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June 30, 2011 / 74

State Sales Tax on Internet Sales

It has come to my attention that some States seek to impose a State Sales tax on all sales that occur on the internet that involve a business located in their State. For some time, I have paid sales taxes to my home State on some internet purchases. The State sales tax I pay goes to the State in which I live. I see absolutely nothing wrong with that. These sales taxes are collected by the merchant, regardless of what State they are located in, I believe through an agreement with the State. If the merchant has any physical presence in the Customer’s State, then they should be collecting sales taxes from the customers who order things from that State. If a merchant does NOT collect sales taxes from the customer for their State, then in many States the customer is supposed to pay “use” taxes (sales taxes by another name that are voluntarily paid by the purchaser in compliance with the State’s law). I have actually filed use tax returns in the past.

The big to-do in California isn’t anything new – other States have done what CA seeks to do. California is simply reclassifying merchants as “in State” (resident) sellers if they have ANY physical presence in the State AT ALL!!! Thus, Amazon.Com who has what they call “affiliates” who live and do business in CA would become legally liable for collecting CA state sales taxes on all transactions involving people in the State.

Who PAYS sales taxes? The purchaser. The merchant simply collects them from the purchaser as the agent of the State, and remits them to the State. Merchants are NOT liable for sales taxes on things they sell to others. The Purchaser is.  CA is attempting to collect sales taxes from people who are not either resident in CA, and who are not physically present in CA, which makes the sales tax collected a SELLER’S tax because the SELLER becomes liable for paying it, since the seller is the only one who has a corpus resident relationship in the State.

Amazon’s answer to the situation is to dump all of their affiliates in CA, thus eliminating their “physical presence” in CA, and thus eliminating the need to collect CA State sales taxes on purchases made by CA residents, and on sales made by their affiliates to residents from out of State. As I understand it, Amazon could still sell merchandise to people who live in CA over the internet without paying CA sales taxes on those sales. The purchasers would be liable for use taxes in their own states if their State has such a tax, but that would not involve Amazon, or require Amazon to spend untold sums keeping track of those CA sales that required sales taxes (strictly digital sales – things like E-books and software, would not require collection of CA sales taxes as long as there was no PHYSICAL material sent), or the cost of becoming a CA tax co0llector.

So at this point, if CA wants to whack off the income taxes they currently receive from the affiliates, and throw what has been estimated as 25,000 people out of work (affiliate employees and owners), I have no problem with that. I don’t live in CA and I mostly don’t have to put up with the brand of CA stupidity that we so often see from the place from such mental midgets as Jerry “Gov Moonbeam” Brown and Nancy “Wicked Witch of the West” Pelousy, to say nothing of the “World’s Most Inept Legislature”.

The basic issue here is this – there should be no taxation without representation. (Sound familiar?) If someone who lives out of State buys something from a merchant there, but doesn’t enter that State to do so, unless the tax collecting State wants to grant that customer the right to vote in CA elections, they shouldn’t be collecting taxes from them. I can guarantee you one thing – if I see an invoice on something I buy from another State that has that State’s sales taxes on it, I will a. refuse delivery, and b. never buy anything from any merchant in that State again. If OTOH I see MY State’s sales taxes on the invoice… I have NO problem with that.

How about if CA writes the sales tax law so that ALL sales subject to Sales taxes in the purchaser’s State collect and pay same, but when it’s an internet sale, the taxes must be collected for, and remitted to the State the purchaser lives in.


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