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Internet Sales Tax Passed
app103:
Up until now, states could not force businesses in another state to collect their taxes for them. They could only force businesses within their own state to do so. In order for a state to be able to force a business in another state to collect their taxes, it would take an act of Congress.
Now let's go back to the days before the internet and online shopping to see what kind of effect those kinds of restrictions had...
Mail order: Anyone wanting to save some money and evade state sales taxes could buy from a catalog, from a business located outside their state, and not comply with their state's laws about reporting it and paying the taxes due. States could not force the out of state mail order business to collect their taxes for them. Every sale made through a mail order catalog for the purpose of tax evasion was a lost sale to a brick & mortar store.
More recently in the brick and mortar world: New Jersey does not tax clothing. At one time, residents of NYC had to pay over 8% sales tax on clothing purchases made within NYC. Christmas time and back to school shopping by residents of NYC meant a lot of shoppers crossing the river into NJ to save money by evading the sales tax in NYC. NYC businesses lost a lot of sales due to this rampant tax evasion and the fact that NY couldn't force NJ businesses to collect their taxes for them.
What made matters even worse was the fact that NJ set up enterprise zones within the state. For any town or city that qualified as an enterprise zone by having a higher than state average rate of unemployment, the sales tax collected on purchases made from business having over a certain number of employees, was reduced by 50%. This meant that shopping at those businesses was more attractive than shopping at a business that didn't have a bunch of employees.
Within the state it means that businesses within more well off towns lose business to inner city shopping centers. And locally within declared enterprise zones, small mom & pop businesses without any employees, lose business to the larger corporate chain stores.
And when you consider that one of those enterprise zones is right across the river from NYC, in Jersey City, and there is a HUGE mall there convenient to public transportation, it was very easy for NYC residents to evade not only the tax on clothing by shopping there, but on purchases that were also taxable in NJ, they only paid 3.5%.
There was nothing NYC could do about it. They couldn't force the shops at the malls in NJ to collect their taxes for them. So they responded by reducing and/or eliminating the tax on clothing during certain times of the year to give residents an incentive to shop locally instead of in NJ. Eventually they eliminated the sales tax on clothing items under $100. Of course didn't eliminate the problem with people crossing the river to buy expensive electronics, paying 3.5% NJ sales tax instead of over 8% in NYC.
Now, all of this would never have been an issue if people didn't evade taxes. If everyone actually submitted the tax due to their state on out of state purchases, there would have been much less incentive for them to shop out of state, through mail order catalogs, or even online. Or if states could force businesses in other states to collect their taxes for them, it would have eliminated the rampant tax evasion altogether.
Would all those shoppers have crossed the river into NJ to shop for their kid's school clothing if they were reporting the purchases to their state and paying the taxes due? Would they have crossed the river into NJ if NY could have forced NJ businesses to collect their taxes for them? Would people have made expensive out of state mail order purchases if they paid the taxes due on them? Would they have still ordered from the same mail order company if that company had been required to collect the tax due on their purchases?
Would there have been such rampant tax evasion if the states had a way of knowing if a resident had made a large out of state purchases that the taxes had not been collected on, and made a point of yanking them out of bed in the middle of the night and arresting them, charging them with tax evasion if they didn't report it within the required length of time?
So is the problem brick & mortar stores? Mail order catalogs? Internet businesses? Other states? Or the fact that up until now, states could not force businesses in other states to collect their taxes? Or is it the shoppers, themselves, not complying with the laws in their state and paying the taxes they are supposed to be paying?
Honestly, if you are pissed off that your state now has a way to stop you from evading taxes, the problem isn't the fact they can force you to comply with the law, the problem isn't Congress allowing them to do it, the problem is within your state...the tax laws themselves. And if you don't like how much your state charges in taxes and for what, take it up with your state's law makers and don't blame Congress for it, because it's your state that is the problem this time, not the federal government.
Go TP your state capitol, like we did in NJ in 1990, to protest almost $3 billion in tax increases that included taxing tons of previously exempt items, like toilet paper! We managed to get most of it repealed.
wraith808:
Honestly, if you are pissed off that your state now has a way to stop you from evading taxes, the problem isn't the fact they can force you to comply with the law, the problem isn't Congress allowing them to do it, the problem is within your state...the tax laws themselves. And if you don't like how much your state charges in taxes and for what, take it up with your state's law makers and don't blame Congress for it, because it's your state that is the problem this time, not the federal government.
-app103 (May 08, 2013, 01:30 PM)
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This is missing the point.
It's sort of like the whole patent fight. Is what they're doing with software and hardware patents legal? Is it legal to patent the shape of an iphone and sue samsung for it? Apparently so.
But is that legality best for the consumers and the economy or the businesses?
I think we can all answer that question.
And that's the point of this Act. It isn't to make things better for the consumers or the taxpayers or the economy. It's not even to make things better for the state, though that is a side effect. It's a result of lobby gone mad, and competition by legislation rather than competition on its own merits.
And this is shown by the exclusions clause. How much more revenue (if that was the point) could they get without such a generous exclusion? You could reduce it to $100,000, get a lot more evaded taxes, and not penalize Mrs. Housewife selling her children's old clothes on ebay to pay for the new clothes. But by removing that exclusion, Main Street would be penalized, as they would be hoisted by their own petard.
It is what it is, and it's not what's best for the consumers nor the economy.
It's trade regulation, not tax regulation. And any statement otherwise is either naive or willfully oblivious to the political environment that surrounds this decision.
Tinman57:
I'm curious what will be the next argument of those who are feeling the brunt of obsolescence.
-eleman (May 08, 2013, 01:39 AM)
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So everyone who raises the BS flag on this issue is "feeling the brunt of obsolescence?" That really sounds adolescent to me. Don't confuse obsolescence for knowledgeability that is mostly found in the seasoned....
Tinman57:
Survey: US residents oppose Internet sales tax
05.13.2013 2:03 PM
Sixty-one percent of U.S. residents surveyed by online postage vendor Endicia said they don't support the Marketplace Fairness Act, which would allow states with sales taxes to collect those taxes from large online retailers.
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http://lm.pcworld.com/t/3789873/5571255/362474/0/
Edvard:
Does selling from one state to another count as an export? Because if so, my son pointed out that this tax would be unconstitutional:
Article I, Section 9, Clause 5:
No Tax or Duty shall be laid on Articles exported from any State.
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