Response: LA Times Article “Plugging the Web tax loophole”,0,1649969.story

Yesterday’s Editorial in the LA times made a strong case for the provisions of the Main Street Fairness Act, notably that this is not a new tax (as opponents are spinning it).  Rather that tax laws have not kept up with the changing sales environment.  The editorial correctly notes that the Supreme Court rulings often referenced as opposing collection of sales tax by remote sellers (Quill, Bellas Hess) actually pre-date the Web itself.  It also notes that arguments which fall back on the existence of ‘use taxes’ — the longstanding requirement that individuals report and remit the equivalent of sales tax on their own – are not productive and that the problem could be better solved at the retailer level.

The impact to states of a change in law is significant.  According to a study cited by the National Conference of State Legislatures, by failing to collect that tax California alone will lose over $3.3 billion in 2010.  A link to that study is below.  The efforts of the Streamlined sales tax project combined with passage of the Main Street Fairness Act will give states the opportunity to collect these taxes and distribute them to local communities, as determined by local law.  TaxCloud proves that technology is indeed up to the task – and it is available at no cost to the merchants themselves.

The University of Tennessee 2009 Study: State and Local Government Sales Tax Revenue Losses from Electronic Commerce

4 Responses to Response: LA Times Article “Plugging the Web tax loophole”

  1. Steve says:

    Screw HR 5660 and the internet sales tax. Do you think some person who sells maybe $1000 worth of stuff on Ebay needs to jump through all these proposed new tax hoops. And **** your tax cloud software, free or not. I’m not collecting or submitting any taxes. States are not losing any money if they weren’t collecting it in the first place. If they were getting it, they would just waste it anyway. You know how to lower state’s defecits? Shrink the government…get rid of the waste – cut unnecessary workers and programs.

    • says:

      Thanks for posting Steve, we appreciate the dialog – although please in the future keep it family-friendly. I respectfully disagree with your position. I can see no reason why the Internet channel needs to sustain an unfair competitive advantage over a local shop. When the Supreme Court last ruled on the topic — in 1992 —- it was deemed too complex for a seller to calculate taxes for many jurisdictions. I find it hard to believe that it would be difficult today for an internet retailer – or eBay (with 90 million active users!) to figure out how to calculate and collect sales tax. And our company is offering a software service, called TaxCloud, FOR FREE that any merchant, large or small, can use to easily handle this task. Sign-up to tax collection takes less than 20 minutes, and it is as easy to operate as real-time shipping.
      My guess is that if you are only selling $1,000 a year online, you would be exempted from Main Street Fairness anyway — the bill is going to have a small seller exemption — but if not, we would be happy to be your tax calculation and remittance service provider. Again – at no cost to you.
      Finally, I really can’t answer you on the government waste question. I encourage you to lobby your government representatives on that issue. But to require only certain types of sellers to collect local taxes — but not those new-fangled internet types — well, I respectfully can’t agree with you on that one.
      Thanks again for your comment.
      Beatrice Vaccaro

  2. TaxMama says:

    I am very intrigued by your project.
    It would be wonderful to be able to reduce the mass of compliance problems for small, online merchants to one, simple solution.

    My concerns are:
    1) How do you get around the requirement for the out of state business to register with each state, one by one?
    2) Registering in the state is not just limited to collecting and remitting sales tax. Once a ‘foreign’ business is determined to have nexus, they must also file income tax returns in the state. How do you address/get around this issue?
    3) If the company is now deemed to have nexus, any virtual staff may now have to be placed on payroll.

    These are my concerns. Once we open the door, it’s not just about sales taxes. It’s about registered agents, city taxes & licenses, sales taxes, payroll taxes, franchise taxes and income taxes. Compliance with ALL these matters could choke a small business – or force them to become tax criminals.

    There needs to be a set of simplified national laws. And I don’t see that in the Streamlined Sales Tax project either. Do you?

    We do need something!

    Just my two cents worth.

    Eva Rosenberg, EA
    Your TaxMama

  3. says:

    Hello TaxMama,
    Thanks for your comment. Taking it from the top:
    1)The Streamlined Sales Tax project actually takes care of registering with each state. Central registration eliminates the need for a merchant to register in every state. The merchant will register as a Volunteer Seller in all the Streamlined states – except those states that they indicate that they are already registered in to collect sales tax.
    2)Registering as a Volunteer seller does not create nexus.
    3)Again, registering as a Volunteer seller does not create nexus. If nexus exists under current laws, the business would have to meet those requirements anyway. TaxCloud won’t be able to help with that — our service is focused on sales tax calculation and remittance only.
    As far as simplified National laws, in my humble opinion, I don’t think it is likely that the country will go very far in the direction of a national sales tax; mainly because of the need to keep taxation closely connected to representation. Again, though, that is a personal opinion. Streamlined is aimed at simplifying and harmonizing the tax structure, while retaining the rights of the states to set tax levels.
    Thanks again for the comment.
    Beatrice Vaccaro

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