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S.743 - Marketplace Fairness Act of 2013
Apparently, there is an exemption for those businesses that don't have sales over a certain threshold, but I still don't understand how states can enact tax on interstate sales. Just curious if there is other thought on this out there.
I thought part of the rule was along the lines of if the merchant you are purchasing your item from has a brick and mortar location in your state then they can (must?) collect the sales tax for the transaction - assuming the state has a sales tax of course.
Ah, ok. The other thing I'm not clear on then, is does the state where the seller is located get the tax or the state where the buyer is located get it?
Knowing that government has never found a tax it didn't like- I bet the answer to this is "Yes".
How is this going to work for international purchases?
Ah, ok. The other thing I'm not clear on then, is does the state where the seller is located get the tax or the state where the buyer is located get it?
It the state where the buyer is...I believe...as you file it on your State tax form. You also use your state sale tax rate to calculate what you owe. The seller has no responsibilty to pay this tax at all.
Mmmm I often wonder how it would effect internet sells if they did enforce this law.
Ah, ok. The other thing I'm not clear on then, is does the state where the seller is located get the tax or the state where the buyer is located get it?Knowing that government has never found a tax it didn't like- I bet the answer to this is "Yes".
And you would be wrong. It is only the buyer's state that must collect sales tax, because that is considered the point of sale.
Yes... sales tax is the entire point of selling to the government.
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Actually, by my understanding (and cursory reading) this will require companies who do more than $1M in sales per year online to track the sales tax based off of the sales tax rates for every state and locality (for those areas that have a local sales tax) and remit tax payment to every state's tax authority and will subject these businesses to potential audits by states within which they have no physical presence.
Currently a business is required to charge tax on sales within any state they have a physical presence. This can mean a brick and mortar store, a corporate office, warehousing, etc.
Not sure this is actually a good thing as far as relatively small online businesses goes (i.e. - those businesses which barely exceed $1M annually in online sales).
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It's a good idea tax policy-wise.
All other things being equal Consumer A and Consumer B should be taxed the same amount if they live in the same state, even if one shops online and the other shops locally.
Likewise, by not charging (or being unable to collect) sales tax on internet purchases, the tax system is effectively subsidizing (and encouraging people to use) the online shopping industry / out of state purchases.
It's fine if normal market forces make online shopping cheaper but there is no reason to hand internet retailers a subsidy unavailable to brick and mortar stores.
Now the practical side of things (collecting and forwarding sales tax all around the country) could be an issue.
Example 1:
Retailer is out of state. I live in Delaware without sales tax. I buy an item and it ships to my place in DE. No sales tax is charged.
Example 2:
Retailer is out of state. I live in Pennsylvania with 6% (I think) sales tax. I buy an item and it ships to my place in PA. 6% sales tax is charged to me. Retailer remits my tax to PA.
Example 3:
Retailer is out of state. I live in PA but am in DE and buy a virtual product for download. Do I pay the 6% PA sales tax because I'm a resident even if I didn't ship anything there? Does the tax not apply to digital purchases?
If I am not mistaken it is entirely based on where you live, not where you physically ARE at the time of purchase.
I think so too. I'm pretty sure there are already laws on the books for physical purchases out of state that are brought accross state lines. FOr instance, if you buy a car out of state, I believe you still need to pay your state's sales tax. The dealer doesn't collect it, but it is your responcibility to.
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I've read that this requires the states to provide software that will handle the tax calculations, given the buyer's address, for the business on a state by state basis, and that each state must provide a single remittance address for all the taxes collected for that state to make the burden on the retailers a little smaller.
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So, wait, am I supposed to keep the receipts for every item I buy online, and then compile them when I do my taxes and declare the values and then calculate how much sales tax would be owed and pay that? I'd be lucky to remember half the stuff, and I don't even know what the sales tax would be on different items from different places. And do shipping costs count towards sales tax, or just the item costs? What about gift cards and such -- do I pay the tax, or does the person buying the gift card?
This has got to be the most ass-backward way of handling this that anyone could possibly have come up with.
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They will have to maintain a listing of over 9000 different state/county/city tax rates. Some of this will be mitigated by using an established 3rd party for order processing. But if the shopping cart is a custom solution, they will be looking at maintaining this in house. This is not exactly simple.
When talking about a small company with just over $1M in sales, maintaining this listing to ensure compliance will be an added burden, as will the potential of facing audits from every state.
The large online marketers are one thing (i.e. - Amazon), but small business will take a hit to their bottom lines (not huge, but a hit none the less) in order to deal with this.
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The real problem with this is that it would require retailers to handle all sorts of bizzare sales tax rules. For example, did you know that in Massachusetts, shoes are not taxed -- unless they cost more than $175.00, in which case it's not a shoe, it's a "luxury item", and is taxed at 6.25%. But only by the amount by which it exceeds $175! Unless it happens to be August 11th or 12th, 2013, in which case it's a "Sales Tax Holiday" and no tax should be charged at all.
Amazon and the other really big players might be able to keep it all straight, but I can't see how a business that makes $1,000,000.01 in online sales would have the resources to figure out all the crazy tax laws in *every state!*
</rant>
Personaly the simplest way to handle this is to charge the sell tax from where the seller is. I mean if I travel to New York and buy something than I pay New York sells tax...I don't than have to pay NJ sales tax. Just because I am doing it via mail or the internet should not change a thing.
Or a better idea would be just can the whole sales tax thing and finding a another means of raising revenue for the goverment...as it evidently causes issues between the states but getting rid of a tax is like 'stealing' money from the goverment.
They will have to maintain a listing of over 9000 different state/county/city tax rates.
Actually as far as I can tell from reading the linked Act this burden is not placed on businesses. States which want to take advantage of the Act must:
Provide a uniform sales and use tax base among the State and the local taxing jurisdictions within the State pursuant to paragraph (1).
and also must provide:
software free of charge for remote sellers that calculates sales and use taxes due on each transaction at the time the transaction is completed, that files sales and use tax returns, and that is updated to reflect rate changes as described in sub-paragraph (H)
I'm not exactly sure whether the first quote means what I think it means, but the second one seems to fairly unambiguously falsify your statement. The state will be responsible for the lists and math and crap.
Simplifications required of states that want to take advantage of this Act start on page 3 line 12 of the linked document.
In addition, the state must:
Relieve remote sellers and certified software providers from liability to the State or locality for incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of incorrect information or software provided by the State.
Actually, I think you're supposed to pay sales tax even when you buy things elsewhere. At least for big ticket items that can be tracked. Again, no one does.
Yeah you might be right. To registrate a car in NJ you have to pay the sales tax...or show proof that you paid Nj sales tax on it. I did not think of that till now.
And that may not be as simple as you might think. Where is that store on the internet? Where it's incorporated? Where the corporate headquarters are? Where the server that handles the transaction is? Where the warehouse that the item is shipped from is?
Some of those will differ from transaction to transaction or may not be known at the time of sale. Others are easy to manipulate: file some papers and poof, you're located in no-tax state.I'd love to drop sales taxes, since they're generally pretty regressive. The alternative is probably higher property tax rates and income tax rates, which have their own problems and are even less likely to happen in the current political environment.
Of course, a national sales tax wouldn't have the same problems as all the different state and local ones since it would be uniform, but doesn't solve the problem of funding state and local budgets.
Yeah...though a simple way is to make where the bussiness head quarters are. And yes there would be a way to manipulate the system...but whatever ways you come up with there will be ways to manipulate it.
This is one of the few times where I do think the federal goverment has to step in...it is their responsibilty to regulate interstate trade...which this is defintly a case of that.
This is one of the few times where I do think the federal goverment has to step in...it is their responsibilty to regulate interstate trade...which this is defintly a case of that.But how can they step in? Forbid it? Levy their own sales tax and then distribute it, giving the federal government even more control over state & local budgets? Define a uniform rate, but let the states collect it, still screwing up state & local budgets?
I don't really see a good way to handle this.
Well there is a need for regulation and probably over see it. By regulation I mean who gets the taxes...how those taxes are collected...etc. The problem is I can't think of way because I just generally find the idea of sale tax to...stupid.
Getting rid of it and raising other taxes I think in the long run would be the best solution. And I don't think raising property tax and getting rid of sales tax would be as unpopular as you believe...or raising incometax even. As long as you are making it clear that you are getting rid of sales tax.
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If I am not mistaken it is entirely based on where you live, not where you physically ARE at the time of purchase.
I was on temporary duty (about 8 months) in Kansas a few years ago.
I'm a resident of Alaska. All my credit cards have an Alaska billing address. My bank is in Alaska. I lived on a military reservation (FT Leavenworth; federal property).
Orders from Amazon.com, payed for with a credit card issued by an Alaska bank and with an Alaska billing address, shipped to federal property, were still subject to Kansas sales tax.
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They will have to maintain a listing of over 9000 different state/county/city tax rates.Actually as far as I can tell from reading the linked Act this burden is not placed on businesses. States which want to take advantage of the Act must:
Provide a uniform sales and use tax base among the State and the local taxing jurisdictions within the State pursuant to paragraph (1).and also must provide:
software free of charge for remote sellers that calculates sales and use taxes due on each transaction at the time the transaction is completed, that files sales and use tax returns, and that is updated to reflect rate changes as described in sub-paragraph (H)I'm not exactly sure whether the first quote means what I think it means, but the second one seems to fairly unambiguously falsify your statement. The state will be responsible for the lists and math and crap.
Simplifications required of states that want to take advantage of this Act start on page 3 line 12 of the linked document.
In addition, the state must:
Relieve remote sellers and certified software providers from liability to the State or locality for incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of incorrect information or software provided by the State.
I stand corrected.
However, if one is running with a custom shopping cart solution, how exactly will this free software get integrated with the shopping cart? For that matter, will integrations be developed for ALL shopping cart solutions that are out there?
Or will the cost of having the free federally required software play nicely with whatever shopping cart solution you are running with fall on your shoulders to code/pay to have developed? I would assume that commercially available shopping cart solutions would implement their own integrations (which hopefully would not end up breaking any customization you did or paid to have done ... but in all likelihood would).
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However, if one is running with a custom shopping cart solution, how exactly will this free software get integrated with the shopping cart? For that matter, will integrations be developed for ALL shopping cart solutions that are out there?
Or will the cost of having the free federally required software play nicely with whatever shopping cart solution you are running with fall on your shoulders to code/pay to have developed? I would assume that commercially available shopping cart solutions would implement their own integrations (which hopefully would...
Not to mention that each state will probably end up with different software. Now you don't just have to integrate with one piece of software, you have to play nice with 50 of them! (Well, okay, really it would only be 45 (and probably less than that because some states will most likely end up using a common system), but still, you get the idea...)
They will have to maintain a listing of over 9000 different state/county/city tax rates.Actually as far as I can tell from reading the linked Act this burden is not placed on businesses. States which want to take advantage of the Act must:
Provide a uniform sales and use tax base among the State and the local taxing jurisdictions within the State pursuant to paragraph (1).and also must provide:
software free of charge for remote sellers that calculates sales and use taxes due on each transaction at the time the transaction is completed, that files sales and use tax returns, and that is updated to reflect rate changes as described in sub-paragraph (H)I'm not exactly sure whether the first quote means what I think it means, but the second one seems to fairly unambiguously falsify your statement. The state will be responsible for the lists and math and crap.
Simplifications required of states that want to take advantage of this Act start on page 3 line 12 of the linked document.
In addition, the state must:
Relieve remote sellers and certified software providers from liability to the State or locality for incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of incorrect information or software provided by the State.I stand corrected.
However, if one is running with a custom shopping cart solution, how exactly will this free software get integrated with the shopping cart? For that matter, will integrations be developed for ALL shopping cart solutions that are out there?
Or will the cost of having the free federally required software play nicely with whatever shopping cart solution you are running with fall on your shoulders to code/pay to have developed? I would assume that commercially available shopping cart solutions would implement their own integrations (which hopefully would...
You set up a module that takes the customer information, most likely zip code, submits it to a central database and returns the specific tax rate and governmental bodies owed. You document the standard format of the input and output of the module. People then download it and attach it to their code, and then deal with the tax exactly how they deal with tax now. Companies then probably need to add some information into their database to track how much is owed to each agency.
Seriously, this is a really easy coding problem.|
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Which could result in a violation of PCI compliance depending on how it is handled ... there are more moving parts than are immediately obvious.
Additionally, it would require more than simply zip code. As has been pointed out above, some states do have some truly wonked out tax code, so you could be looking at total item cost, item type (which would require online merchants to have products categorized according to each state's listing of taxable item types ... the terminology is not uniform between states I am sure), date of sale, etc.
Personaly the simplest way to handle this is to charge the sell tax from where the seller is. I mean if I travel to New York and buy something than I pay New York sells tax...I don't than have to pay NJ sales tax. Just because I am doing it via mail or the internet should not change a thing.
Or a better idea would be just can the whole sales tax thing and finding a another means of raising revenue for the goverment...as it evidently causes issues between the states but getting rid of a tax is like 'stealing' money from the goverment.
Actually, I think you're supposed to pay sales tax even when you buy things elsewhere. At least for big ticket items that can be tracked. Again, no one does.
And that may not be as simple as you might think. Where is that store on the internet? Where it's incorporated? Where the corporate headquarters are? Where the server that handles the transaction is? Where the warehouse that the item is shipped from is?
Some of those will differ from transaction to transaction or may not be known at the time of sale. Others are easy to manipulate: file some papers and poof, you're located in no-tax state.I'd love to drop sales taxes, since they're generally pretty regressive. The alternative is probably higher property tax rates and income tax rates, which have their own problems and are even less likely to happen in the current political environment.
Of course, a national sales tax wouldn't have the same problems as all the different state and local ones since it would be uniform, but doesn't solve the problem of funding state and local budgets.
This makes sense to me.
If you're going to start to have to pay sales tax everywhere online, I hope they have a way of making it easy for tax exempt organizations to prove their tax exempt status and keep it on file. Otherwise, ordering stuff online becomes a real pain, and yet it's the easiest way to get certain necessary supplies.
Which could result in a violation of PCI compliance depending on how it is handled ... there are more moving parts than are immediately obvious.
Additionally, it would require more than simply zip code. As has been pointed out above, some states do have some truly wonked out tax code, so you could be looking at total item cost, item type (which would require online merchants to have products categorized according to each state's listing of taxable item types ... the terminology is not uniform between states I am sure), date of sale, etc.
Which is why this bill includes language to force states to clean up their tax code laws for ease of use by the system.
Seriously, those aspects are trivial compared to what gets handled by companies and government every day. You are looking at a multi-year software development cycle to handle them, followed by an extensive vetting process. There will be kinks in the system initially that will need to be worked out. But this process is valuable and necessary as online purchasing becomes more standard.
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Amazon and the other really big players might be able to keep it all straight, but I can't see how a business that makes $1,000,000.01 in online sales would have the resources to figure out all the crazy tax laws in *every state!*
</rant>
3rd party software.
It won't take long for at least a few companies to start hawking solutions to small businesses.
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Force states to clean up their tax code law.
Sure. That will be the day.
Force states to clean up their tax code law.
Sure. That will be the day.
You would be suprized how much the incentive of "you can only collect tax if you follow these rules" will cause people to voluntarily follow those rules.
You have always had to pay sales tax on mail order purchases. State's just can't force a business without a business locus (or whatever the term is) to collect it for them. You're supposed to fess up when you file your state taxes. No one does though.
I'm not sure nobody does. In fact, I do pay taxes on internet purchases on my state taxes. I figure it's only a matter of time before leaving that field blank becomes an audit risk.
You have always had to pay sales tax on mail order purchases. State's just can't force a business without a business locus (or whatever the term is) to collect it for them. You're supposed to fess up when you file your state taxes. No one does though.I'm not sure nobody does. In fact, I do pay taxes on internet purchases on my state taxes. I figure it's only a matter of time before leaving that field blank becomes an audit risk.
I know tax act automatically assumes a value and then asks you if you want to change it.
*flips table*