New Zealand adds 15% GST to (some) ebooks from today

[John F]

FWIW...

I was posting if you had a retail presence in CT, you had to collect sales tax; I was wrong, it looks like if you have any presence, you are supposed to collect CT sales tax. Actually, if your total sales for a year are over $2000 (an "Amazon law") in CT, you need to collect sales tax.

[pwalker8]

Originally Posted by issybird

There are now sales tax laws called, you guessed it, Amazon laws, whereby a company has to charge the applicable sales tax for the delivery address even in stars where it doesn't have a physical presence. It apples to several states and I believe involves only companies of a certain size, so that artisan cited above only had to collect for her home state.

I haven't made a big study of this, though, since there's no sales tax in my state and it's just of (limited) academic interest to me.

Those laws are currently unconstitutional according to the Supreme Court. A number of states are trying it again, with the hope that they will find a sympathetic judge and it will get past the current Supreme Court. Congress explicitly exempts online sales from sales tax.

[HarryT]

Given that an ever-increasing proportion of commerce is carried out online, excluding it from sales tax seems like an odd thing to do, in terms of tax revenue.

[Fiat_Lux]

Originally Posted by HarryT

the task of deciding the correct rate of sales tax to charge based on the customer's location, is not an insurmountable one, because innumerable retailers do precisely this.

Retailers selling from a brick and mortar store usually get the tax rate right, for customers picking up product at the store. When it comes to mailing the product, they usually manage to get the tax rate wrong. Which is why some state revenue departments have apps that calculate the appropriate tax rate for the physical location, when the correct item category is entered. However, at least one such agency does not warrant that the rate provided by their app is accurate for the location, and that the organization using it is responsible for ensuring that the correct tax rate is charged,]even if it the wrong rate is displayed by the app.

I've been in shopping centers where the property management company has drawn lines through the center, to indicate which tax district the store is in.
I think it was JCPenney that the lines went through, consequently the receipts included the address of each taxation authority, and instructions on applying for a tax refund, if the customer thought that they were overcharged. Management charged the higher of the tax rates, and split the proceeds between the two tax authorities.

[Fiat_Lux]

Originally Posted by HarryT

there seem to be innumerable resources for looking up the rate of sales tax from a ZIP code,

If they use 13 digit zip codes, then it has a fighting chance of being accurate within 1%. IE, if it claims 5.5%, the correct rate is somewhere between 4.6% and 6.4%.

so it doesn't seem like much of an issue even if the customer's location were involved.

For the United States, calculating the correct sales tax rate can be extremely complicated, due to how and where the boundary lines for the various tax districts fall. The other half of the problem is knowing which agencies that can impose sales tax, do impose it, and how much they impose, which is something that some state revenue departments appear to be unable to keep track of.

Amber

[Cinisajoy]

Originally Posted by Fiat_Lux

If they use 13 digit zip codes, then it has a fighting chance of being accurate within 1%. IE, if it claims 5.5%, the correct rate is somewhere between 4.6% and 6.4%.



For the United States, calculating the correct sales tax rate can be extremely complicated, due to how and where the boundary lines for the various tax districts fall. The other half of the problem is knowing which agencies that can impose sales tax, do impose it, and how much they impose, which is something that some state revenue departments appear to be unable to keep track of.

Amber

Not to mention there are places where you go from city, to county back to city.
Or one side of the road is city and the other is county.

[AnotherCat]

Originally Posted by BearMountainBooks

These changes are hard on us Indies and very confusing...

I know you are referring in the main to sales through the likes of Amazon and Kobo, but moving aside a bit to independents that sell soft products through their own websites to foreign purchasers in another country the following outlines a behaviour which is likely to become available to them and similar suppliers.

Large suppliers into the foreign market may decide to comply by collecting and returning the GST/VAT to the foreign country's Revenue but that never because they legally have to (unless in the unlikely case of their own country enabling its own legislation requiring their own tax residents to comply with the tax legislation of a foreign Government), but because they have other reasons such as image to their consumers, that compliant image hopefully producing a return. Therefore it is likely that the market price of the product in the foreign country will increase (in NZ's case for soft products by an amount influenced by the 15% GST, the extent of compliance and the elasticity of the market).

Therefore the sensible choice, having responsibility to its shareholders, employees, etc. of a business is to increase its own price for the product according to the change in the market but not collect it as, or return it as GST/VAT to the foreign Revenue. So, for suppliers doing this, this provides an opportunity for legally won windfall profits generated by the unenforceable tax legislation of the foreign country. Furthermore, the increase in their profits will increase their tax liability to their own country's revenue so increasing the social wealth of their own country (as will the increased earnings won from increased export prices)

To some extent I am surprised that NZ has taken their approach as they, unlike some other countries doing the same, pride themselves on the simplicity of their tax system for easy compliance and reduced opportunity for avoidance, and strive for that; hence, for example, their single rate GST with few exemptions (financial transactions and second hand goods being the main ones).

While there is an obvious concern about tax leakage due these cross border transactions the approach has resulted in increased complexity for foreign suppliers that choose to comply, a situation where it is unlikely that foreign suppliers can ever be audited or compliance enforced in law (nor perhaps even information collected where a tax information sharing agreement exists between the two Governments), and probably much freedom for those that choose not to comply to win windfall profits legally to the extent that the market price moves upwards.

In all, it does look to me that a good part of NZ's action is actually a publicity stunt of a "calming the natives" nature (as I mentioned was the informally expressed view of a tax specialist).

[Little.Egret]

Originally Posted by HarryT

I'm sorry, but you've slightly lost me. Retailers who have a presence in a state have to charge sales tax. True? Plainly, that being the case, the task of deciding the correct rate of sales tax to charge based on the customer's location, is not an insurmountable one, because innumerable retailers do precisely this.

Software is available to take account of different rates of sales tax by state, city and county and different rules for what is taxable. The EU has only 28 sets of rates and NZ only one.

But of course before Amazon (say) opens a warehouse in a state they check these matters and consider the costs.

[AnemicOak]

Originally Posted by HarryT

Thanks, Greg, I didn't know that. If one does a Google search for "US sales tax calculator", though, there seem to be innumerable resources for looking up the rate of sales tax from a ZIP code, so it doesn't seem like much of an issue even if the customer's location were involved.

The are of course software packages such as those from Vertex and Avalara, but I have no idea how costly they are. Fine I'm sure for larger retailers like Amazon, WalMart, etc, but might be tougher for smaller sellers.

Figuring out sales tax for the 9,000 - 12,000 different tax jurisdictions (number varies on if you're counting things like stadiums and convention centers which sometimes have an additional sales tax & are their own jurisdiction) isn't easy without such software. Zip codes are often split by multiple jurisdictions which may or may not have the same rate and almost every calculator I've seen provided by various states have a disclaimer that their info should be verified with the individual jurisdiction.

[sherman]

Originally Posted by AnotherCat

In all, it does look to me that a good part of NZ's action is actually a publicity stunt of a "calming the natives" nature (as I mentioned was the informally expressed view of a tax specialist).

I believe what brought the current situation to a head was Netflix entering the NZ market (hence the reason for labeling it the 'Netflix Tax'). Basically, Netflix markets to NZers, charges us in NZD, and has a content catalogue specific to NZ. Yet when they arrived, they outright stated in public that as an international company they no obligation to charge GST, so they didn't.

Needless to say, the local alternative, Lightbox (itself very new to market) cried "Hang on a minute...!!", and as they say, the rest is history.

And for those crying "They should absorb the cost rather than complain!", 15% is not an insignificant amount to absorb, especially for what I imagine could be a fairly low margin business to begin with (if you aren't a big multinational anyway).

[fjtorres]

Originally Posted by HarryT

Given that an ever-increasing proportion of commerce is carried out online, excluding it from sales tax seems like an odd thing to do, in terms of tax revenue.

The law dates to the 90's and was intended to foster widespread commercial internet use by treating internet commerce like mail order: no tax without a physical presence. This, combined with the commerce clause of the constitution and past Supreme Court precedents render most of the so-called "Amazon" laws unconstitutional: states simply do not have the power to tax out-of-state companies selling to their residents or force them to be tax collectors for the state.

Whether the state is "losing" hypothetical revenues is irrelevant.
It's not as if they *own* the residents and can charge for access to their pocketbooks, though many politicians in and out of Congress act as if they do and portray not-raising-taxes as "cutting taxes". Americans aren't that close to serfdom.
Yet.

[Fiat_Lux]

Originally Posted by fjtorres

states simply do not have the power to tax out-of-state companies selling to their residents or force them to be tax collectors for the state.

However, SCUSA has ruled that states can define what constitutes "a business presence". Which is why small businesses often refuse to attend anything in California. It simply is too easy to trigger "a business presence", even if one is on vacation.

Amber

[HarryT]

Originally Posted by fjtorres

Whether the state is "losing" hypothetical revenues is irrelevant.
It's not as if they *own* the residents and can charge for access to their pocketbooks, though many politicians in and out of Congress act as if they do and portray not-raising-taxes as "cutting taxes".

"Owning" residents isn't at all the same thing as ensuring that everyone pays fairly for sales tax. Getting back to the original topic of this thread, if a company can sell things more cheaply over the Internet simply because they don't have to charge sales tax, that gives them a commercial advantage over those who do have to charge tax. Business should be a level playing field, at least as far as taxation.

[Apache]

Originally Posted by Cinisajoy

This is the first I had ever heard of that law. It is not well known.

Originally Posted by HarryT

Well, now you do know and you'll have the pleasure of paying it.

In Georgia Sales and Use Tax is a Division of the Department of Revenue.
Apache

[Fiat_Lux]

Originally Posted by AnemicOak

Figuring out sales tax for the 9,000 - 12,000 different tax jurisdictions

I've probably left out a couple of things that theoretically can impose sales tax.
I have provided numbers, for those things which DuckDuckGo readilly provided an answer.

• State: 51 of these;
• County: 3,144 of these;
• City/Town/Village: 19,429 of these;
• Educational District: 16,210 of these;
• Fire District. There are 25,947 fire departments;
• Transporation District. 9,296 (^1) of these
• Water and Sewage Districts: 54,000 of these;
• Convention District;
• Historical District: 2,300 of these;
• Stadium District;
• Tourism Board;
• Port Authority: 183 of these;

As such, I'd suggest 12,000 is a vast underestimate of the number of different tax rates.

isn't easy without such software.

The big issue is knowing where the tax lines fall. If those lines have been accurately translated into geographical co-ordinates, and all physical addresses have also been accurately translated into geographical co-ordinates, then a simple database is all that is needed.

The usual case is that neither tax lines, nor physical addresses have been accurately translated into geographical co-ordinates.

^1: This is the highest 4 digit NTDID I could find. I'm not sure if these numbers are sequentially issued.

Amber