"...South Dakota, whose law requires retailers with more than $100,000 in sales or 200 transactions annually in the state to pay a 4.5 percent tax on purchases"
"..Kennedy’s majority opinion strongly suggested the measure was constitutional, in part because it has the $100,000 threshold and doesn’t try to impose retroactive taxation."
A clear bar is set for what is covered here and what is a burden.
It's an interesting precedent.
But regardless, that kind of number is a full time job. If you're selling over the internet and making a full time job out of it, you can handle computing sales tax for SD residents. Yes, it's burdensome. Yes, it would be good to have a simpler federal framework for this. No, it's not the end of the world.
"No tax on the internet" sort of made sense in 1997 when it was a new and exciting market and we wanted to see what would happen. Now, it's just a giant subsidy for Amazon. We can put that money to better uses.
Amazon voluntarily started collecting taxes nationwide without a blip to its bottom line.
The new law will in fact put Amazon's first-party goods in parity with 3rd party sales. Third party sellers could often undercut Amazon's own pricing due to the disparity.
This tax change is a huge win for Amazon on many fronts. Any protests they make to the contrary are strategic, imo.
This makes it tougher for these small businesses to compete and since Amazon takes 15% of those sales AND makes money off them for fulfillment services.
I personally worked on this sort of problem for a large company; most of the work is in figuring out what the business logic ought to be; turning it into code is (largely) trivial.
Figuring out the logic only needs to be done once, and the payments provider is the natural place for it to live.
Note, though, that for South Dakota it is $100k in annual revenue or 200 transactions per year.
Consider a company selling a subscription product/service for $5/month.
If they had a mere 17 customers in South Dakota, their South Dakota annual revenue would be a mere $1020, but they would have 204 transactions per year.
This assumes each re-billing on a subscription counts separately. If it could be counted as a single $60 sales that is merely being billed in 12 equal parts, then they would only have 17 South Dakota transactions.
In practice though, indie retailers will use reseller services that collect & remit the taxes on their behalf, in return for a ~10% cut. I use FastSpring for my shopping cart, others use Paddle or Gumroad. The EU has had similar tax laws on internet sales since the mid 2000s, and Australia will enforce their own 10% internet tax on non-Australian internet businesses from July 1st.
[1] https://taxfoundation.org/amicus-brief-south-dakota-v-wayfai...
I wonder if Adobe publishes how many noneducational Photoshop licenses South Dakotans buys a year. As I highly doubt you're in any danger of needing to pay SD tax.
It was always just a giant subsidy for Amazon.
But it isn't just SD, it's hundreds, if not thousands of jurisdictions. One person doesn't have that kind of time.
But it's not. This line is reasoning is very outdated.
They have built a massive network of warehouses all over the country, and that's the physical presence that a state sales tax collection clause needs to come into effect. Amazon has been charging people sales tax in many states for a few years now. (I wish I had a number of states, but top jazzy to look it up.)
1) Assume that they will hit one of those limits and collect tax from the start. Once they've told the customer that they've been charged tax, they will have to file anyway. I don't see anything that says the first $100k/200 transactions are exempt from the requirement. And if you hit the limits this year, you'll have to collect taxes no matter what from my reading of the bill.
2) Keep track of how much has been sold to South Dakota residents and stop selling if they hit the limits.
3) Give up and tell South Dakota residents that they're out of luck and that a state with less than 900k residents isn't worth putting up with the filing hassles.
If I'm not sure if my business will take off, I'm probably not interesting in paying taxjar or someone else $5000/year just in their filing fees (to make sure I'm covered), so I'm most likely to go with option 3 and start by limiting sales to my home state, those with no sales tax, and those that aren't going to try and make me collect the sales tax for them.
The Commerce Clause gives Congress the power: "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." This has been widely construed as meaning that states cannot make taxes that affect other states' citizens unless they are doing business in that state.
The Supreme Court has just ruled that their earlier ruling (that Store A had to have some physical presence in State S in order for S to require A to charge sales tax) is wrong, and no such physical presence is required.
Did you pay income tax in the state, which will be what supports the university? Congrats, you get in-state tuition.
>>Drive a car into my state? You have to pay a roads tax.
Two points: 1) you are using the roads in the state, why can't you fund them? 2) that tax already exists, you pay it when you buy gas.
Most things are pretty similar state-by-state, but it can be really nice being able to pick your laws if you have to. Maybe you love weed and you want to pick a state with legal weed. Or maybe you like drones and want to pick a state with fewer drone laws. So many things differ state-to-state, from REAL ID to trans rights to surveillance to taxes to guns to driving age to social aid to public transit. Gay marriage, slavery, and interracial marriage were all issues of the past but they were very important in their day too.
I do think it's an important part of what makes America America, and being able to "pick your laws" is an amazing freedom that most people don't have.
Now, the actual ability to move wherever you want can sometimes be limited. If you're in Vermont and you want New Hampshire laws, well, that's easy. (Differences: weed, guns, advertising, taxes, many more.) But if you're in Maine and you want Hawaii laws, a move like that probably isn't doable. Still, I think it's a valuable freedom.
We might actually see some movement in this direction now.
While the average EU interchange fee for taking credit cards is cheaper than in the US, it’s not “less than a penny”
This situation is called an oligopoly. I don't think it has something to do with government sanctioned rent seeking.
At one small company I worked for, we paid SAAS companies for:
- expense reporting and reimbursement (Concur)
- managing payroll
- Managing retirement benefits
- source control hosting (Github)
- Infrastructure (Microsoft Azure)
- Salesforce (I don’t know what they do)
- Training and Compliance
- Chat (Slack)
- Email, Office software (Microsoft Office 365)
- vending services
Etc.
How are these companies any different than the company that helps businesses manage tax collection? They all saw a business opportunity and my company was glad to pay them so it could focus on its niche.
The time to lower interchange fees was before reward programs became standard, interest is where card issuers make their money.
I think its more tenable for governments to provide an optional sales tax as a service and remit the money to the states. One singular report to file one party to pay.
- mapping an address to one or more jurisdictions
- digital deliveries might not have a shipping address
- tax rates often depend on the type of product
- product types have different definitions in different jurisdictions
- some taxes are time dependent (back to school tax holidays)
- some buyers are exempt in some jurisdictions for some products> Think you got a great deal not paying sales tax on your online purchases last year? In most states, there’s a pesky tax called “use tax” that you are supposed to pay in lieu of sales tax if you buy stuff out of state or online--and bring it in state. Theoretically, you’re supposed to root through all your receipts and credit card statements, calculate what you owe and report it on your state income tax return.
Or http://www.pmbusinessadvisors.com/use-tax-reporting-requirem...
> Use tax is a tax imposed on the use of taxable items and services in a state when the sales tax has not been paid. For example, use tax would be due if taxable property is purchased from a seller located outside of New York, the property is used in New York, and sales tax was not paid on the purchase. With online platforms and sales being increasingly popular currently, this concept is significant. Remote retailers that make sales into a state but do not have any presence there (i.e. an office, store, storage, employees) may not be registered to collect sales tax in that state because of the lack of presence there. However, the use tax reporting requirement that has been recently implemented by a number of states requires remote retailers to notify their customers that they may owe use tax on their purchases.
I think it's good to start harmonizing the sales taxes, but such a fee (if I understand you correctly) should be removed...
TaxJar will register for you in the States that you need for ~$100 per state, plus their fees (https://www.taxjar.com/state-registrations/) -- I'm sure Avalara does something similar but that's ~$5000 that a small business probably won't have.
It's a system designed ages ago, not only pre-internet, but even pre-car.
For internet businesses it's really unworkable to require they submit anything other than state sales tax but even that is onerous due to registration fees and old and nonstandardized submission systems.
Note that the disaster area that is US regulatory overlap means passing a law like this is probably impossible without constitutional amendment.
Right now in the US it's often difficult, and sometimes impossible, to know how much you'll actually be paying in any transaction. It's ridiculous, and from a pure Econ 101 perspective it's a first order problem in the market.
tampons
raw chicken
rotisserie chicken
prepared sandwich
bread and cold cuts
toilet paper
condoms
20 oz soda
12 pack soda
juice
milk
prepackaged donuts
donuts from the bakery
cat food
beer
DO you know which of those items are going to be taxed and at which rate? Me neither!
>Note that the disaster area that is US regulatory overlap means passing a law like this is probably impossible without constitutional amendment.
I actually don't think so. The FTC covers truth-in-advertising laws.
https://www.ftc.gov/news-events/media-resources/truth-advert...
I would love someone to at least make the case -- it seems like a non-partisan thing, surely the free market types should be in favor of price transparency, while liberals should be against misleading consumers.
A rhetorical question, since obviously because it serves the agenda of the merchants, who want to set up a "let's you and him fight" situation between consumers and government.
If we really start peeling the onion, we can talk about the merchants' profit margins, and then also externalized costs in the form of stuff like pollution and bankruptcies (and the tax money spent to clean those up.)
In this case the "hidden cost" would be clearly printed on the receipt.
It's probably less of a problem for someone starting from zero, but I'd imagine there's a type of vendor that's a huge nightmare. The firm that basically said "we can sell anything we can get from our vendor", and stocked their cart with thousands of SKUs, many of which exist only as lines in CSV files so they may not even know what they are offhand. The cart was probably built in the Eisenhower administration so good luck extending it.
It would be interesting to see some states offer a "trade convenience for savings" model-- rather than try to navigate a maze of regional rates and product categories to decide if a widget is taxed at 8.2% or 8.3, just file a one-page form and charge everyone 8.5% on everything. Saying "pay us $50 per year more in taxes, rather than spend $50k and ongoing service subscriptions to optimize the rates down to the penny" is a pretty compelling argument.
2) Zip codes have zero to do with taxing jurisdictions; zip codes merely tell you where the closest post office is.
Why would a law like that contradict with the constitution?
But we can't make the switch unilaterally because if we're the only ones doing it, then we look more expensive than everyone else and lose sales. Even if the final price is the same, consumers tend to just look at the up-front cost when making buying decisions. So we'd need everyone in our market to switch, or nobody can. So basically it would need to be mandated by the government.
I recall going to a cafe in India, looking at the menu price, handing over cash then being asked for more. It would be impossible for me to account for which taxes would be applied at what rate to work out the end price before paying.
As an example; the sales tax rate in my region is 7%, but cigarettes are then flat taxed $1.36 a pack so roughly 20% tax at the state level, plus often times there is an added "local option tax" which adds on top of this.
I also think it sets it up so that sales taxes are actually paid by the intended target - they buyer. When Ireland changed its VAT rate from 21% to 23%, I suspect very few coffee shops changed the price of their latte from €3.00 to €3.06. So it feels like the tax increase can end up being paid by the seller, not the buyer.
Since VAT is a tax that is paid by the customer but usually remitted to the tax authority by the merchant, it has to be shown on the receipt.
Why does it matter who of buyer or retailer covers the few pennies, or if retailer makes a small price change to stick at a .99 or .00 price point? Retailers have done this forever in both directions.
(1) very large organizations with retail over a wide area as a core business focus would handle relations with taxing jurisdictions directly as a central function.
(2) medium scale organizations would outsource tax compliance to specialized vendors that would handle it.
(3) very small organizations would either do the same as medium orgs (assuming vendors handle them) or just not sell into many jurisdictions.
Truth be told most here are just mad that their online sales tax loophole is getting closed.
You are also now open to tax audits from all other states, since you may need to prove you are below any exemption limit.
It's a bad deal for small business no matter how you slice it. I think that if your revenue is below ~$100m annually, the future is beginning to look bleak. Very helpful to the big players like Amazon in killing off small competition.
I wish I shared that faith in market forces. What seems more likely to the cynic in me is that a big player like PayPal will incorporate it into their merchant services, obtain some overly broad patents on the process, use those to stifle competition, and make the service a nominally cheap add-on (but only for their own customers).
Why wants to win by being the asshole who did it for $500 instead of say a percentage of revenue?
Basic economic principles. You compete by lowering your price. So more competing providers would make it highly likely that price moves closer to cost, because there is a higher chance that one will defect from the current price structure.
To put it plainly. You run a gas station but the guy across the street gets all the customers. You both charge $3 but your cost is only $2. What do you do to get more customers? Lower the price.
I think eBay and Etsy side hustle sellers especially should be worried. This helps large internet retailers like Amazon. They have the systems in place to charge and remit sales tax for 3rd party merchants, they've just been waiting until this ruling happened.
It's a business opportunity now, but as with many government laws, in the future businesses end up depending on government forcing their markets existence. So then they lobby for the government to keep the system, even if it's out dated or badly thought out. We can't stream line anything, because entrenched businesses don't want anything to change.
It makes me sad the world is this way.
but a petition is always an option?
As far as I know, Stripe doesn't do this, they only provide integrations for services that will calculate your tax obligations. (My guess is governments will eventually force Stripe to pay the taxes themselves directly.) Here's Stripe's page with tax calculation integration options:
Strange huh? Seems like the little guy is being attacked by the elites in every manner possible. Whether it is small online sellers, small time youtubers, independent freelance journalists, small time artists, writers, etc, seems like the rules are being changed to favor corporations and the heavy hitters. Heck, even search and social media results/algorithms are changing to cater to corporations.
Odd that this story hasn't gotten that much traction anywhere either. You'd think something this important would be all over hacker news and social media. I remember Bezos used to be very vocal whenever internet tax issues came up. He's been awfully quiet. Oh that's right, amzn is no longer a small time book and music seller.
It's the top story on... Hacker News.