The Los Angeles Times just published a piece (California tax collectors want their cut on out-of-state sales) describing how California is targeting service businesses in its latest bid to collect more of the estimated $1.1 billion in taxes that go unpaid each year on out-of-state purchases.
Strangely the article fails to mention the Streamlined Sales and Use Tax Agreement, which the State of California participanted in creating, which establishes the necessary frameworks to allow remote sellers to easily calculate, collect, and remit local sales taxes for their customers – so that the customer isn’t required to specifically keep track of and report all their online purchases in their annual tax return.
It also seemed odd that the article didn’t take the opportunity to point out that this matter could be addressed entirely at the federal level, if (or more when) the Main Street Fairness Act becomes law.
Naturally, we posted a comment to point this out:
The Main Street Fairness Act will soon be introduced before congress to address this issue – that out-of-state or “Remote Sellers” should be required to collect and remit local sales tax.
The only reason they don’t right now is that in 1967 & 1992 the issue of Remote Sellers came before the US Supreme Court (in the context of mail order catalog merchants). In both opinions, the court agreed that remote sellers should collect and remit local sales taxes, but they also conceded that requiring remote sellers to keep track of 4,000+ local tax jurisdictions would be too difficult.
With contemporary companies like Amazon.com and services like iTunes, no one questions their technical ability to keep track of over many million of transactions per quarter. Further, with the successes of the Internet over the last 25 years, it is time to revisit how difficult it is for remote sellers to manage a mere 10,000+ local jurisdictions.
It is time to tell Internet merchants to start collecting and remitting local sales tax, just like the corner store has to. Stop pretending that the transaction is “tax-free” because Use tax is still due.
Your local sales tax should be collected & remitted for you by all merchants, so businesses and individuals don’t have to meticulously keep track of all out-of-state transactions.
Once again our response had to be heavily restrained due to posting size restrictions. Hopefully we will provoke some thoughtful conversation.