Democrats Introduce Federal Bill to Collect Online Sales Tax | Hacker News Reader

Democrats Introduce Federal Bill to Collect Online Sales Tax

pcmag.com

38 pointsjenhsun49 comments

The thing to keep in mind is that internet retails will have to keep track of and pay out to more than just the 50 state-level tax jurisdictions. Many counties and municipalities impose their own sales tax rules, which are often more complicated than just a blanket X% of sales. For example, some states exempt clothing and basic food items from sales tax, and some have periodic tax holidays.

I understand the desire to eliminate the tax advantage internet retailers currently have, but I think it would be better solved by a federal sales tax (either directly or indirectly disbursed to states) than by forcing retailers to hire a team of tax accountants to keep up with thousands of sets of sales tax laws.

The frequent and dangerous assumption here is that a federal sales tax means the end to state sales tax.

Obviously that didn't work for income tax, and I would go even further to argue the feds should not be paid one bit of direct tax.

When the feds collect money and disperse it to the states, the states become enslaved to the federal government and loose their sovereignty. More importantly, without this sovereignty there is no competition or experimentation amongst the states.

I saw someone had downvoted you and went to upvote and gave you another downvote by accident, sorry.[1] I think you are entirely correct, state competition and experimentation is a good thing, as is decentralisation. Even if someone disagrees with your points, I don't see the need to downvote them.

I like the idea elsewhere on the thread of standardizing a database to enable the calculation to be readily done by the seller (and those places with systems so complex that they can't be represented with a couple of fields - state, tax level, exceptions - can just lose out).

[1] pg can we please have some more space between the up and down vote buttons for touch screens?

I downvoted because of the inflammatory language.

Sorry, sometimes my writing style just comes out that way.

To make my point differently and maybe to make it more tech specific:

I would rather pay individual companies for software I want to run on my PC than to pay Microsoft a lump sum and have them give me a bunch of software they think I need (and then distribute the funds to the creators how they see fit).

It could be argued that it would be easier for consumers to pay only Microsoft, saving them the headache of creating relationships with multiple vendors.

Or it could be argued that the chaos of the market is worth the competition that ultimately benefits the consumer.

I like the bottom up approach because it creates competition and choice.

Even a very 18th-c conception of the federal government doesn't have it receiving no direct tax. In fact it was considered necessary that it have its own direct source of revenue, since its financial dependence on the states was one of the things crippling the Articles of Confederation government. Import tariffs were long the main tax. In that case, the Constitution does make sure that federal taxation means no state taxation, because states are prohibited from enacting tariffs. The other traditional main source of federal revenue was income from federal lands (mining, forestry, etc.).

Yes, I should have been more clear. I don't think individuals should pay direct taxes to the Federal government. I prefer the pre-16th amendment scheme of apportioning amongst the states.

Regardless of today's law, I am currently of the opinion that direct taxes should be collected at the most local level possible with each community paying it's parent an apportioned amount for the service, privileged, and protection it provides.

That's a very American attitude, one that, as a Canadian, I simply can't understand. It always strikes me as odd that Americans prefer a system in which each state has almost total control, up to and including its own constitution. You're left with things like California being insolvent and practically unsalvageable, Arizona mandating racial profiling and giving retarded cowboys like Arpaio free reign, Kansas banning science, most everywhere banning gay marriage... it's just a very strange and haphazard system. My best friend in high school was from San Francisco and his father hated our system, saying we had ceded all our freedom to the federal government, were socialists, and all manner of other invectives. Given how messed up everything is down there, I wouldn't really be complaining.

>most everywhere banning gay marriage...

And thus my point. I live in MA, where it's legal, and the world didn't end and God didn't smite us. This "experiment", if done at the federal level, wouldn't have happened for another decade because the country is still split.

Now people can point to MA and say, see this works. Gay marriage laws are literally spreading from MA outward.

So, if you're gay move to MA, if you're appalled by the idea move out. If you're of Hispanic decent move away from Arizona. If you don't like super irresponsible government spending, move out of California. Either way, you're still an American and you have choice.

What we need is a common database for cities, counties, and states to add their taxes for different things to so the burden of tracking isn't on retailers. A site could pull the appropriate tax amount with a single API.

I think it's good to let the individual places set their own tax rates as long as there's a way to take the burden off web retailers. For example, a city might have a tax on tire sales to help fund road upgrades. Online tire retailers shouldn't be able to skip out on the tax since the tires are going to be used on the roads the city is upgrading.

LOLz, I wrote my comment at the same time as you. Want to co-found this project?

Maybe this can lead to a homogenization in the sales tax across states ? Or is that too optimistic?

Not all states use the same methods for generating revenue. My home state of Florida does not collect income tax. Instead we tax sales and hotel rooms to better capture tourist dollars. Florida and say North Dakota would find it difficult to agree on a unified state tax code.

It would be nice to force adoption of harmonized tax laws as a prerequisite for being eligible to receive internet taxes, but it would be difficult to come up with a set of laws that appealed to everyone. States with lower tax rates would be unlikely to want to raise the rates on their citizens, where states with higher rates may not be able to afford dropping down to a lower rate (although the lower overall rate may be offset by the larger number of taxable transactions). Multiply this 50-way negotiation by the number of actual tax rules and you can see how feasible harmonization would really be.

Don't get me wrong, I would love to see something like this come to pass, so you'll have to excuse my cynicism (no doubt brought on by current events).

From a comment in the article, someone mentioned Taxcloud.com which tracks the sales tax percentage.

I'm sure that it's completely possible to track all the tax-specific details that you mention, and I know it's already being done (Amazon ran Target.com which has full 50-state coverage and did collect sales taxes everywhere).

If it's mandated, there will be an opportunity to sell this service to retailers... though I do agree that a single federal % number would be more feasible, it will never happen.

That is still a significant burden to implement especially for a small business that is not tech related. Sure it's a benefit for the people who will sell the service but you could make the same argument about mandating all websites display new logos everyday like google does, it will benefit artistes who provide the service but is it really good for society?

Also, what about foreign companies? We already know that sales tax has kept digital companies out of states with sales tax could this encourage such companies to move to Canada or Mexico? Next when I buy a purely digital good this work? Do you use my current location or my billing address?

The "Main Street Fairness Act"

If I got to congress, the first thing I'd do would be to introduce a bill to ban the use of cute and/or self-advertising names for bills. Let it be the "Sales Tax Collection Act of 2011" or something like that.

>But Sen. Welch also noted that brick-and-mortar shops are also being used as display cases for products later bought online. "When a consumer can walk into a store, try out a product and then go home and buy it online without paying sales tax, Main Street businesses and downtowns lose," he said in a statement.

In my experience, sales tax does not account for the price difference, in most stuff I buy. What does account for it is the insane markup. Try buying an HDMI cable at bestbuy, then compare to the $1.50 at monoprice.com

I think that's true for commodity items like cables and video games but I can see what the Senator is saying if people come into a store to check out a TV or a laptop then go home and buy it online. My guess is that people are more hesitant to purchase an important or big-ticket item unless they've seen it and played with it in person.

I bought a Nexus S at the shop across the street from me. The price was the same as I could find online, but I paid an extra $40 in sales tax (NC).

I don't mind paying sales tax (I do enjoy having police, firemen, and teachers) but let's be honest - $40 is enough for someone to think twice.

Legally, others still must pay the $40. It's just that they get to pay it at the end of the year as part of their the "USE TAX" line item in their state taxes. They don't avoid the expense: they are deferring (er, perhaps, ignoring? the law).

It is not always pure mark-up. Small businesses don't have the volume to be able to sell things at the low prices large online retailers like Amazon do.

The Main Street Fairness Act doesn't ask anyone to pay a single penny more in taxes. Instead, it would help governors and mayors collect taxes that are already owed.

This seems to be an interesting selling point, except that people, in the main, seem to not be paying taxes they actually owe. What I wonder as a non-American, though, is how illegal is this practice? Is it essentially a form of tax evasion and, therefore, a crime? If so, why hasn't there been a random "shakedown" RIAA-style to scare people into declaring these purchases and paying the taxes?

They don't owe anything, the Supreme Court has ruled that you don't have to collect sales tax unless you have a presence in the state (a la the Commerce Clause of the Constitution). It isn't tax evasion, pure and simple.

Congress has the sole authority to tax and regulate interstate commerce, and if they choose to do so via this act, that is fine and dandy but that is a totally different issue.

You've got too many pronouns without antecedents in your post. The merchants are not liable to collect sales tax, but customers may be liable to pay it under their state law. This is called a use tax: http://en.wikipedia.org/wiki/Use_tax

Exact details vary from jurisdiction to jurisdiction... and in fact that's the problem this bill is intended to address. A federal framework is necessary to avoid the problem of being required to track an arbitrary number of non-Federal frameworks.

The purchaser has always been responsible for the sales tax. However, in America, almost all taxing jurisdictions implement a withholding charge on the merchant, so that the merchant collects the sales tax owed by the purchaser on the purchaser's behalf.

Quill v. North Dakota, the SCOTUS case to which you refer, was about a sale-order catalog's obligation to withhold the sales tax for purchases by out-of-state state customers (in the case, customers in North Dakota). SCOTUS ruled that North Dakota did not have the jurisdiction to impose a withholding obligation on Quill because it did not do sufficient business in the state to have a "presence". However, after the case in various speeches, several of the deciding justices noted that if Quill had had a greater volume of business (on the order of an in-state retailer), the outcome would probably have been different.

I think a more general "fix" for this would be to just ditch state sales taxes and go for a more general % of income state tax.

Yes it means I'd get hit for more money tax wise, but would eliminate the utter and sheer horror that is state and local sales tax code.

That or something more like Britains tax code, though collect for the state the person is in for a flat % and pass that along. But really I think this whole debate sidesteps the real issue our local/federal government has with local vs nonlocal sales tax.

Not paying the tax is illegal, but it's a state crime, not a Federal crime. Trying to flaunt Federal tax law can be very, very risky (just ask Al Capone), but it isn't as big a risk to flaunt state tax laws. That doesn't make it right or risk free, but you won't be looking at Federal prison time because you didn't pay your state's use tax on your most recent Amazon purchase.

The amounts in question, though, are usually pretty low. Most people don't spend tens of thousands of dollars on internet purchases, so that lowers the incentive of the state tax agencies to pursue these transgressions with their limited resources. (Remember, they don't have easy access to your out-of-state spending records, so they really don't know whether you've spent $5.00 or $500,000.00 online.)

Also, there's the whole burden of proof issue involved here. You want to charge me with a crime? You need to prove beyond a reasonable doubt that I committed that crime. In practice, that means that you'll be flying in a record keeper from Amazon - and putting her up in a hotel - to testify at trial. Maybe someone from Paypal or my credit card company, too. (As a defense attorney, there's no way I'm going to stipulate to that information.) That makes prosecuting smaller violations more costly than it's worth.

(For the record, I declare and pay my state's use tax every year on my tax form; I put my internet purchase receipts in a particular email folder to make calculating my costs super easy. Not paying the miniscule tax simply isn't worth the potential hassle to me; lawsuits are a major pain in the rear whether you win or lose, especially when the charges are criminal.)

I am a anti-tax libertarian type and also a affiliate marketer but even i think its an unfair advantage eCommerce companies have. Creating a nationwide eCommerce sales tax system is the best way to solve this

But they require no government services from states they're shipping to so it's unfair to tax them the same.

That's not how taxation works.

Also, presumably the goods they're shipping are traveling on government-maintained roads, right?

Also, presumably the goods they're shipping are traveling on government-maintained roads, right?

Presumably Fedex/etc pay state taxes in rough proportion to their use of the roads.

But I suppose that if you don't believe taxes are payments for public goods provided, but are instead fidelity owed by vassals to their lord, that doesn't really matter.

The point isn't that taxes are good or bad. It's that people who shop at Internet companies are effectively getting a tax break relative to people who shop at physical stores. And that doesn't really make sense.

The point is that you pay taxes regardless of your personal service consumption. I don't consume medicaid and I live in a city so I don't see the work of the Fish and Wildlife dept that much. Tough shit. That's how taxes work because it'd cost way more than it saved to break out fine granularity at the billing level.

Fedex pays for their use of the roads? No, they pay for their corporate income. They have no billing related to their miles driven on federal, state or local roads (aside from toll roads, which are a minority case).

Spare me the rhetoric about vassals.

> Fedex [has] no billing related to their miles driven on federal, state or local roads (aside from toll roads, which are a minority case).

So you're saying FedEx, being an evil corporation, is exempt from Federal, State, and local fuel taxes?

That's how taxes work because it'd cost way more than it saved to break out fine granularity at the billing level.

Yes - in principle taxes pay for public goods which are provided to everyone in a geographic region.

But if you paid attention to the discussion, you'd realize we are discussing entities who don't exist in that geographic region. It's actually quite easy to figure out that I don't owe NY anything and you don't owe Maharashtra anything.

Fedex pays for their use of the roads? No, they pay for their corporate income.

The taxes they pay to the states in which they do business cover their use of the roads, no?

>The taxes they pay to the states in which they do business cover their use of the roads, no?

Yeah, and they cover grade school education, which FedEx doesn't directly use at all. That was my point about how taxes work.

Regarding your point about regions,

A) The tax is on the consumers, not on amazon.com (or equivalent, proper noun provided to eliminate pronoun confusion).

B) Whether or not amazon.com 'exists' in that region, they're certainly doing business in it, no? Otherwise there'd be no taxes to collect. Brave new world, used to be it was impossible to do business somewhere you didn't have a shop, mail order was nothing close to the web. That's why tax codes and enforcement methods need to be updated for the 21st century. It's less competitive and less capitalist to have different tax codes for the same goods (or even different goods, IMO, with rare exceptions).

Yes but the companies that don't require state services aren't getting taxed. They are being told to tax their customers who are (theoretically) getting state services.

This is not about taxing the companies, it's about simplifying collection of already-owed taxes from residents of the various states, all of whom are indeed using those services (to whatever varying degree).

So we should get rid of state sales taxes (which were always a stupid idea -- why would a state want to punish businesses for doing business in that state, especially in border areas?) and make sales taxes federal.

Then, to compensate, we lower Federal income taxes and let states collect some more income tax.

In fact, by locating distribution centers much further from population centers, they require even more government services.

Anyone want to summarize the bill?

I'm not sure how a federal tax is going to help the states since it seems highly unlikely that the federal government would hand revenues over to the states.

Also anyone know the constitutionality of this? I can make arguments that it is discriminatory taxation of interstate commerce as well as it not being.

Would I get double-taxed if I bought online from a retailer in your own state? Does it apply only to online or also to mail-order and phone orders?

Also: what about people outside the US ordering stuff to be shipped internationally?

Fuck, if it turns out the cheapest way to buy something is to have it shipped from Washington to Australia and then back to California, I'm doing that.

I'd much rather be automatically taxed at checkout than having to keep track of all my online purchases year-round when it comes time to file my tax return.

Interesting to see Amazon on that side of the fence. If they ask people to report on their own, it won't happen. As much as I hate the idea of taxes online, this makes sense -- collect what is already due.

Reading the language of the bill, I'm unsure on one point: what about those states which do not have a sales tax? Here in Oregon my income tax is slightly higher but I pay no sales tax. This is good for:

* the poor

* local commerce (we get out of state folks buying)

* tax code complexity

If this bill passes and the "framework" enforces a federal sales tax I will be most put out.

My guess is that you will get a refund at the end of the year. Of course, now you'll have to track how much in "taxes" you paid, so you can ask for the right amount back.

Jolly. I suppose if this bill passes it will provide further incentive for me to shop locally or, indeed, exclusively--especially as Portland _has_ shops in which it is a joy to purchase goods. I dislike the further record-keeping burden it places on each citizen, though that's somewhat par for the course in the US tax code.

The complexity seems like an opportunity for the Hacker community to build an open source, web-based tax computation service. Set up a WikiTaxes Foundation to pay for the servers, devise a simple API, publish sample code for various languages and there you go, complexity dealt with in one go.

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