States Can Require Internet Tax Collection, Supreme Court Rules

https://www.bloomberg.com/news/articles/2018-06-21/states-can-require-internet-tax-collection-supreme-court-rules-jiomtl5c

by uptown • 8 years ago

541 579 8 years ago

bloomberg.com

sdhgaiojfsa2• 8 years ago

This is good news for the country, even if it's bad for my wallet. The prior state of affairs was absurd. Online retailers already have major advantages in terms of convenience and inventory. Getting a N% discount vs. brick and mortar by not charging taxes was completely unnecessary.

ransom1538• 8 years ago

Yes. But it is too late. AMZN has already wiped out all local retail. AMZN not enforcing local taxes was a huge win - in the early days.

Spivak7• 8 years ago

Yeah, but the irony is that Amazon can't compete with its own marketplace a lot of times now that they're collecting tax.

The prime markup with tax is almost always more expensive than the 3rd-party seller without.

WillPostForFood• 8 years ago

It’s good for big business and bad for small businesses because compliance will be tough, and harder to compete and price.

mtgx• 8 years ago

And this is why everyone should be supporting a federal VAT instead. If I'm not mistaken, Amazon had a similar argument a few years ago.

mullingitover5• 8 years ago

Exposing consumers to more regressive sales taxes is in no way good for the country. What would be good for the country is to abolish sales taxes entirely.

magduf3• 8 years ago

Exactly; sales taxes generally just hurt the poor and middle class. A good case could be made for consumption taxes on luxury items, but taxing things like food and inexpensive consumer items (like non-luxury clothing) simply hurts poorer people while not significantly affecting wealthier ones.

Spivak7• 8 years ago

Cleaning up a loophole that evens the playing ground for different types of businesses is a good thing. If you have a problem with sales tax or taxation in general that's a different issue.

s73v3r_6• 8 years ago

"What would be good for the country is to abolish sales taxes entirely."

In favor of what, exactly? Don't pretend that sales taxes could just be abolished, and states would just go without that revenue. Kansas tried gutting their tax revenue; it failed miserably.

jcborro2• 8 years ago

The unintended consequence may be to drive business offshore. The de minimis import duty was quadrupled to $800 a few years ago (meaning no duty while US retailers pay duty buying in bulk and incorporate into the US price) and this could be yet another advantage handed to sellers outside the country.

ghaff8• 8 years ago

I find it hard to argue with from a fairness perspective. Clearly, retail is in a much different place from when Quill was decided. My concern is more in how a mom & pop online shop operating independently complies as a practical matter, which means not only collecting the right amount for different types of items but presumably remitting and filing with a huge number of different tax jurisdictions.

omfg3• 8 years ago

We’ve been looking at tech solutions for calculation / remittance. So far only found Avalara. I’d be surprised if PayPal, Stripe, and others won’t step into this now that it’ll be fairly profitable.

ghaff8• 8 years ago

Yeah, it seems like something the payment processors have to handle automagically in some manner. Otherwise, small online merchants are going to have no practical choice other than 1.) Selling through e.g. Amazon or 2.) Just ignoring the law.

jeffmould2• 8 years ago

Stripe already recommends Avalara and a couple others:

https://stripe.com/docs/orders/tax-integration

mgkimsal4• 8 years ago

have been using taxjar.com with... ok results so far - they seem to only provide a sandbox/playground for 'pro' accounts ("call for pricing" - ugh).

rstupek3• 8 years ago

We have used TaxCloud which handles paying each jurisdiction

tzs4• 8 years ago

Besides Avalara, I'm aware of taxjar.com, taxify.co, taxamo.com.

Avalara and Taxamo don't list prices on their sites as far as I managed to find. Googling turns up comments saying that Avalara is expensive.

TaxJar and Taxify do list prices.

For a small business (up to 1k transactions/month) is $17/month if you pay for a year up front ($19/month on month-to-month). A transaction is either giving them an order and having them figure the tax, or looking up a rate with their API.

That will get you reports for each state, ready to file. If you want them to actually file for you, that costs more. If you have to file in all 45 states that have sales/use tax, with a monthly filing in each, it would come to $5000/year at TaxJar.

Taxify is $47/month for up to 1k transactions, and it would be $14580 to have them handle filing under the same 45 state/monthly filing assumption.

jxcl• 8 years ago

In Colorado you're already asked when filing state taxes what the value of the goods you bought online that haven't been taxed yet, so the onus is on the filer to look up receipts from the year for tax purposes.

Amazon already collects tax in Colorado, but a few smaller retailers will send you a letter at the end of the year totaling up your untaxed purchases. Since different counties and localities collect different rates, it's hard to get the total tax right at the time of sale.

ghaff8• 8 years ago

In Colorado you're already asked when filing state taxes what the value of the goods you bought online that haven't been taxed yet

Many states do this. I imagine that relatively few individuals (as opposed to businesses) actually comply.

planteen• 8 years ago

I also live in Colorado and only got one such letter last year after a lot of online shopping. It was from B&H and was wrong, though the dollar amount wasn't very high. I placed an order where one item was back ordered, so separate shipments came. They said tax was owed on the back ordered item twice.

But, as you said, Amazon already collects tax at time of sale which was the bulk of my purchases.

himom• 8 years ago

It’s called an use tax. It’s equivalent to a sales tax, reporting is required but voluntary. Not paying use taxes on internet purchases is tax evasion. Here’s what CA’s state tax collectors have to say:

https://www.ftb.ca.gov/individuals/use-tax.shtml

https://www.cdtfa.ca.gov/taxes-and-fees/use-tax.htm

paulie_a• 8 years ago

Wisconsin does the same and I will be honest have simply lied and put an insignificant random number.

anonymous513312• 8 years ago

It is not hard to get the right rates. All you need to do is have a master file with all zip codes with the corresponding rate to charge. The difficult part is filing out the returns and dealing with potential audits.

s73v3r_6• 8 years ago

Just about every state requires this. No one does it, and it's simply not feasible for any state to go after taxpayers for this.

chasil2• 8 years ago

I live in an Illinois border community, and work in Iowa. I wonder what tax would be collected if I close an Ebay transaction in Iowa, but have the products shipped to my address in Illinois.

honest_george• 8 years ago

While I can't speak for US law, most of the time it's the delivery address that matters - if the location you're at when purchasing matters, you could do all of your expensive on-line shopping when on holiday in some place with low taxes (or using a VPN...).

xienze2• 8 years ago

Technically you're supposed to pay your state's tax, even for a purchase where you were physically in another state. Even if that other state actually charges its own sales tax!

Nasrudith• 8 years ago

There are two against it on fairness grounds I can see but your mileage may vary on practically and definitions of fairness.

One is that they don't use the infrastructure in the state. Shippers are either already taxed for their use if private or self funding government in the case of UPS.

The second is a more slippery taxation without representation which also gets into all sorts of semantic issues with who is really being taxed the in state residents or the out of state residents.

Really the tax infrastructure is in drastic need of modernization and streamlining. It may step on a lot of toes but I could see forcing online sales tax into a federal fixed rate with redistributed fixed percentages as worth it. Say 5% rate nationally and of that 1/3rd each to the buyer's state and the seller's state and 1/6th to each municipality respectively with it defaulting to the state if it is unincorporated. It would even actually fit in interstate commerce domain nicely.

ghaff8• 8 years ago

On the other hand, local businesses are paying other types of taxes anyway (such as property taxes) and they're actually employing local people--so there's almost an argument that local businesses should be paying less sales tax rather than more. And then you're almost in why have a sales tax at all territory given that they're mostly regressive.

There's certainly a good argument for a flat national sales tax but that doesn't really fit with federalism and, anyway, good luck getting New Hampshire and New York to agree on a number.

Eridrus• 8 years ago

One is that they don't use the infrastructure in the state.

This is one way of looking at things, but I think sales tax is much closer to a tax on consumers than on businesses. Or at least is intended as a tax on consumers to fund their state infrastructure, often because imposing an income tax is impossible (e.g. Washington State constitution) or just politically unpalatable.

Normalising taxes is basically impossible in an environment where sales taxes are a meaningful part of a government's budget.

test65543• 8 years ago

Avalara provides this service to mom and pops for $50 per year.

pishpash7• 8 years ago

It's never going to be fair, since online shops don't have physical plant costs (as an example). Are you going to penalize them for that too and make them pay a phantom imputed presence tax? That's why fairness is the wrong path to go down.

gigatexal• 8 years ago

Amazon and other retailers’ stocks are down to session lows after the news. Makes sense.

DanCarvajal• 8 years ago

Really Amazon already collected sales taxes but now it extends to Amazon marketplace sellers.

seanmcdirmid• 8 years ago

Amazon has been collecting sales tax for quite a while now.

rahimnathwani3• 8 years ago

The situation for retailers shipping to states where they have no physical presence reminds me of the situation of foreign retailers with significant online sales to customers in the EU.

In each case, the seller (who has no physical or other presence in X) is required to collect tax from the buyer (a resident of X) and remit it to the tax authorities in X.

The tax is owed by a resident of X, to the tax authorities in X. But the tax authorities in X want someone outside X to collect it on their behalf.

EDIT: According to Wikipedia, some states charge sellers sales tax, and others do it the way I assumed (tax is charged to buyers, but collected by sellers).

xur17• 8 years ago

And as a seller you are required to register with every state, and collect + pay taxes quarterly in every state. Quite onerous for smaller sellers.

dtech• 8 years ago

That is the price of doing business with customers of the EU, similar to how you must comply to EU regulations if you want to sell physical goods. In return, you get access to the EU market and can deal with a single ruleset for the whole EU instead of each country individually.

Also, this is only for consumers, to business customers you can reverse-charge the VAT so they have to handle it.

rahimnathwani3• 8 years ago

Anything can be construed as 'the price of doing business'. If the EU instead required every retailer with at least one customer in the EU to get a tattoo of the EU flag, in return for getting access to the market, would you also consider that just 'the price of doing business'?

My objections to this are:

- If an EU country is owed tax by people resident within its borders, then perhaps the country's tax authorities should arrange for it to be collected, rather than relying on some foreign entity (e.g. Chinese company) to collect it.

- There are ~200 countries in the world. Should any company who wants to sell over the internet need to know about the sales tax or VAT registration thresholds in each of those countries? If so, this gives a huge advantage to large retailers over small ones.

anoncoward1112• 8 years ago

More compliance and regulation for us to deal with. How about you just tax property? It doesn't move. And also, how about the state stops spending money?

URSpider943• 8 years ago

Thankfully, we have computers! Any online sales program worth paying for includes automatic sales tax collection by jurisdiction.

Note, this ruling doesn’t mean that all businesses will immediately be taxed. The law over which this suit was filed requires collection if your annual business in the state is $100,000 or >200 sales, which means you’re already doing a sizeable business.

supertrope2• 8 years ago

Compliance is far more complex than a simple look up table. Rates vary by state, county, city, school district, mass transit zone, water district. And each of these political subdivisions and the sales tax they assess changes with every ballot issue!

There's a lot of faxing, forms to fill, etc.

So most of the value is the vendor doing the legwork in keeping up with details and fixing corner cases. And leveraging their pre-existing trust network and economy of scale.

Retric8• 8 years ago

A computer program can't tell what category your product falls under.

Does a smock qualify as an Apron and thus it's free from sales tax? What if I print 'kiss the cook' on a smock?

Sales tax has a single set of rules that if you are in a specific physical location, but it becomes 50,000+ wildly inconsistent rule sets when you look nationwide.

toast0• 8 years ago

Jurisdictional boundaries are very complex. The city field in an address really identifies the post office that serves the address, not the city that the address is in. Many people live outside of city boundaries, and "simple" processing may charge them city sales tax surcharges.

From experience, the city of San Jose barely knows what its border is, so I wouldn't expect others to either.

sidlls• 8 years ago

What's to stop the powers that be from lowering those threshold requirements, though, now that this has happened?

Also, "jurisdiction" is terribly complicated when it comes to sales taxes. A jurisdiction can be defined by the type of goods sold, date of sale, location, and sometimes (often?) there are overlapping jurisdictions. Full compliance is incredibly hard to achieve without a relatively pricey sales tax software solution that is actively maintained and updated every time a city, township, county, state, etc. decides to adjust something. If applied strictly this would essentially work to lock-in established, wealthy concerns and stifle entrepreneurship.

ghaff8• 8 years ago

That's just one state. There's nothing to keep the 49 other states from passing laws that apply it to any dollar amount.

ADDED: Though the decision has some language that would seem to imply there has to be some lower bound.

jahewson2• 8 years ago

Actually taxes on consumption are far more effective and fair than taxes on property.

dxhdr• 8 years ago

Source?

Sales tax is considered to be regressive because it takes a proportionally larger percent of income from low income tax payers. They don't own property but still need to purchase consumer goods, afterall.

nlh• 8 years ago

Fascinating mix of justices on this one:

The vote was 5 to 4. Justice Anthony M. Kennedy wrote the majority opinion and was joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel A. Alito Jr. and Neil M. Gorsuch.

I can't imagine we're gonna see RBG agreeing with the Alito/Gorsuch/Thomas clan too often.

anoncoward1112• 8 years ago

If there's one thing that career DC-ites can agree on, it's that citizens and (most) corporations need to pay their pound of flesh to the government.

Retric8• 8 years ago

So how exactly is this a constitutional question where a new court can have a different opinion?

Quill now harms states to a degree far greater than could have been anticipated earlier. That hardly seems like it changes the Constitution.

gascan2• 8 years ago

The Constitution uses a fair amount of fuzzy language. "Undue burden", "excessive bail", "cruel & unusual punishment", "unreasonable search & seizure", etc.

Thus our perception of what is undue, excessive, cruel, or unreasonable can change, without the Constitution changing a word.

brlewis2• 8 years ago

They aren't saying that the Constitution has changed since Quill, but that Quill was wrong to begin with. See pages 2-4 of the ruling, https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf

acheron• 8 years ago

I can't imagine we're gonna see RBG agreeing with the Alito/Gorsuch/Thomas clan too often.

To some extent, sure, but that's also exaggerated. The one or two "ideological" decisions with stereotypical lineups get all the attention, because general readers can pick a team and root for it, just like sports and election politics, so it makes for lots of clicks and ad eyeballs. In reality, differing lineups happen frequently, because the justices have their own unique perspectives on most cases and areas of law, and over the past several years unanimous and 8-1 decisions are up compared to the past.

supertrope2• 8 years ago

The media focuses on the most controversial cases. There's less headlines for court orders signed by all nine. Between even two of the most ideologically/philosophically different justices, they concur 67% of the time.

gascan2• 8 years ago

I love these crossover rulings. They give me just the faintest confidence that the judiciary actually works, and isn't simply filled with a bunch of partisan hacks.

kruipen• 8 years ago

All nine Justices agreed on the merit, including Justice Thomas who was in majority on Quill which he now voted to overturn. The decedent argued that the precedent, while wrongly decided, should be upheld on stare decisis grounds, and it should be left to Congress to correct the mistake.

zchrykng• 8 years ago

Someone needs to develop a service to make calculating and paying the sales tax easier. Something like plugin an address and it spits out the tax percentage and where to remit the payment to. Ideally the states would get together and create a centralized service so companies don't have to be mailing checks to every single county government that has a sales tax.

donatj• 8 years ago

A number of these exist. Where I used to work we used Avalara.

Agathos• 8 years ago

I'm pretty sure that product exists. I've heard of AvaTax; there may be others.

I typed "avatax vs" in Google and it autocompleted "taxjar", so there's another I guess.

Yes it would be nice if the states made it easier.

magduf3• 8 years ago

The problem with this is: how do you know what the tax rate is for the product you're selling? For instance, if you're in New Jersey and you're selling a clothing item like a pair of socks, then there's no tax. But if you're selling a fur coat, then there's full sales tax. There's different tax rates for different products, and it varies wildly across almost 10,000 different jurisdictions in the US.

nulagrithom• 8 years ago

I wonder if this extends to county/city taxes? That would open up even more ridiculous complexity.

Locally, there's a poorly structured (ie not machine-readable) spreadsheet of municipal taxes that tell you, based on _what side of the street_ you're on, whether you fall under the "mosquito district tax" that requires a small percentage more sales tax to pay for the annual spraying of mosquitoes.

Without simplifying the tax codes, I'm not sure full compliance over the web is even possible...

anonymous513312• 8 years ago

I work as a sales tax auditor. The answer is, you as the merchant need to know those rules. For smaller retailers they usually just tax everything unless the buyer has given some sort of exemption certificate. For the merchant you can tax exempt items as long as you remit the tax but if you dont tax a taxable item then you become fully liable for the uncollected tax. Thats why these smaller retailers tax everything.

TangoTrotFox• 8 years ago

On top of this there are also conditional taxations and tiers. For instance you pay $x in tax if you've moved $y in product $z in jurisdiction q unless condition c applies. This seems pretty nasty for any business that doesn't have full time legal and accounting teams.

jonknee5• 8 years ago

In general you would identify the product type from a list of a lot of product types and then let your sales tax calculator as a service provider sort out what needs taxed and at what rate.

jakejohnson10• 8 years ago

When using a sales tax API, the merchant configures their product catalog by assigning products to specific tax categories or tax codes based on the sales tax provider. Some tax categories are extremely granular to accommodate the scenario you mentioned. The logic on whether or not the product is taxable in a specific state based on a certain threshold is done completely within the API when passing over tax codes for each line item.

rstupek3• 8 years ago

We have used TaxCloud which handles computing and paying the sales tax. You have to set what type of product each item you sell is so they know how to calculate tax for that type of item where you're selling it

mbesto• 8 years ago

It does.

https://www.taxjar.com/

https://www.avalara.com/

Lots of ERP's have it built in.

gmiller123456• 8 years ago

And that "someone" should be whoever is requiring the tax to be collected. If such a process is too complicated or expensive for a state to offer, that should be the first clue that it's too complicated or expensive to require every single business across the country to implement.

rossdavidh3• 8 years ago

I have a hunch that this will, in the end, be a massive win for large retailers vs. small ones. The task of figuring out how to calculate tax for all states is more or less the same amount of work regardless of size, which means for someone like Amazon it's more or less trivial, but for a mom-and-pop store it's a major hassle.

TheCoreh• 8 years ago

Payment processing services will most likely provide a solution to do this automatically. Charging credit cards is already pretty complicated, and they abstract it away already, so it would make sense for them to provide this as an additional service.

tpurves• 8 years ago

In fact they do already.

pwned1• 8 years ago

Agreed. I envision "tax compliance as a service" being offered by processors or third parties.

My only question is then whether individual municipalities in states that allow them to have their own sales tax will also now be able to force compliance. If that's the case, what a nightmare for online retailers.

jakejohnson10• 8 years ago

Payment processing services could certainly build out their own solution to collect and remit sales tax, but a lot of merchants sell on a variety of platforms and channels. For instance, a merchant might sell on Amazon and their own eCommerce site powered by Shopify. They might also have an ERP system as a "single source of truth" to record all of their transactions. Each of these platforms collect sales tax differently, possibly providing automatic calculations or simply leaving it to you to provide your own rates. This can get complicated very quickly and a payment processing service only has insight into the data you're passing over to them.

That's why companies like TaxJar and Avalara are focused on sales tax -- to integrate with every shopping cart, payment processor, marketplace, accounting, order management / ERP platform out there to combine all of your transaction data and determine how much sales tax you need to remit in every state.

rossdavidh3• 8 years ago

They can match up rate to location, but most jurisdictions have their own laws on what items are taxable. There are also jurisdiction-dependent tax holidays. For example, Texas has a weekend in August where certain kinds of items (that are "back-to-school" appropriate) are tax free. So you have to know not only the rate, but also the rules for categorization, and those vary by jurisdiction and time of year, sometimes differently from year to year.

anonymous513312• 8 years ago

They will just hire avalara to do it. Do you think a payment processor is going to hire hundreds of tax accountants to look all this stuff up?

Cheaper to just hire avalara to do it for you.

jeffwilcox• 8 years ago

Congrats to Avalara on their recent IPO, pretty good timing... this is a Seattle-area firm that does local/state/etc. tax calculations. In the end, it's a huge tax on infrastructure.

rconti5• 8 years ago

What's a huge tax on infrastructure? The supreme court ruling? On what infrastructure? Software?

nolta• 8 years ago

The South Dakota tax only applies if you sell more than $100k or send more than 200 shipments, which factored into the decision:

Respondents argue that “the physical presence rule has permitted start-ups and small businesses to use the Internet as a means to grow their companies and access a national market, without exposing them to the daunting complexity and business-development obstacles of nationwide sales tax collection.” These burdens may pose legitimate concerns in some instances, particularly for small businesses that make a small volume of sales to customers in many States. State taxes differ, not only in the rate imposed but also in the categories of goods that are taxed and, sometimes, the relevant date of purchase. Eventually, software that is available at a reasonable cost may make it easier for small businesses to cope with these problems. Indeed, as the physical presence rule no longer controls, those systems may well become available in a short period of time, either from private providers or from state taxing agencies themselves. And in all events, Congress may legislate to address these problems if it deems it necessary and fit to do so.

In this case, however, South Dakota affords small merchants a reasonable degree of protection. The law at issue requires a merchant to collect the tax only if it does a considerable amount of business in the State; the law is not retroactive; and South Dakota is a party to the Streamlined Sales and Use Tax Agreement, see infra at 23.

WiseWeasel• 8 years ago

That's still difficult to comply with. Imagine 50 different laws like that, each with their own tiers, and consider the difficulty accounting for them all and staying in compliance. That's not even getting into municipal taxes.

Someone1234• 8 years ago

That sounds harder and more expensive for the business than simply having a standard system to collect and pay the sales tax.

Glyptodon2• 8 years ago

200 shipments is nothing, and $100k isn't particularly meaningful revenue, either. I don't know what kind of margins people get, but I'd guess $100k yearly revenue isn't even enough for one person to live decently, let alone afford to handle keeping up with a business.

gowld3• 8 years ago

$100K can be quite a low number, if it's revenue not profit.

Consider selling 100x$1000 computers at $50 profit per each, vs 1000x$100 jewelry at $50 profit per each.

bluepeter7• 8 years ago

Time to push those annual (vs monthly) SaaS plans I guess...

bluedino• 8 years ago

There's a bunch of services that you can send your transactions to and they'll return sales tax data via API, your accounting software should have integration for them already. Worst case you can do them on a simple web form online (enter the address, types of goods, etc)

Those same services can also automate your tax filings with each state. It's not free, though.

xoail2• 8 years ago

Would love to see Stripe provide an API for this.

jandrese• 8 years ago

Seems like there should already be a service that does this. It's just static data, a microservice would be easy to run.

djsumdog2• 8 years ago

Many online payment gateways already offer some kind of sales tax API. Keep in mind in California, sales tax changes per county. In places like Tennessee, the tax rate can change if your item is a grocery or isn't a grocery.

There are companies that already sell massive lookup tables or API access to calculate a lot of this stuff. I think for most retailers, this won't be that big a change.

Most mom-and-pop online stores have disappeared too. Gone are the days when you went to Pricewatch.com and Pricescan.com. Now all the individual shops just create a store on Newegg, Amazon and eBay. I'm pretty sure the big players will start offering up tools to do these calculations for them as well.

ghaff8• 8 years ago

Hopefully you're right and that there will be/are services that make it fairly easy/cheap for anyone of any size to be compliant without a lot of extra work. While there are a lot of edge cases, the reality is that companies using a payment processor will probably be fine even though there's a mistake here and there--which no one will actually know about.

And the reality is that small businesses will mostly just fly under the radar if they want to even if some states don't have a floor for the sales that trigger taxes.

jakejohnson10• 8 years ago

Yes, there are affordable sales tax APIs available for calculating sales tax. Usually massive lookup tables are at the zip / postal code level and don't provide enough granular detail by jurisdiction to accurately collect sales tax. They also don't contain logic around product exemptions, customer exemptions, shipping taxability, sales tax holidays, etc. I recommend using an API if you want to avoid under-collecting or over-collecting sales tax.

However, this is a HUGE change. Instead of registering for a sales tax permit and remitting tax for one state, smaller merchants will have to do this in many states if they meet a certain threshold. They will likely have to use sales tax compliance software to aggregate all of their transaction data across multiple platforms (Amazon, eBay, Walmart, etc) and their shopping cart, then report / remit accordingly.

deathanatos• 8 years ago

Tennessee also has a "Sales Tax Holiday" on which certain items are tax exempt during certain times (during the holiday). And because we know how much programmers love date and time manipulations, it starts on "the last Friday in July" (I mean, it kinda had to, to be a weekend).

[1] https://www.tn.gov/revenue/taxes/sales-and-use-tax/sales-tax...

gist2• 8 years ago

There are companies that already sell massive lookup tables or API access to calculate a lot of this stuff. I think for most retailers, this won't be that big a change.

Ok great so you know the tax to collect. How do you remit to a vast amount of jurisdictions? You think that's trivial? It's not.

nacho2sweet• 8 years ago

Programming one of these for a Canadian website for provincial tax to hook into another recurring payment script, that hooked into PayPal was an annoying overhead especially when the company was bootstrapped and had like $0 revenue to even care about at that point.

I would hope Stripe or people using online services like Shopify will quickly add support for everyone. But the state by state, county by county, grocery vs non grocery stuff sounds like a goddamn nightmare.

EDIT: You won't be able to just be some just launch it break stuff and fix later SASS. You will have to keep track of all this shit and send out 50 different cheques, or track when your company has reached the minimum to have to pay sales tax back.

sbov• 8 years ago

Keep in mind in California, sales tax changes per county.

More than that. Sales tax in California can change arbitrarily, not just by county. E.g. different cities in the same county can have different sales tax. To further complicate things, shipping address may have a city on it but they might not actually "live" in that city.

E.g. in SoCal there is a city of "Westlake Village", which spans the Ventura-LA county border, which technically is a city in LA County, but technically is just a neighborhood within the city of Thousand Oaks in Ventura County.

When I last looked at this a few years ago for a project, for certain problem addresses, no one got them right. Not Macy's, not Amazon, etc.

The only real way to properly calculate sales tax is to geolocate their location.

Glyptodon2• 8 years ago

One of the things I've been wondering is if "state sales tax" in this ruling includes cities, counties, other subdivisions, or just full state level taxes only.

mark-r• 8 years ago

It's not just rates, it's product categories that matter. The rules separating one product category from another can get incredibly arcane. Here in Minnesota, a pizza ordered from Papa John's is taxed but from Papa Murphy's it isn't - because the Papa Murphy's isn't cooked. Clothing isn't taxed, but determining what is or isn't considered clothing isn't always easy out at the margins. If you live in a state you can get guidance on this stuff, but if you don't you might not even know to look.

cosmie• 8 years ago

In places like Tennessee, the tax rate can change if your item is a grocery or isn't a grocery.

That's not even the half of it. Grocery vs. non-grocery changes the rate. Some services that are tax exempt in other states are not in Tennessee.

And in Tennessee, you have the state level of 7%, and the ability for it to rise up to 9.75% based on a whole lot of inter-dependent local tax overlays.

The 2.75% difference comes from county, state, school district, transportation district, and "special purpose district" levies. All of which are optional to levy and voted on at the local level, and which may or may not overlap with each other to "stack" up to that cap at 9.75%.

Avalara, which is the de-facto owner of the sales tax calculation software space, has a good write up[1].

[1] https://www.avalara.com/taxrates/en/state-rates/tennessee.ht...

dalbasal• 8 years ago

Not sure how much there's left to disadvantage. Regulation, as a rule of thumb, benefits larger businesses.

These days, the structural advantages larger businesses have are huge. Many of them are on feedback loops.

There're reasons we will soon see several companies pass the $1trn mark, reasons that aren't economies of scale.

rconti5• 8 years ago

Well, regulatory compliance is an economy of scale too :)

saugnsckuigfh2• 8 years ago

I find it highly unlikely that mom-and-pop stores will have to collect and remit taxes to other states.

From they very start of Quill they said: "we ruled that a "seller whose only connection ... is by common carrier ... lacked the requisite minimum contacts with the State." So the issue was: how substantial does the seller's contact have to be?

The court ends this decision by saying "the first prong ... asks whether the tax applies to an activity with a substantial nexus with the taxing State... sellers who engage in a significant quantity ... are large, national companies ... undoubtedly maintain an extensive virtual presence." So the issue remains: how substantial does the seller's contact have to be?

The underlying logic of the law hasn't changed, they just fixed some imprudently broad language referring to a physical presence.

So I doubt the SCOTUS abandoned one bright-line rule for being flawed in favor of another bright-line rule that equally fails to address the underlying issue of substantiality (e.g. imposing a "single-sale" rule).

saas_co_de• 8 years ago

In order to enforce this ruling a State Attorney General would have to file a lawsuit against a company and get an injunction requiring them to collect taxes and get a judgement for back taxes.

Small businesses will just ignore this because there will be no enforcement unless you are operating at a scale large enough (millions in taxes) to justify enforcement.

c12• 8 years ago

That is an interesting take on it. I was thinking it would be more of a level playing field for small physical retailers if the larger online stores had to charge the same retail tax.

My thoughts were that if you bought something from a store it would be x% more expensive with sales tax than purchasing off of amazon and having it delivered without needing to pay sales tax.

This way both have to charge the same sales tax and the difference in price will simply be down to the costs relating to owning a store.

the_watcher2• 8 years ago

Amazon already collects sales taxes based on the state the order is delivered to, despite not being legally required to until now. They've already baked the compliance costs into their prices. Smaller retailers who weren't doing this will suffer, as they now need to raise prices.

chc• 8 years ago

You seem to be conflating online vs. physical with large vs. small. There are small online merchants and large physical retailers — for example, Walmart is significantly bigger than, say, the online bakery Vegaron.

the_watcher2• 8 years ago

It's absolutely a win for Amazon, who have been doing this for several years already, so their compliance costs are already baked in.

jonathanmoore2• 8 years ago

Thankfully with Shopify it is extremely easy and straightforward to manage for my wife's small online store. Their platform does a great job properly charging taxes by state, county and city in certain situations. Then using an inexpensive plan from https://www.taxjar.com/ the entire filing and paying process is 100% automated.

In 10 minutes I was able to file and pay all the sales taxes to several state, dozens of California counties and a handful of cities that charge additional taxes on top.

Retric8• 8 years ago

So you assume. As a small business you are unlikely to be audited, but that software could easily be wrong creating a huge minefield and potential liability.

vxNsr• 8 years ago

This assumes these mom and pop shops have heard of these services. Personally I was helping someone get their little internet store off the ground and it was a huge hassle even with woocommerce.

omni• 8 years ago

How much do you end up having to pay for TaxJar? It looked to me like the monthly plan was cheap but you'd get totally hosed if you tried to use them to auto-file all the taxes. Are you filing yourself?

jhayward2• 8 years ago

How do you handle knowing what items are taxable vs non-taxable for each item and taxing district? How do you handle customers who are tax-exempt? How do you handle tax holidays and reduced tax on school items in August?

s2g2• 8 years ago

How many mom and pop stores go through the hassle of maintaining their own software for this vs just paying someone else to handle it, who can do so trivially?

emodendroket• 8 years ago

I expect that some third-party solutions will spring up, but of course that's more money that any third-party retailer has to pay.

wonderwonder• 8 years ago

I agree. The most challenging task for smaller in house built sites is going to be figuring out how to stay up to date with the hundreds of tax rates especially in CA as well as modifying their systems to handle blended tax rates when a customer orders both a digital and physical product.

vkou2• 8 years ago

Except for the part where mom-and-pop stores were competing with large retailers operating out of state, who could undercut them because they weren't charging sales tax.

I suppose we should continue that state of affairs, because heaven forbid we hurt the mom-and-pop online stores... Which make up a tiny fraction of overall commerce, compared to physical mom-and-pop stores.

seibelj2• 8 years ago

Software engineers and entrepreneurs are extremely clever, numerous solutions will arise to integrate with all of the major ecommerce platforms to automate this. This won't be much of a burden on business. As long as regulations are clearly defined (unlike GDPR) the industry will deal. Uncertainty is always the biggest risk.

curun1r3• 8 years ago

That depends on whether this decision gets extended to the municipal-level taxes. That's where things get really complex. The geo-boundaries on the areas where taxes are enforced aren't limited to simple city boundaries. Street number or side of the street (odd/even addresses) can matter. And taxes can vary depending not just on location, but also the items purchased. It's a nightmare scenario for internet businesses. Brick-and-mortar stores deal with this by just supporting taxation for a one specific location. If internet stores are required to support all locations, it will be a huge disadvantage.

Analemma_• 8 years ago

If internet stores are required to support all locations, it will be a huge disadvantage.

Who said anything about internet stores being required to support all locations? Nothing is stopping an e-commerce outfit from restricting sales to a particular state, or county, or city, and simplifying their tax situation considerably. And brick-and-mortar chains with multiple locations already have to deal with these rules.

I don't see the "huge disadvantage" you're talking about.

briandear• 8 years ago

You have no idea what you are talking about. Won’t be much burden on business? If you have physical shipping addresses, it is a bit easier, but what if you sell virtual goods/services? Billing address? But that doesn’t actually have anything to do where the person is actually buying the product. If I go to a masseuse in California but my credit card has a Texas billing address, I am still charged California taxes. So the precedent of using billing address for tax calculation is a bit ridiculous and innaccurate. What if I have a foreign billing address? So do we use IP address? My IP address routinely has me in the wrong city and sometimes wrong region. When I lived near Avignon, France, my IP would always show me as being in Corsica. Then there is VPN that could make us all in Oregon and avoid taxes completely. Oregon-as-a-Service.

Engineers are clever. Sure that might be true, but now that cleverness is going to be wasted building tax compliance solutions which aren’t even close to being “not much of a burden.”

seibelj2• 8 years ago

If the purchaser has an address in an area with taxes, you then pay it. If they do some weird VPN workaround and billing address in the Cayman Islands, then you don't pay the taxes. It's self compliance. We sent men on the moon in 1969, this isn't rocket science to calculate a tax bill.

msbarnett2• 8 years ago

Engineers are clever. Sure that might be true, but now that cleverness is going to be wasted building tax compliance solutions which aren’t even close to being “not much of a burden.

Orrrrr a couple of companies will step into this problem space, solve it, and everyone will offload their tax compliance to those companies, in exactly the same way that we don't all waste 1,000,000 engineering hours on the arcana of banking and credit card networks and just offload that concern to payment gateways with nice APIs.

This is already the way it works in most of the world. HN is showing its provincialism by convincing themselves this is some kind of impossible-to-solve problem.

hoveringcto2• 8 years ago

This is great news for Amazon. They already collect sales tax on everything they sell in most states (47 I think?). Now that smaller sellers (marketplace sellers, eBay, etc.) also have to collect tax, that hurts the ~8% discount built in, so why even shop around?

13years• 8 years ago

In addition this adds a new administrative burden to small sellers that isn't free

pishpash7• 8 years ago

How does f'ing the third-party sellers help Amazon? You know they make money from them, too right? If anything Amazon and eBay have offloaded inventory and sometimes logistics risk onto third parties and they're happy to just extract rent. They're not interested in going back to be a first-party warehouse of everything.

wolco• 8 years ago

The problem with Amazon is that shipping can take months for non-prime users. In most cases you are better off buying from walmart if they carry the item.

Sent from someone outside of the US

Retric8• 8 years ago

US sales tax is not relevant if you're not in the US.

throwawaylalala• 8 years ago

Most of Amazons sales are through third parties, most of them dont collect.

hoveringcto2• 8 years ago

It is about 50/50.

irrational2• 8 years ago

Note: the states where Amazon doesn't collect sales tax are those states that don't have a sales tax.

j792• 8 years ago

Now that smaller sellers (marketplace sellers, eBay, etc.) also have to collect tax, that hurts the ~8% discount built in, so why even shop around?

Because the more I learn about Amazon and their warehouse employees, the less I've been shopping on Amazon.

Having choice is a good thing.

JustSomeNobody• 8 years ago

If you're going to take the onus away from the _purchaser_ to file correctly for his state and put it on the retailer, then there should be a uniform, very simplified way to correctly do that in place first.

zdw• 8 years ago

I tend to view the avoidance of paying local taxes as one of the internet's original legislation workarounds (1). The entire wholesale (you buy for resale, pay taxes when that happens) vs retail (you sell to the end user) division was abused to allow the historical "nobody pays taxes on the internet, so buy there and avoid them" logic many people used.

It would have been interesting to see how differently retail sales would have grown, especially Amazon, if they were required to wrangle with local sales tax in all the places they sold into.

Additionally, most locations have a Use Tax that's identical to local sales tax, so it's transferring the legal burden onto the buyer. Almost nobody does this.

1: It's not a new or internet-specific tactic either - many car dealerships advertise "No City Sales Tax!" and are barely on the other side of the city limits.

kevin_thibedeau• 8 years ago

This wasn't invented by the internet. Interstate mail order sales delivered by railroad in the 19th century were always tax free. E-commerce inherited that system.

braythwayt• 8 years ago

Then there was this thing called mail-order. Comic books seemed to rely on advertising mail-order novelty items as their revenue model.

pishpash7• 8 years ago

This is potentially much broader though -- say you buy a domain on some registrar, do you pay taxes on that now? Every such place then needs your address, too.

And going down this road, p2p barter on the internet of any kind might be subject to a tax regime soon.

jahewson2• 8 years ago

You don’t need people’s address to charge them sales tax. The business is responsible for paying the sales tax - not the customer.

e.g. If I buy a sandwich I do not give my name and address to the deli.

rbritton4• 8 years ago

You need the address to charge them the _correct_ sales tax. In Washington State, the rate is based on the address where the product is delivered, so in the case of your example sandwich, that's the address of the deli.

hacym• 8 years ago

Because you’re in the physical location, so you have to abide by that tax law. You’d need at least the zip code of someone to charge appropriate taxes for where that person physically is.

rstupek3• 8 years ago

I would need your address to know whether and how much tax to charge you

joezydeco2• 8 years ago

So while the states and small businesses are busy patting themselves on their backs, Amazon will quietly build distribution points in every zip code and prepare for 1 hour shipping everywhere.

dsfyu404ed4• 8 years ago

One of the nice benefits of the US system of government is that the ability to relatively easily pick and choose where to live, where to work, where to do business, etc forces the states to compete with each other to some degree. This ruling runs counter to that because using online retailers to avoid local taxes is a very low effort way to avoid local taxes or avoid funding a local government you disagree with and this ruling paves the way for states to prevent that.

I have no problem with sales tax. I have a problem with states getting a cut of transactions that did not result in transfer of money to an entity within their borders.

Sales taxes generally follow the location where the money was received, not where the goods were used. If I buy something at a brick and mortar store then I'm subject to the sales tax where that store is located. Why should the state of buyer be getting a cut of the transaction when the state of the merchant is the one that is responsible for the environment in which that commerce happened?

If I live in MA and drive to NH and buy fireworks then MA has no claim to tax the transaction because it's obviously the environment of NH that made that commerce possible at all (you can't buy fireworks in MA). What if I live in CA and want to buy some special paint or cleaning product not for sale in CA so I drive to NV to buy it? What if I want to buy a widget and my home state taxes it and some other state subsidizes it (not necessarily at the retail level, the tax/subsidy could be anywhere in the supply chain) so much that I drive to the other state. In that case my home state still has no claim to tax the transaction since it happened out of state. What if the price is so much better elsewhere I'll be willing to pay shipping from half was across the country? How does the fact that the a 3rd party (shipping company) is responsible for getting the goods to their address change the situation? Does the fact that the transaction originates online affect anything?

I have no problem paying state sales tax as long as it goes toward the state of the merchant. The state of the merchant is responsible for creating the environment that facilitated the commerce. They should be the ones getting a cut.

Edit: I genuinely would like to know what the reasoning of those who disagree with me is. I see no good that can come from allowing states to exert authority on businesses outside their jurisdiction.

irrational2• 8 years ago

In what way? I choose to live in Oregon. Oregon doesn't have a sales tax. So the Supreme court ruling has no bearing on me. There is nothing stopping anyone from moving to one of the states that don't have a sales tax.

s73v3r_6• 8 years ago

Why do you think it's fair that online businesses are given such an advantage over physical businesses in your state?

rconti5• 8 years ago

The US system allows you to easily pick and choose where to live, from which where you work and where you do business generally follows.

Except in the case of living close to a border (which is a bit of a hack), you generally live, work, and pay sales taxes in the same jurisdiction in which you vote and receive services.

You're right that it forces states to compete with each other, which is great.

Your example runs completely counter to your stated narrative. Your example is one in which you live and collect services in one place, but refuse to pay taxes to support your chosen lifestyle by instead "supporting" with your dollars a system you don't want to live under.

Apparently you DO have a problem with sales tax.

greghendershott• 8 years ago

It's already non-easy to figure out what customers want, make it, make sure they know you have it, and get them to buy it.

On top of that, lately it seems more challenging not to be an oligopoly if you have customers in Europe and/or the US.

I suppose this represents an opportunity for startups to help other startups to manage compliance and payment.

xoail2• 8 years ago

Sales tax has one of the most complicated structures. Recently ADP built logic to tax according to counties and sub-zones (not just states and cities) to save millions on taxes for its customers. I doubt small start-ups can afford their software. It will be great if Stripe can come up with an API to simplify this. Or else, its clearly a win for large retailers and not as much for small ecommerce stores.

psetq• 8 years ago

Automated Tax Calculations in the Orders API:

https://stripe.com/docs/orders/tax-integration

gregrata2• 8 years ago

Isn't this at some level taxation without representation? If I don't like how some other state is taxing, I can't alter that behaviour by voting. At least in my current state I might have a chance to do so.

gregrata2• 8 years ago

(and yeah, I get this already happens if, for example, I visit the state. Just seems to be different in this case)

opsroller• 8 years ago

So buy from a retailer in your state.

DINKDINK• 8 years ago

Isn't this at some level taxation without representation?

I'm not a fan of the ruling but I would expect the answer to your question would be: "No because you aren't forced to buy the product from a retailer in that state"

Kerrick• 8 years ago

From the perspective of "the retailer is being taxed," then this _is_ taxation (of the retailer) without representation. But of course, almost every retailer passes sales taxes right along to the consumer, so "the retailer is beng taxed" is only true in a theoretical sense.

tgb2• 8 years ago

Am I missing how this operates? I see others on the article making the same claim as you, but isn't the ruling that if company X sells to person A then the state where A resides gets to tax the sale? So in any transaction there will be one or more party that can vote on the tax. You can hardly complain about that unless you think it is valid to tax transactions that occur between two people if and only if they live near each other. Edit: and the sales tax was already legal to impose, the only change is whether the purchaser or the seller collects it. So this doesn't change whether anything is taxed, hence not changing whether it's taxation without representation.

s73v3r_6• 8 years ago

By that measure, if I am driving through a state, and I don't like their gas tax policies, me paying tax on gas that I had to buy while driving through is also taxation without representation.

redbeard0x0a• 8 years ago

The taxation is on the person living in that state. Most states require that a person buys something and doesn't pay sales tax, they are supposed to self-report and pay the tax. (Most people don't).

koboll2• 8 years ago

The taxation is on the person living in that state.

Right, and before this decision, it was that person's responsibility to remit. Now it is the business's. So the burden of remittance has shifted to the disenfranchised party.

latortuga• 8 years ago

Yes, I believe the term for this is "use tax".

vkou2• 8 years ago

If this is taxation without representation, you should see how green card holders and people on visas are dealt with.

[x] Taxation

[ ] Representation

gnopgnip4• 8 years ago

This is about whether using a common carrier to ship goods somewhere is considered a business nexus. And the supreme court ruled that it is, if you are making 200+ shipments a year or $100k in revenue.

pishpash7• 8 years ago

Doesn't cover what happens with electronic delivery. Pretty slippery slope towards banning the use of VPN's when shopping, for example.

nkurz4• 8 years ago

The actual (quite readable) Supreme Court decision is here: https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf

Most of the coverage I've seen downplays it, but it should be noted that the question is not whether tax is owed on these out-of-state internet purchases, but whether the retailer should be required to collect it and submit it to the state. Currently, the purchaser is (in 45 of 50 states) legally required to pay a "use tax", but most Americans (98%?) are blissfully unaware of this requirement, or have simply decided not to pay it. This is pure illegal tax evasion, based on the (correct) assumption that enforcement is lax and risk of punishment is low: https://www.npr.org/sections/money/2013/04/16/177384487/most...

Rather than attempting to enforce these existing laws against their residents (unpopular and difficult), states believe it will be easier to get compliance from retailers. Until this decision, it was unconstitutional under the Commerce Clause for a state to demand this collection unless the retailer had a "substantial nexus" in the state, generally defined as a physical presence. Post-decision (pending new national laws created by Congress) all retailers are fair game. The particular South Dakota law in question has requirements as to volume of purchase, but this is not a principle of the decision.

Beyond the implications for internet retailers, this is an interesting counter-example to the Supreme Court tradition of "stare decisis" (to stand by things already decided). Apparently, everyone on the court agrees that earlier decisions that produced the physical location test were poor precedent. Usually, the court is very reluctant to revisit these decisions, but in this case, the majority justices decided to abandon precedent and explicitly call the earlier decisions mistakes. The dissenting justices, despite conceding that "Bellas Hess was wrongly decided", felt that the court was better off sticking with the flawed precedent than changing things up now.

Personally, whether or not this is good constitutional precedent, I think I agree with the dissenters that allowing local jurisdictions to make laws affecting far-away businesses who have no other local presense is going to lead to problems. Beyond just the burden of collecting confusing locally defined taxes, I fear about where else it leads. If a locality can enforce its local tax laws, what other custom crafted local laws can it enforce in return for access to customers? Can it require a business license? Should it be allowed to enforce its local environmental and labor standards as well? Is this a good thing?

jdhn• 8 years ago

If a locality can enforce its local tax laws, what other custom crafted local laws can it enforce in return for access to customers? Should it be allowed to enforce its local environmental and labor standards as well?

This is pretty much what happens with California and car manufacturers. Even today on certain aftermarket car parts (primarily exhaust systems), there are explicit notices that they are legal anywhere in the US except California.

bluepeter7• 8 years ago

If a locality can enforce its local tax laws, what other custom crafted local laws can it enforce in return for access to customers?

Obscenity, for one.

astdb2• 8 years ago

Is the opinion pdf formatted with LaTeX? Couldn't help noticing the margins etc.

nkurz4• 8 years ago

Others have asked, and despite some surface similarity the answer seems to be "no": https://www.reddit.com/r/LaTeX/comments/1galio/does_the_gove...

It doesn't address the LaTeX question, but this page had some interesting details on the style guide for Supreme Court opinions: https://lawyerist.com/style-guide-supreme-court/

tafurnace• 8 years ago

It seems kind of silly that the stock prices dropped for online sellers that already collect state sales tax. Is this a knee-jerk reaction or is there more to this ruling that would be cause for this?

tvanantwerp• 8 years ago

A good TL;DR from my co-worker at the Tax Foundation (https://twitter.com/jbhenchman/status/1009808187137150977):

Does your state online sales tax law have:

* Safe harbor for sellers who have limited activity

* No retroactivity

* Adheres to SSUTA

* State level admin

* Provides software

* Provides immunity for errors

If so, upheld. If not...

Meekro• 8 years ago

If you run a SaaS company, you're affected too. You probably live in California (which doesn't consider SaaS sales-taxable), but other states do[1] so you'll have to start collecting taxes.

[1] https://blog.taxjar.com/saas-sales-tax/

Symmetry2• 8 years ago

So, if a state has a flat sales tax for all purchases then that's pretty easy to implement. But often you tax different categories of product at different rates. And there are fuzzy edges. The advertisements for Fig Netwons famously were "a cookie is just a cookie, but Newtons are fruit and cake." But is that true, legally speaking? And if it's true in one state jurisdiction does that that necessarily translate to another? How you you avoid having to figure out the tax rate for each product you carry in each of the 50 states?

swsieber• 8 years ago

I would think the same way any national chain does it.

Symmetry2• 8 years ago

That's true but stores have an advantage in that if they mess up it's harder for regulators to notice. But I'd bet the way this actually works is that companies mess up on this all the time and regulators will yell at companies to fix it before they start resorting to fines.

devmunchies• 8 years ago

Thats why companies like Avalara exist and are doing well. https://www.crunchbase.com/organization/avalara (not affiliated in any way)

cmurf2• 8 years ago

The ruling gives states the power to collect state taxes, but will states require out of state retailers to also collect and remit sales tax for each county, special tax districts, and cities?

It does not level the playing field if a non-local business must collect and remit sales taxes for thousands of jurisdictions while a local business must only collect and remit sales tax for their jurisdiction. It actually flips it completely around, burdening online business more than local business.

As a small business owner, the sales tax remittance is super annoying, it's so byzantine. They often refuse to let small businesses use automated submittal unless you have enough volume, and if you don't, you have to hand write out the forms and send in a check. Per jurisdiction. Separate forms for state+county, and city. I'd rather see the states take back the taxing authority of cities and counties, and dole out funding from the state sales tax revenue based on population.

jedberg10• 8 years ago

Grover Norquist, president of the anti-tax group Americans for Tax Reform, said in a statement, "Today the Supreme Court said yes -- you can be taxed by politicians you do not elect and who act knowing you are powerless to object."

That doesn't follow. The people being taxed are the people living in that state, and their representatives are enacting that tax. As usually Norquist is making up BS to scare people.

anonymous513312• 8 years ago

It is so significant of a claim that brings the question...does norquist know how sales/use tax even works?

jedberg10• 8 years ago

I'm sure he does. He just likes to abuse his position as a "tax expert" to say outrageous things and people believe him. He's very good at it.

spaginal• 8 years ago

If a state the business doesn’t operate in imposes the requirement to collect sales tax on your business out of state, you do have a multitude of costs and issues as a small business. If the federal government wished to circumvent this with a VAT split amongst the states, that is one thing, both sane and constitutional in the face of this, but this invites a mess.

First, if you are required to possess a sales tax license with that state, and potentially municipalities or jurisdictions within the state that require the fees and paperwork yearly, there is one huge cost, both in time and fees. No software will absolve your liability of this if you mess it up or dont pay the fees, you as the business own it.

If you are required to file monthly or quarterly statements with the state along with any remittances, there is time and costs there. File late, file incorrectly, fees and interest on top of the tax obligation. Refuse or forget to pay the tax to a jurisdiction in backwater Alaska, time and money to wrestle with tax auditors from another state if they pursue action. How will the states negotiate auditors and tax authorities stepping all over eachother within their jurisdictions.

Need to purchase extra services to juggle the spiderweb of compliance, reporting, and remittance issues, there is also more cost, whether in your additional time ($), accountants ($), or third party services ($). Keep in mind, none of these things absolve you of liability if you mess this up.

He is absolutely right.

datamingle• 8 years ago

Think of it from the perspective of the business selling goods. Then the quote makes more sense.

jethro_tell3• 8 years ago

The business isn't paying the tax though? If the people paying the tax don't want it, they should replace their reps or move to a state that doesn't have that tax.

So we could think of it from the point of the business but that wouldn't be based in fact.

jedberg10• 8 years ago

No it doesn't. The business isn't paying the tax. They are only collecting it on behalf of the taxing agency.

txsh2• 8 years ago

Wrong. If you live in a state without income tax, buy a product from a company in the same state, and then ship the product to your friend in Texas, you have to pay Texas sales even though you have never been to Texas.

jedberg10• 8 years ago

That's because you asked the company to ship it there. That's the company collecting tax on your friend's behalf. If you buy it and ship it to yourself, and then ship it to your friend, there would be no tax, because then you bought it and they have no way of knowing it is going to your friend.

Technically, your friend had to pay use tax when they got it from you. But they probably didn't. Which is why they want the retailer to collect the tax for them.

s2g2• 8 years ago

and who act knowing you are powerless to object

I still have the power, mostly, to just not buy from other states.

kels2• 8 years ago

What no one is talking about here is how this would be handled, especially for a small online sellers. There are almost 10,000 tax jurisdictions (https://www.washingtonpost.com/blogs/fact-checker/post/mccon...) and you're not allowed to collect sales tax unless you register for that jurisdiction. There is also a fee collected by most jurisdictions to register and most make you send in periodic reports, even if you didn't collect any taxes for them.

tomrod• 8 years ago

Sounds like a business opportunity.

johns• 8 years ago

Avalara just went public and is benefitting from the ruling: https://www.geekwire.com/2018/avalara-stock-soars-following-...

notheguyouthink• 8 years ago

Funny, I hear anti-competitive not business opportunity.

It's a business opportunity now, but as with many government laws, in the future businesses end up depending on government forcing their markets existence. So then they lobby for the government to keep the system, even if it's out dated or badly thought out. We can't stream line anything, because entrenched businesses don't want anything to change.

It makes me sad the world is this way.

DoctorOetker9• 8 years ago

With fee, do you mean that you have to pay a yearly fee for simply registering as possibly collecting taxes for that jurisdiction? Not sure what most is, but ~30-50 pay-to-play fee's a year will certainly hurt the small businesses.

I think it's good to start harmonizing the sales taxes, but such a fee (if I understand you correctly) should be removed...

kels2• 8 years ago

I'm in Colorado and I had to pay $66 up front. $50 is a deposit and $16 is the fee every two years. I see that California doesn't have a fee but I know other states do.

TaxJar will register for you in the States that you need for ~$100 per state, plus their fees (https://www.taxjar.com/state-registrations/) -- I'm sure Avalara does something similar but that's ~$5000 that a small business probably won't have.

beberlei• 8 years ago

suddenly the EU VAT system looks awesome :-)

Tloewald3• 8 years ago

The US system of local sales taxes doesn't look awesome ever. If there were one economic reform I would push in the US it would be advertised price is final price (i.e. if you say "I'm selling this for $9.99" then that's all you pay, and the taxes are all inclusive) this would pretty much force underlying tax reform as businesses lost their shit having to deal with the insanity.

Note that the disaster area that is US regulatory overlap means passing a law like this is probably impossible without constitutional amendment.

Right now in the US it's often difficult, and sometimes impossible, to know how much you'll actually be paying in any transaction. It's ridiculous, and from a pure Econ 101 perspective it's a first order problem in the market.

windows_tips6• 8 years ago

Hmm, always 30% or sometimes 8%?

Animats2• 8 years ago

See [1]. Sales tax as a service is available from seven different providers. Shopping cart integration is available. You pay one bill, they handle the rest.

[1] http://www.streamlinedsalestax.org/

sp3323• 8 years ago

Where do you get to see the list of providers?

lightbyte• 8 years ago

So this is another needless regulation that creates more useless rent-seekers?

gnopgnip4• 8 years ago

There is a threshold in the South Dakota bill for $100k in sales in the state. Small online sellers are not affected

arbuge• 8 years ago

That's just the exemption SD chose to apply, and which they could change at any time. Other states may choose to not have such an exemption.

You are also now open to tax audits from all other states, since you may need to prove you are below any exemption limit.

It's a bad deal for small business no matter how you slice it. I think that if your revenue is below ~$100m annually, the future is beginning to look bleak. Very helpful to the big players like Amazon in killing off small competition.

bluepeter7• 8 years ago

100k or 200 transactions... that 200 bar is pretty easy to hit w/ monthly subscription SaaS providers.

myrandomcomment• 8 years ago

Read the story...

"...South Dakota, whose law requires retailers with more than $100,000 in sales or 200 transactions annually in the state to pay a 4.5 percent tax on purchases"

"..Kennedy’s majority opinion strongly suggested the measure was constitutional, in part because it has the $100,000 threshold and doesn’t try to impose retroactive taxation."

A clear bar is set for what is covered here and what is a burden.

mlindner• 8 years ago

$100,000 in sales is a very low bar. That's equivalent to a business with a single employee, the owner, and they're probably not making a livable wage yet.

alfredallan1• 8 years ago

This is probably a very simple question, buy will someone please clarify: $100K in sales - does that mean: 1) $100K worth of (3rd party, for an ecommerce platform) product sold via the platform, or 2) $100K revenue accruing to the platform, as the commission earned on sales of whatever amount.

tallanvor• 8 years ago

Here's the problem with that $100k/200 transaction law. Small businesses have to do one of three things:

1) Assume that they will hit one of those limits and collect tax from the start. Once they've told the customer that they've been charged tax, they will have to file anyway. I don't see anything that says the first $100k/200 transactions are exempt from the requirement. And if you hit the limits this year, you'll have to collect taxes no matter what from my reading of the bill.

2) Keep track of how much has been sold to South Dakota residents and stop selling if they hit the limits.

3) Give up and tell South Dakota residents that they're out of luck and that a state with less than 900k residents isn't worth putting up with the filing hassles.

If I'm not sure if my business will take off, I'm probably not interesting in paying taxjar or someone else $5000/year just in their filing fees (to make sure I'm covered), so I'm most likely to go with option 3 and start by limiting sales to my home state, those with no sales tax, and those that aren't going to try and make me collect the sales tax for them.

dragonwriter2• 8 years ago

It's very simple how it would be handled:

(1) very large organizations with retail over a wide area as a core business focus would handle relations with taxing jurisdictions directly as a central function.

(2) medium scale organizations would outsource tax compliance to specialized vendors that would handle it.

(3) very small organizations would either do the same as medium orgs (assuming vendors handle them) or just not sell into many jurisdictions.

anonymous513312• 8 years ago

Agree lots of people here are overly sensational. In the most basic terms it simply consists of getting somethig like avalara, configuring it correcrtly and then avalara does the rest. No different than setting up quickbooks. Yet people here make it sound like it is the end of the world.

Truth be told most here are just mad that their online sales tax loophole is getting closed.

vinceguidry• 8 years ago

3 would be a source of political pressure for those jurisdictions to simplify tax compliance.

joezydeco2• 8 years ago

Watch Amazon offer it as an AWS service...for a 0.2% fee.

anonymous513312• 8 years ago

Or just buy out avalara and take over the whole market.

cityhomesteader• 8 years ago

What no one is talking about here is how this would be handled, especially for a small online sellers.

Strange huh? Seems like the little guy is being attacked by the elites in every manner possible. Whether it is small online sellers, small time youtubers, independent freelance journalists, small time artists, writers, etc, seems like the rules are being changed to favor corporations and the heavy hitters. Heck, even search and social media results/algorithms are changing to cater to corporations.

Odd that this story hasn't gotten that much traction anywhere either. You'd think something this important would be all over hacker news and social media. I remember Bezos used to be very vocal whenever internet tax issues came up. He's been awfully quiet. Oh that's right, amzn is no longer a small time book and music seller.

bluepeter7• 8 years ago

You'd think something this important would be all over hacker news and social media

It's the top story on... Hacker News.

ggm• 8 years ago

If only we had .. machines which can look up an item in a huge list of items and find some specific properties about it.. just think! We could sell maybe two or three of these machines a year.

coldseattle• 8 years ago

That’s exactly the point. Only the biggest companies with large pools of compliance accountants and attorneys will be able to do business.

skybrian• 8 years ago

Unless it can be outsourced? Companies providing an Internet storefront that takes care of sales tax should do well. Could Stripe do this?

azinman23• 8 years ago

Until you pay one of many existing SaaS providers a modest fee to do this for you.

peter303• 8 years ago

I remember a service already available in the 1990s to compute and collect proper tax in every US zip code. Its not rocket science folks.

jhayward2• 8 years ago

Well, since zip codes don't map to taxing districts it's pretty much screen doors in submarines. Not possible to compute taxes via zip code for the 50 US states plus territories.

Shivetya• 8 years ago

then states need to step in and set "online" rates that trump the local rates. many states already do similar with Ad valorem taxes on automobiles. Taxes aren't your only problem, there local restrictions on items sales that one area considers hazardous or regulated that another doesn't even acknowledge.

rbritton4• 8 years ago

Something like ten years ago now, Washington State changed their sales tax requirements in a way that required the seller to look up the four-digit rate code of the buyer, both for determining the rate to charge and later for remitting to the state. The quarterly file they provide with this information is ~150000 rows. Prior to that date, you just reported for the jurisdiction in which the business was registered.

Between this and similarly far-reaching laws (e.g., GDPR), it's becoming increasingly burdensome for small players to the point where secondary services like Avalara are effectively required.

panda888888• 8 years ago

Yep. The most annoying part is that tax jurisdictions don't correspond to ZIP codes. If they did, this would be so much easier.

eric_h• 8 years ago

As someone who grew up in a house who's mailing address and zip code were for a different town and county from the actual physical location of the house (it was just past the border) - I can't even begin to imagine how to actually do this completely correctly.

sseveran• 8 years ago

That's because zip codes don't really align with anything in the general case. There are even zip codes that span multiple states.

https://gis.stackexchange.com/questions/53918/determining-wh...

test65543• 8 years ago

It sounds like Avalara costs $50 per year for small businesses, but scales up for larger companies. So compliance is trivial if it truly works.

omfg3• 8 years ago

Unfortunately they don’t have transparent pricing. So it’s a bit of a mystery. We were in the middle of getting a quote but then found TaxJar thanks to this thread and are going to try that. I prefer the pricing being up front.

tathougies• 8 years ago

If compliance were required to this new extent, then avalara could likely raise prices

maehwasu• 8 years ago

The mental overhead of tracking compliance requirements (and finding service providers to meet them) dwarfs the monetary cost.

jMyles• 8 years ago

Between this and similarly far-reaching laws (e.g., GDPR), it's becoming increasingly burdensome for small players

So you're saying that these laws are achieving their intended purpose?

bostonscott• 8 years ago

Bingo. This is precisely how big companies leverage big government to prevent challenges from threatening their business model. Amazon is investing its money into lobbying for "Main-street Fairness" ... https://www.reuters.com/article/usa-amazon-lobbying-idUSL1N1...

inferiorhuman• 8 years ago

Between this and similarly far-reaching laws (e.g., GDPR), it's becoming increasingly burdensome for small players to the point where secondary services like Avalara are effectively required.

Sounds like a good justification for a federal GST instead of the patchwork of (hyper) local sales taxes. I fully understand why that will never happen in the United States (states' rights), and think that it's the tax patchwork that's the problem not the requirement to collect taxes itself.

kccqzy• 8 years ago

Local sales taxes are sometimes earmarked for a specific purpose that improves the local community. For example recently voters in the Los Angeles county approved a sales tax increase to fund new Metro lines [0]. It seems fair that since this Metro line primarily benefits residents in this region, this additional sales tax should only be charged when one buys products in this region (primarily residents). Concentrating all the money at the federal level and then redistributing doesn't seem very fair.

[0] https://ballotpedia.org/Los_Angeles_County,_California,_Sale...

slavik81• 8 years ago

My impression from browsing these discussions is that the set of rules governing sales taxes even in a single state are sometimes more complicated than those for all of Canada. It's pretty incredible to see all the fancy tax rules.

Aloha• 8 years ago

I see a opening for a SaaS business, that can automate and outsource this, and figure out how much tax is due per transaction, and then make the payments for small businesses - its something online payment processors like stripe, for example could do too.

mindslight2• 8 years ago

Yet another tenuous stretching of nexus by lawyers who have little interest in how technology works, but do have every incentive to justify increasing their own scope. This is the equivalent of telling New Hampshire stores that they're responsible for collecting Massachusetts sales tax for people coming over the border to shop.

A business collecting taxes for the state they are in, even for orders shipped out of state, would make sense. But the individual states seem unwilling to do this, as it would decrease their own businesses' advantage. And that's the whole point - we should welcome competition in tax rates, wherever it can possibly even be found.

Referencing New England was not arbitrary, as the ability to drive two states over to simply have dinner is a condition that holds the state governments to a modicum of honesty.

dsfyu404ed4• 8 years ago

holds the state governments to a modicum of honesty.

Coffee almost came out my nose.

Governments in southern New England are only regarded as legitimate because people in MA and CT bury their heads in the sand and RI compares itself to NYC and Chicago (that's not to say that useful or good programs don't exist within these governments).

This is the equivalent of telling New Hampshire stores that they're responsible for collecting Massachusetts sales tax for people coming over the border to shop.

I fully agree that state tax should follow the state of the merchant. If a state's cost of doing business (through taxes, cost of living or some other reasons) is so high that businesses that have to pay to ship their good can out compete them then it's that state's problem. If it wants a cut it's going to need to change things so that more business happens in its jurisdiction. Sales taxes are regressive anyway so they should be a race to the bottom.

mindslight2• 8 years ago

Sure, but at least MA/CT sales tax is just above 6%, while CA is pushing 9%.

The bigger picture is that if one wants to live close to family and friends in New England, they're still able to move and pay 0% sales and state earned income taxes. Whereas if one wants to live close to family and friends in CA, they're completely over the barrel.

jatsign2• 8 years ago

I run a little side project that sells a small software tool for $12/customer (forever, not recurring). It generates about $1200/month.

Should I care about this? I use Stripe to collect payments, if it matters.

brlewis2• 8 years ago

If I were a lawyer, I'd be able to tell you with great certainty and precision what all the reasons are why you shouldn't look for an answer to that question here.

jatsign2• 8 years ago

True, but there probably aren't many lawyers who can answer the question either.

jakejohnson10• 8 years ago

SaaS is taxable in some states [1], so if you have nexus in one of those states you'll want to register for a sales tax permit and collect sales tax for that state. When these states introduce thresholds similar to South Dakota, you may be obligated to collect sales tax in additional states.

You can use a sales tax API with Stripe [2] to calculate sales tax before processing the payment. From there, you'll have to remit the sales tax to the state manually or use sales tax compliance software like TaxJar or Avalara.

[1] https://blog.taxjar.com/saas-sales-tax/ [2] https://developers.taxjar.com/blog/handling-sales-tax-with-s...

bluepeter7• 8 years ago

Any idea how this will affect SaaS folks with no physical products?

jakejohnson10• 8 years ago

Some states consider SaaS [1] and digital products [2] taxable. Refer to the blog posts below:

[1] https://blog.taxjar.com/saas-sales-tax/ [2] https://blog.taxjar.com/sales-tax-digital-products/

0x86DD_• 8 years ago

I'm Just wondering how long it will take to happen a data breach with all these tax info. what a headache.

koolba• 8 years ago

How does this work for virtual delivery of products? Do online SaaS companies have to ask for an address now as well?

miguelrochefort• 8 years ago

Why don't we get rid of taxes altogether?

test65543• 8 years ago

Ideally, there would be an API provided by the federal government that would give you a list of tax rates for any address. Where there's always a standard rate for general goods, and then any additional rates for things like school supplies or other stuff.

Thersites• 8 years ago

More friction for everyone, benefiting the entrenched leaders in all online retail spaces, looks like another step towards Balajis Network State, his Startup Society speech is amazing https://www.youtube.com/watch?v=KiLUPvUsdXg

hnburnsy2• 8 years ago

Anyone ever feel like a vendor is collecting sales tax, but never remitting it to the taxing authority. I remember Vonage was collecting a city\state telecommunication services tax for where I lived but only the city (not the state) actually levied the tax.

DanielBMarkham• 8 years ago

This decision has effectively killed the "internet lemonade stand", where a person with a bit of web knowledge could go online and a day or two later have a store that sold something.

Oh sure, you can still do that. But now it's going to all be channeled through gatekeepers that will ensure regulatory compliance. And run their own little walled gardens. Better not tick them off. (This is a nice little website you have here. Are you sure you're happy with that tweet you sent one night after heavy partying seven years ago? Be a shame if somebody made a fuss about that and started harassing your gateway provider)

There should also be some interesting macro changes. At some certain price and weight points, it's probably going to be easier to buy overseas and avoid taxes, at least for some residents. I would expect international shipping to tick up a bit.

hnburnsy2• 8 years ago

Yes on international, just bought a one plus phone, came from Hong Kong, not one penny in sales tax. Quite the advantage over the iPhone x where I would have paid close to 100$ in sales tax.

pishpash7• 8 years ago

And soon you'll get hit with a 10% tariff on it, as the phone most likely originated in Shenzhen.

blairanderson2• 8 years ago

IF this is as burdensome as it sounds, I think Amazon will create an even-larger competitive advantage for their marketplace and start collecting and remitting taxes for all sellers in all states.

Since January 2018, Amazon has started collecting and remitting taxes for all orders / all merchants in the state of Washington and Pennsyvania, and Oklahoma will join in July.

They already do it. Why wouldn't they expand that program?

ashelmire• 8 years ago

So what if you split your company:

1) A US based warehouse/shipping company. 2) An offshore entity that owns the products and sells them - but the products never leave the US.

Company 2 sells the products to consumer, company 1 ships them. Company 2 is, presumably, beyond the enforceable jurisdiction of the states and therefore can't be forced to pay the taxes?

taurath• 8 years ago

What a boon for SaaS payment providers, and what a loss for both smaller and larger shops doing things in-house.

We are seeing in action the consolidation and corporatization of the internet, as regulators and laws catch up from the wild west days. This is how every industry goes, but start saying goodbye to startups as they've been for the last 15 years. Already its a better deal for most workers to just work at a bigco (and has been for a while).

Of course, this doesn't address whether internet sites should have to deal with state taxes (they probably should), but gosh everything is getting a heck of a lot more complicated.

windows_tips6• 8 years ago

Although the court left open the possibility that other arguments could be pressed against the South Dakota law, Kennedy’s majority opinion strongly suggested the measure was constitutional, in part because it has the $100,000 threshold and...

Anyone know where the Constitution talks about this $100,000 threshold?

doesn’t try to impose retroactive taxation.

Similar to how it presumably not limiting what arms can be sold makes it 'constitutional'.

aerotwelve• 8 years ago

I haven't been able to read the opinion yet, as I'm on a phone, but often these types of thresholds or tests come from related cases that have been previously decided.

Natural places to start looking in this case would be the Quill Corp. v. North Dakota or National Bellas Hess Inc. v. Illinois Department of Revenue.

(If not there, following the footnotes in Kennedy's opinion will likely get you there eventually.)

c3534l• 8 years ago

The federal government was granted the power to regulate interstate commerce. They seem more than happy to regulate matters of in-state commerce, yet when it comes to actually doing a job they have legal authority to do, standards are conspicuously absent to the points where it's quickly becoming a problem for everyone.

switchstance2• 8 years ago

Is this for only physical products? What about digital downloads and software services?

switchstance2• 8 years ago

Anyone?

graeme• 8 years ago

Does this affect the sale of services or info products sold online?

I run an online business from Canada with American customers and am wondering if I'm affected. All digital products or services.

bluepeter7• 8 years ago

Yes.

jimnotgym2• 8 years ago

It's a shame that this wont apply to us here in the 51st state. US companies will continue to drive on UK roads, use UK security and UK law and UK infrastructure to access UK consumers, and will continue to pay less tax than me.

DrJokepu• 8 years ago

What? US companies have to pay VAT in the UK, just like anybody else.

jimnotgym2• 8 years ago

1) Consumers pay VAT not companies. Companies only collect VAT, unless you mean they are buying goods in the UK.

2) Google use EU cross border services rules to avoid charging VAT in the UK. But since it is b2b it is generally reclaimable so no gain to exchequer either way

3) Uber avoid VAT by classing their drivers as self-employed so they each run a business below the threshold for registration. This is despite being found at fault for this.[0]

So there are some very large cases of US companies not charging VAT.

[0] https://goodlawproject.org/uber-case/:

marze• 8 years ago

Shouldn’t this require an amendment to the constitution, to eliminate the constitution’s clause forbidding the taxing interstate commerce?

dragonwriter2• 8 years ago

Shouldn’t this require an amendment to the constitution, to eliminate the constitution’s clause forbidding the taxing interstate commerce?

No such clause exists; there is a clause in Art. I, Sec. 9 prohibiting state import and export duties, but a tax on sales applied equally to sales into the state regardless of whether the origin is in or out of state is not an import duty, and therefore not prohibited.

methehack• 8 years ago

So how is this going to work? Imagine you're a small online retailer and people from every state buy your stuff. Does that mean each state can send you a tax bill? Without knowing what you owe? And what if you ignore it? What recourse does the state (that you don't live in or don't own a business in) have? Seems like none or very little. Plus, the administrative burden could be quite large for any given state. And it's a crapshoot from the state's perspective, since the state has no idea which retailers are heavily used in their states. I wonder if the states will work together on collections and figuring that part out... Seems like in the short term small sellers will be ignored by the states and the large sellers will loose. Mid to long term -- who knows... Obviously, I'm guessing.

And another thing... The idea that the states are "losing out" on revenue seems like a very simplistic way to look at things to me. First, the states have undoubtably already adjusted their tax structure to get the revenue they want/need. Lots of things affect that and the states adjust all the time. The weather (literally) for instance. It's not like there's an unaccounted for shortfall.

Second, the retailers in question are always local to a given state and their online businesses contribute to their home state's revenue. If those businesses have the administrative burden of managing sales tax across fifty states they may contribute less to the given state's revenue. Or -- they raise prices.

I think it probably hurts people starting up the most as it effectively creates a lot more regulatory risk.

In any case, an economic drag as all bad regulation and regulatory uncertainty is. There's huge uncertainty here as who knows what/if congress will do. "Nothing" is a certitude for a few more months at least. Probably a few more years. Just long enough for it not to be worth creating a business around solving the problem.

g0dg0d• 8 years ago

This is going to drive so much business OUT of states with these taxes.

bluepeter7• 8 years ago

Unlikely. This is similar to an occupancy tax... why not soak out-of-state guests who don't have much choice in the matter, and won't be voting to do away with the tax. A SaaS business is going to refuse to do business w/, say, Proctor & Gamble and pay Ohio sales taxes? No way.

astdb2• 8 years ago

How did catalogue/mail-order retailers handle this (presumably in business since before the Internet)?

jhall1468• 8 years ago

This ruling overturned previous rulings that allowed mail-order businesses to avoid collecting sales tax outside of their state.

blairanderson2• 8 years ago

I think Amazon will figure out a way to make things good for the end customer.

- They already collect taxes properly for all cities and counties for everything THEY SELL. - They already calculate/collect/remit sales taxes for all orders(including merchant orders) shipped to Washington && Pennsylvania && Ohlahoma.

For other states, they can fairly easily take on this burden if it benefits the customer.

donbright• 8 years ago

I've lived in many a city in "flyover country" and I think it's long overdue.

The result of plunging sales tax revenue due to online shopping, for a lot of places, is bridges falling apart, underfunded police agencies, teachers leaving the profession because they don't want to live in poverty, schools without supplies, without music programs, without art programs, let alone STEM programs, colleges shrinking, faculty not being hired, roads going unrepaired, homeless population growing, libraries being gutted, social programs and social service agencies facing layoffs and shortages, and on and on.

baus• 8 years ago

All because of online shopping? It is difficult to believe some of these aren't the result of changing demographics and/or economic forces beyond online shopping

opo• 8 years ago

... is bridges falling apart, underfunded police agencies, teachers leaving the profession because they don't want to live in poverty, schools without supplies, without music programs, without art programs, let alone STEM programs, colleges shrinking, faculty not being hired, roads going unrepaired, homeless population growing, libraries being gutted, social programs and social service agencies facing layoffs and shortages, and on and on.

Non one can seriously claim the lack of sales tax revenue from out of state shippers has that big of an impact on state and local revenue.

According to the article:

...Broader taxing power will let state and local governments collect an extra $8 billion to $23 billion a year, according to various estimates.

As a comparison in 2012:

...Tax revenues increased in all but five states in fiscal year 2012, with some recording noticeable gains. In all, states collected $794.6 billion, a record-high that represents a 13 percent increase from 2010 totals

http://www.governing.com/gov-data/state-tax-revenue-data.htm...

So even using the high estimates of 23 billion, that would be a small fraction of total state/local tax revenue. The extra few percent of revenue from taxing out of state businesses isn't going to solve the huge list of problems you listed (nor is it obvious that the money will be spend on any of those issues).

The real question with this ruling is how much it will cost all the Internet retailers to comply with the law.

foxylad2• 8 years ago

Will foreign companies who sell internet services to US customers have to collect state sales taxes?

This would be a serious nightmare. We already limit our sales to Canada because if we go over a relatively low threshold, we'd have to collect and remit state sales tax for about 12 territories. Having to do the same for 11,000 US jurisdictions would instantly stop foreign entrants into the US market.

foxylad2• 8 years ago

This is a huge opportunity for payment services to value-add. Providing automatic sales tax calculation, collection and remittance (including another couple of percent for their trouble) is a no-brainer.

PrimHelios2• 8 years ago

Fucking RIP literally every internet store that doesn't have the ability to register for 10 thousand (literally) different fucking tax jurisdictions.

nickjj2• 8 years ago

Unless I'm totally misunderstanding this, doesn't this mean the following:

If you sell a few thousand digital goods (let's say video courses or ebooks) to people spread across 30 states in the US over the year, you will be responsible to collect sales tax and do the paperwork to pay each of those 30 states sales tax every quarter (or per year)?

When dealing with a low priced item, it's not difficult to accumulate a high number of transactions.

Not only are those fees a huge financial burden but I imagine the act of filing all of that is going to kill any motivation to do anything. For me, I'll end up either stop doing what I love (creating educational content to help other developers while making enough $ to live on) or move to a different country with a better tax system.

SubiculumCode3• 8 years ago

Maybe the problem is sales tax. Its regressive. Its complicated in the multi-jurisdictional context.

techsin1014• 8 years ago

Exactly

bcheung• 8 years ago

Does this mean companies need to file 50 different state returns? How can any company other than a mega-corporation be expected to handle that level of bureaucracy? Even if their are firms that pop up to handle compliance it's probably going to cost a fortune. This will put a huge strain on small companies forcing many of them out of business.

doggydogs94• 8 years ago

It’s about time for internet sales tax. Just how do local firms stay in business when internet based businesses can undercut them by 5-10% automatically.

techsin1014• 8 years ago

There should be no sales tax to begin with, Or income tax or property tax.... Most taxes can be simplified and reduced to a 1 simple wealth tax.

If you look at this matters with some attention you realize system works against poor...

Only income taxes are progressive. And Rich don't get richer because of their income.

Whether you're a trillion dollar company or about to make your first sale to pay rent you owe same amout of sales tax.

Wether you live in NYC and pay 3k in rent or live in Alaska you pay same federal income tax.

.... Wealth tax is way simpler... It let's govt tax wealth/income on its last form. Like a fraction in reduced form, or equation that's been simplified.

Easier to conduct business, easier to start business, easier to pay taxes, easier to be poor. Much much fair to all.

Capital tax is not same as wealth tax. In fact if you have wealth tax there is no need for capital tax.

I suggest 4% wealth tax and remove pretty much all other taxes.

If your wealth is 200 billion, first year you pay 8 billion. If your wealth is $5000 then you pay only.. $200, doesn't matter if you earned 400k. If you didn't accquire assets you spent it and some else have that now so they will pay it...if you bought stuff then your wealth isn't really 5k

gnicholas2• 8 years ago

This disincentives savings and is in many ways the opposite of VAT taxes, which many tax scholars hold out as one of the most efficient ways to raise revenue without distorting desirable economic behavior.

techsin1014• 8 years ago

The incentive to be wealthy is far more greater than 4% tax on wealth could be a disincentive. Beauty of this is you only pay if you are rich, not if you are poor or even if you earn a lot and still have lot of expenses (medical, live in nyc, or have children etc)

nickjj2• 8 years ago

I don't understand how this can be enforced for selling digital goods online.

Right now you can process a credit card transaction with only needing the number, exp date and CVC. You do not need the card holder's billing address. You don't even need the card holder's name.

So what's stopping someone from buying your digital item (let's say an ebook or course where you use Stripe / PayPal to handle the transaction) but put in a fake address, or an address they don't live in. I don't think Stripe / PayPal will halt the transaction. Instead they might flag it as questionable but the transaction will still go through.

In this case the business owner has no idea where the customer actually lives to tax them properly and the customer has no incentive to put a real address in because they are not getting something delivered to an address.

mkempe• 8 years ago

How does this apply to traditional mail-order catalogues? I thought their no-sales-tax orders were the model for e-commerce.

States Can Require Internet Tax Collection, Supreme Court Rules

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