intended *consequences.  The are trying to 'balance the playing field', in other words, make it harder for online retailers.  That's what it would do, all right.


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## sbell111 (Apr 26, 2013)

ed4copies said:


> I would expect more creativity from you, Smitty!!
> 
> COLLECT the tax for Hawaii!!  Over a year or so, that might amount to $20-$50!!!!
> 
> ...



You can probably deduct that stamp that you used to get the taxes to South Carolina and New Jersey, also.


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## Chasper (Apr 26, 2013)

Smitty37 said:


> Chasper said:
> 
> 
> > Smitty37 said:
> ...



Your logic is almost exactly the same as that of the Supreme Court in the 1967 Bellas Hess case  
National Bellas Hess v. Illinois - Wikipedia, the free encyclopedia  The ruling was reaffirmed by Quill vs North Dakota in the early 1990s.  Since then there have been numerous attempts by states to circumvent the ruling.  States passed laws defining nexus as using state roads to deliver packages, using phone lines within a state to place orders, and a long list of other unsuccessful efforts.  A tax auditor from Tennessee once showed up at the door of the company I worked for in Missouri, he announced that he was there to audit our catalog sales and use tax collection in his state.  That was an interesting standoff.

Courts interpret laws, they do not make laws (lets not start an argument over that). Congress is free to cancel old laws and make new ones.  The basis for the ruling goes back to the Interstate Commerce Act of 1887.  It can be changed.

BTW, if you take that trip to Hawaii, don't take along any pen kits to deliver to anyone, don't even talk to a customer who might be influenced to buy kits from you in the future.  That would establish a presence and you would have to start collecting use tax in the state.


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## sbell111 (Apr 26, 2013)

Chasper said:


> Smitty37 said:
> 
> 
> > Chasper said:
> ...


I'm not sure if your logic is valid.

Let's imagine for a moment that I own a chain of brick and morter stores and sell online.  Most of my stores are in Tennessee, but I also have one in Kentucky.  Since I have that store in Kentucky, I collect sales tax for online sales to Kentucky.

My Kentucky store is underperforming, so I close it.  Now I have no physical locations in Kentucky.  Therefore, I no longer collect sales tax for online sales to Kentucky.

Similarly, you would only have a physical presence in other states while you are attending art fairs in that state.  The mere fact that you previously attended an art fair in a state doesn't mean that you will do a future one and certainly doesn't mean that you have a current physical presence in that state.


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## sbell111 (Apr 26, 2013)

So imagine that you are an online retailer with total sales of 750k.  You are not affected by this law.  However, you have a very strong 4th quarter next year which pushes your total sales to $1,000,000.01.  Does that mean that you have to go back and pay the sales tax for everyone that you sold to all year long?


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## ed4copies (Apr 26, 2013)

sbell111 said:


> So imagine that you are an online retailer with total sales of 750k.  You are not affected by this law.  However, you have a very strong 4th quarter next year which pushes your total sales to $1,000,000.01.  Does that mean that you have to go back and pay the sales tax for everyone that you sold to all year long?



As I read the proposed law, no.  But the following year you will be expected to pay.


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## Chasper (Apr 26, 2013)

sbell111 said:


> I'm not sure if your logic is valid.
> 
> Let's imagine for a moment that I own a chain of brick and morter stores and sell online.  Most of my stores are in Tennessee, but I also have one in Kentucky.  Since I have that store in Kentucky, I collect sales tax for online sales to Kentucky.
> 
> ...



It is not my logic, it is the way state enforcement works.  

If you closed the KY store you could de-register with the state and stop collecting.

It may not seem fair that one visit to a state for a few days to conduct business is the same as a year round presence, but exactly that has been well established in the courts.  You can be required to register and you remain registered until you deregister.  While you are registered you can be fined for not filing the required sales/use tax reporting forms, even if you have no sales during a reporting period.  DAMHIK


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## Smitty37 (Apr 26, 2013)

Russianwolf said:


> PR_Princess said:
> 
> 
> > Currently, there are something like over 9,600 separate tax reporting locations (state, local, city etc) that the tax software would have to accommodate and keep current on. That means filing reports to 40 states involving these (and writing checks as it applies) every month - whether you had a sale in those states or not. I expect that this  number will also grow as time goes on.
> ...


 You're right but I think only partly - I read that as saying only one authority can audit you and you only have to file with one authority in each state....however I didn't see anything in the bill that prohibits the states from requiring you to report sales taxes collected for the other jurisdictions.  i.e. you only have to file to NY State for taxes collected for NY City but nothing prevents NY State from requiring you to report how much you collected for the city....and perhaps the counties.  The states need that information to properly distribute the money collected from their residents.  Admittedly all states do not allow local sales taxes so for them there would be only the state to worry about.


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## sbell111 (Apr 26, 2013)

Chasper said:


> sbell111 said:
> 
> 
> > I'm not sure if your logic is valid.
> ...



In that case, I would 'deregister' (is that really a thing???) after my show in that state is over.


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## Chasper (Apr 26, 2013)

sbell111 said:


> In that case, I would 'deregister' (is that really a thing???) after my show in that state is over.


 
Dream on.  You can expect it take a year or so for the the de-registration to be processed and approved.  There is one state where we are required to file the tax forms monthly, we only do shows there twice a year.  If we fail to file a monthly report we receive a penalty (aka FINE).


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## sbell111 (Apr 26, 2013)

I'll take your word for it.  Still, if I don't have a physical presence in a state, I'm not collecting online tax there.  It doesn't matter if I once did a show there.  I have yet to be called on it.


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## Haynie (Apr 26, 2013)

Smitty37 said:


> Those who favor this (as near as I can tell that would only be politicians wanting to get more of your money) are trying to sell it as a way to help "level the playing field" for *small* box stores but I have not been able to figure out how they will benefit at all - it isn't going to increase traffic to them a bit.  Small box stores are not losing business to the internet - many of them already have internet sales themselves or sell products not condusive to internet sales.




I sell boat parts At least until my inventory runs out.  New OEM parts.  Several people have come in looked at the part.  Got the price and right in front of me checked the price on the net.  Several said, "will you charge me sales tax?"  I have said yes.  So they left to order it off the net.  Many will openly challenge my prices based on giant outlet prices.  I cannot compete with the giant outlets.  They are able to give lower prices AND no sales tax. At least this bill will make them charge sales tax. 

So, yes Smitty I have lost business to internet sales because, when the prices match, the sales tax charged has driven and does drive customers to the net.  

I HAVE to charge sales tax.  I understand when I HAVE to pay sales tax.  I understand that one of my jobs is dependent on taxes that are collected.


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## Smitty37 (Apr 26, 2013)

ed4copies said:


> sbell111 said:
> 
> 
> > So imagine that you are an online retailer with total sales of 750k.  You are not affected by this law.  However, you have a very strong 4th quarter next year which pushes your total sales to $1,000,000.01.  Does that mean that you have to go back and pay the sales tax for everyone that you sold to all year long?
> ...


 That would be even if your sales drop below $1,000,000.   Not only that I think that after you collected them once, you would be harrassed by 45 states even if you never reached $1,000,000 in sales again.  For instance, I go over a million this year but didn't expect to - I didn't collect sales tax.  Next year because I went over a million this year and I have to pay quarterly, I have to start collecting taxes --- at the end of the year I don't go over a million....if I stop collecting taxes, you can bet your last dollar that come about April of the following year because I paid the tax the previous year, I am going to begin to get "listen criminal" letters from 45 unhappy state sales tax collection departments that didn't get their check.  

And I am going to have to respond to all of them, and they will want "Proof" that I don't have enough sales to be required to collect for them.  If I don't I will find 45 states auditing me to prove I don't owe them taxes collected from their residents.

At least some states also require businesses to maintain their sales tax collections in a separate account from your personal and business accounts so the state's money does not get co mingled with yours - and heaven help you if the auditor shows up and you don't have enough money in that account to pay the state what you were supposed to have collected. You can go to jail for that. I did not see anything in the bill to change that either.

Like I've been saying it will be a nightmare.


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## sbell111 (Apr 26, 2013)

It seems that the fact that they charge shipping pretty much makes up for the 'no sales tax' thing.


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## sbell111 (Apr 26, 2013)

Smitty37 said:


> ed4copies said:
> 
> 
> > sbell111 said:
> ...



There are very few issues that you and I completely agree on.  This is one of them.  Of course, that very fact means that the bill will be passed.  :biggrin:


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## Smitty37 (Apr 26, 2013)

Haynie said:


> Smitty37 said:
> 
> 
> > Those who favor this (as near as I can tell that would only be politicians wanting to get more of your money) are trying to sell it as a way to help "level the playing field" for *small* box stores but I have not been able to figure out how they will benefit at all - it isn't going to increase traffic to them a bit.  Small box stores are not losing business to the internet - many of them already have internet sales themselves or sell products not condusive to internet sales.
> ...



On the otherhand my wife worked at a boat dealership who made 75% of their sales of "boating related" items such as life jackets, etc. through their internet sales department.

We have a little boutique here that can stay in business and be available to local folks only because of their internet business.  The owner told me she makes only about 30% of her gross sales to locals.

I buy a lot on the net personally, yet I live in one of the states that does not have a sales tax so I'm not going there to avoid paying sales tax.  

Most of the sales I make (and they are all internet sales) the cost of shipping exceeds what you would pay in local sales tax if you bought from me rather than a box store in your state unless it is a fairly large order or your state sales tax is very low.

I've found that unless it is free shipping I can usually get it for less locally even though I don't pay sales tax in either case.  Are you losing customers to 'no sales tax' or free shipping?


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## PaulDoug (Apr 26, 2013)

For those that think this will only impact business over 1M.  Who are their customers?  You think those business are just going to eat the increase coat?


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## Smitty37 (Apr 26, 2013)

I think there will be a big rush of people here applying for sales tax exemptions for buying items to be used in production of items for resale.   It this passes next year we'll be telling everybody to start a business to get their kits tax free.


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## PR_Princess (Apr 26, 2013)

Russianwolf said:


> *The legislation as proposed actually solves this by saying to participate, the state must establish a single sales/use tax department. local and city taxes would not apply.*



From the way I understand it Mike (again I could be wrong here...this is not exactly lite reading!), one of the ways (but not the only) a state can participate in this bill is by being a member of SSUTA (Streamlined Sales and Use Tax Agreement). 


You can read the current SSUTA agreement here - 

http://www.streamlinedsalestax.org/uploads/downloads/Archive/SSUTA/SSUTA%20As%20Amended%205-24-12.pdf

FAQ from the SSUTA site - 

Streamlined sales tax



  And yes! If you run a pen selling business, and want to have your on line purchases sales tax exempt due to resale, you can do that! But you will have to fill this out this (proposed) form,  in advance,  and file it with every on line seller to might like to buy from. 

http://www.streamlinedsalestax.org/uploads/downloads/Forms/F0003 Exemption Certificate_5_10_11.pdf


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## Smitty37 (Apr 26, 2013)

PR_Princess said:


> Russianwolf said:
> 
> 
> > *The legislation as proposed actually solves this by saying to participate, the state must establish a single sales/use tax department. local and city taxes would not apply.*
> ...



But at least they would only have to file the exemption once for each seller...not with every purchase.


I think the "level playing field" is a hoax.  First, many of the small local stores have internet sales themselves and second, 500 large businesses account for the lions share of the internet sales of taxable items. This agreement is clearly designed by states to allow them to force retailers who receive no services from them to collect taxes for them.

Another interesting point is that the agreement does not allow individual sellers who think they are treated wrong by a state to use the States belonging to that organization as a cause of action.


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## Smitty37 (Apr 26, 2013)

Russianwolf said:


> I decided when I started my business that the state would get tax on every sale. Just as if I set up shop downtown and sold things out of a store front.
> 
> I put the pricing on my website with the little click button and when they pressed it it was added to their cart at a reduced price and tax was added to get it back up to the advertised price. $106 click button = $100 in cart price + $6 tax.
> 
> ...


I've done some driving around WV and you're getting cheated:biggrin::biggrin::biggrin:


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## Smitty37 (Apr 26, 2013)

Chasper said:


> Smitty37 said:
> 
> 
> > Chasper said:
> ...


I would think that a psuedo nexus would apply only while you were actually in the state. I'm surprised that going to the State 1 day and making 1 sale could obligate you to collect tax on internet sales.


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## Smitty37 (Apr 26, 2013)

BSea said:


> Russianwolf said:
> 
> 
> > Smitty37 said:
> ...


 I think there is regarding internet sales.


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## alphageek (Apr 26, 2013)

Smitty37 said:


> I would think that a psuedo nexus would apply only while you were actually in the state. I'm surprised that going to the State 1 day and making 1 sale could obligate you to collect tax on internet sales.



Well..  
A) I hope he makes more than one sale in a show. And
B) I haven't left my state for shows, but most the shows require you to prove you are set-up witha state tax id.  So the obligation to collect is a prerequisite to the show.


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## BSea (Apr 26, 2013)

Smitty37 said:


> Russianwolf said:
> 
> 
> > I decided when I started my business that the state would get tax on every sale. Just as if I set up shop downtown and sold things out of a store front.
> ...


:rotfl::rotfl:  Ok, That's a good one to end the day on.


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## Smitty37 (Apr 26, 2013)

alphageek said:


> Smitty37 said:
> 
> 
> > I would think that a psuedo nexus would apply only while you were actually in the state. I'm surprised that going to the State 1 day and making 1 sale could obligate you to collect tax on internet sales.
> ...


 I don't disagree with that Dean.  My surprise is that he says that obligates him to collect the sales tax on internet sales after the show....and how about the next year when he doesn't go to a show in that state - must he still collect the tax?


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## Smitty37 (Apr 27, 2013)

I find it interesting that the proposed bill is being offered to "level the playing field" for small box stores in sales tax states yet in another thread I started the sense I get is that not paying sales tax isn't the reason most people have for buying on line.  

I suspected as much because I live in a no tax state, I live 1 mile from a super WalMart where my wife does most of her grocery shopping we also have two or three plazas with local shops and a small "downtown" area with small shops and I still do a lot of buying on line because I stll need a lot of things I would have to drive a long way to get. A 35 mile round trip (if I went to the next bigger city with more stores) still costs me about $7.00 in fuel alone.  To go to where I could buy pen supplies would cost me a 128 mile round trip or about $22.00 or so in fuel.  Shipping averages to about $7.00 or thereabout so I shop on line and don't have to spend an hour driving.

The short is that the real driving force behind the bill is getting more money -- not leveling the playing field -- that's the smoke being used to hide the truth.


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## ed4copies (Apr 27, 2013)

The motivation for this bill is simple!!  THE STATES WANT THE MONEY!!

In 2012, the US Dept of Commerce estimates total internet sales at $225.5 Billion.
EVEN IF 30% of that is large sales that will require the seller to remit sales tax (cars, boats, other 'registered' items), that still leaves over 150 Billion that is "sales tax free"!

That means $7.5 billion in REVENUE (at an average 5% sales tax rate).    Which is about $21 per person in the USA.  Multiply that by your population--for say, Illinois (now deep in debt). (12,800,000)

This results in over $280 million per year, growing at a 15% annual growth rate.  AND the impact on the consumer is negligible, if we accept the $21 per person!!

ALL governments need money.
WE are their only source (people, usually residents)

A "hidden" tax increase gets less public rage than an increase in taxes you are "billed for" and, therefore, SEE!

And, they can always make the argument that you can AVOID this tax by simply SAVING more and SPENDING less.  Which, if everyone complies, will further destroy the economy, make more people unemployed and increase the amount needed by government to support the unemployed.

It is really, very simple math.


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## ed4copies (Apr 27, 2013)

Actually, taking the average spending per person on the internet and multiplying Illinois population by the "per capita" spending, then applying the real 6.25% sales tax of Illinois, you will derive a number slightly OVER half a BILLION dollars for 2012.  Growing at 15% per year.

Of course this bill shifts all the costs of collection to the private sector, so this revenue is pure "gravy".


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## Smitty37 (Apr 27, 2013)

ed4copies said:


> The motivation for this bill is simple!!  THE STATES WANT THE MONEY!!
> 
> In 2012, the US Dept of Commerce estimates total internet sales at $225.5 Billion.
> EVEN IF 30% of that is large sales that will require the seller to remit sales tax (cars, boats, other 'registered' items), that still leaves over 150 Billion that is "sales tax free"!
> ...


Ed, the numbers are a little muddied on this but estimates I've read seem to be saying that the top 500 retailers account for 93% of the states "lost" revenue and this study
http://www.netchoice.org/wp-content/uploads/eisenach-litan-e-commerce-taxes.pdf 

indicates that the most commonly referred to study might overstate the uncollected revenue by as much as 100%.  The above study estimates that the lost revenue is not more than .6% of the states total revenue and only about 2.5% of their sales tax revenue.

The above means to me that if the states go after those top 500 companies (some of whom are voluntarily collecting sales tax on most of their sales 1.e. Amazon) all of which will likely have income far more than 100 million they could get the money they're after without harassing millions of small businesses like you and I.

I am not upset that they want the tax - in fact I am far more favorable toward sales (consumption) taxes than I am income taxes  - but it is the buyer who owes the state that tax not the seller so why should we have to be their tax collectors.  The states impose the tax on their citizens let them collect it from them.


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## ed4copies (Apr 27, 2013)

C'mon Smitty!!!

You ain't no kid!!!!

The government long ago realized that private businesses were able to collect taxes MUCH MORE CHEAPLY than government.

This is WHY we have withholding!!!

How many times have you heard "I got a TAX REFUND"  in a very joyous exclamation?

Sure, we withheld (at government's mandate) SEVERAL THOUSAND DOLLARS of your PAY!!!!  Now, when you get back a couple hundred, you are ELATED!!

Think of the difference if we did NOT withhold, and you got the BILL for several thousand dollars!!  We live up to our income (spend every penny we get)---now the government is attempting to "get blood from the proverbial turnip"!!

Maybe you worked for a major company for too long.  For our small company (copiers), I have given hundreds of thousands of "other people's money" to the government over the years.

Government has not yet said, "THANK YOU" for helping them out.
I suspect I will not live long enough.


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## Russianwolf (Apr 27, 2013)

I'd add that sales tax is a tax to the purchaser, not the business. That's why its added to the bill instead of simple a tax on the sales of the business. AND why C3 non-profits and some others are exempt from paying it.

They already have you acting as the collector.

In effect the states are saying "If you have your businesses collect our use taxes, we'll have ours collect yours".

They are trying to collect what they know is due them in the simplest way they can. Since there are fewer businesses than consumers.....easier to get the business to comply than the consumers. Herding the fewest number of rats.


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## Smitty37 (Apr 27, 2013)

ed4copies said:


> C'mon Smitty!!!
> 
> You ain't no kid!!!!
> 
> ...


Ed - here is another point....given the total of all state tax collections from all sources 280 million spread across 45 states can be lost as a "rounding error".

I suspect the percentage of 'uncollected tax' internet spending is actually far lower than the 70% you assume. Remember internet sellers must already collect the tax for any state in which they have a nexes. and  I believe that 70 plus per cent of internet sales are from 'brick and morter" companies that also have internet sales. For instance Dell Computers collects sales tax from almost every state...Amazon is currently up to 38 states, WalMart, Staples, Radio Shack, Apple Computers, and on and on already collect taxes from almost all of the states on their internet sales and they cover a lot of internet sales.

My estimate would be more in the range of half what your estimate for their increased revenues even given that the average sales tax rate is higher than the 5% you used (I think it's about 7% or so).  The amount would be lost in the grass of the tolerance of their estimates.



i


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## Russianwolf (Apr 27, 2013)

If I recall Amazon recently lost their fight on this.... maybe why they are supporting the measure now. THEY want a "level playing field". and THEY have the money to lobby for this whereas small businesses don't.


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## Smitty37 (Apr 27, 2013)

Russianwolf said:


> If I recall Amazon recently lost their fight on this.... maybe why they are supporting the measure now. THEY want a "level playing field". and THEY have the money to lobby for this whereas small businesses don't.



They have changed their business plan where they expect to have a physical nexes in most states and would be subject to collecting ther sales tax anyway == I it is related to establishing very fast delivery.  I think the fight they lost was in a State court and had to do with the fact that they used servers located in that state and the question was whether or not that established a nexes.  Because of their change in business plan they did not appeal.  Amazon has also found that they collect the sales taxes for many other business who where Amazon get the order and collects the money but the item is sold by the other business -- Amazon collects the sales tax for those businesses and charges them a fee for doing so.  Wal-Mart also supports it I think, because they have a physical presence in all 50 states and already have to collect sales tax on all internet sales.  Dell Computer probably by way of 'service' people also collects from all or nearly all the states that have sales tax.

I think if this is implemented, when the smoke clears, there will be very little new revenue to the states.  Cars, boats, RV's, Mobile Homes and a lot of other big ticket items the sales tax is collected, not by the seller but when the item is registered. Many food items are exempt, clothing is exempt in several states, downloaded intangables (i.e. software) is exempt in many states, business to business transactions are usually exempt and any sales taxes due are usually paid  by the business because they are usually already subject to sales tax audit and internet transactions will not be difficult to find, foreign sales, as much as 20% of transactions for lots of businesses are exempt.  So that 225B number is in my opinion highly inflated since (I believe) it includes all of those things.


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## PR_Princess (Apr 27, 2013)

Russianwolf said:


> If I recall Amazon recently lost their fight on this.... maybe why they are supporting the measure now. THEY want a "level playing field". and THEY have the money to lobby for this whereas small businesses don't.



One way for Amazon to eliminate competition, increase diversity of offerings and at the same time make money by fees is to incorporate whatever small businesses they can under the Amazon umbrella.

By making it onerous for all but the tiniest of business to operate independently (or operate period), would certainly help Amazon increase their reach.  It's hard to grow when you are already on top, but this is certainly one way for Amazon to do it. Amazon is interested in Amazon, not a level playing field. 

FWIW, Amazon's sales last year were $61.09 BILLION, up from $48.08 BILLION in 2011


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## Smitty37 (Apr 27, 2013)

PR_Princess said:


> Russianwolf said:
> 
> 
> > If I recall Amazon recently lost their fight on this.... maybe why they are supporting the measure now. THEY want a "level playing field". and THEY have the money to lobby for this whereas small businesses don't.
> ...


Yea and I don't think WalMart is in a big need of a level playing field either even though internet sales is a small part of their business, their buying power is humongous.


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## joefyffe (Apr 27, 2013)

ed4copies said:


> I would expect more creativity from you, Smitty!!
> 
> COLLECT the tax for Hawaii!!  Over a year or so, that might amount to $20-$50!!!!
> 
> ...



Ed:  I like the way you think!  :biggrin:  Another thing I have been thinking about, what if I were to buy a new table saw.  In indiana, that is used for the manufacture of product and is tax exempt.  I haven't seen anything about anything being tax exempt on this internet tax issue!  ?????


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## Smitty37 (Apr 27, 2013)

joefyffe said:


> ed4copies said:
> 
> 
> > I would expect more creativity from you, Smitty!!
> ...


The figure of 225B in internet sales include tax exempt sales and sales in which tax is currently collected.  Tax exempt include items like Cars, boats, RVs and Mobile homes because the tax is collected at time of registration but they are counted in the internet sales.  

Busness to Busness transactions (and there are tons of them) are also included in that 225B on those transactions there is no tax collected because the items are going to be used producing business goods or services  that will be taxed when sold to the final customer. 

In business to business transactions where sales tax should be paid by the buyer it is usually paid because the buyer is already subject to sales tax audit and such transactions are easy for auditors to find..  

It also includes intra state internet sales where the sales tax is already collected. In addition it includes sales of food and clothing which are exempt from sales tax in a lot of jurisdictions. It also includes intangables some of which (down loaded software) are not taxable in many juridictions as well. 

In addition it includes international transactions where there is no tax due to any US state.  For instance myself I buy nearly every thing I sell on the internet - no tax due because I buy most of it internationally and Delaware has no sales tax anyway.

  90% of my sales are internet transactions - while today many of them would be taxable, well over half of my customers also sell finished pens and could get sales tax exemptions because what I sell is used in making the end product they sell to consumers and the tax is due on their sale. Additionally 15% - 20% of my sales dollar volume is international wih no tax due.  In the end the states would be due sales tax on only about 20 or so percent of my sales and none of my purchases.  I think nearly all IAP vendors would fall into that catagory.


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## ed4copies (Apr 27, 2013)

Worldwide is 1.29Trillion, Smitty.

The figure I gave above is the US Dept of Commerce estimate of domestic sales, I would think.


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## ed4copies (Apr 27, 2013)

As to WHY internet, this may help:

*Top Consumer Reasons For Shopping Online**Percent of Survey Citing Reason*Time Saving73 %More Variety67 %Easy to Compare Prices59 %No Crowd58 %Lower Prices55 %Spend Less on Gas40 %Less Taxes30 %Other3 %
Statistic Brain .com


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## ed4copies (Apr 27, 2013)

According to Forbes mag, here is the impact:



The U.S. Bureau of the Census estimated there were $4.1 trillion in  retail and wholesale transactions over the Internet in 2010, amounting  to 16.1% of all U.S. shipments and sales.
Estimates put lost tax revenue at approximately $11.4 billion in  2012. California alone was projected to lose $1.9 billion; Texas, $870.4  million; and New York, $865.5 million.
Researchers estimated in April 2009 that total state and local  revenue loss from new e-commerce in 2012 will be approximately $11.4  billion.
State governments rely on sales and use taxes for nearly one-third (32%) of their total tax revenue.
Local governments derive 11.2% of their tax revenue from sales and use taxes.


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## Smitty37 (Apr 28, 2013)

ed4copies said:


> Worldwide is 1.29Trillion, Smitty.
> 
> The figure I gave above is the US Dept of Commerce estimate of domestic sales, I would think.


I would think it's all internet sales for US companies...I don't think that figure was developed only for the proposed bill so there would be no reason to exclude overseas sales..I'll try to check sometime today to see if I can learn more.


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## rixstix (Apr 28, 2013)

TLR

I'm late to reading the discussion but for anyone that falls within the scope of collecting sales tax...

taxcloud.net

*Has plugins available for many of the current ecommerce applications and is working on more as they are requested.*

When you use their service, you make a single payment to TaxCloud and they take care of the individual disbursements to appropriate taxing authorities...  at least as I understand the program.

There are other applications that currently perform similar functions for a fee.  AFAIK, TaxCloud is currently the only no-fee version.


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## Smitty37 (Apr 28, 2013)

Smitty37 said:


> ed4copies said:
> 
> 
> > Worldwide is 1.29Trillion, Smitty.
> ...


Here is an FAQ from the US Census 

*Question:* Are foreign sales included in the e-commerce estimate? 
*Answer:* The e-commerce and total sales estimates include sales covering all store and non-store retail locations in the United States operated by a firm selected in the survey. Sales made to a customer in a foreign country through a U.S. web site are included in the estimates.

I would think the DOC would do the same.


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## ed4copies (Apr 28, 2013)

In that Forbes is rather conservative, I would look at their numbers as "low estimates".

However in further researching this bill, it passed the Senate, but is not yet even on the docket for the House (Republican controlled).  I would give it less than a 25% chance of passing the House, in it's current form.


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## Smitty37 (Apr 28, 2013)

ed4copies said:


> In that Forbes is rather conservative, I would look at their numbers as "low estimates".
> 
> However in further researching this bill, it passed the Senate, but is not yet even on the docket for the House (Republican controlled).  I would give it less than a 25% chance of passing the House, in it's current form.



You might be right but there will be a lot of Republicans who support this bill because they come from sales tax states and as we found in our look at this most internet buyers are not trying to get away from sales tax so there isn't likely to be a ground swell of consumer opposition.


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## ed4copies (Apr 28, 2013)

From my reading, Smitty, the House does not oppose the idea of the sales tax.  But they DO oppose the burden it will put on small business, to keep track of all the states.

What MIGHT happen would be the adoption of one "internet sales tax" rate that would be collected by us on ALL sales and turned over to a "taxing authority" with our breakdown of sales by state.  Then, each state would get their share.

This would be MUCH easier for the vendors to administer and still satisfy the supposed motivation of "leveling the playing field" for the brick & mortars.

This would also solve the problem of "tax exempts".  Just like you "get back" taxes overwithheld now.   When the penmaker filed his individual tax return for the sole proprietorship, they could add a line for "sales tax paid"  This would then be applied toward any additional taxes owed, or returned if the sole proprietor has "over-withheld".

Makes the whole system quite simple.


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## Monty (Apr 28, 2013)

ed4copies said:


> .....This would also solve the problem of "tax exempts".  Just like you "get back" taxes overwithheld now.   When the penmaker filed his individual tax return for the sole proprietorship, they could add a line for "sales tax paid"  This would then be applied toward any additional taxes owed, or returned if the sole proprietor has "over-withheld".
> 
> Makes the whole system quite simple.


Have you ever seen Congress make anything simple????:biggrin:


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## sbell111 (Apr 29, 2013)

ed4copies said:


> In that Forbes is rather conservative, I would look at their numbers as "low estimates".
> 
> However in further researching this bill, it passed the Senate, but is not yet even on the docket for the House (Republican controlled).  I would give it less than a 25% chance of passing the House, in it's current form.



My understanding is that the bill (S.743) passed cloture in the Senate but has not yet been actually voted on.


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## sbell111 (Apr 29, 2013)

ed4copies said:


> From my reading, Smitty, the House does not oppose the idea of the sales tax.  But they DO oppose the burden it will put on small business, to keep track of all the states.
> 
> What MIGHT happen would be the adoption of one "internet sales tax" rate that would be collected by us on ALL sales and turned over to a "taxing authority" with our breakdown of sales by state.  Then, each state would get their share.
> 
> ...


The bolded part would never work.  This is because sales taxes that we collect aren't 'ours'.  This is money that belongs either to the customer or the state (depending on how you look at it), not the business.  This is why some jurisdictions require these funds to be kept in a separate account.


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## Chasper (Apr 29, 2013)

joefyffe said:


> ed4copies said:
> 
> 
> > Ed:  I like the way you think!  :biggrin:  Another thing I have been thinking about, what if I were to buy a new table saw.  In indiana, that is used for the manufacture of product and is tax exempt.  I haven't seen anything about anything being tax exempt on this internet tax issue!  ?????
> ...


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## Smitty37 (Apr 29, 2013)

Chasper said:


> joefyffe said:
> 
> 
> > ed4copies said:
> ...


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## BSea (Apr 29, 2013)

sbell111 said:


> ed4copies said:
> 
> 
> > From my reading, Smitty, the House does not oppose the idea of the sales tax.  But they DO oppose the burden it will put on small business, to keep track of all the states.
> ...


I think it would work.  The business would have a line item that was the sales tax paid.  The business may or may not be getting a refund.  Regardless of that, the "Sales Tax Paid" amount doesn't change.  It's no different than an employer withholding income tax from their employees.  Depending on the amount, the employer makes regular deposits to the IRS throughout the quarter for income withheld during the quarter.  After each quarter they file a return (941) showing what's owed.  If they over deposited, they get a refund,  If they under deposited they pay the balance.  How would the internet tax be any different?

The fact that some jurisdictions require a separate account is not relevant.  That's just a way (theoretically) of making sure the business doesn't spend the money before it's paid.  

I would guess that the businesses would be required to make regular deposits to the "*D*epartment *R*egulating *I*nternet *A*ccumulation of *N*uggets" (hereafter referred to as the *DRAIN*).  So depending on your amount of sales, you might have to send your money down the *DRAIN *weekly, monthly, quarterly, or annually.  Regardless, it all goes down the *DRAIN*.  :biggrin:

Ok, I had to have a little fun with this.


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## MesquiteMan (Apr 29, 2013)

Chasper said:


> joefyffe said:
> 
> 
> > ed4copies said:
> ...


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## sbell111 (Apr 29, 2013)

BSea said:


> sbell111 said:
> 
> 
> > ed4copies said:
> ...


If you were to overcharge someone sales tax, the overcharged amount does not belong to you.  It belongs to the person that you just cheated.

This is far different than income tax withholdings because that is shown as a tax paid on the employee's taxes, not yours.  Therefore, if too much income tax is paid, the employee will get a refund, not the employer.


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## Smitty37 (Apr 29, 2013)

sbell111 said:


> BSea said:
> 
> 
> > sbell111 said:
> ...


 Therein lies much of my objection to the bill. I don't owe the tax the buyer does - the buyer does not owe the tax to the state in which I am doing business, the buyer owes the tax to the state where he/she resides.  In my opinion there is no good reason to ask me to collect taxes to pay for government services that are not provided for me - regardless of how much or how little work is involved, they are making me responsible to a state government that should have no jurisdiction over me.


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## PR_Princess (Apr 29, 2013)

Steve, I think you are misreading the sole proprietor. I would read the bolded part of  statement to mean the sole proprietor as the *pen MAKER*...not pen kit seller.

When the pen maker (business owner) filed his taxes, he could claim any of the sales taxes paid on inventory purchases (and sent to DRAIN :biggrin:by the seller) as tax credit. This could happen as a line item credit on the schedule C, or K or whatever. As I understand the intent, it would a) make sure that the claimant was a business, and b) could be much simpler for both buyer and seller. More so than keeping track of dozens, hundreds or thousands of those individual sales tax exempt forms.


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## BSea (Apr 29, 2013)

sbell111 said:


> If you were to overcharge someone sales tax, the overcharged amount does not belong to you.  It belongs to the person that you just cheated.
> 
> This is far different than income tax withholdings because that is shown as a tax paid on the employee's taxes, not yours.  Therefore, if too much income tax is paid, the employee will get a refund, not the employer.


I agree that if you overcharge someone, then that's cheating.  However, when you are dealing in fractions of cents, then there can be a discrepancy when you take into account the rounding per sale.

For Example:  Let's say you sold 25 pens for $50 each.  And the tax was 7.25%.  The tax for the sale would be $3.63 for each sale.  It's actually 3.625, but of course you round up.  When you report the tax, you take your total sales of $1,250 (50 x 25), and calculate the tax on the sales, you get $90.63 ($1,250 x .0725).  But you collected $90.75 (25 x 3.63).   Did you cheat the customers? Of course not.  I work in the payroll industry.  For the 941 report (Quarterly Wage withholding Report) there is a line item for fractional cents to balance the report just for this type of rounding discrepancy.

Then there is the case where maybe a seller deposits his sales tax monthly, but let's say he made an error, and underpaid the tax.  The error is discovered when the report is filed, and he pays the balance due.  No customer got cheated, the sales were reported correctly when the report was files, It's just that a mistake was made for a deposit.  In the same 941 report I mentioned above, there is a place to show the amount deposited, and if it doesn't match what is calculated, there is a place for Amount Due, and another for Amount Refunded.

I have to agree with Ed.  This looks like a viable solution.  In the event someone overcharges their customer (either intentionally or not), the government would be out of the loop.  If it was done intentionally, then the person doing it isn't going to report it anyway.  Yes it's cheating, and no I don't condone it.  But I fail to see how that pertains to the discussion.  And if it was done accidentally, and found out later, I'd expect the seller to contact the customer and return the overcharge.  When that's not possible, then it's shown as additional income, and the seller would have to adjust the sales tax return to reflect a higher sales amount.  So there is a balance due with the return.

Either way, I fail to see where the system mentioned wouldn't work.  I'm not saying it's good or bad, I just can see how it would work.


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## sbell111 (Apr 29, 2013)

My thinking is that even though this bill has gotten tons of press, it's fairly unlikely to ever be passed into law because it will divide the House in ways that House leadership cannot afford.

Even if it does get passed, it might not survive a judicial challenge.


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## Smitty37 (Apr 29, 2013)

BSea said:


> sbell111 said:
> 
> 
> > If you were to overcharge someone sales tax, the overcharged amount does not belong to you.  It belongs to the person that you just cheated.
> ...


Good, bad or neutral doesn't really matter - it won't pass it woud require a new federal sales tax and right now that dog ain't gonna hunt.


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