U.S. Ecommerce To Be Broadly Taxed?

fl!ptop writes "ZDnet has a story about U.S. Senators proposing sweeping changes to how Americans are taxed for online purchases. As proposed, businesses would be required to collect sales taxes and send them to the state the purchase was shipped to. As a small business owner that primarily sells via ecommerce, I am shuddering at the prospect of having to deal with government sales tax forms and coupon books for 30 or more states. Will I have to register with each state's tax department? As an ecommerce Web developer, I'm also wondering what implications this will have on maintaining code that calculates sales taxes, expecially in states like Ohio where they differ by county and municipality."

Re:Once again

[donnyspi]

E-commerce sales take away from brick-and-mortar sales, which are taxed. The gov't feels they are losing money.

Re:Nightmare

[AllahsAvatar]

It depends on how small they are.

FTFA: The legislation would apply only to businesses with more than $5 million in "gross remote taxable sales" each year.

Re:Should be reversed

[donnyspi]

NH has no sales tax :-)

Re:Once again

[EvilSS]

The reason is the states are loosing money on sales tax for online purchases. Now don't get me wrong, I like not having to pay taxes on my online purchases, but you have to understand the states point of view on it. They rely on taxes for revenue and a big part of it is sales tax for many states.

Too late

[dereference]

They've [streamlinedsalestax.org] already been there and done that [slashdot.org].

Re:A Republican? How shocking

[Anonymous Coward]

From TFA:

A related bill has been introduced by Sen. Byron Dorgan, a North Dakota Democrat

Good job reading the article, idiot.

Re:Once again

[COMON$]

Wow, you really need to restructure your understanding of the internet.

http://en.wikipedia.org/wiki/Dns_root_servers

Re:Once again

[metternich]

State Governemnets, (The ones that charge Sales taxes,) use the money to do things like fund schools, pave the roads, etc. It's not a user fee for the internet or e-commerce, but rather it's meant to pay for all government functions. Personally I think this is a good idea, (objections to Sales Taxes generally aside.) If you're going to tax sales as a way of funding public projects and programs, there's no reason to exempt ecommerce.

Re:Once again

[madman101]

but the gov't is a non-profit. Not a money making machine. Or at least it is not intended to be one

Have you ever heard of a government making a profit? Even if they ran a surplus, it would take several hundred years to wipe out the deficit they've already incurred!

Unconstitutional

[Guppy06]

"As proposed, businesses would be required to collect sales taxes and send them to the state the purchase was shipped to."

No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States(.)

Congress can let them tax ecommerce, but the proceeds can't go into state coffers.

Re:Once again

[doubledoh]

Yes, but the arguement is that the states do nothing to EARN a piece of that ecommerce money and have no right to tax it. Hell, I'd argue that the states do nothing to earn the money they tax on brick and morter stores either, but that's a debate for another day.

Re:Once again

[doubledoh]

The justification behind the law makes sense. There is no reason that customers of say, Amazon.com, should be mostly exempted from paying sales tax while customers of bestbuy.com or compusa.com have to do so for the exact same items.

Actually, there is a big reason. Best Buy and CompUSA have a physical presence in almost every single state and therefor must collect taxes for the states they exist in. Amazon only has a physical presence in 4 states (and they DO collect taxes from those 4 states). Best Buy and CompUSA a free to kill their physical stores and go with the online-only distribution model like Amazon.com, but they CHOOSE not too. Amazon.com most certainly should be exempt from paying sales taxes in states they are not even present in.

Re:but doesn't the constitution forbid the taxing

[Rotten168]

Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof.

Interstate tariffs are unconstitutional, but forcing states to obey other's tax laws is not.

Re:Once again

[DrShoe]

There are other problems to this as well, for instance in Texas there are Tax Free days. There are also City and County taxes to take into consideration, there are 74 counties alone here in Oklahoma. In Pennsylvania there are different taxes depending on the type of product purchased (some food, clothing and medicine doesn't get taxed).

The article does state that it would only require it for businesses that have over $5 million in gross taxable sales, which would eliminate the truely small businesses. The big problem would be the small businesses that have just over the $5 million minimum and that has a very narrow net profit. You would probably find a large portion of them that operate in good faith, but failed to collect the proper taxes for one reason or another and could be fined. With a narrow net profit and fines, could easily mean a downward spiral for that small business.

Any policy enacted in the United States should help promote small business, not make it more difficult to operate. Especially, since they accounted for 99.7 of the businesses in the U.S. in 2003 and they account for over Half of the employment in the US. Small Business Administration [sba.gov]

Re:Poster didnt read the article either.

[fl!ptop]

Of course, maybe my definition of small business is different than the posters.

according to the SBA [sba.gov], the threshold for 'nonstore retailers, electronic shopping' is $23M.

ps - i did read the article.

Re:Once again

[Overzeetop]

Yes, but what they don't say is that reporting will likely be for the current year, so if you grossed $1M last year, and you hit "critical mass" you may be subject to reporting/paying for the current year, but not know it until you cross then $5M in December.

Don't think this can happen? That's EXACTLY the way reporting for payroll taxes to the federal government. If you have less than $2500 in taxes due in a quarter, you may pay quarterly. Otherwise, you must pay monthly. Here's the catch: if, at the end of the quarter (or, just in the second month) you find that you've gone over the $2500 limit, you are retroactively charged penalty and interest for not filing monthly even if you were on track to owe less than $2500 that quarter. Not really very business friendly.

Anyway, it's worth noting that $5M in sales in extremely competitive industries will often only make $50,000 to $100,000 in profit in a year (1-2%). For a "small fee" of $500/quarter for tax updates, you've just cut into profits by 4%. All because states are too lazy to police their own laws.

tax calculation in the US

[Anonymous Coward]

Give up, run screaming. There are 50,000 tax jurisdictions in the US. Any given transaction can be taxed by 3-5 of them (state, county, city, optionally a second county, and a second city). You should record all 5 tax rates and amounts. Tax on shipping and tax on handling depend on the judisdiction. There are 30,000 different product classifications, each possibly with a different tax rate in each of the 50,000 jurisdictions. (In reality many rates are the same or zero, but you can't know). Furthermore the rates change all the time as the 50,000 tax jurisdictions pass regulations. Get Taxware or Vertex (the acknowledged leaders). We use Taxware and they send updates every month electronically.