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Senate Backs Bill to Force Tax Collection on Internet Sales
- r00fus 13y agoDoes this matter if the Republican-controlled house (generally anti-tax) will not pass it? It sounds like the Ryan budget that was passed in the House back in '10 and was never going to pass the Senate. Either it's inefficient politics, grandstanding, kabuki theater or all of the above. It's definitely not newsworthy.
- dangrossman 13y agoThere's a not-insignificant chance this will pass. Republican opinion on it is split -- they can get away with saying they're not reneging on no-tax-increase pledges because it's merely enforcement of tax laws already on the books (consumers are supposed to pay use tax on their out-of-state purchases). There's strong pressure on them from brick-and-mortar businesses in every state since it makes them more competitive with online retailers.
- mullingitover 13y agoSo the republicans are in favor of closing tax loopholes now? Oh right, this is for consumers. I thought I woke up in an alternate universe where congress wasn't bought and paid for.
- Turing_Machine 13y agoThis has nothing to do with "Republicans" (or Democrats, for that matter). It's high sales tax states v. low sales tax states.
- mullingitover 13y agoThe money the states are losing to lost sales tax revenues pale in comparison to the money lost to esoteric corporate tax loopholes. Those loopholes were sacrosanct to the republicans in recent negotiations over the debt ceiling, tantamount to a tax increase. In this case apparently it's ok with (many of) them.
- duck 13y agoThe money lost to esoteric corporate tax loopholes pale in comparison to the money lost to entitlements.
- mullingitover 13y agoThe thing about money "lost" to entitlements is that it's not really lost. It's spent immediately and generally contributes a great deal to the economy. On the other hand, money lost to tax loopholes generally ends up enriching people who are already wealthy and are less likely to circulate the extra capital.
- twoodfin 13y agoNot that it matters at this point, but "closing loopholes" was not President Obama's tax position during the debt ceiling negotiations. He cleverly made a big deal about a penny-ante change to private jet depreciation, but the meat of his proposal was a combination of higher rates and lower deductions for high earners. Neither of which could be properly described as loophole-closing.
- smackfu 13y agoOne of the Republicans constitutencies is small business owners, and they generally like the internet sales tax proposals, since it makes them more competitive with online stores.
- mullingitover 13y agoTrue, but another republican core constituency is people who hate paying taxes, and I argue that it's a more important constituent group than the small business lobby. This might seem like a good move for the republicans now, but I suspect they'll regret it in primary season when their challenger can paint them as "the incumbent, who brought sales taxes to the internet."
- Turing_Machine 13y agoThere's also a not-insignificant chance that the Supreme Court will throw it out if it does pass. These issues aren't new; most of them were hashed out back in the heyday of the Sears Catalog and other mail-order operations. As far as I know, no state ever managed to collect taxes from out-of-state companies.
- dangrossman 13y agoThat's because the states had no jurisdiction over entities outside their boundaries with which to enforce tax collection. There's never been a federal bill giving it to them, and the federal government definitely has authority to regulate interstate commerce. On what grounds would the Supreme Court throw this out? The SC rulings on out-of-state taxes have always specifically said that Congress is free to make changes that would enable tax collection. E.g. Quill v North Dakota: > [O]ur decision is made easier by the fact that the underlying issue is not only one that Congress may be better qualified to resolve, but also one that Congress has the ultimate power to resolve. No matter how we evaluate the burdens that use taxes impose on interstate commerce, Congress remains free to disagree with our conclusions
- Turing_Machine 13y ago"the federal government definitely has authority to regulate interstate commerce" Agreed, but that's not what they're doing. They're granting authority to one state to regulate commerce in another state. They might have the authority to enact a national sales tax paid to the federal government (but then again, they might not -- note that the income tax required an actual constitutional amendment), but I don't think they can make citizens of one state subject to the tax (or other) laws of another. If they do have that power, how far does it go? Can the feds require that you abide by all the laws of (insert least favorite state) even though you've never set foot in it?
- tzs 13y agoNo, they were quite clear in Quill [1] that Congress can do this. ------------ This aspect of our decision is made easier by the fact that the underlying issue is not only one that Congress may be better qualified to resolve, 10 but also one that Congress has the ultimate power to resolve. No matter how we evaluate the burdens that use taxes impose on interstate commerce, Congress remains free to disagree with our conclusions. See Prudential Insurance Co. v. Benjamin, 328 U.S. 408 (1946). Indeed, in recent years, Congress has considered legislation that would "overrule" the Bellas Hess rule. 11 Its decision not to take action in this direction may, of course, have been dictated by respect for our holding in Bellas Hess that the Due Process Clause prohibits States from imposing such taxes, but today we have put that problem to rest. Accordingly, Congress is now free to decide whether, when, and to what extent the States may burden interstate mail-order concerns with a duty to collect use taxes. Indeed, even if we were convinced that Bellas Hess was inconsistent with our Commerce Clause jurisprudence, "this very fact [might] giv[e us] pause and counse[l] withholding our hand, at least for now. Congress has the power to protect interstate commerce from intolerable or even undesirable burdens." Commonwealth Edison Co. v. Montana, 453 U.S., at 637 (1981) (WHITE, J., concurring). In this situation, it [504 U.S. 298, 319] may be that "the better part of both wisdom and valor is to respect the judgment of the other branches of the Government." Id., at 638. ------------ [1] http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=504&invol=298 http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us...
- nostromo 13y agoI wish this was paired with a provision that required states to simplify their sales tax codes. I know in Seattle for example food is tax free, unless it's carbonated (which has a surtax), or prepared, or alcoholic, or coffee, or until recently a 'snack' which of course has a lengthy definition on page 3,641 section 4 subpart D... Even if you make a million dollars in sales, it's hard to imagine keeping up with these regulations. I'd be especially worried if I was a sharing based company (will Airbnb pay hotel rate taxes, RelayRide car rental rates? Who pays, the owner or the company?)
- dangrossman 13y agoThis is paired with a provision that states must simplify their sales tax codes before they can collect from out-of-state sellers, though it's not hard to see how they could stay within the requirements of the bill and still have overly complicated rules. I wrote a summary a few weeks ago: http://www.dangrossman.info/2013/04/24/what-startups-need-to-know-about-the-internet-sales-tax-bill/ http://www.dangrossman.info/2013/04/24/what-startups-need-to...
- vaadu 13y agoIt's not that simple. http://online.wsj.com/article/SB10001424127887323628004578457030883341340.html http://online.wsj.com/article/SB1000142412788732362800457845...
- dangrossman 13y agoIt's very clear that remote sellers cannot be audited by any entity except that one per state which will be created. > Such authority shall commence...after the date that the State...implements each of the following minimum simplification requirements: a single audit of a remote seller for all State and local taxing jurisdictions within that State Local municipalities have no legal jurisdiction to tax entities outside their boundaries, and this bill does nothing to change that.
- Turing_Machine 13y ago
- angersock 13y agoSee, this might be remotely tolerable if there was also a funded mandate to create federally-run queryable API free of charge for all online businesses to make use of. Alas, I doubt this will happen. (And the first person to chime in with "hurr durr a chance to disrupt the state tax industry" can go fuck right off.) EDIT: Reading Dan's summary above, it looks like states (not the feds) will be responsible for providing this API. Urk.
- betterunix 13y agoWhy release an API? Just release the tax code itself as software. That is basically what it is, right? Instead of English, publish the tax code in Prolog or some similar declarative language (added bonus: contradictory tax codes will be caught early and automatically).
- McGlockenshire 13y ago> And the first person to chime in with "hurr durr a chance to disrupt the state tax industry" can go fuck right off. Especially as it's already been done by Avalara and a bunch of others.
- joe-mccann 13y agoI shorted Amazon in the after market on the news.
- ghaff 13y agoYou do know Amazon is backing this?
- jerf 13y agoIs that because you think it's bad for them? Have you considered the implications of the fact that Amazon is pushing for this? Byzantine regulations favor the incumbents. Even sometimes ironically the complicated regulations designed to favor the little guy, who is unable to hire enough lawyer power to take advantage of them while the incumbents work out how to use the new loopholes.
- illuminate 13y agoAren't you clever!
- noonespecial 13y agoMy problem with this as it stands: $0.42 in tax to remit, $42.50 to figure out where to send it.
- w1ntermute 13y agoI'm really looking forward to same-day delivery from Amazon.
- cpursley 13y agoMy issue is not the complexity and methods of collection (although that is problematic); it's what it will be wasted on once collected.
- Hawkee 13y agoThe online affiliate industry should be happy about this. For the past few years states have been instituting laws stating online affiliates earning commissions on sales constitute a physical nexus. This first passed in New York and Amazon began collecting tax from New York residents. Many other states followed, but rather than collect the tax like they did in NY they started killing off their affiliates in each of these states. I know of one particular case where Fat Wallet moved out of state to avoid being severed by a majority of their affiliate partners. States have been trying everything they can to force online merchants to collect tax, but they've been failing miserably. Amazon even said they would start collecting tax if the federal government steps in. It looks like we've finally reached that point. There's a lot more history to this issue than it appears.
- burke 13y agoI wrote Shopify's current US Sales Tax calculation system. Here are a few interesting tidbits: * There are over 23,000 distinct tax rates in the US. Most of these can be nicely pigeonholed as 'State', 'County', or 'Municipal'. Some can not. * There are a handful of cities with multiple municipal tax rates. Most of these straddle counties. A small handful of them, perplexingly, don't. * Most states charge tax based on the three(ish!) rates applicable at the sale's destination. Several charge based on the origin. * Some states charge tax on shipping. Some states charge tax on shipping and handling. Some both, some neither. * Three states only charge county and municipal level taxes if the destination is located in a county that the business has a phyiscal presence in. Of these three, one does something subtly different still. * Figure the 5-digit zip code is sufficient to identify the applicable rates at a given address? Nope. You actually need to geolocate the street address to get it right sometimes. * There are a nearly-unfathomable depth and breadth of exceptions on a type-of-goods basis (selling clothing in New York? It's exempt if it's under $110, but only from State tax, and additionally county tax if the destination is in one of 14 specific counties, unless it's in the cities of Norwich or Oneida, in which case the County tax applies again.) This astounds me as a Software Developer and a Canadian (we have vastly simpler Sales Taxes). How they expect Joe Merchant to be able to charge all these taxes correctly without radical simplification (and unification) of tax codes is beyond me. Very far beyond me. --EDIT-- After reading the full bill, it's not as bad as I previously thought (logistically, ignoring the more-taxes discussion). However, it is still pretty bad. Salient points: * One central authority per state means at most ~50 points of contact. This is better than 23,000, but not exactly good. * Doesn't apply to merchants doing less than $1M/yr in business. * States are required to provide a database of rates and boundaries. As worded in the bill, it's unclear whether this means zipcodes or bounding coordinates. Geolocation is not a cheap service at scale. * Each state is required to provide software to calculate rates for a given sale. Given government, this will likely be a desktop Windows app that does not integrate cleanly with any server-side infrastructure, nevermind the fact that there will be 50 likely-distinct pieces of software. On the other hand, with states actually being encouraged to publish their rates in a freely-available machine-friendly format for once, perhaps we'll see some startups pop up around this problem to ease the pain.
- dangrossman 13y ago
- jacoblyles 13y agoHere's the vote on today's bill: (http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=113&session=1&vote=00113 http://www.senate.gov/legislative/LIS/roll_call_lists/roll_c...) Boxer: yea Feinstein: yea Silicon Valley sucks at politics, even our own senators are selling us out.
- jvm 13y agoa) Silicon Valley doesn't have "its own senators" b) Why should internet retailers get special privileges? Complexity sucks but that's life, and the law does require states to simplify the collection process.
- barry-cotter 13y agoa) Hollywood does, why doesn't Silicon Valley?
- dangrossman 13y agob) This actually creates a burden on internet retailers that brick-and-mortar stores don't have; it makes things unfair rather than fair. A single retail store has to worry about only the taxes of the locale it resides in. At most, they are filing 3 sales tax returns and could potentially have their books audited by 3 entities. An internet retailer now has to comply with 50 separate sales tax rules, file 50 separate returns, and potentially be audited 50 times a year. For an individual making $30k/year (3% net on $1m in gross), is that really levelling the playing field? How many of your aunts and uncles do you think have the time and the skill to locate, understand and properly comply with 50 states' separate tax codes? Contrast that to opening a brick-and-mortar shop on main street in their town, where if they need help, they can walk up to the town hall and ask the tax administrator in person, or hire a local accountant who already knows all the local rules. That's feasible, where getting assistance from 50 accountants to start a business is not.
- jvm 13y agoThis argument is ludicrous. You are saying that you shouldn't have to pay the taxes you legally owe because it's hard for you to do the accounting? It's much harder to file taxes if you have to itemize returns, should that make you exempt from paying taxes? You could avoid them entirely by only selling to the five states that don't have sales taxes, that's a vastly larger market than the area around a single mom & pop store. I'd be all for some sort of scheme for streamlining tax collection for online purchases, but paying nothing at all is just rent-seeking. > For an individual making $30k/year (3% net on $1m in gross), is that really levelling the playing field? If they're making that $30k/year because they're dodging state taxes, then yeah, it's leveling the playing field.
- fixxer 13y agoI think the long term (5 years out) result of this tax is going to be faster distribution from Amazon (local warehouses, delivery infrastructure). I hate taxes, but this makes the short bet on Best Buy more interesting to me.
- EGreg 13y agoHow will this affect purchase of digital goods?
- dangrossman 13y agoSome states tax them, some don't, and that will continue to be. If this passes, once each state sets its new sales/use tax code, you'll have to check each one to see if what you're selling is taxable there.
- gte910h 13y agoWho the hell cares if there are taxes collected. But it's OBSCENE to exact the costs required to comply with every little tiny jurisdiction. Make a streamlined approach where tax is based on 1-10 plans laid out in federal statues, and able to be looked up via a city/state/zipcode lookup table
- dangrossman 13y agoThis is being flagged off the front page. Why does that happen to every mention of this bill?
- _delirium 13y agoI flag it because at this point, afaict all the productive HN discussion that's going to happen has happened. Check the previous submissions with comments and compare the comments to the ones here: A lot of words seem to be being re-spilled saying the same things on all sides, which indicates a stalled (or perhaps, cyclical) conversation. Just the news itself I can get from elsewhere; the usefulness of something being on HN is if it produces good discussion, which repeated submissions of the same topic tend not to do, unless interesting new information comes to light between the submissions. That said, it's still on the front page 8 hours after submission, so obviously most HN readers don't agree with me.
- cmircea 13y ago2 cents from an European here: Why does the US not have VAT and instead have this big mess called sales tax? IIRC it's one of the only few developed countries without VAT.
- TheCoelacanth 13y agoBecause any given locality has at least three different governments that all have the power to implement taxes. There's not a chance that all of the ~10000 different governments in the US would agree to a single tax.