Sales tax on online sales

So, with today's SCOTUS decision, most larger companies will have to collect the sales tax on internet sales. Amazon has been doing this for a few years anyway, but it will effect most online retailers now.


Will this change your buying habits for boat related products?

dhays said:

So, with today's SCOTUS decision, most larger companies will have to collect the sales tax on internet sales. Amazon has been doing this for a few years anyway, but it will effect most online retailers now.

Will this change your buying habits for boat related products?

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Won't change my habits on any purchases. Online is just way too convenient.

Once upon a time it was too tedious for resellers to know the proper state AND local taxes that should be levied for all of their customers. Let alone knowing where to send the collected money. But since the 90's that info has been readily accessible in just about all computer accounting software. So the excuse of it being too hard to properly collect has largely vanished.

As long as the taxes are levied equally for both in and out of state purchasers, and the rates aren't otherwise egregious, it'll do little to change my buying habits. Now, start charging out of state residents more (like ridiculous hotel taxes) and I'll damned sure take my business elsewhere.

I’m just thinking out loud here... but... Would a flat Federal online sales tax rate make any sense whatsoever? So i stead of companies trying to figure out 50 different rates, online purchases get a simply calculated single rate. This money goes to the purchase state and not to the Federal coffer.

Tom.B said:

I’m just thinking out loud here... but... Would a flat Federal online sales tax rate make any sense whatsoever? So i stead of companies trying to figure out 50 different rates, online purchases get a simply calculated single rate. This money goes to the purchase state and not to the Federal coffer.

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I think maybe not really... at least not without some other changes to various state tax structures.

States (should) set their sales tax rate based on the cost of budgeted government-supplied goods and services, and that varies from place to place... partly due to environmental factors, partly due to the rest of their particular tax structure.

While a flat rate might be easier for merchants to navigate, it may not speak easily to individual State budget processes.

-Chris

ranger42c said:

I think maybe not really... at least not without some other changes to various state tax structures.



States (should) set their sales tax rate based on the cost of budgeted government-supplied goods and services, and that varies from place to place... partly due to environmental factors, partly due to the rest of their particular tax structure.



While a flat rate might be easier for merchants to navigate, it may not speak easily to individual State budget processes.



-Chris

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I agree with you Chris. Each state has such wildly different tax structures. Oregon has no sales tax. Why should an Oregon resident pay sales tax on an online purchase? WA has relatively high sales tax as we have no income tax. Should WA forgo its rightful tax out of convenience?

I live in a suburban city that has had some significant budget issues over the past decade due to some changes in state laws. However, I was speaking with a city official the other day and they are finding that with the increase in online sales, our city budget is starting to look a little less dire. Sales tax is paid based on the location of the purchaser. So if I order a widget from Amazon, my city gets their cut of the sales tax. If I leave the city and purchase the widget at a B&M store in Tacoma, then my city never sees any sales tax revenue.

I am firmly against giving any of the states more money to waste. Consider public pensions for example. It has been well known for years now that public employee pensions are grossly underfunded.

Underfunded for many reasons such as outrageous public salaries that drive their pension benefits.

Consider:

https://www.masslive.com/news/index.ssf/2009/04/retirees_from_umass_state_poli.html

wkearney99 said:

Once upon a time it was too tedious for resellers to know the proper state AND local taxes that should be levied for all of their customers. Let alone knowing where to send the collected money. But since the 90's that info has been readily accessible in just about all computer accounting software. So the excuse of it being too hard to properly collect has largely vanished.

As long as the taxes are levied equally for both in and out of state purchasers, and the rates aren't otherwise egregious, it'll do little to change my buying habits. Now, start charging out of state residents more (like ridiculous hotel taxes) and I'll damned sure take my business elsewhere.

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Yes, collecting the tax is no longer a problem. However, the retailer will now have to file something like 48 state sales tax returns plus an unknown number of city returns. Hugely expensive for the smaller retailer.

foggysail said:

I am firmly against giving any of the states more money to waste...

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The late Kerry Packer would approve. Accused of tax avoidance(not evasion), said he didn`t like how the Govt. spent the tax he paid and he was not contributing more than he had to.
With over a year`s notice, Australia imposed a 10% goods and Services Tax on all imports under $1000, as well as those >$1K which were already taxed.(Some people even split orders> $1K into 2 parts,tut tut).All local purchases are subject to GST so it just levels things up.

Ebay and other sellers seem to be coping with no problems,it gets added to the purchase at the outset.

Bruce - being obliged to collect the GST on all orders was the reason that Amazon no longer ships to Australia (as of 1 July). Only the Australian Amazon site is now available and it has far few products available and noticeably higher prices. Not saying it’s not a inherently fairer situation for local retailers but as a consumer It has reduced our options in a big way.

RobertLeatch said:

Bruce - being obliged to collect the GST on all orders was the reason that Amazon no longer ships to Australia (as of 1 July). Only the Australian Amazon site is now available and it has far few products available and noticeably higher prices. Not saying it’s not a inherently fairer situation for local retailers but as a consumer It has reduced our options in a big way.

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Robert, let`s hope Amazon, having cut access to overseas product, increases its limited local product range. I saw a suggestion they could go the way of Starbucks company owned stores in Australia if they don`t.
But, if Ebay can collect and remit GST,surely Amazon can. Assuming they want to allow international purchasing, they could be forcing sales to their local arm.
Ebay`s system just delivered me an engine part, from the UK, in 5 days,GST paid, standard shipping. Someone will get a good reference for that.

BruceK said:

Robert, let`s hope Amazon, having cut access to overseas product, increases its limited local product range. I saw a suggestion they could go the way of Starbucks company owned stores in Australia if they don`t.
But, if Ebay can collect and remit GST,surely Amazon can. Assuming they want to allow international purchasing, they could be forcing sales to their local arm.
Ebay`s system just delivered me an engine part, from the UK, in 5 days,GST paid, standard shipping. Someone will get a good reference for that.

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Not sure how Amazon is collecting taxes but one thing I am sure is that it is not working really properly (for my own benefit). When I order there I pay from 0 to 15% taxes (the normal tax here) randomly.

L

In my state I am required to pay "use" (i.e. sales) tax on anything I buy online if the seller does not charge me for the sales tax in my state. It is paid as part of my state income tax every year. I am supposed to tell them how much I spent and calculate the appropriate tax. Having some online retailers that charge tax and some that do not makes it more complicated than it used to be.

I usually just ballpark a number and pay the tax on that (so far so good). Since all online sales are paid electronically there is a record which cannot be "fudged" like cash sales can be should someone decide to really look at how much I (or anyone else) buy online. I suppose you could use Bitcoin to avoid a record that the tax authorities could follow.

Things sold by Amazon proper are taxed. Things sold by 3rd parties via the Amazon market or hosting (there are a lot of them) may or may not have taxes applied. It is up to the individual companies to decide how they handle the tax question.

The misconception here is that we speak in terms of a "state" sales tax when in fact there are over 40,000 different "sales" tax taxing districts in the United States.

Years ago when I worked in this area of the law it was said that no one knew the correct tax in every district on any given day. The base rate in Illinois may change on July 1, but the add on rates for Cook County or Chicago may change on any day selected by the politicians. Rates have gone up or down mid-month. These districts are not divided by zip code or even by city. Sometimes a house on one side of a street is in a different district than the house across the street. And the districts overlap. Thus the tax rate for item A could be 6.75% for a house at 4909 Jones Street and 7.25% for a house at 4910 Jones Street. This is not a problem if the store is at 4909 Jones Street because all items are taxed at the rate for that location, not where the customer lives.

There is also a problem in that not all item are taxed at the same rate in the same taxing district, some districts exempt many items, others do not, again this would vary by address within the same zip code.

My reason that this was a bad decision is that it should have been left to congress to adopt a workable law, for example a law in which each state could charge one tax for any sale shipped to within that state and there would be only one report to be filed per state.

Another problem is that in many taxing districts the sales tax is a main source of income for the district. If the out of state seller files only one report on sale how does the local district get its money.

For those of you who know this area of the law I realize I am using the common but incorrect term for this tax. It is actually a "Retail Occupation Tax" on the retailer not a tax on the customer. Taxing interstate sales by a state would violate the constitution.

Bay Pelican said:

For those of you who know this area of the law I realize I am using the common but incorrect term for this tax. It is actually a "Retail Occupation Tax" on the retailer not a tax on the customer. Taxing interstate sales by a state would violate the constitution.

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That's a very interesting distinction that really calls into question the court decision. Previously, a business had to collect tax if it had a business presence in a particular state. That seems consistent with a Retail Occupation Tax. So, for example, I have been paying MA sales tax on Amazon purchases for as long as I can remember, since Amazon has some presence in the state. Back when I was running my company, we started collecting and remitting sales tax for states when we opened up a sales office in that state, but not before. So I wonder just how many states will start getting Amazon sales tax revenue now who weren't getting it before. Amazon was painted as the bad guy who was evading taxes, but for me that's just not the case at all.



All this really suggests that the court decision was about leveling the playing field, not about interpreting the law.


And I don't know about others, but not having to pay sales tax is only a minor consideration when I decide where to buy something. Product quality, availability, and price I think are the key consideration, in that order. Sales tax has only a minor impact on price. My point is that the only way I'll buy more locally is if availability and quality of product gets better. 9 out of 10 times when I order by mail, it's because of availability of what I want. If I could buy it locally, I would/do.

twistedtree said:

All this really suggests that the court decision was about leveling the playing field, not about interpreting the law.

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Yes! And that is a fundamental problem with judges. If they want to make laws they run for a seat in congress!

foggysail said:

Yes! And that is a fundamental problem with judges. If they want to make laws they run for a seat in congress!

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Well, I don't agree with that in general, but in this case I do. Interpretation of laws can seem like writing laws, especially when you disagree with the decision.


But remember, our "laws" come in two parts; statutes (written laws), and case law (interpreted law). If you only want statutory laws, France comes to mind as a place to live....


And there is another side to the argument that Judges "write" laws. If the public disagrees with an interpretation, it's Congresses job to re-write the laws to correct. That's THEIR job. And that includes going so far as constitutional amendments.

twistedtree said:

And there is another side to the argument that Judges "write" laws. If the public disagrees with an interpretation, it's Congresses job to re-write the laws to correct. That's THEIR job. And that includes going so far as constitutional amendments.

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Laws initiated by a congress and finalized by a president are verrrry difficult to change. So your reference to " Congresses job to re-write the laws" may be factual, although extremely difficult to make happen. Elections have consequences! Time to get judges to leave their social thoughts home and abide with the constitution at work

My winter port is Oregon. Sales tax is a big reason. My income isn't taxable so the state income tax doesn't get me.
In sales tax states some counties have different rates. If there was a federal sales tax the states wouldn't drop theirs. I can't think of any sales tax ever getting reduced. It just goes up.
The problem with congress fixing anything is they only really answer to their big donors. And those donors get exemptions.

twistedtree said:

And I don't know about others, but not having to pay sales tax is only a minor consideration when I decide where to buy something. Product quality, availability, and price I think are the key consideration, in that order. Sales tax has only a minor impact on price. My point is that the only way I'll buy more locally is if availability and quality of product gets better. 9 out of 10 times when I order by mail, it's because of availability of what I want. If I could buy it locally, I would/do.

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In many places the local and state sales tax can amount to 10%. That makes a $100 item now $110. That is certainly enough to influence my buying decision.

As a non-lawyer, it seems to me that the actual sale takes place where the purchase was initiated or delivered. As such, the local sales tax should be collected and paid. Not saying it is easy, but it certainly seems to be the right thing to do from my perspective. If states don’t like it, they can always change their taxing structure.

Sales tax is an important consideration for me whenever I make an online purchase.......and I do not care if the tax is even less than a buck! I just resent giving the governing communities/state additional cash to spend and spend they will. They even spend when they don’t have the needed cash.

Beside sales tax and property taxes, Rhode Island bangs use with HUGE water and sewer bills! It costs our small company > $100/month/apartment for water and sewer. And yes, those utilities all seem to be able to afford new cars and trucks for their employees.....oh, and great salaries and pensions.

Most if not all states with "sales " taxes (retail occupation tax) have a corresponding tax called a "use" tax for items shipped into the state which is supposed to be reported by the customer.

The whole issue on the recent Supreme Court case is forcing the out of state seller to collect the tax at the time of sale and reporting and paying the tax to the tax district in which the customer is located.

In general paying the tax based on the customer's location would allow companies to set up "offices" in low tax districts and then reship to their various other locations. This is currently being done with respect to airline fuel in Illinois where the airlines have negotiated special tax rates from one taxing district. In that case 1% of a couple of hundred million dollars is a major difference.

Another example of the complexity of the issue is the shopping mall. If where the item is delivered determines the tax then cities such as Oakbook Illinois (population 8,000) would suffer as its revenue comes from the sales tax at a major mall in the town. Delivery of items to the home are substantial and the tax would then go to the neighboring town. Illinois is an example of a state which allows local districts to add substantial taxes to the base state rate, thus in Illinois you can pay 10.25% or 6% depending on where the store is located.

This is an extremely complicated area that has been fought over for years. My thoughts are that it is too complicated to be administered by the courts and should be left to the legislatures.

Here is an example of the haphazard collection of sales taxes for online sales.

Yesterday I ordered something from Amazon. As is often the case, they suggested that if I bought item A, I might also want item B to go with it. I said sure and ordered both items.

Both items were ordered together through Amazon at the same time as one purchase. However, when looking at the order invoice I found that sales tax was only charged on one of the items and not the other. In fact, the lowest priced item was the only thing taxed.

ssobol said:

Here is an example of the haphazard collection of sales taxes for online sales.

Yesterday I ordered something from Amazon. As is often the case, they suggested that if I bought item A, I might also want item B to go with it. I said sure and ordered both items.

Both items were ordered together through Amazon at the same time as one purchase. However, when looking at the order invoice I found that sales tax was only charged on one of the items and not the other. In fact, the lowest priced item was the only thing taxed.

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Amazon collects sale tax on items it sells and ships. It generally does not collect sales tax on items sold through Amazon by others.