Sunday, April 19, 2009

Congress Finally Going After Online Shoppers In Earnest

Internet sales tax is coming. After several years of talk, it looks like Congress is finally setup to start going after online shoppers to pay sales tax on purchases.

JammieWearingFool says:

The government's insatiable thirst for tax revenue is about to hit online shoppers, who've largely managed to escape onerous state taxes by shopping at sites such as Amazon.com [and The Anime Corner Store]. So if you've been wondering what to do with that $13-a-week windfall from King Obama, just forward it to your state government.

The big question for us evey time this comes up is how are they going to administer collection of the taxes. Right now, most people are supposed to claim their out of state purchases on their state income tax return and pay 'use tax' on them, but few people actually do and this system is basically unenforceable, so the government wants to shift the burden for collecting online sales taxes onto the businesses that sell on the net. Oh Fun!

But there is huge problem with that. We already collect and distribute sales tax for orders shipped to customers in Virginia (because our warehouse is located in Virginia), of which there is a lot of paperwork, time, and expense involved. How can a business like us possibly hope to collect and distribute tax payments to 50 different state governments with different rules and tax rates. On top of that, many states even have local sales taxes broken down by city or county that have to be collected individually, so there are really maybe 1,000 different jurisdictions across the US that have different sales tax rates and rules. Pretty much impossible for us to do without some sort of centralized system, and that too is a quandary because the Federal Government has no authority to collect taxes for state governments.

To be honest, the libertarian part of me views online purchases as an exercise in civil disobedience to protest already ridiculously high taxation across the broad spectrum of federal, state, and local governments. Of course, most people would never think of it that way, and shop online instead for the deals and/or convenience. But retailer associations that have large brick and mortar memberships have been steadily lobbying for tax parity on online purchases. And of course, states are seeing declining real estate tax revenue and you KNOW they just can't cut spending accordingly, so they are looking to makup the difference anyway possible.

I would prefer to see them leave the system as it is and have each state deal with enforcing their own existing tax laws on their own citizens. That way citizens of each state can deal with the elected officials in their state and local governments directly, just as it's supposed to be. But now that the era of gargantuan federal government is upon us, I'm sure those concerns will eventually be thrown to the wind and we'll all end up paying more. A national online sales tax system is coming, like it or not.

As JammieWearingFool says:

In case you're wondering, and I know you are, this isn't just another Democrat tax scheme. It's bi-partisan confiscation of your money.

Yep, that's about right.

10 comments:

scottfrye said...

I don't see this going well. Another law created by people who don't realize how this will work or not work.

Richard J. said...

It's not the government doesn't understand that this kind of law would be extremely bad, it's just that they don't care. Online companies are small businesses without huge labor unions to get tribute from so, of course, they really don't care about you.

The government just wants more money so Congress can vote themselves more pay raises and play around like the modern day aristocracy they are.

All we can hope is that there just enough sane people left to block it. (I wonder how all the Tea Party detractors will feel now?)

Robert said...

It's funny how taxes work. We just got our 2009 property tax bill from Frederick County for the warehouse in Winchester.

This year's bill is $2,807.55.

In 2005, the bill was $1,755.08.

But the 'assessed' valuation of the property has actually gone down a bit (about $20,000). What the county does is that every year as property values decline, they increase the tax rate in response, but how they can justify a 35% increase in 4 years I can't say. What the heck are they doing with the money? We certainly aren't getting any additional county services. I doubt police, fire, or teachers salaries have increased 35% in the past 4 years. In fact, I doubt they've increased at all. This is just one example of more than a dozen taxes and fees that we've seen increase significantly over the past 4 years here just at the state and county level. It now costs us $4,060 annually just to renew our county business license. That fee [tax] is based on a % of our gross [not net] revenue, so it's possible to run a business in Frederick county and have zero profit but still have to pay thousands in business license fees. And that does not include the corporate franchise tax (about the same amount) the state levies on us just for the privilege of being incorporated. It's absurd.

It seems like all the politicians know how to do is spend and waste. Our county officials might find a Tea Party happening outside the next county commission meeting if they keeps this up. Perhaps a little tar and feathering is in order. -_^

Richard J. said...

I sincerely hope the Tea Party movement will actually bring some order back but with many in the media dismissing it as a Republican or "crazy right-wing" thing, it's not getting the rational attention it deserves.

The government is wasting vast amounts of money. It's bi-partisan and it's insane. Not to mention that every time the government sticks another tentacle into something, they create dozens of buearucratic and administrative jobs that cost more and are demonstrably less efficient than the a private sector solution.

The government increases it's budget, wastes money, demands more from tax payers because they can use sticks with their police power if we don't give in, gives some people a tax free life as a carrot so they'll support the government and generally ignores basic economics in the interest of "doing what's right."

Robert, I feel for you. Before you even get to pay your employees, the government is taking your money, even though any sane economist will tell you that sending money through the capitalist economy works better. (The multiplier effect works.)

The way things are going, small businesses are just going to cease to exist in the future. (And big business will leave the country, because they can afford to outsource!)

Sorry to rant.

Starcade, now from Leviathan said...

Is any money really "your money" anymore? Seriously speaking?

Neko said...

But the "Chosen One" promised 95% of us wouldn't see our taxes go up...

ajlordnikon said...

As a Libertarian I won't even get in to the tax debacle. I have to wonder how this would affect RACS in that after shipping costs and the new tax, the cost of ordering is going to be well over what the costs would be going to Best Buy.

Personally, with tax, I can get my anime from BB now for about three bucks less a disc than from RACS, BUT, I prefer to give my money to Rob just to support a local small business.

Even if this bill still passes I would like to support and give my money over to RACS, however, thanks to Obama's big talk of alternative energy I recently lost my technical writing job at bp solar (who is packing up to move to China), it's getting harder and hard not to cut costs anywhere I can.

Peter in Japan said...

My two cents...
Living in Japan, there is a 5% sales tax, 'scuze me, consumption tax. It's rolled into every price, so a computer that costs 180,000 yen really costs [whatever 95% of 180 yen is]. Honestly, you never think about the tax and it's a good system for that reason. If they could somehow get to that point -- perhaps have a nationally mandated inner-state rate that was one number, which would be the rate everyone would pay, that would be good. Not good or easy to mess with, and no fun for any small business or for individual state tax offices trying to keep track of it all (how the hell would they audit you?).

In a way, it's a shame America has the state vs. national government thing so deeply engrained in its history. Sometimes a little top-down thinking, which happens all the time in Japan, is good for the country, like the 5% sales tax that's rolled into every single thing, and thus is not ever thought about by anyone.

/my two cents. Feel free to acativate flame throwers.

TJ said...

Normally I have only minor issues with the government on what they do. Yes I disagree but I see it as a situation of "made your bed, now lay in it." when it comes to elections.

But this is just ridiculous. I can't actually see this going well at all. Even if they somehow manage to generate a central or compact way of doing this it will still be so complex that some businesses might flounder and start to fall because fewer people see the benefit. Every time I purchased online it was not a 100% chance to avoid the taxes as much as to get something harder to obtain in a small town but my God why should I have to pay three times for something?

And don't even get me started on property tax. I manage my companies books and the 4 warehouses we own went from average $2348.18 each to $3057.96 in just 3 years but their values dropped close to 20%.

Griffin said...

I'm actually OK with enforcing sales tax on online purchases, but I agree that applying the purchaser's home sales tax would be insanely complicated. (And, of course, it would be harder for small businesses to deal with than for huge corporations ... which most in Congress probably consider not a bug but a feature if they recognize it at all.) I'd rather just have the merchant charge sales tax for where the merchant is based, which makes more sense to me, and has the additional salutary effect of rewarding business-friendly states more than the others.