4 ms·

> to taxes not in the sale price This gets complicated and there's good reason. The taxes depend on where you take possession of the goods. If you purchase a

by shagie 4y ago

> to taxes not in the sale price This gets complicated and there's good reason. The taxes depend on where you take possession of the goods. If you purchase an item and walk up to the checkout counter, you pay the taxes there. On the other hand, if you are buying lumber in Kansas City, KS to be delivered in Kanas City, MO - you pay the MO taxes (4.225%) rather than the KS taxes (6.5%). So, putting the taxes on the lumber ($3.35) in KS would be $0.22 and if it was to be delivered on the other side of the state line, that would be $0.15. If you were to say "ahh! Lets solve this by having taxes paid for where you buy it instead" then everyone incorporates in Delaware and you get some sizable data centers in Oregon and sell everything online from there... and you've got other problems with states trying to collect sales tax on goods delivered there.

skaushik92 4y ago
This is not necessarily a bad thing. This incentivizes states and districts to compete on taxation and would likely drive sales tax down nationally.
- shagie 4y ago
  As there are states that are 0%, this would mean "no sales tax at all" which would really hit states where they don't have any income tax and instead just have sales tax. Under that approach, live in Texas and buy everything online from Oregon and you'll never pay any taxes. States need to raise revenue somehow and playing that form of tax arbitrage shifts the burden of taxes to the people who don't have the resources to do that.
  - skaushik92 4y ago
    No; in fact sales tax is what’s shifting the burden in that direction. Income tax on the other hand is a progressive tax that keeps impact more proportional.
    - shagie 4y ago
      If you have the resources to declare residency in Texas and pay sales taxes from Oregon you are able to avoid paying most taxes. I am saying that most people don't have the resources to play tax arbitrage. Those that do are the ones that should likely be paying the most taxes. Going to a system were sales taxes go to 0 based on where you buy it (online in Oregon) doesn't mean that states will abandon the sales tax but rather that the tax burden that local governments can collect (sales, property) will go up and disproportionately impact the people who can least afford it. As it is, that approach would be overturning South Dakota vs Wayfair https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc. --- https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf Sales tax is regressive and a worse option for taxation. It is, however, one of the few options that local governments have for raising funds. The tax system needs an overhaul (though frankly my confidence in congress not just doing another tax cut for the rich is low). Disrupting sales tax without a corresponding overhaul would likely make things much worse in many of the poorer areas of the nation and those where much of the economy is based on non-residents visiting.
      - skaushik92 4y ago
        Interesting point; yeah, I agree that a significant population does not have the ability to move around. If I understand you correctly, you’re saying that in a world where all sales tax is zero, the wealthier population will be able to arbitrage/optimize over the remaining tax types they pay more easily than those less wealthy, resulting in a larger wealth gap. This argument could also apply inductively in a sense over those remaining types as well, since the optimization problem gets easier as we have fewer dimensions of tax types to worry about. What I’m thinking then is the improvement here isn’t to remove taxes entirely but to remove flat taxes like sales tax and replace them with more/varying progressive taxes that make arbitrage difficult? I hope I’m not coming off as rude—really appreciate the discussion thus far!
        shagie 4y ago
        Yep - we're on the same page now. Also consider things like Nevada which has no income tax and one of the higher combined sales tax because they are able to extract money from out of state people as tourists there. California also shows up in the "rather high combined sales tax" in part because local governments arne't able to reliably use property tax (yes, its another regressive tax - and California is a special case there) to raise local funds. ( https://www.lao.ca.gov/reports/2015/finance/sales-tax/understanding-sales-tax-050615.aspx https://www.lao.ca.gov/reports/2015/finance/sales-tax/unders... ). There are some progressiveish aspects to sales tax as it selects which items are taxable. In Minnesota (for example), clothing is not taxed. On the other hand, from Wisconsin, its sometimes cheaper to shop online and have Ikea delivered rather than go to Chicago and pay local taxes there ( https://upload.wikimedia.org/wikipedia/commons/a/ae/State_Sales_Taxes.webp https://upload.wikimedia.org/wikipedia/commons/a/ae/State_Sa... ) In many cases, sales taxes try to tax the more "luxury" items though it gets complicated (food eaten in the place of purchase gets taxed while food that is not hot and to be consumed elsewhere is not taxed). This comes from experience working in the tax part of point of sales software a few years ago. The "it gets complicated" gets really complicated... and even worse when you then start looking at it from the fiscal policy side for local governments.
rootusrootus 4y ago
> if you are buying lumber in Kansas City, KS to be delivered in Kanas City, MO - you pay the MO taxes (4.225%) rather than the KS taxes (6.5%) It gets even better. In some places (e.g. Washington) you pay use tax[0][1] if the use tax would be higher than the sales tax you did pay. So if for example you buy something in Oregon and bring it home to Washington, you pay all of the use tax. If you bought something in a state with a sales tax that is lower than the Washington use tax, you pay the difference. (It isn't immediately clear if you can try to recoup the difference if you buy something in a higher sales tax location than your local use tax rate). [0] It's the same as your sales tax rate. [1] https://dor.wa.gov/taxes-rates/use-tax https://dor.wa.gov/taxes-rates/use-tax
- shagie 4y ago
  That was the case before and is still the case, just most of the time they ignore it. It is really looked at when a state borders another one with no sales tax. Some time back that was also the case with online sales. That you paid the tax of the state where you bought if it if that state had a tax nexus there - otherwise you didn't pay sales tax and were expected to self report the use tax. Except no one did. So sales tax was required to be collected by online sellers always. https://www.cnbc.com/2018/06/21/heres-what-that-supreme-court-sales-tax-decision-means-for-you.html https://www.cnbc.com/2018/06/21/heres-what-that-supreme-cour... As to the use tax - when I bought clothes at Mall of America in MN (2010ish) and lived in northern Wisconsin I'd remember to add that to the tax reporting.
- ghaff 4y ago
  Well, you're supposed to. I expect very few consumers pay the use tax except in situations like purchasing a car where they can't hide it.
vineyardmike 4y ago
If you buy something in one state and drive it to another then you’re supposed to be taxes based on the destination when you “import” it. If you sell to Missouri, you pay Missouri tax. It’s not actually complicated. I’m not sure what you’re trying to solve?
- shagie 4y ago
  That the easiest solution is to have "tax not included" on the price of the item. If you buy it in MO and import it to another state, that is tax added on to the overall price of the item that is "hidden". Trying to put that on the sticker price gets complicated. I am not saying there's an easy solution but rather a "the easy solution misses every complicated case for which there are many."
deleted 4y ago
[deleted]
grahar64 4y ago
Another annoying thing about the USA is the willingness to complicate everyones life based on a caveat only affecting a few. Most people are only employed by one job, take the standard deduction, and have no other tax complications. But they are forced to file a tax return because they *might* have something to declare the IRS doesn't already know about. Removing the sales tax from milk I am buying at a supermarket because a person might purchase lumber is insane, ..., right?
nktrnk 4y ago
This is a good example, but it should be a problem of whoever finds themselves in that situation and not the rest of us. I’m eating a sandwich in Des Moins, Iowa and there’s no reason I should do a mental math of $6.99 + 10% tax + 22% tip. Why not just print the final price? Or at least offer two versions of the menu: for nerds and for the rest of us.

by shagie 4y ago

skaushik92 4y ago

This is not necessarily a bad thing. This incentivizes states and districts to compete on taxation and would likely drive sales tax down nationally.

shagie 4y ago
As there are states that are 0%, this would mean "no sales tax at all" which would really hit states where they don't have any income tax and instead just have sales tax. Under that approach, live in Texas and buy everything online from Oregon and you'll never pay any taxes. States need to raise revenue somehow and playing that form of tax arbitrage shifts the burden of taxes to the people who don't have the resources to do that.
- skaushik92 4y ago
  No; in fact sales tax is what’s shifting the burden in that direction. Income tax on the other hand is a progressive tax that keeps impact more proportional.
  - shagie 4y ago
    If you have the resources to declare residency in Texas and pay sales taxes from Oregon you are able to avoid paying most taxes. I am saying that most people don't have the resources to play tax arbitrage. Those that do are the ones that should likely be paying the most taxes. Going to a system were sales taxes go to 0 based on where you buy it (online in Oregon) doesn't mean that states will abandon the sales tax but rather that the tax burden that local governments can collect (sales, property) will go up and disproportionately impact the people who can least afford it. As it is, that approach would be overturning South Dakota vs Wayfair https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc. --- https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf Sales tax is regressive and a worse option for taxation. It is, however, one of the few options that local governments have for raising funds. The tax system needs an overhaul (though frankly my confidence in congress not just doing another tax cut for the rich is low). Disrupting sales tax without a corresponding overhaul would likely make things much worse in many of the poorer areas of the nation and those where much of the economy is based on non-residents visiting.
    - skaushik92 4y ago
      Interesting point; yeah, I agree that a significant population does not have the ability to move around. If I understand you correctly, you’re saying that in a world where all sales tax is zero, the wealthier population will be able to arbitrage/optimize over the remaining tax types they pay more easily than those less wealthy, resulting in a larger wealth gap. This argument could also apply inductively in a sense over those remaining types as well, since the optimization problem gets easier as we have fewer dimensions of tax types to worry about. What I’m thinking then is the improvement here isn’t to remove taxes entirely but to remove flat taxes like sales tax and replace them with more/varying progressive taxes that make arbitrage difficult? I hope I’m not coming off as rude—really appreciate the discussion thus far!
      - shagie 4y ago
        Yep - we're on the same page now. Also consider things like Nevada which has no income tax and one of the higher combined sales tax because they are able to extract money from out of state people as tourists there. California also shows up in the "rather high combined sales tax" in part because local governments arne't able to reliably use property tax (yes, its another regressive tax - and California is a special case there) to raise local funds. ( https://www.lao.ca.gov/reports/2015/finance/sales-tax/understanding-sales-tax-050615.aspx https://www.lao.ca.gov/reports/2015/finance/sales-tax/unders... ). There are some progressiveish aspects to sales tax as it selects which items are taxable. In Minnesota (for example), clothing is not taxed. On the other hand, from Wisconsin, its sometimes cheaper to shop online and have Ikea delivered rather than go to Chicago and pay local taxes there ( https://upload.wikimedia.org/wikipedia/commons/a/ae/State_Sales_Taxes.webp https://upload.wikimedia.org/wikipedia/commons/a/ae/State_Sa... ) In many cases, sales taxes try to tax the more "luxury" items though it gets complicated (food eaten in the place of purchase gets taxed while food that is not hot and to be consumed elsewhere is not taxed). This comes from experience working in the tax part of point of sales software a few years ago. The "it gets complicated" gets really complicated... and even worse when you then start looking at it from the fiscal policy side for local governments.

rootusrootus 4y ago

> if you are buying lumber in Kansas City, KS to be delivered in Kanas City, MO - you pay the MO taxes (4.225%) rather than the KS taxes (6.5%) It gets even better. In some places (e.g. Washington) you pay use tax[0][1] if the use tax would be higher than the sales tax you did pay. So if for example you buy something in Oregon and bring it home to Washington, you pay all of the use tax. If you bought something in a state with a sales tax that is lower than the Washington use tax, you pay the difference. (It isn't immediately clear if you can try to recoup the difference if you buy something in a higher sales tax location than your local use tax rate). [0] It's the same as your sales tax rate. [1] https://dor.wa.gov/taxes-rates/use-tax https://dor.wa.gov/taxes-rates/use-tax

shagie 4y ago
That was the case before and is still the case, just most of the time they ignore it. It is really looked at when a state borders another one with no sales tax. Some time back that was also the case with online sales. That you paid the tax of the state where you bought if it if that state had a tax nexus there - otherwise you didn't pay sales tax and were expected to self report the use tax. Except no one did. So sales tax was required to be collected by online sellers always. https://www.cnbc.com/2018/06/21/heres-what-that-supreme-court-sales-tax-decision-means-for-you.html https://www.cnbc.com/2018/06/21/heres-what-that-supreme-cour... As to the use tax - when I bought clothes at Mall of America in MN (2010ish) and lived in northern Wisconsin I'd remember to add that to the tax reporting.
ghaff 4y ago
Well, you're supposed to. I expect very few consumers pay the use tax except in situations like purchasing a car where they can't hide it.

vineyardmike 4y ago

If you buy something in one state and drive it to another then you’re supposed to be taxes based on the destination when you “import” it. If you sell to Missouri, you pay Missouri tax. It’s not actually complicated. I’m not sure what you’re trying to solve?

shagie 4y ago
That the easiest solution is to have "tax not included" on the price of the item. If you buy it in MO and import it to another state, that is tax added on to the overall price of the item that is "hidden". Trying to put that on the sticker price gets complicated. I am not saying there's an easy solution but rather a "the easy solution misses every complicated case for which there are many."

deleted 4y ago

[deleted]

grahar64 4y ago

Another annoying thing about the USA is the willingness to complicate everyones life based on a caveat only affecting a few. Most people are only employed by one job, take the standard deduction, and have no other tax complications. But they are forced to file a tax return because they *might* have something to declare the IRS doesn't already know about. Removing the sales tax from milk I am buying at a supermarket because a person might purchase lumber is insane, ..., right?

nktrnk 4y ago

This is a good example, but it should be a problem of whoever finds themselves in that situation and not the rest of us. I’m eating a sandwich in Des Moins, Iowa and there’s no reason I should do a mental math of $6.99 + 10% tax + 22% tip. Why not just print the final price? Or at least offer two versions of the menu: for nerds and for the rest of us.