Friend of Bill (Delahunt)

July 29, 2010

There was a press conference in Washington DC today about The Main Street Fairness Act, a bill introduced by Congressman Bill Delahunt (D-MA) on July 1, 2010. The bill aims to help states retrieve billions of lost sales tax revenues that are currently owed but go uncollected on remote (online and catalog) sales. Rep. Delahunt was joined by South Dakota Governor Mike Rounds (R-SD), Former Speaker of the Iowa House of Representatives Chris Rants (R-IA), state leaders and small business owners.  Here is the Press Release on Rep. Delahunt’s website.  Coverage of the press conference is included in this Washington Post Article.

FedTax.net CEO R. David L. Campbell was on hand to show support for the MSFA bill, and to respond to questions about whether sales tax calculation and collection can be done without causing a burden on retailers.  The answer is an emphatic ‘YES’ .  TaxCloud is our free, easy-to-use sales tax calculation and remittance service for retailers. It’s the only service created solely to comply with the Streamlined Sales and Use Tax Agreement (SSUTA) at a scale to support all internet merchants.

Here’s a picture of David with Representative Bill Delahunt.


Response: Time Magazine Cover Story – The Broken States of America

June 30, 2010

ILLUSTRATION BY JOE ZEFF DESIGN FOR TIME - Image Courtesy of Time, Inc.

I trust you have already seen and read the cover story of Time magazine this week, but if you haven’t, check it out now.

The article does a masterful job of describing the current financial crisis in most states. It even  details how the states have not seen such financial calamity since the Great Depression. Strangely, though, the article does not address the action states took after the Great Depression to ensure such a situation would never happen again. Since you are reading our blog, you probably already know what they did: They created the sales and use tax system.

Their goal at the time rings true to this day, more than 70 years later. The purpose of the sales and use tax paradigm was to have a more progressive, consumption-based system of taxation. After establishing sales and use tax as a way to finance local services, many localities were able to fund up to 40% of their annual budgets through the collection of sales taxes. Unfortunately, the brightest minds of the 1930s could never have imagined a marketplace of the scale and ubiquity of the internet. As shoppers have migrated online, largely for convenience, the practice of collecting local sales taxes at the time of the transaction has not migrated with them. And now that the internet marketplace is maturing, local governments have seen proceeds from sales taxes drop to approximately 16% of their annual budgets—hardly a coincidence.

Most internet merchants do not collect local sales taxes because the Supreme Court, in 1967 (Bellas Hess) and again in 1992 (Quill), ruled that it would be too difficult for a “remote seller” (mail-order catalogs at the time) to calculate and remit local sales taxes for the thousands of tax jurisdictions in the country. In these rulings, the court did point out that one day technology would likely solve this problem, but even then, they said, only an act of Congress could grant states the authority to compel out-of-state merchants to collect sales tax (just as bricks-and-mortar merchants are required to do). Today, many internet merchants rely upon the Quill ruling to justify their non-collection of sales taxes. (Ironically, the Quill Corporation, which litigated this matter against North Dakota all the way to the US Supreme Court in 1992, now collects sales taxes on all their internet sales—even in states where Quill Corp. has no physical presence.)

Hopefully a few of our legislators in Washington, DC, will read the Time magazine article and agree with us that the time has come for federal legislation requiring out-of-state merchants to collect local sales taxes. It is time to introduce (and pass) the Main Street Fairness Act. The Main Street Fairness Act does not contemplate or suggest any new taxes; it simply allows states to require merchants to collect sales tax at the time of a transaction, instead of relying upon the consumer to report and pay these taxes later.

Regarding the Supreme Court opinion that collecting sales tax is too difficult for remote sellers: Our TaxCloud service launches tomorrow! TaxCloud manages local sales tax calculation for every jurisdiction in the United States. In the 23 (soon 24) states that conform to the Streamlined Sales and Use Tax Agreement, TaxCloud also manages collection, remittance, and sales tax returns for all TaxCloud registered merchants—all for free.


Ladies and Gentlemen… Start Your Engines!!!

May 11, 2010

Rumors abound that a certain piece of legislation might be introduced this Thursday!

Increasing state-by-state efforts to recover uncollected sales taxes due for most Internet purchases are creating an increasingly hostile compliance burden on multi-state retailers. If you didn’t think the budget problems were enough to encourage federal action on this matter, perhaps this growing body of state-by-state legislation (such as the so-called “Amazon Taxes,” and aggressive reporting requirements) is enough to compel federal action due to the Commerce Clause of the United States Constitution.

Not to mention, our new TaxCloud service (launching July 1) will eliminate all previous concerns related to undue technical or financial burden (its FREE!) as cited in the 1967 Bellas Hess opinion as the only reason for exempting Remote Sellers from their obligations to collect local sales tax. Bellas Hess anticipated technology could eventually solve the administrative burdens of calculating and remitting local sales taxes for every jurisdiction in the land, but even then only Congress has the ability to grant States interstate collection authority. FINALLY, after 43 years, Congress should now act.

As we like to say here at Fed-Tax.net “Shop Globally, Support Locally!”


Friday Fun

April 23, 2010

We could not help but chuckle when we saw this headline in Daily Finance: “Amazon Sues to Facilitate Tax Cheating”


Response: “Turning Web retailers into tax tattlers” from Cnet News

April 14, 2010

Today, a Cnet News article complained about Colorado’s new internet sales tax law. We posted a comment with our ideas on the matter (scroll down to the comments section of the article).


Response: LA Times invents more Amazon Tax.

February 22, 2010

The LA Times ran an article this weekend about California ABX8 (the emergency amazon tax) – unfortunately, the LA Times does not offer a web-forum for comments/responses. The Article incorrectly states in the subtitle and in the article that the effect of this bill could result in $150 million per year in new revenue for the State of California. The fact-checker seems to have been asleep-at-the-wheel, because the actual Senate Analyses (available here) projected the revenue effect of this bill would be $107 million. Don’t get me wrong, $107 million is a lot of money, but when your state has a 14.6% budget gap, perhaps everyone should start double-checking their numbers and actually doing math. Substantially more revenue is “still left on the table” by all the other out-of-state sellers that are not collecting sales tax (hard to imagine sometimes, but there actually are other companies making sales online – about 3.5 million of them).

California should simply become a Full Member State of the Streamlined Sales and Use Tax Agreement (or SSUTA). The California Legislature already passed related legislation last fall. California now should take the remaining steps to become a full Member State under the SSUTA – a collective effort of 44 states (including California) which has been developing for the last 10 years to simplify and standardize sales tax laws to enable congressional action at the federal level to resolve this matter once and for all.

In anticipation of California’s likely ultimate adoption of SSUTA provisions, at Fed-Tax.net we have already prepared our TaxCloud systems to provide real-time calculation of accurate local sales tax for every jurisdiction in California. Take a moment to try it out at http://myrate.taxcloud.net/. Once California becomes a full Member State under the SSUTA we will be happy (and honored) to help merchants all over the country accurately calculate local sales tax for California residents. We will do this at absolutely zero cost to merchants or consumers (we are paid by the states to perform remote merchants’ sales tax management, reporting, and remittance obligations).

We know nobody likes paying sales tax, but the fact remains that this tax is still due, and when merchants do not collect at the time of sale (as they do in all physical stores), then the consumer is obligated to report and pay these taxes on their own. Since few people do, these taxes go unpaid resulting in massive budget shortfalls as California is now enduring. We think it is terrible that through lack of federal action to-date on this matter an entire generation of consumers on the Internet have grown up feeling that not being charged sales tax on Internet purchases is their constitutional right – and are frequently shocked to learn that they are committing tax fraud when they willfully or at least negligently fail to report and pay these taxes. It is time for California to tell all Internet merchants (not just those with affiliate marketing practices) that it is time for them to respect the budget decisions made by the California voters and their elected officials and to stop pretending it is too difficult, too complicated, or too costly to calculate local sales tax. Our TaxCloud service demonstrates these arguments are without merit, and these merchants are simply avoiding collection as a way to bully local merchants (who must collect sales tax) out of consumer price-competition.

California’s Projected 2010 Budget Shortfall: $ 14,400,000,000 1
AXB8 Projected Revenue: $ 107,000,000 2
Difference: $ 14,293,000,000 3

Total Sales Tax due by California consumers based on purchases from out-of-state Internet retailers

Uncollected Sales Tax (from remote sellers) $ 1,441,100,000 4

Admittedly, becoming a full SSUTA Member State will not solve all of California’s budget deficit, but at least it can cover 10% – and it is not a new tax, and no budget cuts are required.

1-Source: Center on Budget and Policy Priorities – http://www.cbpp.org/cms/index.cfm?fa=view&id=711
2 – Source: State of California Senate Analysis – http://www.leginfo.ca.gov/pub/09-10/bill/asm/ab_0001-0050/abx8_8_cfa_20100219_175402_asm_floor.html
3-Source: Simple Math
4-Source: The University of Tennessee 2009 Study: State and Local Government Sales Tax Revenue Losses from Electronic Commerce


Colorado Senate revises HB 1193 to focus on Use Tax Reporting

February 9, 2010

The Colorado Senate has revised HB 1193 quite dramatically.

The Good News: It no longer appears to be targeting affiliate marketing.

The Bad News: It makes no mention of conforming to the Streamlined Sales and Use Tax Agreement. In fact, it now goes into extraordinary detail asserting jurisdictional authority over out-of-state businesses.

Specifically, it states that any out-of-state business which does not voluntarily collect and remit Colorado sales tax must:

  1. Notify each Colorado customer that sales or use tax is due on all purchases from the business, and the purchaser must specifically file a sales or use tax return with the Colorado Department of Revenue. Failure to deliver this notification will subject that out-of-state business to a $5 penalty for each failure to notify.
  2. Send separately to each Colorado customer (by actual First-Class Mail by itself in an envelope labeled “Important Tax Document Enclosed”) an end-of-year summary showing the total amount paid by the customer for all purchases over the past year to that business, and reminding the customer again of their obligation to file a sales or use tax return and pay the appropriate use tax for all such purchases.
  3. Send to the Colorado Department of Revenue (by March 1 of each year) a statement detailing each Colorado customers purchasing activities during the preceding calendar year. Failure to send this statement shall subject the out-of-state business to a $10 penalty for each purchaser which should have been included in such annual statement.

There is also a fair amount of language devoted toward empowering the Colorado Department of Revenue the right to issue subpoena requiring attendance to take oral or written testimony under oath, and to produce all records relating to sales to Colorado residents, along with authorization for judicial enforcement and ability to order judgment against the retailer for contempt.

Holy burden building batman!

Now instead of businesses cancelling their affiliate programs in Colorado, businesses may just suspend all sales efforts in Colorado.

Please Colorado legislators – can we have a few minutes of your time to discuss this matter?

UPDATE 3/2/2010 – This was signed into LAW last week (on Feb. 24th) by the Governor of the State of Colorado.