Federal court tosses Colorado's Amazon tax
denverpost.com
denverpost.com
That doesn't mean that conclusion that "Sales Tax in Colorado shouldn't be collected." It merely means that the Judge made the right call because the law or legal statute was written by an idiot. It's significantly different from NYS' Amazon law that it takes an indefensible position.
Sales tax under Quill v North Dakota has always stated that SALES TAX specifically and not income/franchise tax has a physical presence requirement. Colorado was stupid because they specifically call out non-resident/companies without a physical presence to comply with a series of demands (reporting, notices and etc) that cost crap tons of money. There's an obvious undue hardship here.
The interesting thing is that NYS' position was much smarter they used the affiliate nexus rules. Instead of going after Amazon directly, they simply stated that Amazon had a physical presence in NYS due to the affiliate marketers in the state. The number of affiliates substantiates a "nexus or connection" within the state to require sales tax. This absolutely works!
Don't get your panties in a bunch because this aint over by a long shot. Whoever wrote the law should be shot because any tax professional worth their salt should've seen this coming.
This is coming from a guy that specialized in State and Local Tax at KPMG and defended audits on behalf of Goldman Sachs and etc. I recently had my opinion drafted by Tax Analysts (Tax.com) incase you're wondering about my background.
I'm going to do a full and detailed writeup on my site later tonight
/dancesajig
things are changing and they're not going back.
This is such bullshit. Not charging sales tax on items bought out-of-state will, by definition, discriminate against the in-state retailers by making their prices significantly higher.
Online retailers (excluding the shell games that some companies play) do not benefit from a state's services, so why should they bear the burden of collecting taxes for that state?
Most states have a use tax that is the responsibility of the taxpayer to pay to make up for this; I should know, I just filed my taxes and paid it.
Everything is always connected.
If the citizens are choosing to not pay it, how is that the retailer's issue?
Ultimately, states should probably scrap sales taxes and raise capital gains, inheritance, property, and income taxes to compensate. Those are all tough politically/legislatively though.
What's unfair about it? They're not consuming any resources within the state, like Brick & Mortar merchants, who have an advantage of their own - physical stores to bring people in and sell them stuff on the spot.
No wonder they've been doing so well.
For those downvoting comments above, doing so isn't going to alter that fact.
Note that if you read the decision, the key issue is not whether a state can impose a sales tax on out-of-state retailers (it cannot, even without physical presence, if the substantial nexus test is met), but whether the state law unfairly discriminated against out-of-state retailers (which it does, the law is poorly written).
The reason Amazon folded against New York and California is because it knew both states were willing to take this all the way to the Supreme Court, and it knew that if that happened, it would lose.
Really? That's interesting, I always thought these roads I drive on were paid for by the state. I don't really see many state-enabled services that brick-and-mortar's consume that internet retailers don't.
Since Fedex is not going bankrupt, it seems Amazon is at least paying Fedex enough to offset these expenses, so Amazon is in effect, through Fedex, paying these CA taxes (the same ones that in-state B&M stores would be paying for shipping a purchase to me, or that I would be paying if I bought an item at a local B&M store and transported it in my own motor vehicle).
Now, in my understanding, the purpose of these taxes is to pay for the "services" CA is providing to the taxpayer (in this case, Fedex, and, indirectly, Amazon). For a shipper, "services" would include construction and maintenance of (and bureaucratic overhead associated with) the roads, bridges, airports, etc.
But in your opinion Amazon is skating on their responsibility and should in addition charge sales tax to the customer (apparently for additional "services provided by the state" not covered by the above)? What are these additional services Amazon is receiving (in this transaction) from CA that are not being paid for via [[the above-mentioned]] taxes?
[1] http://www.dmv.ca.gov/vehindustry/mcp/mcpfaq.htm#what
[[edit]]
Blackburn is not comparing in state and out state. He's talking exclusively about out of state. The state has no power to regulate out of state companies. No matter how much the state wants to, it just doesn't have that power.
What Blackurn is saying is that the regulations are imposing burdens on those retailers, and the the state has no legal right to do so.
I don't think that's an accurate interpretation. I believe what the judge was saying was that the law, as written, was vague and put an undue burden on out-of-state retailers. That is unconstitutional because it discriminates against a set of retailers by forcing those businesses to complete a unique burden (complex paperwork) that in-state retailers do not.
Essentially, the law was intended to create an incentive for internet retailers to collect sales tax by requiring that they complete a ridiculous procedure if they do not. That is the undue burden.
However, they cannot discriminate against out-of-state businesses. The same laws must apply to both in-state and out-of-state businesses. Unfortunately, by virtue of their business model, catalog/on-line stores must be discriminated against because they do not operate in the same manner as physical stores.
Sales tax looks like it should be charged at the physical point of the transaction. If Amazon creates a store in my living room through the magic of the internet that's a transaction that happens in my living room and should probably be subject to my state's sales tax.
Why should that count as "creating a store", when taking telephone orders or sending out mail-order catalogs doesn't?
http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us...
http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=us...
At the end of the day, it's a lot like what's happened to the recording industry. The internet disrupted a long-established model that had been built up around physical artifacts. In the case of sales tax, consumers used to spend most of their money with merchants in their own state. This made it easy to establish and enforce sales and use taxes, because the state government had jurisdiction on both parties to the sale, so they could devise a collection mechanism based around the relatively small number of merchants (as opposed to trying to track the relatively larger number of individual consumers).
In the past 1.N decades, a lot of that economic activity that used to be intra-state has become inter-state. And this has, predictably, caused a very real problem for state governments who depend heavily on those sales/use tax revenues.
Tax reform is absolutely necessary. In this case, the smartest thing is probably to abandon sales taxes in favor of higher state income taxes. The benefit there is that income taxes are more progressive anyway. But the states need to weigh the risk of capital flight.
The other, less palatable, option, is federal intervention. Unlike Colorado, the Federal government does possess the power to regulate inter-state commerce. It's possible that a bunch of states-other-than-california could get federal laws passed that would force merchants in any state to collect and disburse funds to satisfy the sales tax statutes in the purchasers' states.
That latter option would probably end up leading to bad unintended consequences.
I'd rather see the states find ways to replace the lost revenue by abandoning the sales tax and increasing income taxes.
If the states are so concerned with the competitiveness of their retailers maybe they should stop taxing them. Personally, I think retailers are just greedy and clinging to an uncompetitive business model while asking for governments to intervene (known as protectionism).