9 ms·

Hard to say what they will do but one thing is for sure. If this goes in the direction of states being allowed to tax without nexus then an entire level of inte

by gist 9y ago

Hard to say what they will do but one thing is for sure. If this goes in the direction of states being allowed to tax without nexus then an entire level of intermediaries will exist (and charge) to service smaller companies that are subject to paying a sales tax. Not all goods are taxed the same way in all states and there is no way that a company even with software can keep up with remitting and rules that change for 50 states. There is also the issue of integrating it in the current workflow which is non-trivial in many situations. My feeling is that (hopefully) the court will rule against this and require the states to simply enforce use tax. The state has more resources (than any small or medium company) and also the ability to fine and penalize. The law says you have to pay use tax on out of state goods (in many cases) and simply saying 'it's to hard for us to do this and we are losing revenue' isn't a great argument.

ghaff 9y ago
Yeah, computing the sales tax is easy. I assume there's already a lookup table somewhere on the web where you enter a zip code and it will tell you the local sales tax. The problem is remitting to tax to all the taxing authorities, perhaps having to make other filings, being subject to audits and regulations, etc. Intermediaries can remove some of the burden but you can't really pass off responsibility to a third party. It seems hard to avoid enormous overheads for a small business outside of some uniform national system. ADDED: I imagine Amazon and other big Internet commerce companies with affiliate programs would love something like this. It would probably effectively force any small seller to work under the umbrella of a company with large scale.
- MBCook 9y ago
  You can’t look up by zip code. Zip codes and tax boundaries aren’t linked so it’s not specific enough. Zip+4 isn’t specific enough either, you can still run into the same issue. Then you get into the fun stuff like special tax districts, different taxes on different kinds of goods, on the kind of person buying it (perhaps teachers don’t have to pay taxes on office supplies), etc. For a business it’d be a disaster if you had to tax based on the buyer’s address instead of the business’s address. For any business that isn’t huge enough to have lots of full time accountants/compliance petiole I imagine you’d basically HAVE to subscribe to some sort of tax service that would work it out for you.
  - deleted 9y ago
    [deleted]
  - DrScump 9y ago
    Zip+4 isn’t specific enough either, you can still run into the same issue. Depending on area, that can be very rare. My building has its own zip+4, and even my P.O. Box has its own. In wrangling voter data, I didn't hit a single case where a given zip+4 spanned multiple precints (but the 2000 census gerrymander came close in a few cases).
- sk5t 9y ago
  > computing the sales tax is easy Sure, it's almost as easy as time zones!
  - ghaff 9y ago
    Creating the database and maintaining it is obviously hard work. But, once it exists, doing a lookup can be straightforward just as it is with time zones.
    - gist 9y ago
      This assumes though that that database can be integrated into the existing software and workflow. That is not trivial to do and can break things easily with proprietary or custom systems. And not all goods or services (that are in theory taxable) are even 'shipped' to a zipcode.
      - ghaff 9y ago
        That's fair and I shouldn't have used the term "easy" before. That said, a lot of companies who sell online and have a widespread physical presence obviously manage to do it. Of course, that's a lot different from a small business doing it.
        nitrogen 9y ago
        Those large businesses often still get it wrong and get audited.
    - coreyp_1 9y ago
      I'm sorry, but no. Here is a pencil. Is it taxed in both A and B? Now, here's another pencil, but it was made from recycled wood. Is it also taxed the same way in both A and B? What about C, which is another one of the USA's 6000+ tax jurisdictions? Wait... did that state just declare a tax-free weekend for school supplies (Texas does), so should that item no longer be taxed for Texas residents? Does the tax free weekend apply to both types of pencils? Wait... A city in California just decided that pencils are dangerous if kids run with them, so they impose an extra sales tax to discourage unsafe writing practices. How are you expected to know about this local rule if you live several states away? Normally, rules of nexus would exempt you... unless you are using affiliates to help you sell pencils. Affiliates can trigger nexus. How can you know the local tax rules for every affiliate that signs up? And, sorry... if you think timezones are simple, then you are way off base. If it is easy, then it is because so many people have dedicated their resources to provide the tools to make it easy. (https://www.timeanddate.com/time/dst/events.html https://www.timeanddate.com/time/dst/events.html, https://en.wikipedia.org/wiki/Tz_database https://en.wikipedia.org/wiki/Tz_database) Sales tax is much, much more complex (9 time zones in the USA vs 6,000+ tax jurisdictions in the USA).
- Keverw 9y ago
  Not just the rates though... Like ice cubes aren't taxed here, but blocks of ice are taxable. Adult diapers aren't taxed here, baby diapers are taxed there. This water is food, this soda isn't food. So would have to somehow classify items... Then I wonder how it works if you bought a prepacked meal that isn't taxable otherwise but since it included a small juice or soda like a lunchable might - one package but items part of it are classified differently.
  - mark-r 9y ago
    +1. Knowing the rates is the easy part - knowing which rates apply to what items can be nearly impossible. Here in Minnesota I can buy two pizzas from national chains, one from Papa John's and one from Papa Murphy's. The one from Papa John's will be taxed, but the one from Papa Murphy's won't - it's uncooked, and falls into the untaxed "grocery" categorization. Tax laws are just weird.
- pitaa 9y ago
  Unfortunately the zip code level is not always precise enough to determine local tax rates, but your point stands that it isn't usually overly difficult to find the tax rates for a particular shipping address. I remember a few years back when I was doing ecommerce, I came across a service called TaxCloud[0] that was supposed to handle all of the tax collection for you, for free. I never actually used them, but the idea was you use their API to calculate tax rates for all your orders, you remit the tax to them and then they paid the states. Apparently many states offer a commission to 3rd parties that collect and remit owed taxes, so TaxCloud was supposed to be making their money that way. [0] taxcloud.net
- sbov 9y ago
  When I last looked at this, most online offerings failed at least one of our test addresses. Most online stores seemed to fail it too. And this was only for California, ignoring the other 49 states.
ryanwaggoner 9y ago
TaxJar already handles all the sales tax lookups and filings, and is integrated with Stripe, Shopify, etc. And it’s cheap too. The problem comes when you want them to handle the filing and remittances for you. That can get expensive fast. Really though, I suspect that the number of small (and large) businesses who are 100% compliant here is zero. 50 states, all with different rules, and increasingly international jurisdictions that want to charge sales, income, and VAT taxes on global companies of any size based on where the customer is, not where the company is. I can’t imagine the enforcement can even come close to keeping up with all this. For example, my understanding is that businesses anywhere in the world are supposed to charge EU customers VAT starting this year. Dream on.
- deleted 9y ago
  [deleted]
- AnssiH 9y ago
  > For example, my understanding is that businesses anywhere in the world are supposed to charge EU customers VAT starting this year. Dream on. I've been following the EU VAT plans somewhat closely, and I'm not aware of any such changes affecting non-EU businesses occurring this year. Or maybe I missed it, could well be... Sellers of digital services situated outside the EU already have been supposed to charge VAT from EU customers for a few years now (since Jan 2015 IIRC). For physical goods, some additional measures are in the pipeline for 2021 - e.g. marketplaces become responsible for collecting VAT on some imports, and sellers outside EU can pre-remit VAT for a fast-track customs procedure for some imports, and VAT-exempt small imports will end - but nothing that requires all non-EU businesses to charge VAT from EU customers, they can still leave it to end-customer to pay on delivery (unless the marketplace took care of it).
  - ryanwaggoner 9y ago
    Yeah, I’m wrong about this, it happened awhile ago. It just seems insane to me. I don’t understand how some random country thinks they have jurisdiction over the entire globe just because someone else sold their citizen something digital. If you want to tax that transaction, I think the best you can do is hold the citizen responsible for payment. But of course, tax law is not usually about what’s right or logical or fair. It’s about what you can enforce and get away with.

by gist 9y ago

ghaff 9y ago

Yeah, computing the sales tax is easy. I assume there's already a lookup table somewhere on the web where you enter a zip code and it will tell you the local sales tax. The problem is remitting to tax to all the taxing authorities, perhaps having to make other filings, being subject to audits and regulations, etc. Intermediaries can remove some of the burden but you can't really pass off responsibility to a third party. It seems hard to avoid enormous overheads for a small business outside of some uniform national system. ADDED: I imagine Amazon and other big Internet commerce companies with affiliate programs would love something like this. It would probably effectively force any small seller to work under the umbrella of a company with large scale.

MBCook 9y ago
You can’t look up by zip code. Zip codes and tax boundaries aren’t linked so it’s not specific enough. Zip+4 isn’t specific enough either, you can still run into the same issue. Then you get into the fun stuff like special tax districts, different taxes on different kinds of goods, on the kind of person buying it (perhaps teachers don’t have to pay taxes on office supplies), etc. For a business it’d be a disaster if you had to tax based on the buyer’s address instead of the business’s address. For any business that isn’t huge enough to have lots of full time accountants/compliance petiole I imagine you’d basically HAVE to subscribe to some sort of tax service that would work it out for you.
- deleted 9y ago
  [deleted]
- DrScump 9y ago
  Zip+4 isn’t specific enough either, you can still run into the same issue. Depending on area, that can be very rare. My building has its own zip+4, and even my P.O. Box has its own. In wrangling voter data, I didn't hit a single case where a given zip+4 spanned multiple precints (but the 2000 census gerrymander came close in a few cases).
sk5t 9y ago
> computing the sales tax is easy Sure, it's almost as easy as time zones!
- ghaff 9y ago
  Creating the database and maintaining it is obviously hard work. But, once it exists, doing a lookup can be straightforward just as it is with time zones.
  - gist 9y ago
    This assumes though that that database can be integrated into the existing software and workflow. That is not trivial to do and can break things easily with proprietary or custom systems. And not all goods or services (that are in theory taxable) are even 'shipped' to a zipcode.
    - ghaff 9y ago
      That's fair and I shouldn't have used the term "easy" before. That said, a lot of companies who sell online and have a widespread physical presence obviously manage to do it. Of course, that's a lot different from a small business doing it.
      - nitrogen 9y ago
        Those large businesses often still get it wrong and get audited.
  - coreyp_1 9y ago
    I'm sorry, but no. Here is a pencil. Is it taxed in both A and B? Now, here's another pencil, but it was made from recycled wood. Is it also taxed the same way in both A and B? What about C, which is another one of the USA's 6000+ tax jurisdictions? Wait... did that state just declare a tax-free weekend for school supplies (Texas does), so should that item no longer be taxed for Texas residents? Does the tax free weekend apply to both types of pencils? Wait... A city in California just decided that pencils are dangerous if kids run with them, so they impose an extra sales tax to discourage unsafe writing practices. How are you expected to know about this local rule if you live several states away? Normally, rules of nexus would exempt you... unless you are using affiliates to help you sell pencils. Affiliates can trigger nexus. How can you know the local tax rules for every affiliate that signs up? And, sorry... if you think timezones are simple, then you are way off base. If it is easy, then it is because so many people have dedicated their resources to provide the tools to make it easy. (https://www.timeanddate.com/time/dst/events.html https://www.timeanddate.com/time/dst/events.html, https://en.wikipedia.org/wiki/Tz_database https://en.wikipedia.org/wiki/Tz_database) Sales tax is much, much more complex (9 time zones in the USA vs 6,000+ tax jurisdictions in the USA).
Keverw 9y ago
Not just the rates though... Like ice cubes aren't taxed here, but blocks of ice are taxable. Adult diapers aren't taxed here, baby diapers are taxed there. This water is food, this soda isn't food. So would have to somehow classify items... Then I wonder how it works if you bought a prepacked meal that isn't taxable otherwise but since it included a small juice or soda like a lunchable might - one package but items part of it are classified differently.
- mark-r 9y ago
  +1. Knowing the rates is the easy part - knowing which rates apply to what items can be nearly impossible. Here in Minnesota I can buy two pizzas from national chains, one from Papa John's and one from Papa Murphy's. The one from Papa John's will be taxed, but the one from Papa Murphy's won't - it's uncooked, and falls into the untaxed "grocery" categorization. Tax laws are just weird.
pitaa 9y ago
Unfortunately the zip code level is not always precise enough to determine local tax rates, but your point stands that it isn't usually overly difficult to find the tax rates for a particular shipping address. I remember a few years back when I was doing ecommerce, I came across a service called TaxCloud[0] that was supposed to handle all of the tax collection for you, for free. I never actually used them, but the idea was you use their API to calculate tax rates for all your orders, you remit the tax to them and then they paid the states. Apparently many states offer a commission to 3rd parties that collect and remit owed taxes, so TaxCloud was supposed to be making their money that way. [0] taxcloud.net
sbov 9y ago
When I last looked at this, most online offerings failed at least one of our test addresses. Most online stores seemed to fail it too. And this was only for California, ignoring the other 49 states.

ryanwaggoner 9y ago

TaxJar already handles all the sales tax lookups and filings, and is integrated with Stripe, Shopify, etc. And it’s cheap too. The problem comes when you want them to handle the filing and remittances for you. That can get expensive fast. Really though, I suspect that the number of small (and large) businesses who are 100% compliant here is zero. 50 states, all with different rules, and increasingly international jurisdictions that want to charge sales, income, and VAT taxes on global companies of any size based on where the customer is, not where the company is. I can’t imagine the enforcement can even come close to keeping up with all this. For example, my understanding is that businesses anywhere in the world are supposed to charge EU customers VAT starting this year. Dream on.

deleted 9y ago
[deleted]
AnssiH 9y ago
> For example, my understanding is that businesses anywhere in the world are supposed to charge EU customers VAT starting this year. Dream on. I've been following the EU VAT plans somewhat closely, and I'm not aware of any such changes affecting non-EU businesses occurring this year. Or maybe I missed it, could well be... Sellers of digital services situated outside the EU already have been supposed to charge VAT from EU customers for a few years now (since Jan 2015 IIRC). For physical goods, some additional measures are in the pipeline for 2021 - e.g. marketplaces become responsible for collecting VAT on some imports, and sellers outside EU can pre-remit VAT for a fast-track customs procedure for some imports, and VAT-exempt small imports will end - but nothing that requires all non-EU businesses to charge VAT from EU customers, they can still leave it to end-customer to pay on delivery (unless the marketplace took care of it).
- ryanwaggoner 9y ago
  Yeah, I’m wrong about this, it happened awhile ago. It just seems insane to me. I don’t understand how some random country thinks they have jurisdiction over the entire globe just because someone else sold their citizen something digital. If you want to tax that transaction, I think the best you can do is hold the citizen responsible for payment. But of course, tax law is not usually about what’s right or logical or fair. It’s about what you can enforce and get away with.