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April 23, 2013 / 74

Internet Sales Tax – The Theft That Will Not Die

This post is a reprint of a couple of posts I’ve done in the past on the issuue of State Sales taxes on internet purchases. This seems to be the California pushed taxataion attempt that will not die. So below is a reprint of a couple of articles I previously posted, with some minor editing.

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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.

There are a lot of fallacies being tossed around over this issue. The biggest is that things cost less when ordered online because the buyer doesn’t have to pay sales tax. Okay. But though both online and brick and mortar stores have to pay shipping to them, the brick and mortar store doesn’t have to charge shipping to the customer. So are you going to force the brick and mortar store to pay into a fund to reimburse the shipper or the customer for their shipping costs? (Shipping costs are usually much more than sales taxes would be.) And how do you level the playing field for the services that the brick and mortar store gets in return for their sales tax collection, that the online retailer would be paying for but would have no access to?

And let’s not forget that the brick and mortar store HAS a physical presence in the State – and so not only receives those services provided by the State, which the online retailer does not, but the brick and mortar store ALSO gets to VOTE on who is running the State and how, while the online retailer does not. what happened to “No taxation without representation“?

There are a lot of small retailers, and people who aren’t “retailers” but who sell things on the internet via E-Bay and such, who would be excluded from the markets because they couldn’t afford to collect and remit the taxes. And there are a lot of things that are not AVAILABLE locally, that once such legislation makes it prohibitively expensive for small specialty retailers to sell online, these things would not be available anywhere at any price!

I recently bought a scythe to mow my small field of grain with. The local hardware stores don’t have scythes. The Big Box stores asked me what a scythe is. But I was able to get the item online in just a couple of weeks. Where would I buy a whetstone for my scythe? (They aren’t the same as the whetstones you buy for knives.) And a lot of the time, the online store sells items made by local craftsmen, while the Big Box store deals in bulk and sells only merchandise made in China or some other overseas mfg. Have you looked into buying a broadfork lately?

And consider also the small online retailer. If a mom n pop online store sells 20 items in a year for $10 each, that’s $200 in “revenue” (LESS cost of goods sold). But then the online retailer has to pay sales tax to HOW many States? Let’s say that all twenty items were sold to folks in DIFFERENT States. For $200 in revenue, the mom n pop store now has to file TWENTY Sales Tax forms with TWENTY States. (AFTER spending the time to familiarize themselves with the laws of those twenty States, and get the forms, and comply with any OTHER laws that would apply to a business that sells things in their State… such as FILING INCOME TAX FORMS FOR THAT STATE!!!)

Sales tax is just the opening gun. California probably would REALLY like to collect income taxes on ALL businesses that sell things to people in their State. California is busy running businesses out of their State, so they now seek to tax businesses in other States, and run them out of business altogether. And all you States that think it would be okay to charge the online businesses in your State California Sales Taxes, consider that this reduces the amount of money those people have to spend in YOUR State, and the expenses involved in filing those CA taxes will reduce the taxable revenues for your State.

Congress – the US Supreme Court has ruled on this issue. It’s a can of worms that you do NOT want to open!!!

Consider – the greedy person killed the goose that laid the golden eggs to get at the trove he assumed was inside. If this law runs countless small online retailers out of business, at over $2 TN a year in online sales, is this an income tax revenue goose you want to kill?

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 collector.

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 spouted by 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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