US Senate approves proposed Internet Sales Tax

http://techcrunch.com/2013/03/23/u-s-senate-approves-proposed-internet-sales-tax/

by Shenglong • 13 years ago

91 128 13 years ago

Evbn• 13 years ago

Interesting that no one ever talked about the alternative to Internet sales tax, to solve the competition problem: removing sales tax, and replacing it with use/income/property/head/etc tax.

ScottBurson• 13 years ago

Well, California, for example, has a use tax on items bought out of state, but it's unenforceable and compliance is pretty much nil.

There are states with no sales tax, but I think you'd have trouble persuading those that have one to give it up.

curt• 13 years ago

Sales Taxes are the least economically destructive of all taxes. If a government's goal to optimize economic growth they should eliminate income, property, capital, etc taxes are replace them with a sales/consumption tax. Bobby Jindal proposed this in Louisiana.

lbarrow• 13 years ago

Sales taxes are also regressive: poor people spend a higher percentage of their income than rich people, so any tax on spending will affect poor people more than rich people.

Retric• 13 years ago

Sales Taxes are vary economically destructive as unlike income tax they artificially shift the economy from real goods to services. The only way to avoid this is to tax all spending and gift giving which ends up being just another income tax.

mikeash• 13 years ago

What makes sales tax better than other taxes in this regard?

greenyoda3• 13 years ago

For state legislatures, charging sales tax to buyers outside the state (like most internet buyers probably are) is much less politically risky than raising income or property taxes on state residents, since people outside the state can't vote them out of office. And raising income or property tax on someone who doesn't buy a lot of goods may end up being a net tax increase for that person, which might also incur their political wrath.

just2n3• 13 years ago

I'm fine with income taxes so long as they're progressive and have no holes, such as investments in the stock market not being considered "income" so that people can make $800,000+ /yr and pay some obnoxious 15% in taxes while people making under $100,000 can easily pay over 25%. Feels like we're losing out on a few hundred billion/yr in tax revenue due to nonsense like that.

chatmasta2• 13 years ago

By "nonsense like that," do you mean nonsense like encouraging investment? We live in a capitalist society. Capital is eponymously fundamental to market growth. Discouraging investment by increasing capital gains tax is one of the surest ways to stymie economic growth. To do so for "a few hundred billion in tax revenue" would be unbelievably short sighted.

rayiner2• 13 years ago

This is misleading: A score of Internet lobbies, such as Netchoice, representing Facebook, Yahoo, and (TechCrunch’s parent company) Aol, argue that the senate’s bill “does nothing to address what the Supreme Court says was an unreasonable burden on interstate commerce,” explains Steve Delbianco of Netchoice.

"Undue burden on interstate commerce" comes from the negative implications of the Commerce Clause, which gives Congress power over interstate commerce and prevents states from putting an undue burden on interstate commerce in an area where Congress has not legislated. If states impose sales tax pursuant to an act of Congress, then there is no Commerce Clause concern since Congress does have the authority to regulate interstate commerce.

kyrra• 13 years ago

Had to look this up. Looks like there was an earlier ruling in 1969 about sales tax on mail orders. The 1992 case seems later further refine the ruling.

http://en.wikipedia.org/wiki/National_Bellas_Hess_v._Illinoi...

http://www.infoplease.com/cig/supreme-court/sales-taxes-mail...

rayiner2• 13 years ago

Basically in Bellas Hess, the appellant claimed that the tax was unconstitutional on Commerce Clause and Due Process grounds. Specifically, that states imposing a tax on mail orders infringed on Congress's power to regulate interstate commerce and alternative that it violated appellant's rights under the 14th amendment to equal protection under the laws. In Bellas Hess, the Court agreed with appellant without justifying the decision explicitly on due process grounds. In Quill, the Supreme Court clarified that it was deciding on Commerce Clause grounds.

The relevant distinction is that Congress cannot pass legislation to allow the states to violate the 14th amendment. It can, however, pass legislation that allows the states to burden interstate commerce since if Congress has sanctioned it than any such state legislation doesn't infringe on Congress's power.

joonix• 13 years ago

I don't think any new tax will pass in the House.

adestefan4• 13 years ago

It's not a new tax. It's to allow states to collect taxes that are already on the books.

andyl• 13 years ago

If I were King: eliminate sales and employment taxes, replace them with carbon taxes.

darkchasma• 13 years ago

This would only penalize the poor, as the rich could afford back yards full of solar panels and wind turbines, and drive Tesla cars... And since the rich are such a small percent, this would have virtually no impact on the environment.

I love the idea, but I do not believe this is a better solution to sales and employment tax.

Xcelerate• 13 years ago

I think a consumption tax is the best solution. Basic necessities like food, housing, etc.. are not taxed (or are minimally taxed). Luxury items like televisions, cell phones, etc. should be taxed though. This wouldn't penalize the poor, but the government would get the money they're looking for.

Can anyone think of any downsides to this?

EDIT: Yikes, I leave for half an hour and come back to a maelstrom of comments. So, to acknowledge one of your points, it could be difficult to categorize what is or isn't a luxury item. But, c'mon, is a $90,000 car really a necessity? I think it's easy to tell which items definitely aren't necessities.

3pt14159• 13 years ago

I'd do a density adjusted land tax, mineral rights tax, & a immigration head tax, combined with a minimal basic income and a massive cut in services.

jabits• 13 years ago

About time, on many fronts. Sales tax is the most economically beneficial tax (from a long-term viewpoint), encouraging savings, reducing consumption, and is taxpayer controllable. And it captures gray/black market transactions as well. No reason any electronic retail transactions should escape. Modern tech removes any "burden" claims.

redblacktree• 13 years ago

How does sales tax capture black market transactions? Does your local pot dealer have a Retail Merchant's Certificate?

NoPiece2• 13 years ago

But when he goes to buy doritos and a red bull at 7-11, some of that money is captured. I.e., Lot's of black market dollars wind up being used to make legal taxed sales purchases.

SoftwareMaven• 13 years ago

It's also incredibly regressive, targeting poor people with a higher percentage of their net income than rich people.

_delirium6• 13 years ago

That's one reason, in practice, for the popularity I think. When a state proposes raising income tax on the one hand, or sales tax on the other hand, raising sales tax is often easier to accomplish, because the lobbies against it are weaker. (There might also be a psychological aspect in that it's more of a nickel-and-diming: people may not realize what it adds up to in terms of a yearly total, while they do see that for income taxes.)

ig13• 13 years ago

Poor people are disproportionately likely to shop in-store rather than online because they're vastly more likely to be unbanked (i.e. no credit card) and be low-education.

I'd hazard an educated guess that the percentage of income spent by the poor online is tiny. Both because the above factors and also because the majority of spending for those group is going on rent, groceries, vice (cigarettes and alcohol) and transport which aren't commonly bought online in any case.

ams61102• 13 years ago

This could be remedied with a tax credit on the state income tax return, i.e. you get an automatic tax credit for sales taxes paid in whatever amount is decided to be "fair".

mbetter• 13 years ago

I've got a serious Poe's law problem with this post.

adanto68402• 13 years ago

Maybe not a burden for the Amazons of the world, but for smaller e-comm stores it is most certainly going to be a burden IMO.

I'd suspect that many online retailers would be forced to go down the path of outsourcing most of this using something like Shopify or similar -- it's just a lot of tax rates and calculations to keep track of, not to mention report on and optimize for!

NoPiece2• 13 years ago

If you were talking about a single national sales tax, you could be right. But what is being discussed is 50 different state taxes, which would be a burden, regardless of modern tech.

autarch• 13 years ago

It's even worse than that, since there are cities and counties which levy their own sales taxes. If an Internet retailed has to collect all of these, they need a comprehensive sales tax database plus a mechanism for sending payments where they're due.

I see a great opportunity for a webservice startup here.

greenyoda3• 13 years ago

"Sales tax is the most economically beneficial tax..., encouraging savings, reducing consumption, ..."

Encouraging savings and reducing consumption might be good things for society, but it seems that they hurt the economy (less trade, fewer jobs) rather than benefiting it.

No1• 13 years ago

Saving money and reducing consumption hurts the economy in the short term, but in the long term it encourages capital investment, lending, and other behavior that creates sustainable jobs and more trade. Whether or not an increase in sales tax will have those effects on Americans has yet to be seen.

teeja• 13 years ago

Savings would be a good thing, but I don't think the banks care to pretend they want to encourage savings any more ... au contraire. The 5% interest passbook savings rate - which the Depression/lWW2 generation enjoyed - "encouraged" savings ... until it got stripped away after the S&L bailout and was never replaced.

So the "good thing" would have to come from Congress. Good luck with that.

lilsunnybee3• 13 years ago

It also only applies to the upper tiers of society. For poorer people, they are going to be able to save less because essentials cost more, and go further into debt if a catastrophe strikes.

svenkatesh• 13 years ago

These were not the tax loopholes people wanted to be closed!

On the other hand, this will benefit brick and mortar stores.

twoodfin• 13 years ago

Just so you know: Every current rule that could potentially reduce your tax burden is now called a "loophole". For example: Limiting deductions for high earners (but not exactly the same deductions for low earners) is now routinely described by politicians and the media as "closing loopholes".

pragone2• 13 years ago

Can anyone find the text of the resolution? This seems to link to a blog that links to a blog that links to a blog...

adestefan4• 13 years ago

It's S 336. http://hdl.loc.gov/loc.uscongress/legislation.113s336

HR 684 is the corresponding bill in the House. http://hdl.loc.gov/loc.uscongress/legislation.113hr684

edit: replaced with permlinks

pragone2• 13 years ago

hey thanks

_delirium6• 13 years ago

Looking at the sponsors is interesting. The main sponsor, Mike Enzi, is a conservative Republican, who you might not normally expect to be sponsoring tax bills. But he represents Wyoming, a state that heavily depends on sales taxes, because they've made the decision not to tax personal or corporate income, leaving sales/use taxes as one of the major revenue sources (responsible for ~40% [1] of the state budget).

[1] See the pie chart on pg. 4 here: http://eadiv.state.wy.us/s&utax/Report_FY11.pdf

dreamdu5t2• 13 years ago

Another tax increase without any corresponding budget relief. So more taxes and and the same debt.

adestefan4• 13 years ago

This has nothing to do with the Federal government. This bill only allows states to collect taxes.

dreamdu5t2• 13 years ago

I'm aware of that. California does not need to tax people more for the exact same reasons.

Competition between brick and mortar stores and Amazon is a smokescreen. Tax deals are given to big box stores all the time, to this day. The whole "protecting small business from online competition" angle is a ruse.

coin• 13 years ago

"There are some exceptions: Amazon currently charges California residents sales tax"

I hate this incorrect terminology. Amazon merely collects sales tax on behalf of the state. The state is the one charging the sales tax.

greenyoda3• 13 years ago

Amazon has also been collecting NY State sales tax for quite some time now. Does anyone know if Amazon has any physical presence in NY State? I've never received anything from Amazon that has been shipped from NY.

I noticed that items that are sold by Amazon always incur NY tax, but items sold by independent retailers who sell through Amazon's site often don't incur tax.

_delirium6• 13 years ago

NY argues that Amazon's relationship with NY-based affiliates constitutes a NY-based Amazon marketing force that produces a sufficient nexus with the state to make them subject to NY law on collecting sales tax. It's currently being litigated [1].

I recall reading [2] that Amazon actually supports the federal legislation though, because they're slowly moving towards having a 50-state presence anyway, as things like grocery delivery and same-day delivery become a bigger part of their strategy.

[1] http://www.reuters.com/article/2013/02/06/us-tax-amazon-cour...

[2] http://www.slate.com/articles/business/small_business/2012/0...

sk5t• 13 years ago

Amazon also collects sales tax in Pennsylvania, where they have significant distribution facilities. However, it took several years for the tax collection to materialize.

Technically residents of a state are supposed to pay "use tax" if not collected by the seller. Of course almost nobody does this... my hunch is that doing it once would invite perpetual persecution from the state department of revenue.

biot• 13 years ago

How is it incorrect? Amazon charges its customers credit cards, and a portion of that charge consists of sales tax which it is obligated to collect on behalf of the state.

johnrgrace• 13 years ago

The "exception" is because Amazon has business operations in the state of California, they go to great lengths to keep the list of states the collect sales tax in limited.

jacoblyles• 13 years ago

Please note that BOTH California Senators voted in favor[1]. They also both voted for PIPA.

Dear internet - we fail at politics.

[1]http://www.senate.gov/legislative/LIS/roll_call_lists/roll_c...

brokentone2• 13 years ago

Playing devil's advocate here. No one pays "use tax" -- the tax you already owe your state for things you purchase online/on the phone etc and do not currently pay sales tax on. This is already an illegal activity that I'd hazard nearly 100% of the US is in on.

If I wanted to come into compliance here, I'd have to save all of my reciepts from every time I shop online, and probably hire an accountant to figure out all the extra tax I owe. This doesn't sound interesting to me, or enforceable by the government. However, online stores collecting this for me could be a value add in some ways.

Let's take a look at the free market though (although I get that issues of tax law cannot be fully free as they start in a non-free place). What if online retailers _offered_ to collect the tax for me, with the note that you owe it either way and they're trusting you to pay it on your own otherwise? I would likely opt-in much more often. Similar to suggested tips increasing tipping in NYC cabs, this might move the needle in the right direction.

jmharvey2• 13 years ago

I pay use tax. I've also been audited several times. It's easy to say, "oh, everybody ignores x tax, it's completely unenforceable," but if you get audited, yeah, the state can look through your bank and credit card records and get a pretty good idea of what you owe.

brokentone2• 13 years ago

Honest question, what sort of process does it look like for you to total everything up? Do you keep running totals or do it at the end of the year? Do you have an accountant? Would you prefer that online stores collected for you?

tocomment2• 13 years ago

Don't all tax bills have to start in the house?

mpyne2• 13 years ago

This isn't a true Federal tax/spending bill as much as it's a change in policy regarding how the states may enforce their own powers to tax.

tocomment2• 13 years ago

Isn't a tax a tax though?

juniatian• 13 years ago

So does this mean that the United States government will now accept bitcoins?

protomyth4• 13 years ago

At this point I wish the Federal Government would pass a straight 5% sales tax for goods crossing state lines. Vendor pays the Fed quarterly with report of zip codes bought from. Fed pays the origin state and the destination state 2% each and keeps 1%. Fed tell states no other taxing of items bought online.

maratd• 13 years ago

Yes, let's introduce another federal tax. Because we don't pay enough in federal income taxes, duties on imports, state income taxes, state sales taxes, county sales taxes, local sales taxes, and local property taxes. Let's add another tax. I'm sure I missed a few.

protomyth4• 13 years ago

I'm normally in the same belief, but the cost of each state getting to tax what is sold online differently will cost more than this. I figure it is a replacement for 50+ taxes with weird rules for one streamlined tax. I'll take that.

US Senate approves proposed Internet Sales Tax

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