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> for any business without a local nexus in the state, this exceeds the taxing authority of a city or state, as it would be regulating inter-state commerce. IA

by eli 11y ago

> for any business without a local nexus in the state, this exceeds the taxing authority of a city or state, as it would be regulating inter-state commerce. IANAL, but I don't think that's true. The locality can tax its citizens pretty much however it wants. Without a local nexus Chicago may have a hard time forcing Netflix to collect the tax on their behalf. But that's an implementation detail. Chicago citizens would still technically be on the hook.

JoshTriplett 11y ago
It'd be interesting to see that tested in court. I know there have been cases that struck down regulations on inter-state commerce, in particular when there's no nexus in the state. It doesn't suffice to claim you're taxing citizens rather than transactions; courts do look at intent and net effect when evaluating a law. A tax on the internet connection itself would sadly be within the taxing authority of a state; however, a tax on an Internet service provided outside the state would be in effect a tax on "imports" across state lines (or country lines in the case of international services), and only the federal government can levy those.
- eli 11y ago
  I'm not so sure about that. When Amazon challenged New York State over sales tax it wasn't over whether NYS could charge a "use" tax for goods purchased online, it was over whether customers had to submit the tax themselves or whether Amazon was obligated to withhold it.
  - JoshTriplett 11y ago
    I haven't seen a court case against any individual or business over "use tax", but I'm skeptical that rebranding an inter-state sales tax as a use tax suddenly makes it Constitutionally acceptable, given that it taxes the same thing. Nonetheless, neither of us are lawyers, and that question probably won't be settled unless someone actually takes it to a sufficiently high court.
- phil21 11y ago
  It's quite well established that if you don't pay sales tax at the time of sale (e.g. via mail order/on-line) you are required to submit a use tax voluntarily by self-reporting. Of course pretty much no one does this. There are exceptions such as some states aggressively going after taxes on the sales of cars you buy across the state line/etc - but in general it's wink wink nudge nudge. If you're in a state with sales tax, and have ordered from an out of state retailer you are breaking the law if you don't pay use tax on that item. https://en.wikipedia.org/wiki/Use_tax https://en.wikipedia.org/wiki/Use_tax
  - JoshTriplett 11y ago
    Cars are a special case, not just because of their size and thus ease of detection, but because you're required to obtain a license to operate it in the state, and the state can set arbitrary conditions on such licensure. More generally, however, under what constitutional authority are you suggesting that states could levy a sales tax on inter-state (rather than intra-state) commerce? That is a power specifically reserved to the federal government, and not granted to the states. There have been federal bills proposed that would authorize states to collect such taxes, and if such a bill passed, that would delegate the necessary taxing authority. To the best of my knowledge, no such bill has passed into law. Why do you think such a bill would be necessary if states can do this already? In any case, one more reason to be in a state with no sales tax. I certainly wouldn't want to fight that particular legal battle myself.
    - eli 11y ago
      States and localities can tax their residents pretty much however they please. The fight over the "Amazon tax" has always been about whether Amazon was required to collect the tax or whether people were supposed to mail a check to the state on their own. There has never been any serious doubt over whether states and cities can levy the tax in the first place, just over whether they can force out-of-state companies to collect it for them. The bill you're thinking of is probably the Marketplace Fairness Act, which was about letting states force retailers with sales over $1 million to do the work of actually collecting the tax.
    - 11y ago
ghaff 11y ago
I believe that's correct. Since Quill the Supreme Court has consistently refused to take cases that involved forcing retailers to collect sales tax for sales that didn't involve shipments to states in which they had a physical presence. However, I'm not aware of legal prohibitions about states collecting use taxes for cross-border sales.

by eli 11y ago

JoshTriplett 11y ago

It'd be interesting to see that tested in court. I know there have been cases that struck down regulations on inter-state commerce, in particular when there's no nexus in the state. It doesn't suffice to claim you're taxing citizens rather than transactions; courts do look at intent and net effect when evaluating a law. A tax on the internet connection itself would sadly be within the taxing authority of a state; however, a tax on an Internet service provided outside the state would be in effect a tax on "imports" across state lines (or country lines in the case of international services), and only the federal government can levy those.

eli 11y ago
I'm not so sure about that. When Amazon challenged New York State over sales tax it wasn't over whether NYS could charge a "use" tax for goods purchased online, it was over whether customers had to submit the tax themselves or whether Amazon was obligated to withhold it.
- JoshTriplett 11y ago
  I haven't seen a court case against any individual or business over "use tax", but I'm skeptical that rebranding an inter-state sales tax as a use tax suddenly makes it Constitutionally acceptable, given that it taxes the same thing. Nonetheless, neither of us are lawyers, and that question probably won't be settled unless someone actually takes it to a sufficiently high court.
phil21 11y ago
It's quite well established that if you don't pay sales tax at the time of sale (e.g. via mail order/on-line) you are required to submit a use tax voluntarily by self-reporting. Of course pretty much no one does this. There are exceptions such as some states aggressively going after taxes on the sales of cars you buy across the state line/etc - but in general it's wink wink nudge nudge. If you're in a state with sales tax, and have ordered from an out of state retailer you are breaking the law if you don't pay use tax on that item. https://en.wikipedia.org/wiki/Use_tax https://en.wikipedia.org/wiki/Use_tax
- JoshTriplett 11y ago
  Cars are a special case, not just because of their size and thus ease of detection, but because you're required to obtain a license to operate it in the state, and the state can set arbitrary conditions on such licensure. More generally, however, under what constitutional authority are you suggesting that states could levy a sales tax on inter-state (rather than intra-state) commerce? That is a power specifically reserved to the federal government, and not granted to the states. There have been federal bills proposed that would authorize states to collect such taxes, and if such a bill passed, that would delegate the necessary taxing authority. To the best of my knowledge, no such bill has passed into law. Why do you think such a bill would be necessary if states can do this already? In any case, one more reason to be in a state with no sales tax. I certainly wouldn't want to fight that particular legal battle myself.
  - eli 11y ago
    States and localities can tax their residents pretty much however they please. The fight over the "Amazon tax" has always been about whether Amazon was required to collect the tax or whether people were supposed to mail a check to the state on their own. There has never been any serious doubt over whether states and cities can levy the tax in the first place, just over whether they can force out-of-state companies to collect it for them. The bill you're thinking of is probably the Marketplace Fairness Act, which was about letting states force retailers with sales over $1 million to do the work of actually collecting the tax.
  - 11y ago

ghaff 11y ago

I believe that's correct. Since Quill the Supreme Court has consistently refused to take cases that involved forcing retailers to collect sales tax for sales that didn't involve shipments to states in which they had a physical presence. However, I'm not aware of legal prohibitions about states collecting use taxes for cross-border sales.