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EDITOR OF REDSTATE

Congressional Republicans Conspiring With Liberals Behind Closed Doors to Raise Taxes

By: Erick Erickson (Diary)  |  July 19th, 2012 at 04:45 AM  | 

RESIZE: AAA

“Instead of downsizing, states have decided to just look for a new tax scheme to fund the leviathan. They see online sales as the way to go. iTunes downloads will be next. Congressional Republicans are helping.”

Congressional Republicans led by Senator Mike Enzi of Wyoming have begun negotiating behind closed doors with liberals like Senator Dick Durbin of Illinois to raise Americans’ taxes. They introduced their internet tax as an amendment to a Senate small business bill, but that bill stalled. Now they are confident they can sneak the internet tax into a lame duck session of Congress, just in time for Christmas shopping.

The tax sounds innocuous enough. The tax is hiding under legislation called the Marketplace Fairness Act. The Act purportedly just harmonizes state laws so internet sales are also taxed. After all, it is not fair that Amazon does not charge all its customers sales taxes. It puts them at a competitive advantage over mom and pop shops.

Heck, I don’t shop online to avoid sales taxes. I do so for convenience and because I hate people and don’t want to interact with people in a store. (kind of kidding) I don’t really care if I have to pay sales taxes online. It just sounds so fair.

As we’ve learned from Barack Obama, beware politicians peddling fairness. Republicans doing this are about to open a pandoras box and, behind closed doors, they admit they know it. Are you ready for your downloads from iTunes to be taxed?

The nation has thus far successfully shielded the internet from Washington taxation and regulation for decades, and the Marketplace Fairness Act would break the floodgates open. Even more troubling, the Marketplace Fairness Act establishes a pretty solid precedent that the federal government can step in to regulate state tax policy. After all, this legislation attempts to exert federal regulatory power over state internet tax policy with state complicity.

Once Congress has opened the pandoras box of federally authorized internet sales taxes, it is only one step away from taxing internet downloads, not just goods purchased online.

But here’s the other troubling thing. The Marketplace Fairness Act, for the first time, establishes a national sales tax. It does so by hiding behind the states. They told us the individual mandate wasn’t a federal tax either.

Here’s the situation. As you may know, the Supreme Court has long held that a business has to have some physical nexus in a state to be subject to sales tax collections — an storefront, distribution center, etc. This is based on the fundamental principle of no taxation without representation.

States have tried to weasel their way around this, but each state taxes goods in different ways. Some taxes, for example, don’t tax baked goods, but do tax candies, even if made in a bakery. So your cake is not taxed, but if you buy fudge at the bakery it is. And it’s not just states, there are over 7,500 different local tax systems, many with special tax holidays or exemptions for different products. Trying to move these varied tax systems to the internet would drive up the burdens of businesses online by forcing compliance with the various taxing schemes of 50 states.

That actually puts a heavier burden on online vendors than brick & mortar local vendors, who only have to comply with the taxes of the state they reside in. Then there are the compliance costs. How does a candy company in Georgia that sells fudge to someone living in Iowa handle a tax dispute with Iowa tax authorities?

MFA would destroy the concept of states as laboratories of democracy that allow businesses to move between states based on better business environments. Today, a business located in New Hampshire charges no sales tax, but if MFA passes, overnight they could be forced to collect taxes for dozens of states with no escape.

Now, let me explain what is really going on here. States have grown huge and bureaucratic. Instead of downsizing and becoming more efficient, states have decided to just look for a new tax scheme to fund the leviathan. They see online sales as the way to go. iTunes downloads will be next. Congressional Republicans are helping.

But consider that there is a carve out for businesses that sell less than $500,000.00 a year online. As Senator Jim DeMint notes this is a pretty good admission that the law will be a burden on businesses.

Proponents of MFA also like to brag that Amazon now supports their internet tax bill after years of opposition. That’s true, but there is a simple reason why: Amazon’s future business model of same-day delivery requires them to have distribution centers in nearly every state in the nation. You see, MFA won’t affect Amazon, because like Target or Walmart expanding to every state, Amazon will be forced by current law to collect sales taxes. So of course Amazon now supports MFA, this is nothing more than a big corporation using Washington politicians to punish their competition, like the many small business sellers on Ebay.

Senator Enzi and the Republicans joining him should be ashamed that they are willing to open a new front in Congress’ quest to tax everything. The Marketplace Fairness Act should really be called the Marketplace Fleecing Act.

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COMMENTS

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  • bluemount

    They will be considered thusly: “they passed taxes on the middle class” by Democrats and BHO and they will never again be seen as tax cutters. Democrats are very good at spinning the message, especially with MSM on their side.

  • olliek

    The American people are headed for a showdown with the government and government unions due to their insatiable appetite to suck ever more tax dollars out of the 50% that actually pay taxes. The Makers versus the Takers

  • mikeymike143

    and shame on any republican who is supporting this bill.

  • jakeofalltrades

    Instead of requiring retailers to serve as tax-collecting arms of the cyberstate, just make them disclose the date, dollar value, address, and addressee of all sales of movable goods shipped to any state on an annual basis. That would allow states to enforce the decades-old use taxes that are ubiquitously violated by practically everyone who has ever purchased something online in this country.

  • willbone87

    An important post that does a very good job of highlighting this pending “Republican” capitulation to redistributionism.

    I would add that Mr. Erickson could also have highlighted the flawed idea that the lack of collection by out of state businesses is somehow due to their flaunting of the rule of law. Truth be told, consumers that buy stuff on the internet sales tax free are supposed to report these sales on their state income tax under the use tax collection area if their states have a sales tax and income tax. (If their states do not have an income tax, then their is a form to self-report.)

    If consumers are disregarding the law, then states should take action against the lawbreakers, not pass the buck to some distant company in a potentially far away state and get them to do their dirty work.

    The Enzi bill reminds me of the successful business man turned government bureaucrat (sorry, can’t recall the name) in the 1940s who came up with the idea of businesses “withholding” income tax from taxpayers and remitting to the government. Sheer liberal genius. It has worked very well and hides the true cost of taxes quite nicely.

    Finally, note the utter lack of humility on the part of the states. “It is our money and we want it.” I look forward to the conservative leader who will challenge these states to negotiate in good faith on this issue. At a minimum, they should be forced to defend the ever increasing sales tax burden they impose upon their citizens. Truthfully, they should be forced to reduce this burden (i.e. cut their sales tax rate) in addition to heightened enforcement of their use taxes and keep their dirty hands out of the pockets of out of state businesses.

    But when is the last time you read about a state that actually cut its state sales tax?

  • funwithknives

    of contact with a war had anything positive to say about it.
    Be it warriors, family, or just The Citizenry involved, it’s nothing but a loser.
    No American likes or admires a loser. So That works in Our favor.

    If what you {and depressingly, Me, on some days and occasions} fear comes to pass, It Must be Peaceable Citizens , working in self-defence., that ‘take the first hit’.
    Then, and only then, do the gloves come off.

    But first, we’ve got Novemember to work on. What you bring up ,shows the consequences of inaction and poor leadership, at it’s end point. This could very well be the last gasp.
    Call our circumstances ‘dire’, and it’s pretty well spot-on…….

    Remember Erick’s Bridge, and all who stand with him.
    We can do this………

  • midwestmike

    This clown tries this and I guarantee you the Tea Party will see this fool is sent packing. Rather have a Socialist you know is a thief than a Republican you can’t trust.

  • spolson

    I would like a list of their names for my bulletin wall. Americans forget real quick. We need constant reminders of who is with us and who is a gin us.

  • http://www.redstate.com/wp-admin/user/profile.php docfreeman

    I am tired of listening to Obama peddling fairness to all. What it really is Marxism and I live in America not WWII Germany. I do not want to go back in time I want to stay in the future where America became a super power. All Senator Enzi and Durbin want to do is come up with new taxes which will destroy the free market. Congress is working on destroying one thing in life that all can use and enjoy. First it will tax on purchases, then it will tax on your service, then it will tax on how long you?re on your computer, then it will tax because you might use the internet, then it will be a tax like Social Security where everyone pays but not everyone will have any benefits from it. The Congress of the United States of America is trying to tax Americans to past death so they can spend more money, make their big donors happy, so they can get more campaign contributions, so they can make more money. That is why Congress has such a low approval rating they are not working for America they are working for themselves.

    You had better hope this does NOT make it into law. President Ronald Reagan was right, – The government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.

    The problem is not that people are taxed too little the problem is that GOVERNMENT SPENDS TOO MUCH.
    Ronald Reagan

    “You cannot help the poor by destroying the rich. You cannot strengthen the weak by weakening the strong.
    You cannot bring about prosperity by discouraging thrift. You cannot lift the wage earner up by pulling the wage payer down. You cannot further the brotherhood of man by inciting class hatred. You cannot build character and courage
    by taking away people’s initiative and independence. You cannot help people permanently by doing for them,
    what they could and should do for themselves.” – Abraham Lincoln

    Man is not free unless government is limited.
    Ronald Reagan

    Ronald Reagan-
    Politics I supposed to be the second-oldest profession. I have come to realize that it bears a very close resemblance to the first. Now that Obama and the 2011th Congress is in charge they have been become one and the American Tax Payer is getting screwed royally.

  • walkerspeakz

    And we’ve got to work really hard to get these Rinos out of office.

  • skorrent1

    Between internet sales sites and mail-order houses, who have operated for decades without collecting sales tax except in their home state. Instead of an “advantage” over in-state competition, mail-order and internet sales offer the consumer an option: “Buy from us and you avoid sales tax, but you must pay postage” (or “shipping and handling charge” as they put it). Imposing a sales tax on everyone places remote sellers at a distinct disadvantage, as they must continue to charge for S&H.

    Lots of small businesses start as remote sellers. Some grow to be big businesses. Many more are able to do so now that internet advertising is so much less expensive than mailers. If the GOP really favors the opportunity to start a small business, then they should oppose the imposition of sales taxes on remote sales. An exemption for small businesses just imposes another impediment to growth like the myriad “more than 50 employees” type laws.

  • jpmhofct

    If congressional Republicans are working with Durbin and the “TAX AND SPEND” Democrats to raise taxes they aree definately RINO.
    This November it will be almost as important to elect as many ) “conservatives” from both parties ( if there are any Conservastive democrats remaining) as it i9s to defeat Obama.

    There are also the idiot Republican organizations that are joining the Democrats calling for more tax filings from Romney so as to muddy the waters eith their dirty tricks by hoping to find something they can use to get their base excited and maybe even cause independaznts to question whether Romney is the best candidate. Hopefully , Romney’s campaign will get angry enough with thje Bain “LIES” to force “VETTING” obama’s secrets,radical history, dirty tricks campaigns, criminal cohorts and Presaidential misrepresentations et al. I don’t believe we have ever had as dishonest a President even Nixon was not as polific a liar or damaging to America’s way of life.

  • acat

    At their height, Sears catalog sales (at one point carrying everything from a cradle to a headstone for your grave, including houses!) were a drop in the bucket compared to today’s internet ordering.

    An online (or catalog) business does face S&H costs, but .. they also don’t face the cost of operating a physical storefront, they can operate out of an old warehouse in a bad neighborhood, in an otherwise empty pole barn on the farm, or in a garage or basement ..

    Further, even under the mail-order model, the customer is *supposed* to be paying sales taxes… every State that has a sales tax has a recapture form.

    Historically, this re-capture has largely been on the honor system because, again, the volume was small, and the paperwork of a company in one State reporting to a company in another State was considered unnecessarily arduous.

    The “arduous” argument goes out the window with the internet and tax databases provided by companies such as Vertex… although standards are still needed to determine whether the sales tax should be collected at the point of sale (customer address) or the point of use (delivery address) …

    My concern is that we’re going to end up with the Federal government over-involved, and something like a VAT-by-another-name.

    Mew

  • http://www.thedumbdog.com xcergy

    NC tried that, and it was struck down by the courts as a privacy issue. Bad idea anyway. The goal is to reduce paperwork, not increase it, and your idea would be more costly in compliance than tax collection itself.

  • justperhaps45

    Utterly politically destroy the leaders. Make them such pariahs that they would be radioactive on an unpaid advisory board?s staff. Damage the fellow travelers to the point that their blood pressure will spike at the passing thought of a new or ?improved? tax. Make sure that their supporters know how the unintended and direct consequences effect them, MAKE IT PERSONAL.

    Progressives, Liberals, Socialist, Nazis consider it fair when others pay more.

    Fair is actually when each pays for what they get. It is unlikely that any tax can be purely fair so the goal is to make taxes lower than the total value of services, and then charge user fees to pay for direct benefits and levy balanced taxes only to cover the necessary expenses where personal charges cannot be clearly defined. It?s a value / responsibility balance thing.

    HOUSTON, WE HAVE A SPENDING PROBLEM.

  • http://www.thedumbdog.com xcergy

    This is not a new tax. You buy online, you owe Use Tax. The bill wants to shift tax collection from the buyer to the retailer.

    The article has some inaccuracies. First, there is no Federal Sales Tax. Read the bill. There is no wording in the Bill that gives the Fed any taxing authority. Second, the article claims 7500 tax districts. Old data, that number is near 11000 in 2012. Finally, MFA has an exemption level of $1M, not $500K as the author claims.

  • plwinteregg

    to support this. Their business plan is to totally dominate the distribution (and sales) online. They are doing all they can to force small online businesses like mine to either use Amazon for sales and/or distribution, or to go out of business all together. Over the last couple of years online sales for Amazon, the other online marketplaces, and the big box stores have increased at twice the rate of the rest of online sales by small merchants. By pushing for the internet tax, they will push small online merchants ever closer to either joining them or die. Small merchants simply will not be able to cope. Free-market competition online will take a major hit.

    Another ludicrous aspect of this for which Republicans in particular should be ashamed is to somehow deny this is a tax increase or that it will not have a negative impact on business growth. This will REDUCE competition, not increase it, and it most likely will have a negative impact on tax revenues by suppressing business activity and taking even more money out of an already weak economy. If it is not helpful to raise income taxes, capital gains, etc., then it is not helpful to raise sales taxes.

    You are very right to point out that states should be careful for what they ask for. The precedent of ceding states rights and authority is a very dangerous slippery slope indeed.

  • acat

    The taxes are already owed, the problem is the number of tax dodgers…. saying this is a “tax increase” is untrue.

    You’re right that this will be easier for a monster like Amazon to deal with compared to a small mom-and-pop .. but that’s true of any regulatory change – the bigger companies have many advantages.

    What alternate solution do you see? I suppose States could raise income taxes or property taxes to compensate for dodged sales tax revenues… but that truly would be a tax increase.

    Mew

  • plwinteregg

    Someone always comes up with a better mousetrap, and we all benefit. If Mailorder and/or Internet sales do so more efficiently, then the consumer benefits. And while there may be some programs that might be able to help medium to large businesses at least figure out how much to charge, no one has yet figured out how to deal with the incredible paperwork burden created. Ask anyone who actually runs an internet business–especially a small one–and they’ll tell you that these types of programs are much more difficult to integrate than anyone would have you believe.

    I own a small internet business–I have enough regulations, compliance issues, and paperwork already. Give me more, and my costs go up and/or I simply don’t have enough time to actually run my business.

  • acat

    to dodge taxes.

    Do you think that model will work indefinitely?

    Mew

  • plwinteregg

    States may claim a buyer has a tax due on purchases made on out-of-state transactions, but that is on thin ice constitutionally and has only been upheld by jumping through some creative legal hoops. As a merchant, I don’t owe the taxes–the only state that has jurisdiction over me for that issue is my own.

    My bigger point is that this is a very flawed and dangerous precedent, and one that for many parties is not motivated by ‘fairness’, but just the opposite.

    Until the Constitution itself is changed, there is no easy answer.

    The problem here is that the states are struggling to maintain an archaic taxation method in a 21st century world. Rather than give up sovereignty and suppress free market innovation and growth, they should instead look for better ways to increase revenue.

    I have a hint–its called increase economic activity. 98% of my revenue comes from out-of-state. So although my state collects very little in sales taxes on my sales, 98% of every dollar I spend in facilities, maintenance, payroll, supplies, etc is new money being pumped into the local economy.

    States should stop their belly-aching and instead figure out how to encourage businesses like mine. If they can ensure more of the interstate commerce money is flowing in to their state instead of out, they will have increased their overall economic activity and tax revenues.

  • plwinteregg

    …the states need to update their taxing models to match a new 21st century world. And by the way, I find it very objectionable to imply that any of my motivation is to help folks “dodge” taxes. Especially since this is not a universal problem (not all states demand this type of payment). I am a guy trying to put food on my table, in spite of the immense efforts by our government to keep me from doing so.

    Instead of trying to force a 21st century economy into an 19th century tax collecting model, perhaps they need to find a more efficient method.

  • http://redpillreport.net/ RedPillReport

    Tax and spend Republicans are no better than tax and spend Democrats. More taxes are NOT the answer. Trimming the out of control fat IS the answer. I don’t care which party you belong to, if you’re not willing to address the real issues, I will work to retire you.

  • tnfriendofcoal101368

    He is not saying your motivation is to help people dodge taxes but that in it’s current form; people use internet based purchasing to dodge paying taxes (i.e. it is a customer motivation, not yours). The inevitable results are you have a large group of sales nationally that is essentially untaxed. Out of my own best interest, I’ll be fighting for taxes to be as close to 0 as possible. The point about the model isn’t going to be sustainable is more that the various levels of government aren’t going to allow that to happen forever. It’s more than likely a matter of time, how and who.

    I’d rather it not be the IRS who pounds on plwinteregg’s door and says “Pay me”. If not the IRS, then what system needs to be in place to collect the taxes? As a small business owner what would a 21st century model look like? How does it need to be implemented to reduce impact to you? I don’t know because I’m not a small business internet owner, but if and when the “internet sales tax collection” becomes a reality…I’ll write my congressman and senators every day to make it as less intrusive as it can be.

    I just need small business owners like you to tell me what I need to be fighting for.

  • celador2

    If there s a tax hike in the lame duck session and Republicans are involived, the new crop of tea party Senators sworn January 2013 can repeal it.

    Enough of that!

  • acat

    States are *constitutionally* allowed to tax almost anything other than voting.

    Oregon chooses to not have a sales tax, but instead have a hefty property and income tax, and that’s their call.

    Washington chooses to have a hefty property and sales tax, but no income tax, and that’s *their* call.

    It’s not a *bug*, it’s a *feature* … States are the laboratories of democracy, and they should all be able to make different choices, based on the will of their citizens.

    The problem here is that your customers are cheating the system, not that the system is broken.

    Mew

  • spoasteph97

    What about drafting Cynthia Lummis to primary challenge him?

    She was noted as one of Jeff Flake’s fellow anti-spending appropriators:

    http://washingtonexaminer.com/politics/2011/04/gop-anti-appropriators-break-spending-party

  • plwinteregg

    …but not the second. Folks may be refusing to report their purchases to pay a ‘Usage’ tax (again, not a problem in all states), but the mere fact we are having this conversation is proof that the system doesn’t work.

    Instead of continuing to spit into the wind, states should instead look for more realistic ways to boost their revenues. And before anyone goes berserk, I’m not talking about raising tax rates elsewhere. Instead they should first look at whether they have a business environment in their state that encourages business development or if there are areas for improvement.

    Second, concerning their taxes, they should look at whether their current methods are effective, efficient, and “do no harm” economically. If any of those are not true, then it is time for an overhaul.

    Bottom line, it generally is true that once you get to a certain level of tax rates, increased economic activity that raises revenues (regardless of taxation method), not increased rates.

  • plwinteregg

    …their sole, main, or overriding consideration to buy online is to avoid paying taxes. It may play into the mix, but for the majority of buyers it is all about availability, convenience, selection, and overall price (of which taxes play only a very small role). Having said that, you are correct that for those states who have such a thing (not all do), nearly everyone refuses to report or pay “usage” taxes on their interstate sales.

    First, focus on encouraging economic activity in your state. The old phrase that “rising water floats all boats” has a lot of validity. Improve your business environment, and you’ll increase your tax revenues.

    Remember also that increasing tax revenues does not always mean raising rates–and for me specifically this is always true. If interstate sales is an activity for which you cannot directly tax, then find ways to improve your take of interstate sales.

    The problem is that our current Constitution and Federal setup doesn’t really allow an easy solution. Eric is correct in assessing the severe damage to states’ sovereignty and rights that could result by beginning to tread down this path.

    One more thought about being efficient. Most of our tax structures–federal, state, income, property, sales, etc are far too complex and create a huge financial loss to our local and national economies in paperwork, time, and other compliance costs. If simple, straight-forward rates were used–regardless of the tax types–then this hidden cost that you pay for in every product you buy would go away, lowering prices and further increasing economic activity. Get rid of all of the exceptions, exemptions, etc., and stop trying to control the behavior of both citizens and businesses, you’ll be able to charge a far lower rate and increase revenue (through an improved economy) at the same time.

  • acat

    and not seriously looking at shaping the conversation so that sales taxes can be collected in, as you put it, a “minimal harm” way.

    The worst-case scenario that I see is, instead of a patchwork of State sales taxes, you’ll be collecting a Federal sales tax. It may be more “efficient”, but it’s a killer long-term because it increases the power in D.C. exponentially.

    Further, your entire argument appears based on government making intelligent choices. I do not recall this event happening more than once or twice a year, on average, in my lifetime … and that average includes the Reagan era.

    Mew

  • votejoel

    http://en.wikipedia.org/wiki/Quill_Corp._v._North_Dakota

    This may help. I used to order office supplies form Quill years ago. That was back before the local office superstore.

    BTW: I do pay Texas tax on iTunes downloads.And I used to order a TON from Amazon, but now they are collecting Texas sales tax, I’ll just order books.

  • From ME to You

    mt

  • tnfriendofcoal101368

  • citizenjerry

    These go-along-to-get-along Republicans need to be named and shamed — then removed in November.

  • Viet71

    Why a joke? Because of the U.S. underground economy. Start with ebay, which is out in the open. Move to the electrician who does off-the-books code work for cash. Move next to farmers markets and barter transactions.

    The tax avoidance here — income and sales — is enough to pay for your favorite pet project, be it health care, the F-35, whatever.

    Tax proposals are all a joke given the real economy.

    The joke is on those who pay and watch their tax dollars wasted.

  • acat

    Skipping out on sales taxes results in a lower *price* … and that’s what people shop online for… the savings.

    5% sales tax on a $100 DeWalt cordless drill (the 18v contractor-grade one, not the cheap residential-grade one…) means it’s at least $105 at the local Home Depot.

    Same drill is $100 on Amazon.com if I take the free shipping option, and that $5 means I get to have lunch at someplace where the ketchup is in a glass bottle, not little packets doled out by a pimply-faced youth …

    The rest of your post, since you don’t say a thing about how you want to fix it, is just noise.

    Mew

    p.s. for someone operating an internet business, you sure don’t know your customers very well…

  • Bill S

    You must have flunked math, pal. Let’s assume one is buying a $1000 LED TV from Amazon. If the retail price is the same as the local Best Buy, I’m saving around $85 in sales tax by shopping at Amazon. My Prime membership gets me 2nd day delivery, and I’ll take that trade off for upwards of a hundred bucks savings on a big ticket item.

  • davenj1

    The lower price, generally being determined by the lack of sales tax, IS a major reason shop online. Do I want to pay $100 for something delivered to my door or pay $107 for something that I have to drive to a store to get? As someone said, either you flunked math or you don’t understand human behavior.

  • plwinteregg

    You are assuming the price at both retail opportunities start out the same. They actually rarely do. Often the online retailer is already at a lower price due to the greater efficiencies of that retail model. While the lack of a sales tax may compound this issue, the real underlying purpose for folks to buy from us are due to the other advantages including the underlying price benefit that comes from buying online. There are states with no sales tax, and I’ll guarantee you will not see a significant difference in online-to-physical stores sale ratio in those states. Some of our best sales are in non-sales tax states.

    So if avoidance of the sales tax is the single primary motivator of why you buy online, you are probably in the majority, or live in a state with one heck of a sales tax rate.

  • plwinteregg

    You’ll see that you are purchasing at not the same price, but actually at a lower price. Amazon doesn’t give away shipping, they simply build it into the price structure and use “free” shipping as a marketing gimmick. You are buying online because Amazon uses the efficiencies of online marketing to offer you a lower price. The lack of sales tax only compounds the issue for folks who live in a state that has a sales tax, and from your example a fairly high one, at that.

  • plwinteregg

    …it is the overall price that is often the prime motivator, but this is rarely determined by just the sales tax. Online prices are usually less than the brick-n-mortar store to begin with. Add to that the convenience of shopping at home (no gas) and other issues such as greater selection and folks have a wide range of reasons to shop online. Sales tax is rarely the single motivating factor.

  • plwinteregg

    …I favor consumption taxes as opposed to income or property taxes. If kept simple, they are the easiest to collect and the least intrusive on our private affairs. I am a US citizen, born and raised here, but did spend a few years overseas in a country with a fairly simple consumption/sales type tax. The freeing effect it had on everyday life was impressive. And the government had little knowledge of or ability to intrude on how I lived my life.

    And I agree with Eric, this State issue should not be handled at the Federal level…it cedes too much sovereignty.

    But man you are right, our governments rarely seem to get it right–which is why we’re in this conundrum do begin with!

  • acat

    You’ve said it’s “a small factor”, so .. what’s the problem?

    Your price will still be lower… right?

    Mew

  • azred

    According to http://www.govtrack.us/congress/bills/112/s1832
    the exemption is $500,000.

    “(c) Small Seller Exception- A State shall be authorized to require a remote seller, or a single or consolidated provider acting on behalf of a remote seller, to collect sales or use tax under this Act if the remote seller has gross annual receipts in total remote sales in the United States in the preceding calendar year exceeding $500,000. For purposes of determining whether the threshold in this subsection is met, the sales of all persons related within the meaning of subsections (b) and (c) of section 267 or section 707(b)(1) of the Internal Revenue Code of 1986 shall be aggregated.”

  • acat

    make it to the States who are owed it?

    Mew

  • azred

    The nightmare for the small site owner that is a middle man (“or a single or consolidated provider acting on behalf of a remote seller”) so to speak for multiple vendors that don’t have their own site. He now is required to collect and report under this legislation as opposed to the individual vendors. And ensure his taxes rates and eligibility are current with the ever changing landscape of state sales taxes.

    His costs go up (nothing to do with the tax revenue itself) via software, services and filing, reporting and maintenance costs (to up to 43 entities – if held only to a state level, or worse if down to a muni level). It’s bad enough when a small guy has to deal with the one local tax entity. Now the small guy has to deal with every state level entity!

    He has a choice to raise his costs to the vendors or prices to the customers, or eat the costs. These are compliance costs. Far and away outside the debate of whether the taxes are valid or not. The closer the total revenue is to the exemption limit, the higher the percentage of those costs are of the total operating costs.

    A $500K floor is far too low. I agree with Sen. Jim DeMint. It should be much higher to ensure it doesn’t make it that much tougher for the little guy. One more painful hurdle to throw in front of the little guy.

  • azred

    follow-up question to what?

  • acat

    your question to xcergy.

    I haven’t read the bill, so am curious about what exactly the goal is here .. is the Fed acting as tax collector for the States, are they just mandating that internet sales follow existing tax rules and pay the State (and Muni) …

    Then there’s the question of whether the buyer’s address, the seller’s address, or the delivery address is the “correct” one to recognize the sale at ..

    Mew

    p.s. Vertex has had tax rates by address down to muni scale for years… I suspect eventually Amazon and eBay will just build this into the system they offer small businesses.

  • azred

    I don’t see where the feds are creating any taxation power (though I just skimmed it). The states will have a single agency, which will be interesting to see how the munis will actually get paid.

    The address is the buyer’s address (s/b shipping since B&M stores pay the destination rate when doing a ship to sale).

    Yes Vertex has been maintaining taxability/rates tables for years. But it ain’t free (it is not attainable at current rates at a price that a annual $500K gross rev company could reach). And it still requires the item level classification be handled relating to it’s taxability in every locale nationwide. Currently, that task is only required of larger multi-state companies, and even then, only the big boys are actually in all states.

    While your point of ‘money owed to the states’ is understood, it suffers from a one size fits all compliance POV, which usually puts the little guy at a disadvantage.

  • acat

    Two points.

    First, the *very* little guys, like my associate’s wife who makes enough picking up used textbooks at yard sales and selling them thru an Amazon storefront to pay for her knitting habit, will likely be covered via that same Amazon storefront… for a somewhat higher fee. (Amazon and eBay can easily afford to work a deal with Vertex or one of their competitors, and pass the capability along, and I am now wondering just what changes Google are up to with Google Shopping…)

    Second, there’s nothing stopping the rest of the “little guys” from doing exactly the same thing .. opening an Amazon or eBay storefront… and this could be the direction Google Shopping takes as well. (who better to out-Vertex Vertex than data-master Google?)

    The downside is, of course, the overhead *will* change, and the prices *will* become less competitive. I don’t view that as all bad, though, because – being blunt – right now, the little guys are benefiting from a tax loophole that was set up specifically to let technology catch up.

    Mew