"States can force online retailers to collect sales tax" Topic

Per article via the link provided below, US Supreme Court ruling issued today. How are any of you in this boat planning to address the issue, or is it time to toss in the towel.

link

Regards, Colonel Bill
ageofeagles.com

In our state, which has an income tax, there is a
procedure by which the taxpayer can provide a small
percentage in addition to owed income taxes to compensate
the state for tax revenues lost to sales out of the state
through the internet.

Our 'contribution' to replace sales tax revenues via this
avenue for 2017 was $12.40 USD – hardly burdensome.

Of course, if a state does not collect income taxes, I
suppose another form of 'compensation' is necessary.

The Supremes said that the States "could" collect it. They gave no guidance on how to do it. I imagine they are thinking "good luck collecting it!"

Chief Justice Roberts said in a recent famous case that it isn't their job to rule on whether or not it's a good or practical law. Only if it's Constitutional.

I know Old Glory collects Pa sales tax at Pa conventions.
Many don't.
When the Revenooers swoop in to collect their due, at least OG will be covered with appropriate paperwork.

My state has had a law on the books that tax payers were supposed to track their own online purchases and pay sales taxes as part of their state income tax. I don't know of anyone that has been doing that.

So they started hitting the big online retailers for sales taxes (Amazon, Wal-Mart, etc). They've even started harassing UPS and FedEx to let them know who gets monthly shipments (shave club, cigar of the month clubs, etc). They the state "calculates" what the sales tax "ought" to be (ie. they guess).

I don't know how they are going to track down every mom and pop online retailer that isn't registered to do business in the state.

Anyway, I just see this as another untenable law passed by money hungry bureaucrats that haven't figured out a few things:
1. They have a spending problem, not an income problem.
2. They are not in government to "help people" or "provide services", they are there to maintain order and provide that which the free market cannot (police and fire protection, and very little else).
The state passes

Virtually all states that have a sales tax in actuality have a sales and use tax. A use tax is a sales tax not collected by a seller but remitted directly by the buyer. In theory, any time you did not pay sales tax you should have gotten a form from the state, calculated the applicable rate including any local additional amounts and remitted. Obviously that rarely if ever happens and other than big ticket items such as art (an NYC millionaire went to jail for playing games to dodge use tax) and cars (most states get that tax on registration) it hasn't been worth hacking off voters.

Amazon and most big retailers already collect sales tax in states where the AG/Revenue folks made a fuss. The challenge to the states will be how do you get the revenue lost to online v brick&mortar without killing truly small and innovative businesses.

Note that since the buyer pays the tax , the burden on small business is in the collection and remittance. Issues such as exemption certificates, local sales tax surcharges etc. virtually make special software a requirement and regardless, compliance is a nightmare. There are, as I recall, something like 18,000 collecting entities in the US.

I expect this will make it easier for states to make big retailers (Amazon, Walmart, etc) to collect sales tax or face fines. After all, the retailer knows where you live since they have to mail it to you.

It isn't just big retailers. Within the past two years
three antique shops in the county (not mine thankfully)
have had their sales tax and remittance records audited.

Two failed the audit and were fined THOUSANDS of dollars.

There ain't that much money in the antiques/collectibles
business, folks, which is why we pay ours every quarter
to avoid such punitive fines.

Amazon and Walmart (and Costco and most other big boxes such as Best Buy) already collect in virtually all states with a sales tax. Amazon does not (and does not have to) collect for third party sellers, that will remain their responsibility and the states have to decide at what level will they be willing to chase retailers with no physical presence.

The real pain will be from third party auditors that get paid a percentage of what they recover. There is no guarantee their discoveries are correct and the appeal process would be beyond the financial resources of many small businesses.

I think McKinstry nailed it. Its not the tax per se, but the administrative burden of compliance. Since I live in PA, I have a PA sales tax license and collect same on any PA sales. I checked to make sure but the law allows, for example, the state of Montana to demand sales tax remittance from me even if only a single resident makes an AOE online purchase from me here in PA. Does this mean I need a Montana sales tax license, is there a fee for doing so and if the city of Billings has its own sales tax, must I collect and remit that as well?

Worse case, but now multiply that by 54 states and territories, not to mention thousands of municipalities. Given the small business nature of the cottage industry that is our hobby, I imagine a lot of vendors may not think its worth it. WHAT DO YOU FOLKS THINK? What WOULD an Old Glory do?

South Dakota, the plaintiff in the case, passed a law making only businesses with $ 100,000 in sales liable, but that is no guarantee other states will follow that example.

Colonel Bill
ageofeagles.com

Indeed, the real elephant in the room is the administrative burden that will fall on small business!! --not just States, but in some cases, counties !!
Of course, what many seem to never really grasp is that eventually, YOU the consumer will pay for this --Question is, can our market withstand this ??

Regards
Russ Dunaway

How does this affect ebay sales?

I think that the South Dakota law is $200,000 USD OR 200 transactions inside the state as the threshold for an exemption. It's what comes after the "or" that will snag a lot of companies.

I'm not up to speed on the interstate commerce rules, but something sticks in my memory that a transaction can't be taxed by more than one state. I'm probably wrong.

A few years ago our GOV Patrick Duval( MA.) tried to get New Hampshire to check buyers and see if they were from MA. and collect taxes from the… we know what they told him! Good luck with states trying to get companies to collect taxes and then turn it over to the state the customer bought it from.

I do business in Illionois and collect and remit sales tax. I file a return quarterly, whether I collected tax or not.

Now I have to file 200 returns, one per state each quarter?

Even one per state annually is 50 returns. They don't take long, but really?

How does this affect ebay sales?

For an individual selling not as a business but just as an individual there is, in all states as far as I know, an "occasional sale" exemption so whether eBay, Craigslist or simply selling a mower to a neighbor, it would be exempt. However, if you have an established pattern of selling through eBay (or another entity) where the appearance becomes that of a business, and the dollar volume is within that states threshold, you face not just sales tax but business license and/or gross receipts issues plus on a broader scale, the IRS.

The states have been waiting with baited breath on this case and they have been working on a coordinated and cooperative approach. The Multi-State Tax Commission is one of the leaders in thinking through how this will be administered going forward. I'm attaching a link.

link

Many counties throughout the US also levy a sales tax. A few like in California levy a local sales tax at the state level. I wonder if these too will fall under this ruling.

We just need a federal law to require sales tax to only be collected from/for the state the business is located in. No different than visiting a brick and mortar store. So when a state has no sales tax it is treated no differently than someone crossing the state line to purchase stuff. Just apply the state tax to all purchases. This would definitely get states competing to attract more online retailers…..

But as many above mentioned, the requirement to track and file the taxes would be a full time job.

I'm torn about the impact this will have on small businesses. On the other hand, I'm torn about the affect NOT having to pay sales taxes in the customer's state has had on that state's small businesses that compete with out of state small businesses not liable for that state's taxes.

The tax liability is incurred where the good changes hand thus a Colorado resident buying some miniatures online from a Pennsylvania company will incur Colorado sales tax. The burden is on the Pennsylvania retailer to collect and remit, to Colorado, the correct sales tax amount which could/will include not just the state rate but any county/city/special taxing district added rates. As noted, this can be a terrible burden on a small business and states need to decide, usually based on annual revenue, a cutoff below which the business is not required to collect and file. Software to handle sales tax for POS/bookkeeping systems has to be constantly updated for changing rates and that makes the software support very expensive.

I worked in a hobby shop for a while. The Internet really cut into our sales. People would come into the shop to see and touch product then get it online for 20% off. AND no sales tax. Impossible to compete. So collecting sales tax for online purchases helps to level the field.

Agree with BTC -- feds have to limit it to state sales tax only and over a certain amount.

It does open quite the can of worms. It will be up to each state to write the legislation to put this in to effect. Could it also extend sales tax to things like Handling Charges and Shipping? These could be considered services.

I live in PA. If I go to the grocery store, most of my food is tax exempt as per state legislation. However, if I go to a restaurant, that same food, because it is prepared and served to me, is now taxed as a service.

If I go to the Post Office to mail a package, there is not a sales tax collected on the transaction. However, if I order goods from someone and have them ship it to me, what is to keep the states from taxing that as a service?

I worked in a hobby shop for a while. The Internet really cut into our sales. People would come into the shop to see and touch product then get it online for 20% off. AND no sales tax. Impossible to compete. So collecting sales tax for online purchases helps to level the field.

Isn't this the point of taxing online sales? To level the playing field with brick & mortar stores. If implemented badly it is a headache for a small online retailer (a good percentage of our hobby these days I suspect), but in theory it helps the local economy.

So the whole point of this is to level the playing field for mom and pop brick stores with mom and pop ECommerce sellers.

That's just brilliant, what a concept.

We'll see what the thresholds will be; ie, how much per year in gross sales? Will they do something like 100K per state/1 million per year, whichever comes first, who knows.

For a small business like myself, I'd have to hire a full time employee to keep track of the sales taxes due to each state whether they be quarterly, biannually or annually.

What a nightmare.

Honest to Christ, everytime I turn around I'm dealing with some sort of nonsense just trying to carve out a living in this broken toilet of a business.

Double G, the reality of this world is that you spend half of your time making the money, then you spend the other half of your time just trying to keep it from from those who would try to take it away from you.

For those who think that this will level the playing field, they are kidding themselves. The big companies will just pay for the expensive software and hire a bunch of cubicle-dwellers to deal with the compliance/reporting issues. The little guys will either pay some big company like Amazon to deal with it, necessitating large price increases on their products, hire compliance people – also hurting their bottom line, or go out of business.

As for mom and pop shops, I try to support them when I can, but there aren't many of them around since the bigger companies muscled them out of the market. Many times when I go into said mom and pops looking for a particular item, guess what? They don't have it. Yeah, they can order it for me, but I can now do that too. I need it NOW usually, not next week. I am willing to pay a little more for the convienience of getting it now, but you've got to stock it first.

Since I am in a semi-rural area, not some big metropolis, there isn't the population density to support specialty shops that might carry what I am looking for in many cases.

As usual, the .gov will steal more money from us, hose over the economy for a while, lots of people will go out of business or say screw it, I'm done. Another poorly thought out plan by our .gov overlords. :(

To use the toy soldier industry as an example; there is not a single shop owner I know of who does not also sell via a website or Ebay or Amazon, none of them sit on their hands waiting for Harry to wander into their shop in Anytown USA.

So this concept designed to help them is actually going to hurt them.

Maybe I'll start selling compliance software, or better yet, start a company to help all the business owners with their compliance.

All I can say is the threshold had better be high or else it will be an accounting nightmare for a ton of small business owners, myself included.

I wonder how this is going to be regulated, ie, how does anyone know how many orders go to State X from company Y?

Oh and I'm sure these states are going to put all this new found money to good use…………insert your laugh track here.

Oh, those states already have it spent, long before the first penny even shows up. The only thing that worries me is that they'll want to come after everybody for backtaxes…

To me, large companies (Amazon, eBay, Walmart, etc) and those that do business via them (my own 4d10 LLC sells via Amazon… the "Fulfilled by Amazon" line when you look at the companies offering items) can just expand their existing code to include all states. That'll likely boost the fees charged to users.

The larger hosting sites (GoDaddy, etc) may offer a sales tax compliance package of some sort, likely as part of whatever hosting package they sell. Again, higher cost to online stores.

In these cases, the shipping address serves as the trigger for the sales tax, gets paid, and 'compliance' paperwork for the seller is minimal. In theory…

Those who use an accountant may be in for a rude surprise with the bill for filling out 50 state tax forms, and quadruply so if reporting on quarterly basis.

As for those sole proprietors who will navigate 50 states' worth of websites and tax forms to do it themselves…egads!

Alternatives?

Hmmm. Maybe…

Redefine data (online catalog sent to your computer) as a physical presence, thus sellers charge sales tax based on where they are, not where the customers are?

Federal Online Sales Tax, like a VAT-style tax of one specific amount that is collected by the seller and is a line on the federal taxes, which distribute as block grants?

State Threshhold Flat Fee, where the size of a business revenues (as per revenues reported to IRS) determines a flat fee payment once per year?

Dunno. Then again, state tax offices will have to expand to process all these tax forms coming in from do it yourselfers. That should be a challenge…

My internet sales would not crack any threshold. As a retired person, I can only make so much a year. Since I teach at a college, there is little room to push for more on line sales.