PDA

View Full Version : Bad News 'Net Sales Tax Fight Returns


Mike Nomad
04-15-2011, 07:10 AM
http://www.raidersmerciless.com/images/cnet.png


Democratic senator wants Internet sales taxes




by Declan McCullagh - April 12, 2011 4:00 AM PDT

A Democratic senator is preparing to introduce legislation that aims to end the golden era of tax-free Internet shopping.

The proposal--expected to be made public soon after Tax Day (http://www.cnet.com/tax-guide/)--would rewrite the ground rules for Internet and mail order sales by eliminating the ability of Americans to shop at Web sites like Amazon.com and Overstock.com without paying state sales taxes.

http://i.i.com.com/cnwk.1d/i/tim/2011/04/12/GovernmentTaxes.jpg Dick Durbin of Illinois, the second most senior Senate Democrat, will introduce the bill after the Easter recess, a Democratic aide told CNET.

"Why should out-of-state companies that sell their products online have an unfair advantage over Main Street bricks-and-mortar businesses?" Durbin said in a speech in Collinsville, Ill., in February. "Out-of-state companies that aren't paying their fair share of taxes are sticking Illinois residents and businesses with the tab."

At the moment, Americans who shop over the Internet from out-of-state vendors aren't always required (http://news.cnet.com/Net-taxes-could-arrive-by-this-fall/2100-1028_3-6186193.html) to pay sales taxes at the time of purchase. Californians buying books from Amazon.com or cameras from Manhattan's B&H Photo, for example, won't pay the sales taxes at checkout time that they would if shopping at a local mall--which is what Durbin means by giving online retailers an "unfair advantage."

On the other hand, there are some 7,500 different taxing jurisdictions in the United States, each with a set of very precise rules describing what can and can't be taxed and at what rate. That makes it challenging terrain for retailers to navigate. Related links
• CNET's tax guide (http://www.cnet.com/tax-guide/)
• Taxes 2010: Four tax prep solutions compared (http://download.cnet.com/8301-2007_4-20033069-12.html)
• Amazon wins fight to keep customer records private (http://news.cnet.com/8301-31921_3-20020680-281.html)
In New Jersey, for instance, bottled water and cookies are exempt from sales tax (PDF) (http://www.streamlinedsalestax.org/uploads/downloads/State%20Compliance/New%20Jersey/2010/New%20Jersey%20Taxability%20Matrix_revised%2020%20 Aug%202010.pdf), but bottled soda and candy are taxable. In Rhode Island, buying a mink handbag is taxed, but a mink fur coat is not (PDF) (http://www.streamlinedsalestax.org/uploads/downloads/State%20Compliance/Rhode%20Island/2010/Rhode%20Island%20Taxability%20Matrix%202010.pdf).

Durbin's bill will be called the Main Street Fairness Act, which follows legislation (http://thomas.loc.gov/cgi-bin/bdquery/z?d111:h.r.05660:) introduced last July in the House of Representatives bearing the same name. A possible co-sponsor is Sen. Mike Enzi, a Wyoming Republican who backed a similar proposal before (http://news.cnet.com/2100-1028_3-6186193.html) and did not respond to a request for comment. (See related update below.)

Making matters more difficult for the pro-tax forces is the decision (http://www.cbsnews.com/stories/2010/03/04/politics/main6268618.shtml) by Rep. William Delahunt, a Massachusetts Democrat, not to run for reelection last year. Delahunt was probably Congress' most enthusiastic proponent (http://news.cnet.com/8301-13578_3-20009603-38.html) of Internet sales taxes, and it's not clear a Republican-controlled House will be as eager to embrace the idea.

One early indication: Rep. Dan Lungren, a California Republican, introduced legislation (http://thomas.loc.gov/cgi-bin/bdquery/z?d112:h.res.00095:) in February saying that allowing states to levy "onerous and burdensome sales tax collecting schemes on Internet-enabled small businesses that do not even reside in their state would adversely impact hundreds of thousands of jobs." Former GOP presidential candidate Ron Paul (http://www.ronpaul.com/) is one of the sponsors.
The Direct Marketing Association (http://www.the-dma.org/), which sued (http://www.the-dma.org/cgi/disppressrelease?article=1426+++++) Colorado last year to block a state tax law from taking effect, is preparing to rally opposition to Durbin's legislation.

"You're just giving the states a blank check to make changes without any congressional oversight," says Jerry Cerasale (http://www.the-dma.org/aboutdma/leadershipteam.shtml), the DMA's senior vice president for government affairs. "We oppose that...We think that's abrogating the authority of Congress."

In response to complexity concerns, the pro-tax forces have offered a proposal that they hope Congress can be persuaded to adopt. The concept is called the Streamlined Sales Tax Agreement (http://www.streamlinedsalestax.org/), which was invented in 2002 by state tax officials hoping to straighten out some of sales tax laws' most notorious convolutions.

Since then, some 24 states have signed on, either wholly or partially, to the agreement, meaning they have agreed to simplify their tax codes and make them uniform. If enough states participate, proponents believe it will ease concerns about complexity and make it easier to convince Congress to make sales collection mandatory for out-of-state retailers.

Paul Misener, vice president of public policy for Amazon, says his employer isn't necessarily opposed to such legislation--as long as it's crafted very carefully. "We've long supported a truly simple, nationwide sales tax system, evenhandedly applied," he says.

The current legal and political landscape was shaped by a 1992 case called Quill v. North Dakota (http://www.law.cornell.edu/supct/html/91-0194.ZO.html), in which the U.S. Supreme Court ruled: "Congress is now free to decide whether, when, and to what extent the states may burden interstate mail order concerns with a duty to collect use taxes."

Under the Quill ruling, out-of-state retailers generally don't have to collect taxes. One exception to that rule is a legal concept called "nexus," which means a company can be forced to collect sales taxes if it has a sufficient business presence, which is why Amazon doesn't have an office in California. (Another exception is the sale of cigarettes, which is covered by the Jenkins Act.)

An important caveat is that under existing law, online purchases from sites like Amazon and eBay only seem to arrive tax-free. Legally, however, purchasers are required to pay their own state's sales tax rate--the concept is called a "use tax"--and then voluntarily report the amount owed at tax time. Few do.

Support for Durbin's forthcoming legislation is likely to come from the Alliance for Main Street Fairness (http://www.standwithmainstreet.com/) and like-minded companies including Wal-Mart and Best Buy.

"Big box stores love to mobilize smaller booksellers to complain about competing with Amazon," says Steve DelBianco (http://www.netchoice.org/about/netchoice-staff/), executive director of the NetChoice coalition (http://www.netchoice.org/), which counts eBay, Overstock.com, and Yahoo as members. "The irony is that those small booksellers have been clobbered by big box stores. The Internet's their friend."

Update 10:30 a.m. PT: I've heard back from Sen. Mike Enzi's office. It sent me e-mail this morning saying: "Senator Enzi plans to co-sponsor the Main Street Fairness bill with Senator Durbin. As far as a timeline or drafts, you'll have to check with Senator Durbin's office."

SOURCE (http://news.cnet.com/8301-31921_3-20052999-281.html?tag=topTechContentWrap;mostRead)

Mike Nomad
05-26-2011, 08:41 AM
http://www.raidersmerciless.com/images/ars.png


How will states tax Internet downloads?
Congress may decide



http://static.arstechnica.net/assets/2011/05/tax_ars-thumb-640xauto-22055.jpg

By Matthew Lasar | Published about 22 hours ago

Here's an interesting conundrum, posed by Representative Dennis Ross (http://dennisross.house.gov/) (R-FL), at a House Judiciary subcommittee (http://judiciary.house.gov/hearings/hear_05232011.html) hearing held on Monday:

"Imagine you are sitting in Dulles airport in Virginia, waiting for a flight back to Florida," Ross began in his opening remarks. "You download a music file from Apple, which is headquartered in California. The music is sent to you via a server in Oklahoma."

Which of these states should be allowed to tax the sale?

Without a "clear national rule," he warned at the hearing, "all four states may attempt to tax the transaction."

And so Congress is considering one such national standard: HR 1860 (http://thomas.loc.gov/cgi-bin/query/z?c112:H.R.1860:), the Digital Goods and Services Tax Fairness Act of 2011. Representative Lamar Smith (R-TX) submitted the bill to the Judiciary committee two weeks ago. A similar law (http://thomas.loc.gov/cgi-bin/bdquery/z?d112:SN00971:) sponsored by Ron Wyden (D-OR) awaits consideration in the Senate.

Multiple or discriminatory

The crux of the legislation centers around this sentence: "No State or local jurisdiction shall impose multiple or discriminatory taxes on or with respect to the sale or use of digital goods or digital services."

The bill defines a "discriminatory tax" as a tax imposed by a State or local jurisdiction at a higher rate than "is generally imposed on or with respect to the sale or use of tangible personal property or of similar services that are not provided electronically."

A "multiple tax" is defined as one in which that State or locality "gives no credit with respect to a tax that was previously paid on or with respect to the sale or use of such digital good or digital service to another State or local jurisdiction."

Then come more specific limits on taxation. Any tax on the sale of digital goods and services can only be imposed on the State and its localities "whose territorial limits encompass the customer's tax address." This is understood as the address that the customer offered and which the seller received in good faith.

This legislation is strongly supported by the Download Fairness Coalition (http://www.downloadfairness.com/about/), which, not coincidentally, describes itself as is "a partnership of businesses, associations, and consumers who have joined together to prevent multiple and discriminatory taxation of digital goods."

The Coalition includes Apple, Time Warner Cable, Comcast, Verizon, and, most notably, Amazon. The last mentioned company has been famously at odds with various states over taxes for years.

The Supreme Court's 1992 Quill v. North Dakota decision stipulated that states can't compel retailers to collect sales taxes for buyers unless the company has some kind of brick-and-mortar residence in the state. But this hasn't resolved everything. For example, Amazon pulled the plug (http://arstechnica.com/tech-policy/news/2010/03/amazon-kills-affiliate-program-in-colorado-thanks-to-taxes.ars) on its affiliate program in Colorado after the state passed a law requiring the online company to collect sales taxes on Amazons' Colorado affiliates. These partners are physically based on those states, Colorado's logic went, and post links on their own sites to Amazon products, thus earning a share of the sale.

All of the benefits

A similar drama took place between Amazon and Illinois. (http://arstechnica.com/tech-policy/news/2011/01/hell-no-we-wont-go-out-of-our-way-to-collect-sales-taxes.ars) And last we checked the company was suing North Carolina (http://arstechnica.com/tech-policy/news/2010/04/taxes-privacy-at-center-of-amazon-tiff-with-north-carolina.ars) for trying to make the web retailer fork over the names of Tar Heel state buyers in a bid to find out who hasn't been paying their sales taxes (perhaps quite a few miscreants).

So no doubt the hearing testimony (http://judiciary.house.gov/hearings/pdf/Atkinson05232011.pdf) of Robert D. Atkinson of the Information Technology and Innovation Foundation pleased these Fairness Coalition members. Atkinson supports the law. According to his research, over 20 states tax digital goods. Of these, 13 have enacted laws designed to place specific tithes on digital items and services. These include Indiana, Kentucky, Mississippi, Nebraska, New Jersey, North Carolina, South Dakota, Tennessee, Utah, Vermont, Washington, Wisconsin, and Wyoming.

"Taxing digital goods increases the cost of online commerce and decreases the value of the Internet economy in the United States," Atkinson argued, measuring that portion of the economy at around $300 billion annually, or about two percent of the US gross domestic product.

Multiple taxes will inhibit a market that is delivering products like digital books at much cheaper prices than their hardback equivalents, he warned: "When states tax digital goods, they receive all of the financial benefit of the tax, but, because of network externalities, the nation as a whole suffers the net social cost of more expensive digital content and services."

Equal praise came from the testimony of James R. Eads (http://judiciary.house.gov/hearings/pdf/Eads05232011.pdf), Public Affairs Director of the Ryan tax services company, who argued that it would simply taxation questions for cities, counties, and states.

"This legislation sets forth the framework needed to ensure that state & local jurisdictions wishing to tax digital commerce can do so with certainty," Eads argued, "by clearly identifying which jurisdiction is entitled to tax such transactions and precluding any other jurisdictions from claiming the right to tax the same transaction."

Making things worse?

Not everybody at the hearing supported HR 1860. In his favorable testimony, Atkinson observed that the bill doesn't change Quill. If it were passed, out-of-state online providers still wouldn't have to collect sales taxes from their customers.

It is in this context that Russ Brubaker, Tax Policy Adviser to the Washington Department of Revenue, (http://dor.wa.gov/Content/Home/Default.aspx) argued (http://judiciary.house.gov/hearings/pdf/Brubaker05232011.pdf) that the legislation would continue to give multistate operations a big ongoing advantage over local businesses: Sellers who have a physical presence in a state (traditional retail sellers) will have to continue to collect or pay tax on sales of digital goods and services to customers in that state, as they do now. Multi-state and Internet sellers who do not maintain a physical presence in a state and who can deliver the digital good or service from a 'remote location' (electronically) can avoid paying or collecting sales taxes already today. This bill further ensures that sales made by these business cannot, in many instances, be taxed in the state where the sale originates, that is, where the seller is located. As a result, traditional "Main Street" could be at a significantly worse competitive disadvantage than they are today compared to Internet and other types or remote sellers if these sellers structure their operations to avoid tax.
The law "will inevitably result in expensive open-ended litigation that will prevent state tax collections for years and prevent authoritative guidance for businesses on their tax obligations," Brubaker warned.

According to the Thomas Congressional site, HR 1860 is in the Judiciary Committee for consideration. Wyden's equivalent is in the Senate Committee for Finance (http://thomas.loc.gov/cgi-bin/bdquery/z?d112:SN00971:@@@C).

SOURCE (http://arstechnica.com/telecom/news/2011/05/how-will-states-tax-internet-downloads-congress-may-decide.ars)

Mike Nomad
11-10-2011, 07:55 AM
http://www.raidersmerciless.com/images/cnet.png



Senate Bill Reignites Internet Sales Tax Debate


by Declan McCullagh - November 9, 2011 9:33 AM PST


A Senate bill introduced today has reignited a long-simmering debate over whether Americans should be required to pay Internet sales taxes when they go shopping online.

The legislation, which CNET reported on last week (http://news.cnet.com/8301-31921_3-20128803-281/republican-senators-push-for-internet-sales-taxes/), would allow states to force Amazon.com, Overstock.com, Blue Nile, and other out-of-state online retailers to collect sales taxes.
Illinois Democrat Dick Durbin (center) says new
Internet tax bill will "level the playing field for local
main street businesses." (Credit: U.S. Senate)

http://i.i.com.com/cnwk.1d/i/tim/2011/11/09/durbin2_270x192.jpg
It was introduced by Sens. Mike Enzi (R-Wyo.), Lamar Alexander (R-Tenn.), and Dick Durbin (D-Ill.) and is backed by Wal-Mart, Best Buy, Home Depot, and other companies that have stores in nearly every state and are currently required to collect sales taxes in both their physical and virtual storefronts.

"This legislation would give states the ability to close the online sales-tax loophole," Alexander said today.

The justification for their bill is a reprise of arguments that state tax collectors have made for at least a decade (http://news.cnet.com/States-push-to-tax-Net-shopping/2100-1028_3-6060450.html): they claim that online retailers that don't collect taxes are unreasonably depriving states of revenue, and that they enjoy an unfair competitive advantage over local retailers that must collect taxes at checkout time.

On the other hand, a 1992 Supreme Court ruling (http://www.law.cornell.edu/supct/html/91-0194.ZO.html) says that, in general, retailers currently can't be forced to collect sales tax on out-of-state shipments unless they have offices in those states. And with over 7,500 taxing jurisdictions, each with its own rules and ability to conduct audits, compliance with each is not a trivial task.

An earlier version of the legislation obtained by CNET exempted (http://news.cnet.com/8301-31921_3-57317335-281/ebay-prepares-for-new-fight-over-internet-sales-taxes/) businesses that had "gross annual receipts" not exceeding $500,000.

That $500,000 exemption didn't, however, mean Internet sales. If a golf store with $500,000 in revenue from a physical storefront started selling even a small number of golf clubs on eBay, the owner would have had to begin collecting taxes for dozens of states and be subject to audits from each one as well. (In addition, assuming a profit margin of perhaps 8.3 percent (http://www.fool.com/investing/value/2006/03/01/the-profit-margin-paradigm.aspx), that golf store would make only $41,500 a year but still be required to collect.)

The final version (PDF (http://enzi.senate.gov/uploads/marketplacebill.pdf)) of the bill introduced today has changed the language to "gross annual receipts in total remote sales" that exceed $500,000.

That's not enough to mollify opponents of the bill. "A small business doing $500,000 in remote state sales is still a very, very small business," says Steve DelBianco of the NetChoice coalition (http://www.netchoice.org/), whose members include eBay, Overstock.com, and Yahoo.

The U.S. Small Business Administration sets a far higher cutoff for small businesses. An SBA table (http://www.sba.gov/content/table-small-business-size-standards) defining retail categories says that "hobby, toy, and game stores," for instance, qualify as small businesses if they have under $25.5 million in annual sales. A U.S. Treasury Department report (PDF (http://www.treasury.gov/resource-center/tax-policy/tax-analysis/Documents/OTA-T2011-04-Small-Business-Methodology-Aug-8-2011.pdf)) from August suggests the cutoff should be $10 million in annual revenue.

Amazon.com, which cut a deal in September (http://news.cnet.com/8301-1023_3-20103588-93) to collect sales tax in California starting next fall, says it supports the Enzi-Alexander-Durbin bill, titled the Marketplace Fairness Act.

"Amazon strongly supports enactment of the Enzi-Durbin-Alexander bill and will work with Congress, retailers, and the states to get this bi-partisan legislation passed," says Paul Misener, vice president for global public policy.

But eBay, which says that the small businesses selling through its auction platform can't be expected to comply with audits from every state, doesn't. (The Marketplace Fairness Act does say that states have to undergo some tax simplification steps before they can require remote sellers to collect sales taxes.)

Tod Cohen, eBay's vice president for government relations, says: "This is another Internet sales tax bill that fails to protect small business retailers using the Internet and will unbalance the playing field between giant retailers and small business competitors."

Technically, of course, Americans in states with sales taxes are supposed to keep track of out-of-state purchases and cough up the necessary sales tax on April 15--the concept is known as a "use tax." But state tax collectors have long complained that in practice, that just doesn't happen, and that the money has remained in taxpayers' pocketbooks.

States are currently limited in their sales tax collection authority because of a 1992 U.S. Supreme Court decision in the Quill v. North Dakota (http://www.law.cornell.edu/supct/html/91-0194.ZO.html) case. It says retailers aren't required to collect sales taxes from customers who live in states where they don't have a physical presence, or "nexus." The justices did, however, make it clear that Congress could step in and change the rules.

That ruling came out the way it did in part because tax codes tend to be complex and vary among states and localities, with bewilderingly different tax rates associated with the same kind of product. In New Jersey, for instance, bottled water and cookies are exempt from sales tax (http://www.streamlinedsalestax.org/uploads/downloads/State%20Compliance/New%20Jersey/2010/New%20Jersey%20Taxability%20Matrix_revised%2020%20 Aug%202010.pdf), but bottled soda and candy are taxable. In Rhode Island, buying a mink handbag is taxed, but a mink fur coat is not (http://www.streamlinedsalestax.org/uploads/downloads/State%20Compliance/Rhode%20Island/2010/Rhode%20Island%20Taxability%20Matrix%202010.pdf).

SOURCE (http://news.cnet.com/8301-31921_3-57321515-281/senate-bill-reignites-internet-sales-tax-debate/?tag=mncol;editorPicks)

______________________________


Perhaps a review of which GIANT Corporations contributed to the campaign coffers of these Congressional Cretins?

Mike Nomad
11-30-2011, 08:16 AM
http://www.raidersmerciless.com/images/cnet.png



Internet sales tax fight returns to Congress


by Declan McCullagh November 29, 2011 11:19 PM PST

eBay is preparing to amplify its attack on a proposed law that would usher in sales taxes on Internet shopping, CNET has learned.

The online auctioneer plans to tell a congressional panel considering the legislation tomorrow that the measure would merely consolidate the market power of Amazon.com and the largest big box retailers while putting eBay's small sellers out of business.

Traditional retailers and Amazon have seen their
e-commerce share jump from 39 to 48 percent
in three years, according to this eBay graphic.
Click for larger image. (Credit: eBay)
http://i.i.com.com/cnwk.1d/i/tim/2011/11/29/ebay_270x205.png (http://i.i.com.com/cnwk.1d/i/tim/2011/11/29/ebay.png)
In fact, says Tod Cohen, eBay's deputy general counsel, online retailers with less than $10 million in sales--eBay sellers, in other words--have seen their share of electronic commerce fall from 31 percent in 2008 to 19 percent in 2010.

"It is the largest retailers that are growing," Cohen will tell a House of Representatives committee tomorrow, according to remarks obtained by CNET. "And not surprisingly, those giant retailers are lined up united in proposing a change in remote sales tax law."

Amazon.com did not respond to a request for comment. The Retail Industry Leaders Association, which counts representatives of Wal-Mart, Best Buy, and J.C. Penny as board members, has called (http://www.rila.org/governmentaffairs/federalissues/Pages/StreamlinedSalesTax1.aspx) new federal laws necessary because "brick-and-mortar retailers are required to collect sales taxes while many online and catalog retailers are not."

On the other hand, a 1992 Supreme Court ruling (http://www.law.cornell.edu/supct/html/91-0194.ZO.html) says that, in general, retailers currently can't be forced to collect sales tax on out-of-state shipments unless they have offices in those states. And with more than 7,500 taxing jurisdictions, each with its own rules and ability to conduct audits, compliance with each is is not a trivial task.

A House bill (H.R. 3179 (http://thomas.loc.gov/cgi-bin/query/z?c112:H.R.3179:)), which currently has 15 sponsors, lets state tax collectors force sales tax collection in some cases, assuming that states simplify their tax system. It exempts "small sellers" with under $1 million in total online revenue a year. (Cohen told CNET this evening that eBay would not oppose legislation with a far higher exemption.)

eBay rival Amazon.com has endorsed (http://www.businesswire.com/news/home/20111109006254/en/Amazon-Strongly-Supports-Enactment-Enzi-Durbin-Alexander-Federal-Online) a similar Senate bill that has an even lower exemption for small businesses that tops out at $500,000. CNET was the first to report (http://news.cnet.com/8301-31921_3-20128803-281) details of the Senate bill earlier this month.

Overstock.com's CEO Patrick Byrne is also scheduled to testify at tomorrow's House hearing. Byrne will say that, if the House bill had been law when his company launched in 1999, it would not have been able to survive and that it's nearly impossible to figure out the tax rates for the thousands of different jurisdictions, according to a source familiar with his testimony.

eBay's remarks represent an escalation in the war of words between it, Amazon.com, and big box retailers. An excerpt from Cohen's remarks: The largest retailer on the Internet, Amazon, is a business with a national network of facilities, and is growing fastest. The giant "Brick & Click" retailers are also growing their market share online. In short, while small business retailers are active online and are adopting technology, they are not winning the race under the status quo...

The face of retail has changed dramatically over the past four decades. At the heart of the story has been the expanding dominance of giant retailers at the expense of small business. Giants have grown more dominant in retail; small independent retailers have been pushed to the edges. To illustrate, big-box discount retailers accounted for 42 percent of total retail sales in 1987. As of July 2010, their market share had jumped to 87 percent... The retail giants make up 18 of the Top 25 retail websites today...
Technically, of course, Americans living in states with sales taxes are supposed to keep track of out-of-state purchases and cough up the necessary sales tax on April 15--the concept is known as a "use tax." But state tax collectors have long complained that in practice, that just doesn't happen, and that the money has remained in taxpayers' pocketbooks.

States are currently limited in their sales tax collection authority because of the 1992 U.S. Supreme Court decision in the Quill v. North Dakota case. The justices ruled that retailers aren't required to collect sales taxes from customers who live in states where they don't have a physical presence, or "nexus." They did, however, make it clear that Congress could step in and change the rules.

SOURCE (http://news.cnet.com/8301-31921_3-57333501-281/internet-sales-tax-fight-returns-to-congress/?tag=mncol;topStories)