Feds to tax internet sales to boost revenue

[Weatherman]

The days of buying online to avoid paying sales taxes may soon be over.

A bill is expected to be introduced to Congress this week that would force retailers like eBay and Amazon.com to start collecting sales taxes on behalf of states from people who shop online or through mail order.

http://www.nypost.com/seven/04192009/business/www_salestax_gov_165098.htm

[vinraith]

Amazon already does this. eBay is person-to-person sales, which have never been subject to sales tax as far as I know (no sales tax at yard sales etc).

[DontSayBanana]

Amazon already does this. eBay is person-to-person sales, which have never been subject to sales tax as far as I know (no sales tax at yard sales etc).

No sales tax because it's a good-faith assumption that you haven't made the $12K minimum sales for the year where sales tax becomes required (not sure if that's still the number, but I know sales below a minimum level aren't subject to sales tax). The listing fee would be subject to sales tax, but honestly, that's a drop in the bucket.

[vinraith]

Amazon already does this. eBay is person-to-person sales, which have never been subject to sales tax as far as I know (no sales tax at yard sales etc).

No sales tax because it's a good-faith assumption that you haven't made the $12K minimum sales for the year where sales tax becomes required (not sure if that's still the number, but I know sales below a minimum level aren't subject to sales tax). The listing fee would be subject to sales tax, but honestly, that's a drop in the bucket.

Ah, wasn't aware it was geared to the amount but that makes perfect sense.

[DontSayBanana]

The thing that surprises me is that I'd never heard this before about sales tax for online sales needing to be filed with income taxes. In fact, I've spoken to taxation representatives for several states who've said sales taxes are not collected on online sales for this reason (I'll use TX as the example for this because this is where I initially heard this):

Online sales are treated as sales by correspondence. If I were to travel to TX to buy something, I would pay TX sales tax. If a representative based in TX were to travel here to NJ to complete the sale, I would pay TX sales tax. If the representative were to travel here to pitch, but returned to TX before the transaction, sales tax would not be collected on that sale. The same goes for if that representative pitched it to me and made the sale over the phone. Those orders are not taxable because there is no transaction in the state where operations occur.

Now, a chink in this is that if I were to open a warehouse in TX, since business operations are being conducted in TX, TX residents would still have to pay me for TX sales tax since operations are then conducted in the state, even though the transactions are not taking place there.

The loophole is much older than online sales; it's why when you travel to DE, there's a huge billboard that says "Welcome to DE, the home of tax-free shopping."

[DGuller]

In NJ, you have pay the sales taxes on things you ordered out of state (and didn't pay taxes on).  TurboTax asks me how much crap I bought out of state every year.

As for the Feds starting to tax online sales, it sucks, but honestly, it has to be done.  The current system is an enormous subsidy for the online retailers, and local brick and mortar stores are royally and unfairly screwed by it.

[grumbler]

In NJ, you have pay the sales taxes on things you ordered out of state (and didn't pay taxes on).  TurboTax asks me how much crap I bought out of state every year. 

Many states have this; all of the ones in which I have filed income taxes (Michigan, California, and Virginia) have done so.

As for the Feds starting to tax online sales, it sucks, but honestly, it has to be done.  The current system is an enormous subsidy for the online retailers, and local brick and mortar stores are royally and unfairly screwed by it.

Reluctantly concur, and note that the states and localities themselves suffer, because they are losing not just the sales tax from the internet transaction, but the income and property taxes from the employees and businesses put out of work by the tax-free internet competition.

I think that there needs to be a lower limit on sales per online corporation that would require the collection of taxes, or else smaller outfits should just have to collect sales tax and send it to the federal government for distribution by some formula, because tracking the sales tax owed to fifty different states plus DC is far too difficult for the typical online retailer.

[Martinus]

They won't break even until they tax foreigners living abroad, as PDH is always saying.

[DontSayBanana]

Reluctantly concur, and note that the states and localities themselves suffer, because they are losing not just the sales tax from the internet transaction, but the income and property taxes from the employees and businesses put out of work by the tax-free internet competition.

I think that there needs to be a lower limit on sales per online corporation that would require the collection of taxes, or else smaller outfits should just have to collect sales tax and send it to the federal government for distribution by some formula, because tracking the sales tax owed to fifty different states plus DC is far too difficult for the typical online retailer.

Also agreed. I think the change should be that the sales tax is paid to the state where processing of the payment is handled, though. I have a hunch that you'll find the shortfall of in-state customers paying taxes is roughly even with the number of out-of-state customers who would be processing payments to online merchants within the state.

As far as peer-to-peer selling as on eBay, there's still that pesky minimum to contend with, but that's an easy enough revamp: put a usage cap on personal accounts that can operate tax-free, above which the user is forced to open a merchant account and sales tax is processed in the transaction.