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Old 06-30-2011, 02:52 PM   #31
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Originally Posted by taustin View Post
If it's a federal tax, the federal government collects it. And the states don't get any of it. This does not help the states.
Not necessarily. Tax could be collected federally as distributed proportionally. There are lots of ways to do things better, but jurisdictional bickering will always mess them up.
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Old 06-30-2011, 02:57 PM   #32
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You don't need a federal tax; you just need a federal law requiring out-of-state businesses to collect sales taxes on products sold in other states. A bill like this has been floating around in congress for ten years of so, but it never gets much traction.
That's because such laws were ruled unconstitutional decades ago, when mail order (and that's what buying physical products off the internet is) was big business. There's nothing new, legally, to explore there.
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Old 06-30-2011, 02:59 PM   #33
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My wife made a 90 dollar Amazon order on June 28 (we live in California), and we were charged 39 cents of sales tax. So somehow we paid tax on one item.
California doesn't (last I knew, anyway) collect sales tax if no physical product changes hands. So ebooks are non-taxable. The other possibility is that one item was bought not from Amazon, but through Amazon, but from a reseller who is in California. (Though I thought Amazon had a fulfillment center in California, and charge sales tax to all California residents anyway. Apparently not.)
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Old 06-30-2011, 03:01 PM   #34
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Not necessarily. Tax could be collected federally as distributed proportionally.
Which is to say, the feds would keep it all, and perhaps dole a tiny bit out to states that provide political support to the current administration.

Yeah, that's gonna fly.
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Old 06-30-2011, 03:51 PM   #35
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I live in New York and I pay tax on all Amazon purchases. I thought this was because of the same law that California is now passing. I wonder why Amazon didn't just shut down the affiliates program in New York, as they did in other states, according to the article?

eP
The U.S. Supreme Court ruled that businesses that don't have a physical presence in a state cannot be forced by that state to collect their taxes. This would be a violation of the inter-state commerce clause which is the jurisdiction of Congress. New York passed a law that basically said if a company like Amazon had "affiliates" who were located in the state then those independent businesses were deemed as part of the Amazon Corporation and thus Amazon would now be required to pay New York sales tax. Amazon thought this was beyond ridiculous. Amazon uses UPS to ship items, but just because UPS has a presence in a state it doesn't mean that now so does Amazon. Amazon also might hire a New York firm for an advertising campaign but that doesn't mean Amazon now has a New York presence. Paying some independent website to send them business shouldn't mean Amazon now has a presence in the state either. Ultimately, Amazon decided to sue the State of New York over this law, however they did start collecting the taxes, BUT they are putting those payments into an escrow account. They are NOT paying New York the tax unless the courts force them to do so. If I had to wager I'd bet on Amazon on this one.

Other states started passing similar laws as New York. Amazon could have charged tax to everyone in those states as well, but instead they took a different tack. They just canceled their affiliate programs with those states. No expensive lawsuits and no burdensome taxes. Problem solved.

The state of Tennessee might have a stronger argument in court. In their case they were going to tax Amazon because Amazon had two distribution centers in the state and plans to build three more. Tennessee said this was a "physical presence" so Amazon needed to charge sales tax. Amazon's position was the warehouses were not a "retail presence" that would require them to collect taxes from Tennesseans. I think Amazon may lose this case, and apparently so does Amazon, because they eventually decided it would just be best to cancel their expansion plans and leave the state of Tennessee all together. So Tennessee is losing thousands of jobs and millions in investment from Amazon.

If you set up a retail store in a state you have to collect taxes in that state. If you have a catalog, mail order, or internet business that doesn't reside in that state you shouldn't have to collect taxes. If you have a distribution center that could go either way -- but the state should treat all businesses the same (most multinationals with warehouses but no retail presence do NOT collect taxes for the state where they just have warehouses).

The smartest thing would be for the U.S. Congress to level the playing field. They could pass a law that would require companies to collect taxes for the state to which they are shipping the item. Each state would set its own tax rate and it wouldn't be too burdensome for a business to consult a table of 50 different tax rates.

Last edited by Daithi; 06-30-2011 at 03:55 PM.
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Old 06-30-2011, 04:06 PM   #36
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Originally Posted by Daithi View Post
The smartest thing would be for the U.S. Congress to level the playing field. They could pass a law that would require companies to collect taxes for the state to which they are shipping the item. Each state would set its own tax rate and it wouldn't be too burdensome for a business to consult a table of 50 different tax rates.
or pass a law that says the transactions occur in the state in which the company resides. then companies could just be responsible for the sales tax owed to the state they reside in just like physical retailers. i would have to collect the Oregon state tax from whomever visited my store- be they from in state, out of state or even out of country- and consumers could decide where they want to shop.
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Old 06-30-2011, 04:12 PM   #37
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or pass a law that says the transactions occur in the state in which the company resides. then companies could just be responsible for the sales tax owed to the state they reside in just like physical retailers. i would have to collect the Oregon state tax from whomever visited my store- be they from in state, out of state or even out of country- and consumers could decide where they want to shop.
Which would immediately make Oregon (or any other state devoid of sales tax) a desirable location for doing business.

Is that a good thing? I don’t know, it’s obviously good for Oregon but is it good for the consumer? The number of variables involved hurt my brain!
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Old 06-30-2011, 04:37 PM   #38
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or pass a law that says the transactions occur in the state in which the company resides. then companies could just be responsible for the sales tax owed to the state they reside in just like physical retailers. i would have to collect the Oregon state tax from whomever visited my store- be they from in state, out of state or even out of country- and consumers could decide where they want to shop.
That's basically the way it works now. The rub is "where does the company reside". For example, Wal-Mart might be incorporated in a state that has no sales tax, so does that mean Wal-Mart shouldn't have to collect taxes at a store it has in Chicago? Or does having a physical retail location in Chicago now mean the company is residing in that state too, so it needs to collect the tax. Suppose it is just the state the company is incorporated that has to pay taxes. Then what happens if a company incorporates in NH where the company doesn't have to pay sales tax unless it has a physical presence, but then the company sets up its headquarters in Chicago. Should it now have to pay taxes to Chicago?

What about New York City where Wal-Mart has a warehouse along the docks for receiving overseas shipments, but it doesn't have any retail stores in the city. Should Wal-Mart be paying sales taxes to NYC for items bought outside of the city because of those warehouses?
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Old 06-30-2011, 04:50 PM   #39
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right. which is why I think it should be clarified by federal statute for businesses BUT I think it should be left the way it is now and in the case of on line businesses it should be clear the transaction takes place where the business people reside.

A shipping location should not be a reason to collect a sales tax. because then you might fall into the trouble of having physical stores which have to collect a sales tax from another state because they have fulfillment space there. that wouldn't make sense.

Today i don't charge you a sales tax because the item is here in my store in Oregon but I have to charge the next person Washington sales tax because I have run out of the item in the store and I will ship it from my Washington warehouse.
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Old 06-30-2011, 05:06 PM   #40
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Actually Phogg's earlier response ("I bet on Amazon") might be helping me understand this. It could be that at the time New York enacted their law, they were in a much stronger position financially than California is now. I guess Amazon is betting that if they strong-arm the state of California, then California will back down, since they have big problems right now.
Actually, what Amazon did is pick New York to fight it out with. Every other state they cancelled affiliates, but in New York's case they instead decided to push the issue into the courts, and they could only do that if they retained the NY affiliates.

This isn't a question of who is right and who is wrong. In fact it is settled law and Amazon is correct. Quill Corp v. North Dakota settled this question way back when, over mail order business.

The company must have a "substantial nexus" in order to come under the jurisdiction of the state to mandate they collect the state's due sales tax. The court ruling left it to Congress to develop a way to create an interstate tax collection regime, which they have consistently failed to do.

The states are getting mighty upset over Congress' failure in this area, and have now resorted to passing laws they know are unconstitutional, and that they know will get overturned, in order to try to force Congress into tackling the issue.

Amazon only needs to fight this in one state, and so there is no reason for them to comply with the law in the other states, since any ruling will end up being applied to all the states when they win. I say when, because I do believe they are right, having taken the time to read the court's ruling in Quill Corp.

To say affiliates create a substantial nexus would be to say that a television station airing a commercial in Alaska, creates a substantial nexus for the Florida based seller who has no other ties to the state.

It's ludicrous and lacks even the most common sense compliance with the terms laid out by the court.
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Old 06-30-2011, 05:11 PM   #41
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Frankly, I think that the states should band together with the federal govt and set a flat use tax, that is uniform nationwide. Decide how it gets remitted, and who gets what.

And then we pass a law that requires all retailers to list the actual, out the door, final price on all items. The price listed, is the price you pay, and includes any use tax. Make an exception for shipping, but require shipping to be cost recovery, and not a profit center. Make the profits on the item price. Call it the Honesty in Pricing Act. Most European countries operate this way, as does Australia.

Businesses fight this concept here, because they want the customers to be more aware of what the taxes are. My answer, make sure you spell out what the total in taxes were on the receipt.
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Old 06-30-2011, 05:35 PM   #42
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WOW, I wonder how much that escrow account is with all of Amazon's New York sales tax in it!!! Very interesting, thanks guys.

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Old 06-30-2011, 07:07 PM   #43
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The states are getting mighty upset over Congress' failure in this area, and have now resorted to passing laws they know are unconstitutional, and that they know will get overturned, in order to try to force Congress into tackling the issue.
Too bad we don't still have a federal legislative chamber to represent the interests of the states. If the Senate still served its original purpose, this sort of thing might be more easily brought up.
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Old 06-30-2011, 08:02 PM   #44
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Some states don't have a sales tax. They'd end up being a tax collector for other states, at no pay...
Not exactly. The retailer only collects taxes in states that have a sales tax. So it doesn't matter whether a state has a sales tax or not. I.e., an Oregon retailer would have to collect sales tax on sales made in California, just like an Illinois retailer would. The tax status of the home state doesn't matter for the collecting state.

Oregon residents would continue to owe no sales tax, regardless of whether they bought the product from an in-state retailer or an internet retailer based in Calif. Cali residents would continue to pay the same sales tax regardless of whether they bought a product in Cali or from an internet retailer in Ore.

It's not entirely for no pay - my state (and I would assume all states) permits retailers to retain a small "collection allowance" (.83%, in my state) to defray the expense of collecting the taxes.
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Old 06-30-2011, 08:08 PM   #45
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or pass a law that says the transactions occur in the state in which the company resides. then companies could just be responsible for the sales tax owed to the state they reside in just like physical retailers. i would have to collect the Oregon state tax from whomever visited my store- be they from in state, out of state or even out of country- and consumers could decide where they want to shop.
But that wouldn't address the real issue at all. The real issue is that if you buy a book from a mom & pop store down the street, you have to pay your state's sales tax on that item, but if you buy the exact same item from Amazon, you *don't* have to pay sales tax. Requiring someone to pay the sales tax of a different state makes things more confusing, but it doesn't really help fix the issue.
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