Magid: Time For Uniform Online Sales Tax

CBS' Tech analyst Larry Magid Says Present E-Tail Sales Tax System Dysfunctional

(CBS)  At the risk of sounding like I oppose online commerce and support high taxes, I have to agree with New York Gov. Eliot Spitzer, who wants out-of-state e-tailers like Amazon.com to collect state sales tax on goods delivered to New York residents.

Paul Misener, Amazon's vice president of global public policy, called the New York proposal "a radical departure from anything that's being done anywhere in the country," according to the Associated Press.

Radical or not, its time has come. Yes, such a plan would cost me money - I'm a heavy user of Amazon and other e-tailing sites. But I can't think of any good reason why customers of online retailers should shop tax-free while people who spend their money locally have to pay sales tax.

Actually, it's more complicated than that. Online retailers that also have a physical presence in a state do have to collect sales tax. If you buy something from Sears.com, Walmart.com or Radio-Shack.com, you will pay California tax even if the item is shipped from an out-of-state warehouse because those companies have stores in California. But because Amazon.com doesn't have a brick-and-mortar presence in California, it's not obligated to collect sales taxes.

It can get even more absurd. While Californians, New Yorkers and residents of most other states don't have to pay sales tax on purchases from Amazon.com, people who live in Kansas, Kentucky, North Dakota or Washington are subject to tax. That's because Amazon has offices, warehouses or other facilities in those states. But if you buy from one of Amazon's associate merchants that does have a presence here, you might have to pay taxes after all.

It's starting to remind me of the complicated and ill-fated "snack tax" that required grocery stores to collect taxes on certain size packages of snack foods and not others.

By exempting out-of-state Internet retailers from collecting tax, the state is essentially discriminating in their favor, over businesses with a local presence which not only collect local and state taxes, but also pay local and state taxes themselves, hire local people who pay all sorts of taxes and also pay rent to local landlords who, in turn, pay property and income taxes that help support our schools and other services.

I love buying things online but I also love how local merchants add to the fabric of our communities. The business climate for independently owned local stores is tough enough. Why should they be forced to charge customers 8 percent more as a punishment for doing business in our communities and contributing to our local economy and job market?

California and New York taxpayers are supposed to pay sales tax on out-of-state Internet purchases, but the burden is on the taxpayer, not the online merchant. In both states, when you fill out your state return, you're asked to report and pay tax on out-of-state purchases, but tax authorities have no effective way to determine how much individuals really paid to out-of-state merchants. Under current law, it's a tax that's almost impossible to collect.

I can think of a few arguments in favor of the status quo. Some might say e-commerce is in its infancy and taxing online purchases would put an undue burden on this fragile new industry. An argument could also be made that we have to pay shipping when we order online, which is like a tax on Internet purchases. But local stores have to pay shipping charges on items that they stock and the cost of shipping to the store is reflected in the retail price. So, unless the government wants to offer tax credits for all shipping charges (an absurd idea), then this argument doesn't hold much water.

And please don't mistake sales tax for a "tax on the Internet." Sales tax on Internet purchases has nothing to do with taxing Internet access - something that Congress has consistently banned.

Fair is fair. If the cost of maintaining our schools, police and other vital services requires that we pay sales tax at favorite local stores, then we should also have to pay the same tax if we order from an out-of-state e-tailer.

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A syndicated technology columnist for over two decades, Larry Magid serves as on air Technology Analyst for CBS Radio News. His technology reports can be heard several times a week on the CBS Radio Network. Magid is the author of several books including "The Little PC Book."

[irliberal]

Fuel Taxes
Cigarette Taxes
Alcohol Taxes
Property Taxes
School Taxes
City Taxes
State Taxes
Federal Taxes
Energy taxes
*etc, etc, etc*

Yes, I go out of my way looking to create and pay new taxes. And so does the author of this article.

Uh-huh.

[mondonerdo]

"...If the cost of maintaining our schools, police and other vital services requires that we pay sales tax at favorite local stores, then we should also have to pay the same tax if we order from an out-of-state e-tailer."

Larry, this is where you miss the point: We pay sales tax at local stores because the stores benefit from the vital services (not us). I benefit from vital services for which I gladly pay with property/license/gas taxes, etc.

I do not however, gladly pay greedy "lost revenue" taxes enacted by states to try to get some of the internet action - the state provides no service to the out-of-state vendor.

[juwboy]

One of the causes of the Revolutionary War was Taxation Without Representation.

I feel so much happier knowing that we now have Taxation With Representation.

[freckster]

The local merchant has 1-3 sales taxing authorities (TAs) for which they have to determine what is taxed by each (e.g. snack tax), how much to collect, file & pay each.

The i-merchant would have 1000s of TAs; just under 5000 different TAs in the US. One merchant may never sell something in each of those authorities but that doesn''t mean they don''t have to know the particulars for every one in the US.

Arguments for this cite "software" or "service companies" that would do this for you from figuring out how much to filing the returns. Good grief. Now the merchant is TAXED again by having to PAY to manage sales tax collection.

It''s not that it is a bad idea to require the collection of some kind of tax. But it has to be in support of commerce & capitalism. The current sales tax systems are not the way to handle it. Just get those 5000 TAs to agree to handle it on their end. Good luck. They not only want the money, they also want the burden on someone else.

One solution: universally collect X% & pay it to the state it is shipped to. Let the hundreds of TAs in that state fight for it from their state coffers. Force them to clean up their act. The X% would not vary from state to state. States like Oregon where few purchases incur sales tax would get just as much as Florida that charges 6%. The X% should be 2 to 3%; because as pointed out, the merchant is not receiving any benefit from the state.

[serack96]

The fact of the matter is, Article I, Section 8, Clause 3 of the Constitution states that only Congress has the authority to manage trade activity between the states or foreign countries.

Which means that its unconstitutional for a state to tax goods that you buy from outside the state.

[jjp735i]

I am sorry, but people are already over taxed as it is. If States would stop wasting so much of the tax payers dollars, they could lower taxes in their home state and maybe people would shop in State more often.

The Government, be it State or Federal, cannot account for most of it''s spending. For what it can account for, most charges paid by the State or Federal Governments are for over priced services.

[usmcgeorge]

Ok Guy and Gals
Let us do away with the income tax that we now have and have a national Sales Tax. The amount would have to be a % that would replace the current system. This way no matter where you buy things the tax would be the same, and all businesses would have to charge sales tax. I''m sure that all states would benefit from this. Business already collect and pay taxes so this would be no additional collection only larger.
Just a thought. Now let me hear the up and down sides to this. I''m sure that there are alot of you out there know alot more about this than I.
Now I''m going to duck because I know that it is comming.
GeoCar

[ms38654ob]

One good reason for living in Mississippi is that virtually no retailers have a physical presence in this state, hence almost all online purchases are tax free.

Not many other benefits of living here though.

[ibzjem]

I gladly support local business when I can, but the fact is, somethings aren''t found in local stores. If I want some musician''s CD who isn''t Hanna Montana or Timbaland, most likely the local stores won''t carry it. Fact is, they base their inventory on what they sell and not what''s available to sell. So then I buy online. In some instances I''ve waisted my time and gas looking in local retailers and I certainly don''t want to pay even more, on top of shipping as much as $6-$8 for a CD, when I turn to the internet.

[edx50]

Some media person proposed last week we should have $5 a gallon gas as well (just like Europe!). Like it would be a good thing to hand over more money to the government, local or otherwise.

Surely you''re not suggesting the government should tax us even more!

Policians tend to read articles like this and assume it represents public opinion so please spare us next time.

I always hate to hear about the government messing with Internet. I look at it as best "anti-government" there is.

Peace

[takimbo-2009]

The Internet is the biggest warehouse in the world. Why go to the effort of traveling from one local store to another and not find what you want? If you do find it, the store often has the attitude it is doing you a favor selling you something.

Many of the local retailers must think a 40% markup means 40% of the distributor''s suggested retail price. They yell about on-line shoppers who are money ahead buying online, paying the freight and, where necessary, paying sales tax, too.

Sadly, rather than changing their ways, the local retailers will continue pressuring their states to take more action to curb the online shoppers. The states do not need a lot of encouragement to pressure congress because they never feel they are collecting enough taxes anyway
.

[random_radar]

We should eliminate all sales taxes everywhere. Why do we have to pay the government a fee to spend our money? When the mafia demands a cut of your business, we call it organized crime. It seems to me that the government is just one more criminal racket with its hand in your till.

[rf35]

The thing about shipping charges is the price on-line is usually the same as it is in the physical store, so Larry''s shipping argument doesn''t work. It''s like we''re paying shipping twice.

And what about people who live in small towns like me...there are often NO local retailers carrying a particular item, so on-line is the only option. How can Internet purchases hurt a local merchant that doesn''t exist? Why should I be penalized for being stationed in the middle of nowhere? It wasn''t my choice to be here.

Now what about being stationed overseas? What state gets to collect that tax? Are you going to pay it to the country the buyer is happens to be in? This idea has far too many holes and would seriously damage some on-line retailers.

[olebd]

I''d pay more taxes if I had more say on how the money is spent.

Our representatives waste it. We should be allowed to vote on all new spending.

[usmcgeorge]

Here is an example of what happens.
I bought a computer board from Computergate and after installed it I found it didn''t work. Computergate would not replace it until I sent it back, even though the manufacturer worked me through trouble shooting and told me that it was a bad board. I kinda got pissed and let them at CG know. They said send it back and we will refund your money... The item was $27 bucks the shipping and handling from them was $11. So now we are talking $38 bucks for a $27 item. Then I had to send it back and that was another $9+ bucks. I don''t know what they will refund but I would guess it will be only the price of the board. $27.00
I looked around, on the Internet, locally (within 15 miles) and found one for $25.95 plus the sales tax of 7%.I picked it up at the store. So in this case buying on line cost me much more. I know I should have looked closer locally but it is so easy.

[usmcgeorge]

That should have been 35.95 not 25.95. But it has 3 more USB ports. That is worth more anyway.

[beehive21-2009]

Tax needs to be more uniform for all.especially income tax and the off shore BS going on,needs to be brought online ,we need a level playing field for all .

[octavianfdlr]

The mad governor''s claim would make more sense if he stopped talking about "sales" tax. This is not a tax on sales, payed by the business which does the selling. This is a tax on the customer, or citizen of the State, rather like an income tax. What the mad governor is discussing is an "outgo" tax.

By the way, the same method of avoiding "sales" tax has been used for years when buying mail-order. Does anyone remember snail mail? Does anyone remember catalogues printed on paper and delivered to a physical mail box? Does anyone remember using a pen to fill out a paper order form and then putting it in an envelope with a stamp?

The mad governor just wants to grab more money, and claim that he did not. Typical lying politician.

[octavianfdlr]

What does this story have to do with science (or technology)?

[cpaide]

the sales/use tax revenue "loss" due to companies locating operations out-of-state is small potatoes compared to the revenues lost when large companies (and wealthy individuals) hide their profits in offshore holding companies. go after them instead.

[maypo]

Spitzer is a malicious greedy man. When he was Attorney General He tried to get taxes from Reservation Indians for selling cigarettes online and by mail. When that was proved to be clearly illegal he took revenge by getting the shipping companies to stop shipping the cigarettes and credit card companies to stop authorizing payments to the tribes for cigarettes. Then he tried to get the US Post Office to stop shipping the cigs. They told him to stuff, in a nce way of course. Now I get my cigs by the US mail. Tax Free.

With a brick and mortar store, when you travel to and from your purchase you are "using" roads (and many other state provided facilities) as well as causing pollution, consuming gas and perhaps food that will need to be replenished with yet more use of state provided facilities.
This is what state taxes pay for.
When you purchase online, you are avoiding much of this state costs (or at least sharing them with many others) so there is no real justification for Internet taxation of any kind.
And in this age of global/green concerns, if all of us made Internet purchases, then we could replace many of the stores with trees, and get half the cars off the roads. Not to mention all the gas wasted.
Now that I think of it we should get an incentive to shop by Internet, perhaps a subsidy...a 5% green reward, an anti-tax, where the your state picks up 5% of your purchase cost for not going out shopping

coming from Oregon were we have decided tax on sales was just an extra tax and we paid enough taxes I don''t like sales tax anywhere, I call it a hidden tax. I REALLY hate to pay $1.08 for a $1.00 Item and I don''t in Oregon or the internet.

[seekingsense]

08:26AM
"only Congress has the authority to manage trade activity between the states"

08:13AM
"One solution: universally collect X% & pay it to the state it is shipped to."..."The X% would not vary from state to state."

09:40AM
"have a national Sales Tax.%u201D%u2026%u201DThis way no matter where you buy things the tax would be the same, and all businesses would have to charge sales tax."

Complicated! Differing philosophies & objectives of unrelated groups facing differing laws make this challenging to fully understand. Just reflexing a flavor of %u201CI don%u2019t like taxes%u201D does not help.

Consider that all taxes are designed to publicly pay for services (generically) at a %u201Ccommunity%u201D level (US,state,city,town,) by collecting from expected users (as possible). It is much an issue of matching payers with users that drives the variety of channels, and keeping control of the funds with the users%u2019 advocates, but also makes it administratively expensive.

We have a mixed system of income & consumption taxes-each has benefits/negatives. We have established users/payers. With e-commerce permanently replacing a large commerce segment, the loss of sales tax is forcing a rebalancing of sources, all else unchanged. So, raise other taxes? Or equitably maintain the sales tax portion of tax supply?

Idea: One Fed sales tax % on all Internet/mailorder sales, period. Simple. $ sent to states. Existing local system could stay, even lower rates.
Magid-bravo.

[yohnvilson]

As a small online vendor, all I can say is, if they start requiring local sales tax on all internet sales they are going to have to vastly simplify the paperwork. I already have to collect tax in NY (where I incorporated) and MA (where I later moved the company) and it''s already a lot of paperwork considering how little I sell (NY has different tax rates in each county). At least NY kicks you up to annual filing (instead of quarterly) if your sales are low enough, in MA it''s monthly no matter what. If I had to keep up with 48 other states and D.C. I wouldn''t have any time for my actual job.

And that''s just on top of sales tax being a shakedown. It seems like everywhere I''ve lived, they''ve jacked the sales tax up by 1% "for one year until we balance the budget" and then forgot to ever bring it back down again. It was 3% in MA when I was a kid, what happened? Inflation instantly and automatically gets added to sales tax revenue so there''s no excuse for increasing the rate.

[random_radar]

The simplest solution is to abolish all sales taxes. Why don''t we like that idea? Most people I talk to honestly think paying taxes is a sign of moral virtue. The government really has brainwashed us through government run schools.

Slavery is where you are forced to work for someone else''s benefit. Taxation is incremental slavery. It doesn''t matter what the money is used for, the fact that it is taken by force is immoral. We should demand less, not more taxation.

[dan9111]

It doesn''''t matter what the money is used for, the fact that it is taken by force is immoral. We should demand less, not more taxation.

Posted by random_radar

Right on! Those who suggest the government is "authorized" to use violence are exactly the ones who are immoral. Consider that there can be no valid excuses for forcing sexual-intercourse, even with a "majority vote" among the locals.

Forcing money - no difference, because what would you rather do: give up half of all your income forever but still have to work fulltime until 65, or else have painful intercourse with a total stranger in an alley? Choose clearly now which violation you would prefer, and ask yourself why one is tolerated and not the other. Plainly there is pure violence at work in all forms of taxation.

[enriquecaliente]

No taxation without representation. That saying started a revolution. The time has come once more for the people to take back the country. Because, lets face it. Our supposed representatives are not representing us.

[sjw1253]

My first comment is directed to: octavianfdlr

What is wrong with you? Of course this has everything to do with technology. You may think that technology only involves "how it works" - but using technology and the costs behind it most definitely have everything to do with technology...

Duh - why post anything if you don''t want to contribute to the discussion??? Must need a lot of attention (and here I gave it to you... Did I fall into your dumb trap?)

I love the tax-free benefit when something does not get taxed - especially a computer or something big...

It helps make up for the massive S&H charges...
I do believe back when the dinosaurs roamed the earth (pre Internet) - when I ordered from a catalog that did not do business in my state - I did not have to pay taxes...

What do you do when you are buying from a different country? It gets a bit ridiculous...

I look at it as virtually going to a state that does not require sales taxes (i.e. Delaware for us) - and not having to pay a sales tax...

Since I cannot physically make it to Delaware - it is really nice to be able to order online from places that are not located in my state... The states will get their revenue... I am confident.

"Fair is fair. If the cost of maintaining our schools, police and other vital services requires that we pay sales tax at favorite local stores, then we should also have to pay the same tax if we order from an out-of-state e-tailer." First, crossing a state line to purchase groceries in a state where there is no sales tax on groceries should require that the "grocery" collect a tax equal to that charged by state of the customer and remit that to the customer''s state. Likewise, if a tax is collected by "grocery''s" state, that tax should be equal to the amount collected in the customer''s state and remitted to the customer''s state. Second, driving across the country and purchasing petroleum products, food, incidentals, perhaps even housing would require at each stop that the sales tax of the "traveler''s" state be collected and remitted to the "traveler''s" state. Finally, if travellers stopped in a community so small that only one store existed, that store would be required to collect and remit the proper sales tax for each traveller''s state. Paying your city, county and state a fee for the opportunity to purchase items elsewhere. That is "online sales tax collection."

[undermyboot]

Magid comes from California. Tax you to death land. No wonder he wants to tax everything that moves.

[nothappyatall]

"But I can''t think of any good reason why customers of online retailers should shop tax-free while people who spend their money locally have to pay sales tax. "


Because those who shop on line pay SHIPPING charges that often come close if not exceed the cost of the GOODS, and the shipping companies pay INCOME taxes and charge fuel surcharges THATS why.