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rayiner

> Since 1998, Apple has declared all of its online sales made in California as having taken place in Cupertino.

How did anyone think that was okay, and how did it escape notice for 25 years.

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This came from an era when online purchases did not have sales tax

And yet even Amazon complied and now computes tax based on where the buyer is.

As does B&H.

Years ago (approaching, if not a decade ago).

So does Apple, for even longer than Amazon and B&H since Apple has had physical locations in most states for longer than Amazon and B&H, so they always had to remit sales tax to most states.

Uh, no? This entire article is how Apple declares all online sales to have happened in Cupertino, regardless of where the buyer is.

Amazon doesn't do that, they say the sale happened where the buyer is.

B&H does the same.

Apple says "it happened in Cupertino, so we'll pay taxes related to Cupertino and our special tax agreement with Cupertino".

That is a California specific situation that applies to California taxes and California’s local governments’ portion of those taxes. If you are in any state, Apple still collects and remits sales tax for that state.

Amazon/B&H example was that they were not collecting sales taxes in states they did not have a physical presence in, until the South Dakota Wayfair ruling.

Technically correct, but in practice if you bought something online from out of state it was subject to your state's use tax, which had the same rate as your state's sales tax.

But your state could not make the seller collect the use tax for the state so instead consumers were required to report those purchases to their state and pay the tax.

Almost no consumer did that, except for items that had to be registered like cars where the state would not allow registration if the use tax was not paid, and so the use tax was widely openly evaded.

For online purchases where the buyer and seller were in the same state the state did have the power to make the seller collect sales tax and I believe most states did.

It was pretty common though for the tax to be the sales tax at the seller's location, not the buyer's location. And not just in the US--prior to 2015 a seller in an EU country selling online to a buyer in another EU country collected their own country's VAT not the buyer's country's VAT.

A few years ago the Supreme Court in the US decided that states could make online sellers in other states collect for them. I believe it is technically use tax that is collected in this case, not sales tax, but since the rates are the same and most consumers weren't even aware of use taxes, so everybody just calls it sales tax.

the fun part: "Then under the same deal, Cupertino actually returns approximately one third of this revenue to Apple."

Boiling the frog. First online purchases were tax free, Then local governments wanted a cut. Now the state wants a cut.

This is about the state / local split. Right now California receives 6.25% and Cupertino receives 1%, regardless of where a California buyer lives, the processing location, or the point of purchase.

If you're going to have sales taxes (or consumption taxes in general) at all, it makes no sense for them not to apply to online purchases. That situation was only in place for a brief time because of a weird interpretation of Constitutional law which would never have been made had internet commerce existed at the scale it does now. This isn't "the terrifying creeping overreach of government", this is "sales taxes working how they're obviously supposed to."

It would be preferable if the government held the buyer responsible for paying sales taxes.

Moving everything to electronic payments should make this possible. Then it would be even possible to implement marginal sales taxes, so that you are progressively taxing consumption. Which would make it impossible to avoid taxes by being so wealthy that you can take a loan out to fund your lifestyle and hence not have to pay income taxes.

Any tax needs to balance how nice and efficient it is on paper with how practical it is to collect in the real world.. Replacing both income and capital gains taxes with a single wealth tax would be theoretically most efficient and incentive-aligned, but wealth taxes are extremely difficult to administer in real life, so we don't do them and instead have income and capital gains taxes as an imperfect but easy-to-collect proxy.

It's the same thing with "buyer-reported sales taxes": nice in theory, impossible in practice (note that this isn't a hypothetical: as others have mentioned in the thread, before sales taxes were extended to internet purchases you were supposed to report internet purchases as use taxes, which approximately nobody did).

Right, but with electronic payments, total purchase amounts can be reported to the government, just like income is reported now.

And you do not have to worry about figuring out valuations of a million different kinds of wealth or who owns what. A much simpler formula for taxation, you spend up to $x, tax rate is y%, and so on and so forth.

> you were supposed to report internet purchases as use taxes, which approximately nobody did

There was an article on here a few days ago about someone trying to do so and no one at the state tax office could figure out what was actually needed for them to do so.

There is a place to do that on your state income taxes at the end of the year. I'm not sure how no one at the state tax office would not know that, they have an easy to understand website. Alternatively, you can report it directly to them.

https://www.cdtfa.ca.gov/taxes-and-fees/use-tax.htm#Overview

Not all states have income tax

Sorry, it was an article about California, figured that was what we were talking about

fair enough, as a Washingtonian I sometimes forget that others have to deal with state income tax, definitely makes sense it'd just be part of yearly tax paperwork you already have to do.

From a quick google I think a lot of the additional confusion is the mix of Use/Sales tax when they mostly (as a customer) have the same meaning but for a tax authority have different meaning, searching for "Washington how to declare sales tax" turns up a bunch of random stuff about regulations for retailers showing sales tax correctly, if you search for "Washington how to declare use tax" actually brings up the correct documents from the state, I can def see some bureaucrat not connecting that that's what was actually meant.

only sedated and braindead frogs stay in the slowly boiling pot, check the source for that idiom

TBH, that reinforces the idiom.

Stupid question, but why should a state get sales tax for something bought online?

I guess the idea of sales tax is that the sales was facilitated by the state through things like roads and infrastructure. But is it true for online sales? It's certainly less true than something I buy downtown main Street. So what gives?

If you want the gory details here's the Supreme Courts opinion in the case that allowed it: South Dakota v. Wayfar, Inc., et al. [1].

[1] https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf

The answer is because the Sales tax is formally the Sales and Use tax. The tax is generally on the use of a purchase, which is facilitated by the services of the State beyond just the sale. It's collected at point of sale as that's easiest. If not collected at point of sale, it's still due as a Use tax.

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