Internet Sales Tax...I think it's coming sooner then we thought...

[Rick Christopherson]

EDIT:
Pardon me, Rick... I think we hit the post button almost simultaneously.

Yes, but I did it with more panache.  [big grin] [big grin]

 

[Bob Marino]

Just to get back on topic, let me re-dress what I said earlier.....

When I first posted, I didn't realize that there was a $1 million threshold. However, now that I have thought about it, that threshold is pretty low. When you consider profit margins and salaries, that would categorize a pretty small company of only a couple employees. Any company operating near that threshold would be hit very hard by the extra overhead. I agree with eBay's stance that it should be increased to something larger than $1 million.

Agree Rick. To most, a million dollars in gross sales sound like a fortune, but in many cases, because of profit margins, employees and a myriad of other expenses, it simply isn't. And again, how do they deal with a company that does 1.1 million in gross sales?

Bob

 

[Bob Marino]

I really doubt that it will go anywhere. The States have already cracked down and are continuing to find significant sources of income that can line their coffers. That won't likely stop.

Tom

EDIT:
Pardon me, Rick... I think we hit the post button almost simultaneously.

  Going to disagree here Tom. As I mentioned earlier; it may be delayed a while, but I think it's inevitable; there's simply too much money the states perceive (rightly or wrongly) as slipping through their hands to let this slide.

Bob

 

[Paul G]

Hi -

The thing that most people miss about paying sales tax (and this may be different in some jurisdictions) is that the consumer is the one that owes the tax - no matter whether it is collected or not by an out-of-state, or out-of-province supplier.

As a business - we remit relevant taxes on all purchases, no matter whether the tax was collected by the vendor or not...that's just the law.

No one like to be an unpaid tax collector... it's a significant cost to many businesses.

If you're not paying the appropriate tax (whether or not it's collected) - you will have some exposure in the event of an audit, or an audit of the firm that made the sale....

Cheers -

Rob
(who is not a tax expert.... but employs dozens of them....  [crying] )

Basically agree, Rob, but in the USA, the purchaser, not the on-line retailer is responsible for paying the tax, unless that retailer has a nexus of business in that state.

Bob

Would it be more accurate to say that in some US States the purchaser is responsible?

 

[Paul G]

I am a web developer and its going to be a nightmare from a shopping cart standpoint in some cases.  In our state we have local option sales tax by county and some city. How we are going to drill down and handle that I have no idea.

Bob, I can assure you its not going to effect your business from me because I cant get Festool support from my local dealer like I do you.  So I would rather buy online !

Probably will be pulling the rates via an API from a govt entity or commercial service that tracks all the rates for a fee, and will probably help with all the payments as well. Yet another overhead cost...

 

[Kev]

Well this stinks! I have about $25,000-$30,000 worth of tools and machinery I want to buy over the next few years to build a complete woodshop. I might be buying a lot of stuff in the near future  [eek]

 

  Well, get going' Dan!

Bob

I wish I could buy everything that I want sooner but I don't have the space in my basement. I am looking to move or maybe even build a new house, but this could be a few years away unless I can find a house that I really love. I am also taking my time on deciding on what equipment to buy. I only want to buy once and I want it to last me the rest of my life. I'm 37 and hope to have my equipment last 40 or more years in a hobbyist shop.

Daniel

According to my wife (who prepares the personal taxes) I spend $35K on tools alone last year ... that'll be the stuff she can see that didn't involve cash. I'll probably spend considerably less this year, I do have a couple of big items on the futures - but space is my enemy!

I rushed the decision on a few things and did spend a little time considering a local 110v install and a trip to the US with a return shipment of Festool to probably save ~$10K+

The bottom line is the things you want will still be the things you want! Maybe there's some stuff you could pre-purchase and the "shop guy's" will be nice enough to keep it in their warehouses for you .. that may be worth a chat or too.

If the bug has bitten you as hard as it appears it has, you'll never stop looking at tools and upgrading (maybe with lower intensity) over time ...

 

[Rob Lee]

Would it be more accurate to say that in some US States the purchaser is responsible?

Hi -

Yes ... that's essentially what I meant...

I tend to use the specific terminology we use internally.... the consumer is the "ship to".... the purchaser is the "bill to" ....

Taxes generally apply according to the destination (delivery address), and not the billing address.

(yeah, I know it's hair splitting.... but we have to make that kind of distinction when talking about our internal processes)

Cheers -

Rob

 

[Rob Lee]

Basically agree, Rob, but in the USA, the purchaser, not the on-line retailer is responsible for paying the tax, unless that retailer has a nexus of business in that state.

Bob

Yes - I agree.

The part people miss though, is that in most jurisdictions the purchaser (consumer) who takes delivery is *always* responsible for paying the tax - whether or not the retailer has collected it. Customers incorrectly interpret the absence of collection as meaning they don't have to pay tax.

The amount of "leakage" at the state level is tremendous (less so in Canada - our leakage is cross-border shopping).

Cheers -

Rob

 

[rvieceli]

As people have pointed out, the taxes are not new. Every state that has a sales tax has a "use tax" that applies to out of state purchases. Most of these laws have been in place prior to the 1960s. the purchaser is responsible for paying the tax. You are liable and legally obligated to pay.

The current system has made it easy to skip paying. However many states have been including the use tax declaration and payment on their state income tax forms. You know the forms that have the "under penalty of perjury" clause above you signature.

 

[Paul G]

Yes - I agree.

The part people miss though, is that in most jurisdictions the purchaser (consumer) who takes delivery is *always* responsible for paying the tax - whether or not the retailer has collected it. Customers incorrectly interpret the absence of collection as meaning they don't have to pay tax.

The amount of "leakage" at the state level is tremendous (less so in Canada - our leakage is cross-border shopping).

Cheers -

Rob

I do the cross border thing all the time here locally, I've got about 10 different sales tax rates within 20 miles of home in my area of California depending on the county, city or even neighborhood I'm shopping in. While the purchaser is technically responsible it sure doesn't feel that way to the business playing tax collector, especially when audited.

 

[AlexThePalex]

Or in short, you guys need a single nation wide tax rate.

 

[Paul G]

Or in short, you guys need a single nation wide tax rate.

In exchange for dumping income tax I would agree. Not interested in the feds working both sides of my wallet.

 

[Paul G]

Or in short, you guys need a single nation wide tax rate.

Just noticed you're in the Netherlands, I don't know your background but consider your entire nation is smaller in size and population than the metro area of Los Angeles, hopefully you can extrapolate the complexity of national taxation in the US that properly services local needs for LA, NY, Miami, Seattle, and the multiple thousands of counties, major cities and tiny towns everywhere else. It doesn't work well.

Does the Netherlands, France, Germany and the rest of the EU members have the same tax rates? That would be a more accurate comparison. The best I could hope for here is a consistent rate within a State.

 

[Frank Pellow]

Or in short, you guys need a single nation wide tax rate.

I don't think that will ever happen. 

It would be much simpler for Canada to agree to a nation-wide sakes tax rate and we can't manage to do so. 

 

[tbellemare]

I moved from Houston to Holland. Holland is about the size of the greater Houston area. Texas is bigger than France. And then there are those other 49...

Tom

 

[fdengel]

In exchange for dumping income tax I would agree. Not interested in the feds working both sides of my wallet.

+1

Sometimes I think it would be best to eliminate sales tax in favor of just having income tax, but then I always manage to wake up and realize it should be the other way around.  That being said, given the different situations in the different states, I'd be all for the states collecting ALL of the sales tax, dumping income tax, and let the states handle "forwarding" the correct amount to the feds.

Regardless, as things currently stand, requiring companies to collect the sales tax out of state makes sense if it can be done in a way that does not create so much added work that it drives the companies out of business.  Some software or service that can determine how much tax should go where given a recipient's address would probably be a good start toward that... so there are approaches that could be made workable.

As a consumer, I would much rather have the company work out the details and save me the trouble of having to calculate the amounts and mail it in myself  ;D

Of course, I also want the company to still be there for my next purchase when it comes down the road, so I don't want to drive them out of business to accomplish that either... 

There is, of course, another approach that could be considered - just to throw this out to see what others might think.  Instead of any of the stores/retailers collecting the sales tax, why not have them simply send a statement to each customer at the end of the quarter/year/whatever, stating that purchases were made in X amount, categorized as food/non-food/whatever categories are needed based on the type of item so that sales tax can be calculated in one go.  A duplicate would be sent to the tax office local to the recipient's address.  That way the companies don't need to concern themselves with keeping track of all of the individual tax rates (just some map of city/zip code or whatever was needed to find the local official to send the copy to), but there are still statements helping the consumer to accurately determine how much they need to pay, and a record for the tax office to help keep things in check.

Maybe the tax offices could take care of forwarding their copy of the statement to the correct offices, so that an individual company would just send a list of "address X received $5 in food, $7 in non-food, ... purchases" or whatever, possibly electronically and tied in to existing software that is used to track these things, and the tax offices would sort out the rest?

Again, just an idea that might simplify things a bit without going overboard...

 

[Paul G]

In exchange for dumping income tax I would agree. Not interested in the feds working both sides of my wallet.

+1

Sometimes I think it would be best to eliminate sales tax in favor of just having income tax, but then I always manage to wake up and realize it should be the other way around.  That being said, given the different situations in the different states, I'd be all for the states collecting ALL of the sales tax, dumping income tax, and let the states handle "forwarding" the correct amount to the feds.

Regardless, as things currently stand, requiring companies to collect the sales tax out of state makes sense if it can be done in a way that does not create so much added work that it drives the companies out of business.  Some software or service that can determine how much tax should go where given a recipient's address would probably be a good start toward that... so there are approaches that could be made workable.

As a consumer, I would much rather have the company work out the details and save me the trouble of having to calculate the amounts and mail it in myself   ;D

Of course, I also want the company to still be there for my next purchase when it comes down the road, so I don't want to drive them out of business to accomplish that either... 

There is, of course, another approach that could be considered - just to throw this out to see what others might think.  Instead of any of the stores/retailers collecting the sales tax, why not have them simply send a statement to each customer at the end of the quarter/year/whatever, stating that purchases were made in X amount, categorized as food/non-food/whatever categories are needed based on the type of item so that sales tax can be calculated in one go.  A duplicate would be sent to the tax office local to the recipient's address.  That way the companies don't need to concern themselves with keeping track of all of the individual tax rates (just some map of city/zip code or whatever was needed to find the local official to send the copy to), but there are still statements helping the consumer to accurately determine how much they need to pay, and a record for the tax office to help keep things in check.

Maybe the tax offices could take care of forwarding their copy of the statement to the correct offices, so that an individual company would just send a list of "address X received $5 in food, $7 in non-food, ... purchases" or whatever, possibly electronically and tied in to existing software that is used to track these things, and the tax offices would sort out the rest?

Again, just an idea that might simplify things a bit without going overboard...

The big reason I would favor consumers directly paying sales tax to the govt is so they actually feel what it is like to write a big fat check each year and then ask, "what am I getting for this?" Of course many would be saying, "I owe what? I don't have the cash for that!"

 

[AlexThePalex]

Or in short, you guys need a single nation wide tax rate.

Just noticed you're in the Netherlands, I don't know your background but consider your entire nation is smaller in size and population than the metro area of Los Angeles, hopefully you can extrapolate the complexity of national taxation in the US that properly services local needs for LA, NY, Miami, Seattle, and the multiple thousands of counties, major cities and tiny towns everywhere else. It doesn't work well.

Seems like the current system and the changes that might be coming according to the article Bob linked to are also very complex. If we are to believe the article, then small retailers will be left with the burden. Seems to me it would be a lot less complex if you introduce one single sales tax rate for all states and let the gubbermint sort out how it's divided.  

Does the Netherlands, France, Germany and the rest of the EU members have the same tax rates? That would be a more accurate comparison. The best I could hope for here is a consistent rate within a State.

I don't think that would be an accurate comparison at all... we're not one country, I thought the USA was. At least that's what the Olympic games taught me.

 

[Paul G]

Or in short, you guys need a single nation wide tax rate.

Just noticed you're in the Netherlands, I don't know your background but consider your entire nation is smaller in size and population than the metro area of Los Angeles, hopefully you can extrapolate the complexity of national taxation in the US that properly services local needs for LA, NY, Miami, Seattle, and the multiple thousands of counties, major cities and tiny towns everywhere else. It doesn't work well.

Seems like the current system and the changes that might be coming according to the article Bob linked to are also very complex. If we are to believe the article, then small retailers will be left with the burden. Seems to me it would be a lot less complex if you introduce one single sales tax rate for all states and let the gubbermint sort out how it's divided.  

While I like the concept in theory to make my life a little simpler, govt already messes up how they spend our money, giving them more centralized autonomy is a fright. Local govt dealing with local govt issues with local accountability is preferable IMO, rather than the tax rate going up everywhere to accommodate the highest common denominator and the worst/most corrupt administrators. It's hard to get our federal legislators to agree on much, imagine if they were debating which street lights should be repaired in a country about the size of Europe.

Does the Netherlands, France, Germany and the rest of the EU members have the same tax rates? That would be a more accurate comparison. The best I could hope for here is a consistent rate within a State.

I don't think that would be an accurate comparison at all... we're not one country, I thought the USA was. At least that's what the Olympic games taught me.

That's an interesting comment, our Constitution speaks of the union of States, also known as the United States of America (USA). No mention of one country or nation throughout the entire document. Note the preamble:

"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."

However by the time of Lincoln he spoke of the USA being a nation (as noted in his Gettysburg Address) and we fought a civil war over States rights, specifically a States right to divorce itself from the Union. The Netherlands has embarked on a similar journey as a member of the European Union, slowly your national sovereignty is being chipped away much like has happened to States in the USA. The comparison is more accurate than it appears, it's just a matter of the timing. The political theater of the IOC is immaterial, especially considering how many olympians live and train in the US but compete under other flags.

 

[Brice Burrell]

.....When I first posted, I didn't realize that there was a $1 million threshold. However, now that I have thought about it, that threshold is pretty low. When you consider profit margins and salaries, that would categorize a pretty small company of only a couple employees. Any company operating near that threshold would be hit very hard by the extra overhead. I agree with eBay's stance that it should be increased to something larger than $1 million.

I bet a higher threshold is a long shot at best.  The bigger online retailers (with more political clout) would want a low threshold to level the playing field with a many competitors as possible.  Then you have the States that don't want to leave money on the table.