Return to the Hot Topics Forum | Post a Follow-Up

 o
Should stuff bought on the Internet be taxed?

Posted by tobr24u z6 RI (My Page) on
Fri, Apr 26, 13 at 4:47

A bill is moving along in the Senate that would make it so and I say Godspeed. RI is in such deep financial trouble that we need every dollar we can get. Plus small businesses can't compete with the behemoths like Amazon, and even Best Buy is threatened...


Follow-Up Postings:

 o
RE: Should stuff bought on the Internet be taxed?

Best Buy was never that "best" of a buy anyway...

I don't know... customer is paying shipping costs already...


 o
RE: Should stuff bought on the Internet be taxed?

From what I hear many suppliers are absorbing shipping costs, and I, like many guys, love Best Buy, especially the Magnolia Room...


 o
RE: Should stuff bought on the Internet be taxed?

  • Posted by ohiomom 3rdrockfromthesun (My Page) on
    Fri, Apr 26, 13 at 7:15

Yes it should be taxed .... if you shop at a brick and mortar store you pay tax, what is the difference unless it is the same reason you (collective you) accuse others of .... "not paying your fair share of taxes" :)


 o
RE: Should stuff bought on the Internet be taxed?

I have mixed feelings.

On one hand, it will generate much needed income for states and localities. Virtually every state that I am familiar with has a consumer tax which is almost universally ignored by people who shop out of state or over the internet. The consumer tax is basically a sales tax on the out of state purchases that currently are not taxed. Based on my experience, states don't agressively pursue enforcing this tax.

On the other hand, this will create a hardship for small companies who do not have the staff, time or expertise to complete the sales tax forms for every state and locality that they ship to. Every state and locality has different rules regarding sales tax, different due dates, different forms, different rates, etc. Yes, there will be software programs that appear for the small business to use, but there will still be the cost of those programs and the time to calculate the data required and the time to enter the data into the forms.

If this bill would create a universal sales tax rate for internet purchases and a very simple universal form allocating the amount of tax to be remitted to each state based on the percent of sales to that state, I'd be happy with it. Every state must accept the same exact form with no modifications for the quirks in their laws.


 o
RE: Should stuff bought on the Internet be taxed?

Very good points, jlhug. I agree with the tax, but it should not be a burden; take this opportunity to make this easy.


 o
RE: Should stuff bought on the Internet be taxed?

We've discussed this many times. :)

Just about every state expects us to pay tax on internet purchases. It's called a "use tax", and there's a special line or even a form just for that. Most businesses already pay the use tax to avoid a "flag" when filing.

Ohio law requires residents to pay the use tax on untaxed purchases made from an internet or catalog (remote) vendor. Sellers who have no physical presence in Ohio are not required to charge and collect the state and local sales tax. If you purchase merchandise from those sellers, the obligation rests with the consumer to pay the use tax, which is equivalent to paying sales tax.

IMO, the senate is going to enforce what taxpayers have ignored.

It's time that all buyers share the tax and it's time the states are enabled to increase their revenue to get some things done.

Added:

Ohio has an amnesty program.

The consumer’s use tax amnesty provisions of H.B. 153 (see uncodified section 757.42) provide an excellent opportunity for taxpayers to satisfy their past consumer’s use tax liability. The amnesty program begins October 1, 2011 and ends May 1, 2013.

This post was edited by brushworks on Fri, Apr 26, 13 at 7:50


 o
RE: Should stuff bought on the Internet be taxed?

  • Posted by ohiomom 3rdrockfromthesun (My Page) on
    Fri, Apr 26, 13 at 7:58

I imagine the bulk of online purchases are from box/warehouse stores, not "mom and pop" stores. We have had this discussion many times in the past, and it seems most people on this forum bypass the mom and pops for the "cheaper' prices at the big box stores.

Pay the devil his dues and quit "whining" ...... :)


 o
RE: Should stuff bought on the Internet be taxed?

Yes.

Part of the bill mandates that states must streamline and simplify their taxes - I imagine that it will end up being just the state sales tax that we will pay, and states will distribute to local jurisdictions, if appropriate.

There are now, and will soon be more, computer programs that will automatically calculate, collect and distribute the sales tax to the appropriate states, it won't be a huge hardship for smaller companies. It will all be done online, as will the sales.

Right now, businesses with $1 million of online sales will have to collect taxes, that may be increased to $10 million, which is probably more reasonable.


 o
RE: Should stuff bought on the Internet be taxed?

What a nightmare this could be. Small sellers who do ebay as a side hobby pay taxes on what they sell, both to the state and federal, I would assume all big sellers do likewise. There are shipping fees as well. Trying to keep up with the paperwork for the different states, I can't even imagine. It would probably be the death knell for many small businesses that are a one or two man operation. Can it be enough that the buyer has already paid taxes on his income, and the seller will pay taxes on the items he sells?


 o
RE: Should stuff bought on the Internet be taxed?

Ohio, I do buy things from Amazon, but I also purchase many things from small businesses. We've found great places to buy gluten free biscotti, chocolate, etc. that are small businesses. If you buy through Etsy, you are dealing with a Mom and Pop "store". I've found some wonderful gifts on Etsy and similar sites. Requiring these stores to file a sales tax return for every state they sell to, would be an unfair burden.


 o
RE: Should stuff bought on the Internet be taxed?

It will not be a burden or unfair to mom and pop. Online merchant software is capable of computing tax based on zip code and sending it to the qualifying state, all completed by a batch file when the customer submits the purchase.

If you're concerned about it, just make sure your purchase from mom and pop is within your state. Those stores are already set up to charge sales tax.

It's not fair to exempt small businesses from online sales tax. Aren't we all about paying our fair share?


 o
RE: Should stuff bought on the Internet be taxed?

Other than groceries, I buy most stuff online as local brick and mortars don't sell the products I want, the mark-up is insane, quantities are low, they're out of stock, restocking is poor, seasonal stocking is short etc.

I also save a small fortune in time, money, fuel and vehicle wear/tear by not traveling to 4/5/6 stores only to find they don't have what I want/need.

Most online businesses I buy from charge tax as they have a presence in New York.


 o
RE: Should stuff bought on the Internet be taxed?

Mark,

You may think the mark up or margin is insane, but first take a look at their overhead, then recalculate.


 o
RE: Should stuff bought on the Internet be taxed?

Ya, I don't really know what the difference would be... it's not like we're talking about that much money. Sales tax isn't usually that big of a percentage.

Stores and businesses already have ways of making up for free shipping or sales... it's not like they're losing anything.


 o
RE: Should stuff bought on the Internet be taxed?

Mark,

You may think the mark up or margin is insane, but first take a look at their overhead, then recalculate.

Even our convenience stores have lower mark-up on many items than the products I'm talking about.

This is why many products at many stores are literally covered with dust, plus why so many customers walk out of stores without making a purchase.

Stores need many low margin products, or loss leaders to attract and retain customers as many purchases are impulse, or convenience related.


 o
RE: Should stuff bought on the Internet be taxed?

No. It's places like Amazon that are pushing this and, while I buy from Amazon a lot, I also believe they would be delighted to put smaller businesses under. It's another layer of work for companies with a small number of employees.


 o
RE: Should stuff bought on the Internet be taxed?

it's not like we're talking about that much money. Sales tax isn't usually that big of a percentage.

State tax is 5.5% here.

Ohio expects to reap about $628.6 million from out of state purchasers.

It is a big deal! That kind of money will shore up the almost bankrupt state employees retirement fund. :(


 o
RE: Should stuff bought on the Internet be taxed?

It is a burden for small sellers or "hobby" sellers, who can't possibly have tax schedules for every state and have no mechanism for registering with the individual taxing entities, and have no manpower for reporting those collected taxes to other states.

Even if you go through the trouble of buying software, equipment, and keeping both up to date, you just know that some stupid, over zealous tax authority is going to have disputes. This means you have to have the time and expertise to deal with those. Then you have to justify your entire existence to them. It's not worth the hassle for a part-time business or for those selling their used items.

I knew a person who stopped her cottage business because it was just too much trouble to deal with the hassles of taxes - and that was just between counties in NYS, not even out-of-state taxes. She had some modest success, and another person working for her part-time, so it's not a big economic loss on the macro level and no one would ever notice the loss, but it is still a lost opportunity.

Obviously, some people don't want to own and run a mega business, but have fun producing and creating something, and maybe selling those items for a profit. It shouldn't require 6 lawyers, 2 extra employees, and a bureaucratic nightmare to just go about doing what you like.

"Just about every state expects us to pay tax on internet purchases. It's called a "use tax", and there's a special line or even a form just for that. Most businesses already pay the use tax to avoid a "flag" when filing."

I believe this just applies to state-level, not local, taxes. If the state-level sales tax is 4% and your county sales tax is another 4%, you are only paying the 4% that goes to the state. Correct me if I'm wrong.

Anyhow, my state likes to assume that you spend $1,000 per year on non-taxed goods, so they automatically assess a $40 penalty for you as a default. Aren't they wonderful?

This is a relic from the days where most online retailers didn't collect taxes for various states. These days, the overwhelming majority of retailers collect sales taxes.

My state is having pipe dreams. More and more retailers collect the state taxes already. It is fairly difficult to spend $1,000 per year on untaxed purchases unless you're a shopaholic or make some really big purchase. Granted, if you're buying snowmobiles or boats or heavy equipment, it's easy to spend many times that. But most people just buy incidental stuff. If I only spent $100 on untaxed, out-of-state goods, then they are only getting $4.00 out of me, and not one penny more.

NY fairly slaughters people with taxes, mostly sizable taxes, and I refuse to let them nickel-and-dime me to death on top of that.

I wonder how many people just throw up their hands and pay the default $40 for no reason (which is probably what the state is hoping for and why this tax will be around forever). They have no compunction about taking money from you at the slightest provocation - or no provocation - so there's no need to give them anything they don't deserve.


 o
RE: Should stuff bought on the Internet be taxed?

I don't get that its a huge problem, as stated, software exists with a shipping zipcode to collect - at least - state tax.

If I buy anything in Colorado over the internet, and the company has a physical brick and mortar store in the state, they collect state sales tax. Thats been happening for at least 10 years now. And they've got it down now to city sales tax, so if I buy from online from Lands End, they charge local city tax as well because there's a Sears in town. Even though I live outside of city limits.

As for small time, mom and pop merchants, thats not where the money is. Even still, it shouldn't be that hard to charge state tax by zipcode. The big money is with Amazon, Lands End, LL Bean, etc.

I thought the concerted effort by some in Congress to get rid of the postal service would do more to destroy small scale mom and pop operations. Those single rate, anywhere boxes are what the people who sell me clematis, garlic, etc. use.


 o
RE: Should stuff bought on the Internet be taxed?

I'm surprised that you aren't already paying sales tax for online purchases.

Anything I buy in Canada online is taxed. In BC the tax totals 12%. And very few companies offer free shipping in Canada.

So often buying on line isn't much of a savings.

~Ann


 o
RE: Should stuff bought on the Internet be taxed?

Yesterday I shopped 7 websites for some automotive parts - some web only and some brick and mortars with web-stores.

I ended up saving over $150 in costs/taxes buying parts from 1 web only and 1 brick and mortar's website.

The savings don't include the money I saved in time, travel, gas, vehicle wear/tear etc.

The cheaper I can buy materials, replacement parts and hardware, the more I can mark them up and the more work I get, especially since more and more jobs are low bid jobs.

Sales taxes are very high in much of New York (8 percent plus), so it pays to shop around, or shop in the second hand market. I don't mind paying taxes on products, however I hate paying taxes on excessive mark-up on top of the time, wasted time and travel costs.

When I shop many brick and mortars they don't have the products I want/need in the stores. They're shipped form a warehouse in another location, plus many discounts like I received yesterday are only available to web customers.


 o
RE: Should stuff bought on the Internet be taxed?

Purchasing the software is an added cost to small businesses.

Having to enter sales in your bookkeeping system so you can correctly calculate the sales on a state by state basis takes either your bookkeeper's time or the owner's time. Yes, it may only be seconds per entry but those seconds add up.

Entering the sales data into the software and then verifying that the software is correctly calculating the amount takes time.

Yes, there is software available but it isn't free nor is the data entry free.

Exactly how much time would you expect to spend entering data to complete 20 or 40 individual state sales tax forms, verifiying that they are correct and transmitting the funds? Even at 15 minutes a state, 20 states would meant five hours. And how often are those forms required? Monthly, quarterly? That starts to add up to significant hours for a small business.

Edited because I can't spell.

This post was edited by jlhug on Fri, Apr 26, 13 at 13:58


 o
RE: Should stuff bought on the Internet be taxed?

tobr24u,
Definition of 'Sales Tax'
A tax imposed by the government at the point of sale on retail goods and services. It is collected by the retailer and passed on to the state. Source.
My opinion is that the tax should be levied (please pardon my choice of the word) at the point of sale; that is - in the state where the money is taken from the buyer.


 o
RE: Should stuff bought on the Internet be taxed?

I don't know what the outcome of all this will be as the article from the WaPo linked below indicates the House will likely balk and block considering it to be a tax increase.

Recall way way back before the advent of the internet, some mail ordering required sales tax from residents of some states - a presence even if nothing more than a mail drop, I suppose.

As for myself, I never got in to ordering on line; a book from Amazon every now and again. Consequently, the addition of sales tax from my point of view as a rare customer wouldn't kill me.

Here is a link that might be useful: On line purchase sales tax


 o
RE: Should stuff bought on the Internet be taxed?

After years of griping from state governors, the Senate is considering another bill that would allow states to collect sales tax from out-of-state sellers. It would close a loophole created by a 1992 Supreme Court ruling that has allowed online behemoths Amazon (AMZN) and EBay (EBAY) to avoid collecting sales tax on many transactions. Unlike previous versions of the legislation, the Marketplace Fairness Act would compel businesses that sell $1 million or more annually in states in which they don’t have a physical location to collect tax on those sales.

Last month, 75 senators voted in principle to support the bill- estimated to add $23 billion annually to states’ coffers - though that’s no guarantee it will become law. (If that’s confusing, here’s a primer.) Yesterday the Senate ended debate on the bill, and its final vote is scheduled for May 6. If it passes, it will face opposition in the House.

What would the law mean for small businesses? The answer varies on a case-by-case basis. For every story about entrepreneurs worried about the added tax compliance burden, there’s another on small business owners who crave the consistency they say the law would give them.

Still, amid all the howling by forces on both sides of the debate, a key piece of the Senate proposal is often overlooked: The law requires states to provide businesses with sales tax compliance software for free. To get a sense of how that will work, it’s useful to read up on the Streamlined Sales and Usage Tax Agreement. The Supreme Court ruling that effectively exempted out-of-state sellers from collecting sales tax argued that the hodgepodge of tax laws in different states made compliance too complex. To try to simplify the process, 24 states (plus the District of Columbia) signed on to SSUTA.

As part of the deal, the administrative body for the agreement certified six software providers to help businesses voluntarily pay sales tax on remote sales. To keep costs down for retailers, states agreed to pay the software companies a commission of 2 percent to 8 percent on taxes collected. Participating states have collected $1.2 billion in sales tax since 2005, says Craig Johnson, executive director at the Streamlined Sales Tax Governing Board. “If this was really such a burden on remote sellers, you wouldn’t expect them to collect taxes when they don’t have to,” Johnson says.

At least one service provider, TaxCloud, already offers free sales tax compliance software in “Streamlined” states, according to Daniela Saunders, a sales and marketing executive at the company. TaxCloud integrates with e-commerce platforms and calculates taxes at the point of sale, and handles other administrative processes, including filing tax returns. “We expect that if the legislation passes, other states will join SSUTA,” Saunders says. Meanwhile, TaxCloud is talking to states about how to offer software without joining the Streamlined agreement.

snip end quote

But you're right, leave it to the teabaggers in the house to shoot it down, because its a tax increase.

Here is a link that might be useful: link


 o
RE: Should stuff bought on the Internet be taxed?

While it may be true that charging sales tax would not be much of a burden to the buyer (itself a questionable assertion), it certainly will be to the seller. I am a very small entrepreneur and to suddenly be faced with having to deal with taxes in multiple states would be a considerable expense--just having to purchase software for this would be a challenge.

A considerable amount of the interchange of goods and services in the US is done off the radar--small farmer's markets, crafts exchanges, local handymen, etc. To me, this is just another way that the big boxes and their henchmen in government and the banking industry are squeezing the middle class into oblivion.


 o
RE: Should stuff bought on the Internet be taxed?

So, we want fair taxes, except for small entrepreneurs, those off radar, underground businesses, etc.

Hypocrisy.


 o
RE: Should stuff bought on the Internet be taxed?

So I guess you small business owners aren't actually reading the posts.

The law requires states to provide businesses with sales tax compliance software for free.

I guess learning what the law actually says is no fun. Why would anyone want to do that.


 o
RE: Should stuff bought on the Internet be taxed?

Pidge, you sell more than a $ million a year to any one state? :-) Then you'd have to comply. Anything less, you'd be exempt.


 o
RE: Should stuff bought on the Internet be taxed?

Thanks, David, I did not know that, probably because my business generates a bit less than a million a year, lol.


 o
RE: Should stuff bought on the Internet be taxed?

"The law requires states to provide businesses with sales tax compliance software for free."

Do they also supply free lawyers when some officious bureaucrat has a dispute?

There are law firms that specialize in sales tax disputes. Apparently, it's something that is relatively common.


 o Post a Follow-Up

Please Note: Only registered members are able to post messages to this forum.

    If you are a member, please log in.

    If you aren't yet a member, join now!


Return to the Hot Topics Forum

Information about Posting

  • You must be logged in to post a message. Once you are logged in, a posting window will appear at the bottom of the messages. If you are not a member, please register for an account.
  • Please review our Rules of Play before posting.
  • Posting is a two-step process. Once you have composed your message, you will be taken to the preview page. You will then have a chance to review your post, make changes and upload photos.
  • After posting your message, you may need to refresh the forum page in order to see it.
  • Before posting copyrighted material, please read about Copyright and Fair Use.
  • We have a strict no-advertising policy!
  • If you would like to practice posting or uploading photos, please visit our Test forum.
  • If you need assistance, please Contact Us and we will be happy to help.


Learn more about in-text links on this page here