TaxCloud in the news!

October 11, 2012

TaxCloudWe’re happy to report that TaxCloud and FedTax have been in the news quite a bit lately.

An end to the free online tax ride nears: In this ComputerWorld article, TaxCloud user Ken Knezek, owner of Bandals Southwest, talks about how his small company has handled online sales tax

What the end of tax-free online shopping means for small businesses: Our CEO, R. David L. Campbell, was interviewed for this Reuters article on how small businesses will be affected by online sales tax

How you can prepare to collect online sales tax: And in an article in Independent Retailer, David offers some tips for online retailers who are thinking about starting to collect sales tax

It’s great to see so much attention being paid to the practicalities of what online sales tax really means for online retailers. As we move closer to federal legislation on the issue, we hope to see more articles like these!


Joan Wagnon, FedTax EVP, quoted in Fox News article

October 27, 2011

Fox News: Republicans Go Big With New Tax Structures, but Status Quo Could Stifle Simplicity

Our own Joan Wagnon, Executive Vice President here at FedTax, was quoted in a Fox News article about Republican presidential candidates’ tax proposals.

It’s not the first article she’s been quoted in, of course—Joan’s background in public service includes positions as the secretary of revenue for the state of Kansas, chair of the Multistate Tax Commission, president of the Streamlined Sales Tax Governing Board, and mayor of Topeka. But we’re always happy to see her expertise in tax matters recognized. We trust her opinion without hesitation, and her analysis in the article is once again spot-on.


The Atlantic: “Why aren’t more states pursuing online sales tax?”

April 6, 2011

An article in The Atlantic asks a great question: “Why aren’t more states pursuing online sales tax?”

The article discusses the reasons that states should (and, in all likelihood, do) want to pursue online taxes: the severity of state budget crises, the amount of money online sales tax should bring in. (The Atlantic estimates the total amount of uncollected sales tax to be about $7 billion; as they say, “This isn’t going to solve all of [states’] budgetary problems, but it certainly would help.”)

Then they focus on what they see as the primary obstacle to collecting sales tax online: logistics.

Now think about Internet sales. Online shops are located across the world. An online retailer can sell an item in any state. It would have to have every state’s sales tax built into its website’s framework to provide customers with the correct after tax total cost for their shopping. And that doesn’t even bring local taxes into account, as some cities require additional sales tax as well. This could get quite complicated.

We’re happy to report that the solution to the logistics problem already exists. It’s called TaxCloud.

TaxCloud is a comprehensive sales tax management service that calculates the sales tax due on any purchase anywhere in the country. It also monitors every tax code and automatically updates any changes, so that retailers using TaxCloud stay in compliance with local tax laws with zero effort. TaxCloud also generates state-by-state monthly reports, files state sales tax returns, handles tax exemptions and audits, and more. (To learn more, visit the TaxCloud website.)

TaxCloud is easy to use and takes just 20 minutes to set up. And, since it’s completely free—there’s no set-up fee, no transaction fee, no fee of any kind—it’s perfect for small retailers that don’t have the resources of Amazon.

Calculating sales tax is no more difficult than calculating shipping rates in real time, something most online retailers do. And with services like TaxCloud available for free, we can’t imagine that any online retailer would find it difficult or costly to collect sales tax.


Boston Globe: “Abolish unfair sales-tax break from online retailers”

April 5, 2011
The Boston Globe

The Boston Globe

The Boston Globe has joined the long list of news outlets—the Chicago Tribune, Los Angeles Times, New York Times, Sacramento Bee, and the Minneapolis Star Tribune—in calling for federal legislation to mandate the collection of online sales tax.

In an editorial published last Friday, the Globe outlined the current online sales tax situation and offered a point-by-point rebuttal of critics’ arguments against online sales tax.

We would like to clarify one point in the article that may cause confusion, however. The article states:

Proponents have argued that online retailers shouldn’t have to collect local taxes because they don’t benefit from the local services that those taxes support.

That argument is invalid for a reason the Globe doesn’t mention: Online sales tax is destination-based, which means that it has everything to do with the consumer’s location and little to do with the retailer’s location. No matter where the online retailer is headquartered, the sales tax consumers pay goes to their respective states.

It’s the consumer, not the retailer, who is key when it comes to sales tax. The consumer is paying the sales tax, which is going to the state or local government where the consumer is located and which helps fund community services there—all the retailer needs to do is collect the sales tax along with the consumer’s payment and pass it on to the government. So if a retailer is selling to people in a certain location, then that retailer needs to be prepared to collect sales tax for that location—just as they need to be able to ship to that location.

The editorial also offers this pointed remark:

Amazon and other big retailers should be able to afford the technology required to track and collect sales taxes across multiple jurisdictions.

However, that technology doesn’t need to cost anything. A free, easy-to-use solution is available for small and large retailers alike in TaxCloud.

With TaxCloud, online retailers don’t need to worry about the cost of “track[ing] and collect[ing] sales taxes across multiple jurisdictions.” With TaxCloud, there is no cost—its comprehensive sales tax management service is absolutely free.

TaxCloud:

  • Calculates sales tax in real time
  • Creates detailed monthly reports for retailers
  • Automatically monitors the tax codes of all 13,000 tax jurisdictions and updates any changes
  • Maintains exemption certificates for retailers
  • Files monthly sales tax returns in the 24 states that are members of the Streamlined Sales and Use Tax Agreement
  • And more!

TaxCloud is making it easy for all online retailers, not just “online juggernauts” like Amazon, to collect sales tax.


LA Times Editorial Board asks readers: Are you an online tax cheat?

March 22, 2011
Los Angeles Times: Are you an online tax cheat?

Los Angeles Times: Are you an online tax cheat?

This editorial in today’s Los Angeles Times covers all the issues in the ongoing debate over sales tax collection. It starts off by outlining on the debate over the affiliate nexus bill introduced by California representative Nancy Skinner. The editorial recognizes the pitfalls of that legislation: that Amazon and other companies will simply drop affiliate relationships with California websites, which is bad for California businesses in the short term (although it will bring in some of the uncollected sales tax—”about $300 million, a fraction of the estimated $1.7 billion California loses each year.” The writers keep the focus where it needs to be, though—the taxes are due and consumers are supposed to report them, but they don’t. The issue is collection, and the most efficient way to improve collection is to shift responsibility to the retailer.

The editorial effectively neutralizes two arguments often made by online sellers: First, that they are neutral as far as sales tax goes. The LA Times says:

Online retailers assert that they are not trying to exploit an unfair advantage over local companies by letting shoppers believe that no taxes are owed, or colluding with them to avoid taxes. But that argument is balderdash on its face. If the Amazons of the world really wanted shoppers to know that they have to pay taxes, they’d include a statement at e-checkout (upfront, not several asterisks and clicks away) telling them to find out from their state and local authorities about adding up and paying the tax. Most are only too happy to promulgate the notion, wordlessly and falsely, that tax obligations dissolve in cyberspace.

The second argument frequently offered by online sellers is that collecting sales tax is too complex. The LA Times points out that it’s not hard to track rates in some 7,500 jurisdictions across the country; it takes a simple software add-on.”

The only point we at FedTax think needs clarifying is that it doesn’t even take software. With TaxCloud, there is no software or database to install. Instead, the relevant tax data is delivered to the merchant or e-commerce shopping cart over a real-time web services API. TaxCloud can calculate correct local sales tax rates in every U.S. tax jurisdiction and account for the type of merchandise, exemptions, and tax holidays. In addition, because we are a Certified Service Provider under the Streamlined Sales and Use Tax Agreement, we take responsibility for tax filings and remittances on behalf of our retailers, who will also appreciate pass-through indemnification by states regarding the accuracy of our rates.

As the editorial points out, with more online buyers than any other state, California has more to gain in uncollected revenue than any other state. Rep. Skinner’s bill, if it passes, is likely to be only the starting point for California. We hope that support for federal legislation is the next step.


Joan Wagnon, former Kansas Secretary of Revenue, joins FedTax

March 10, 2011

Leader in Streamlined Sales Tax effort will now champion the company’s TaxCloud service

Seattle, Washington – March 10, 2011 – FedTax, a private company committed to making it easy for online retailers to collect sales tax, today announced the appointment of Joan Wagnon as Executive Vice President. Ms. Wagnon brings more than twenty-five years of experience in government and financial services to the role.

“We are honored to have Joan on our team,” said R. David L. Campbell, Chief Executive Officer. “Joan’s experience as secretary of revenue for the State of Kansas and as president of the Streamlined Sales Tax Governing Board are invaluable assets to FedTax as we roll out TaxCloud, our sales tax management service, nationwide.” Ms. Wagnon has also served as chair of the Multistate Tax Commission and on the board of directors for the Federation of Tax Administrators. She has a long record of distinguished public service; in addition to serving as secretary of revenue for the past eight years, a position she left only a month ago, she was also the mayor of Topeka, Kansas, from 1997 to 2001 and a legislator in the Kansas House of Representatives from 1983 to 1994.

In addition to Ms. Wagnon’s extensive background in state and local government, she was president of the Central National Bank in Topeka from 2001 to 2003 and served on their board of directors until 2009.

Ms. Wagnon’s experience with state and local government is particularly relevant as states throughout the nation are facing record budget shortfalls, due in part to a decline in sales tax revenue as more shoppers buy online and avoid paying sales tax. According to a 2009 study by researchers at the University of Tennessee, this year alone states will lose over $23 billion in uncollected sales tax. Although states cannot currently require out-of-state retailers to collect sales tax, the Main Street Fairness Act, which is expected to be introduced soon in Congress, would change that, thus helping states to recover lost sales tax revenue and close their budget gaps. The bill would also level the playing field between local retailers that have to collect sales tax and online retailers that don’t.

In her work with the Streamlined Sales and Use Tax Agreement (SSUTA), Ms. Wagnon strove to make the collection and administration of sales tax easier and more affordable for states and retailers alike. She is thus a natural fit for FedTax, whose TaxCloud sales tax management service makes collecting sales tax easy for retailers of any size, at no cost to the retailer.

“FedTax represents the logical progression of my career,” Ms. Wagnon said. “I’m happy to continue my work in support of fair and neutral sales tax collection as part of FedTax. And I’m looking forward to continuing to make the case that with technology like TaxCloud, it’s easy for any retailer to collect sales tax online.”

TaxCloud instantly calculates the sales tax rate for any address in the U.S., monitors tax codes, and automatically incorporates any changes—so all TaxCloud retailers maintain compliance with sales tax laws with zero effort. TaxCloud also manages exemption certificates, generates reports, and automatically files state-by-state sales tax returns for retailers, all at no charge to retailers.

“TaxCloud reflects the guiding principles of the Streamlined Sales and Use Tax Agreement —that sales tax collection can be easy for any retailer,” said Ms. Wagnon. “FedTax has created a secure, scalable, elegant solution, and best of all, they’re offering it to retailers for free.”

About FedTax

FedTax is a private company that is committed to making it easy for online retailers to calculate, collect, and remit sales tax. It was founded by technology veterans with extensive experience in the large-scale development, deployment, and support of internet-based services in environments with extremely high transaction volumes and financially sensitive information. The management team has been directly involved in building some of the most recognizable brands in e-commerce, including MasterCard, Google, Microsoft, and Expedia.

FedTax has been designated a Certified Service Provider by the Streamlined Sales Tax Governing Board. The company’s TaxCloud service enables e-commerce retailers to easily calculate and remit sales tax across the country. TaxCloud is free to retailers and can be easily integrated into virtually any accounting or e-commerce shopping cart system.

FedTax is headquartered in Seattle, Washington, and has offices in Norwalk, Connecticut, Issaquah, Washington, and now Topeka, Kansas.

Contact:
Beatrice Vaccaro
The Federal Tax Authority
bvaccaro@FedTax.net
+1 206-452-1686


Notes on Affiliate Nexus Sales Tax Laws

March 10, 2011

As more and more states are looking to sales tax legislation as a way to put money back in depleted coffers, affiliate nexus legislation (the infamous “Amazon tax”) has been gaining ground. While sales tax absolutely should be collected by out-of-state retailers, affiliate nexus legislation is not the best way to reach this goal.

Affiliate nexus legislation is designed to work with the 1967 and 1992 Supreme Court rulings that say retailers need to collect sales tax only in those state where they have “nexus”—a physical presence, such as an office or warehouse, or an economic presence, such as salesperson or distributor. Since 1992, however, online sales have increased dramatically and state sales tax revenue has decreased proportionally. Since the Supreme Court rulings mean online retailers only collect sales tax for states where they have nexus, states decided to expand the definition of what can create nexus to include affiliate marketers, locally based websites that provide marketing for out-of-state merchants.

There are, however, significant drawbacks to affiliate nexus legislation. Perhaps the biggest is its effect on the affiliate marketers themselves. In states that have enacted affiliate nexus legislation, large online retailers such as Amazon.com and Overstock.com have proved themselves more than willing to end their affiliate marketing programs there—resulting in the loss of income for hundreds, if not thousands, of individuals. Indeed, immediately after the Illinois state assembly passed a bill on January 6, 2011, to enact affiliate nexus legislation, Amazon and Overstock informed their Illinois affiliates that they will terminate their affiliate relationships in the state if the bill is signed into law. Governor Quinn signed House Bill 3659 into law this afternoon (March 10, 2011), and as expected, Amazon notified its affiliates that they were terminating relationships with Illinois web sites.

What’s more, Amazon has been fighting affiliate nexus legislation in the courts. The company has been involved in a lawsuit against New York ever since the state enacted affiliate nexus legislation in 2008, and there is no end in sight. A lengthy court battle is bad for everyone, state and retailers alike. And then there’s the fact that when every state has a different approach to sales tax, it becomes harder and harder for businesses to sell across state lines. The patchwork of regulations created by affiliate nexus legislation (in New York, Rhode Island, and North Carolina), reporting and/or disclosure requirements for out-of-state sellers (in Oklahoma and Colorado), and state-initiated lawsuits intended to get out-of-state retailers to pay retroactive sales tax (in Texas and North Carolina) creates complexity for businesses and consumers alike and has a repressive effect on business.

There is a much better solution to the problem of uncollected sales tax online. The Streamlined Sales and Use Tax Agreement is a cooperative effort by forty-four states to simplify and reduce the administrative costs of sales tax collection. As part of its efforts, the SSUTA governing board has been working toward the passage of the Main Street Fairness Act (MSFA), which would authorize states to require out-of-state merchants to collect sales tax. This is a much more elegant, simple, and straightforward solution, and one that has none of the drawbacks of affiliate nexus legislation.

Unlike affiliate nexus legislation, the MSFA would not hurt affiliate marketers or anyone else who makes their living online. Although there has been some concern about the ability of small businesses to collect sales tax in every tax jurisdiction in the nation, sales tax management services are available to do this work with little input from the retailer, and at no cost. There’s no reason that a small retailer can’t collect sales tax for every state—and all affiliate marketing programs would remain unaffected. Plus, federal legislation would eliminate the problem of the patchwork of state legislation intended to deal with the problem and actually make interstate commerce much easier.

The Main Street Fairness Act (MSFA) was introduced in Congress in 2010 but was not voted on. Given the successes of the internet over the last twenty-five years and the pressures of revenue loss on state and local budgets, it is reasonable to expect that in 2011, federal legislators will act to address the issue of sales tax collection by out-of-state retailers. We support states efforts to collect sales tax revenue, and we urge them support the MSFA and join SSUTA.


North Carolina settles with ACLU

February 10, 2011

The ACLU announced yesterday, February 9, that it had settled its case against the North Carolina Department of Revenue over the customer purchase information released by Amazon in response to a DOR request.  More information is contained in this Daily Tech article.

Amazon itself filed a similar suit against North Carolina. As we blogged about the ruling in that case last October, the decision was not a clear victory for Amazon. The court ruled that North Carolina has the right to ask Amazon for general information about customer purchases, but not for specific purchase information, such as the titles of books bought by an individual.  The court also ruled that North Carolina can pursue Amazon for the sales tax that was justly due to the state.  This statement from Beth Stevenson of the North Carolina Department of Revenue explains the fundamentals of the case:

“The case between the North Carolina Department of Revenue and Amazon has long been twisted into something it is not,” said Beth Stevenson, spokeswoman for the North Carolina Department of Revenue. “Bottom line, this is about fairly collecting the tax that is due to the state of North Carolina and nothing more. The Department has always maintained that we do not need—or wanttitles or similar details about products purchased by Amazon customers. The department voluntarily destroyed the detailed information that Amazon unnecessarily provided and offered them the opportunity to comply with the state tax laws moving forward.

“The lawsuit on this particular issue could have been avoided altogether if not for the aggressive stance Amazon took to avoid compliance with North Carolina’s tax laws. There would have never been an issue of customer privacy if Amazon would simply collect the North Carolina sales tax that others already do.”

It’s not surprising that North Carolina is trying its best to collect the sales tax that is due on those purchases. This article from Storefront Backtalk says that only 6% of North Carolinians took advantage of North Carolina’s eTail sales tax amnesty program last year.

The Streamlined Sales and Use Tax Agreement (SSUTA)—of which North Carolina is a member—in conjunction with federal legislation such as the Main Street Fairness Act, will eliminate the need for states to craft individual strategies to collect the taxes that are already due them.


Hawaii House and Senate re-introduce Streamlined Sales Tax legislation!

January 26, 2011

As we reported to you yesterday, the Senate Majority Leader in Hawaii, Senator Brickwood Galuteria, recently introduced SB 568, a short-form bill, as a placeholder until the final draft legislation of the legislation was completed by the subject matter chair. Well, earlier today, Hawaii State Senator Carol Fukunaga, chair of the Economic Development and Technology Committee, filed SB 1355, an act to “adopt changes to Hawaii’s tax law that will allow Hawaii to participate in the national Streamlined Sales and Use Tax Agreement.”  The bill was cosponsored by Senators Chun Oakland, Baker, Ige, Kidani, Tokuda, Green, Ryan, and Shimabukuro.

The act would take effect upon passage of the bill, rather than on a future specified date. In other words, the intent is to act as quickly as possible. In fact, the bill states that ” Hawaii would benefit tremendously by adopting legislation that would enable the State to be in compliance with the Streamlined Sales and Use Tax Agreement at the same time that federal legislation is being reintroduced in 2011.”

At the same time, Representative John Mizuno of the Hawaii House of Representatives introduced HB 1265, with the same objective (to adopt changes to Hawaii’s tax law to allow Hawaii to participate in Streamlined). The act “shall take effect when the state becomes a party to the Streamlined Sales and Use Tax Agreement”—again, the intent is for Hawaii to act quickly to conform to Streamlined.

As you may recall, last year the Hawaii House and Senate both approved this legislation, but it was vetoed by then-governor Lingle. Although the Senate voted to override Governor Lingle’s veto, the House did not. Hopefully Governor Abercrombie will see the wisdom and necessity of collecting sales tax that is already due in order to offset Hawaii’s $840 million fiscal deficit.


New Mexico and Mississippi join the list of states considering affiliate nexus legislation

January 25, 2011

New Mexico representative Eleanor Chavez introduced HB 102, affiliate nexus tax legislation, on January 20, 2011. It expands the definition of “engaging in business” in New Mexico as follows:

C. A person with a business with no physical presence in New Mexico is presumed to be engaging in business in New Mexico and has nexus with the state for purposes of due process and interstate commerce if:

(1) that person enters into an agreement with an affiliate physically present in New Mexico, for a commission or other consideration, to directly or indirectly refer potential customers, whether by link or an internet web site or otherwise, to that person; and

(2) the cumulative gross receipts from sales by that person to customers physically present in New Mexico who are referred to that person by all affiliates with an agreement described in this subsection are in excess of ten thousand dollars ($10,000) during the preceding twelve-month period ending on June 30 of any year.

D. The presumption of nexus established in Subsection C of this section may be rebutted by proof that the affiliate made no solicitation in the state that would satisfy the nexus requirements of the United States constitution on behalf of the person presumed to be engaging in business in New Mexico.

In Mississippi, HB 363 was proposed by Representative Jessica Sibley Upshaw. The bill’s description is:  Use tax; provide that person soliciting remote sales through representatives in this state is subject to use tax. Specifically, “A person is presumed to be soliciting or transacting business by an independent contractor, agent, or other representative if the person enters into an agreement with a resident of this state under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet website or otherwise, to the person.”

The list of states considering affiliate nexus tax legislation is growing longer—evidence that, absent federal legislation, states are willing to take matters into their own hands to increase the collection of sales tax due on internet transactions. It also seems that the general level of knowledge about the issues—and about the pros and cons of various approaches—is increasing. Recent editorials in two Chicago newspapers (the Tribune and the State Journal-Register) highlighted the affiliate nexus legislation passed by the Illinois House and Senate—and both pointed out the shortcomings of this type of legislation and the need for a federal solution.


Senator Durbin expresses support for collecting sales tax on internet sales

January 21, 2011

According to this article in the Naperville Sun, Senator Dick Durbin is ready to co-sponsor a bill to address the issue of uncollected sales tax on internet purchases. The article states that at a recent meeting between Durbin and Illinois business people, there was a common interest in working on a uniform tax for internet sales, which owners of traditional brick-and-mortar stores said would level the playing field between their businesses and online competitors.

The article quotes Senator Durbin as saying, “I cannot understand how people can buy so many things over the Internet and have them shipped to Naperville, Illinois, and use your streets, your police, your traffic lights, your fire protection, your curbs and gutters, without paying a penny in sales tax to the city of Naperville.” Illinois, he said, is losing between $150 million and $1 billion in sales tax revenue on out-of-state Internet sales. “You are losing so much revenue in this process that should be coming back to the community.”

The article did not mention the Main Street Fairness Act, but it would be most efficient for Senator Durbin to pick up the ball on this bill, which was introduced into the House last year but was not voted upon. The senator’s public statements on the issue caps off a week of support and discussion at the city, state, and federal levels, as we have been covering here on the FedTax.net blog.


Illinois Introduces Affiliate Tax Legislation – Good Intentions, Not-so-Good Approach

January 5, 2011

Update #2: Rep. Patrick J. Verschoore (the original House sponsor) filed a motion to concur, and now it has been passed to the Revenue & Finance Committee for a hearing to be held right now (notice of the hearing was posted 58 minutes in advance of proceedings). Wow – this here is some fast-moving legislation?!

Updated 1/6/2011 – On Tuesday 1/5/2011 an Illinois state Senate committee approved a floor amendment (mentioned by the Daily Herald) to HB 3659 that would require out-of-state retailers to collect Illinois sales tax if customers purchase an item through an ‘affiliate’ web site located in Illinois. On Wednesday 1/6/2011, the Illinois Senate Passed the Bill as amended and sent it back to the House for concurrence.

This comes on the heels of a sales tax amnesty campaign by Illinois to motivate taxpayers to self-report and pay previously unreported sales tax.

The actual amendment under consideration (new language in blue) is to the definition of a “Retailer maintaining a place of business in this State” with obligation to collect and remit sales tax:

  1. A retailer having or maintaining within this State[…full text available here…]
    1. Beginning July 1, 2011, a retailer having a contract with a person located in this State under which the person, for a commission or other consideration based upon the sale of tangible personal property by the retailer, directly or indirectly refers potential customers to the retailer by a link on the person’s Internet website. The provisions of this paragraph 1.1 shall apply only if the cumulative gross receipts from sales of tangible personal property by the retailer to customers who are referred to the retailer by all persons in this State under such contracts exceed $10,000 during the preceding 4 quarterly periods ending on the last day of March, June, September, and December.
    2. Beginning July 1, 2011, a retailer having a contract with a person located in this State under which:
      1. the retailer sells the same or substantially similar line of products as the person located in this State and does so using an identical or substantially similar name, trade name, or trademark as the person located in this State; and
      2. the retailer provides a commission or other consideration to the person located in this State based upon the sale of tangible personal property by the retailer.

      The provisions of this paragraph 1.2 shall apply only if the cumulative gross receipts from sales of tangible personal property by the retailer to customers in this State under all such contracts exceed $10,000 during the preceding 4 quarterly periods ending on the last day of March, June, September, and December.

We understand the motivations — Illinois, like many other states, is facing unprecedented budget shortfalls.  The missed taxes on internet sales could help ease the pain.  However, the Affiliate Tax approach has a downside — large internet merchants are likely to cut affiliate ties with Illinois businesses, as they have already done in other states which enacted such legislation.

We urge Illinois to skip the Affiliate Tax law and rather join 24 other states by enacting legislation conforming to the Streamlined Sales and Use Tax Agreement (SSUTA).  All of Illinois’ neighbors have already done this, now that Missouri introduced SSUTA legislation.  The SSUTA standardizes and simplifies sales tax collection obligations for all retailers, and does not introduce discriminatory taxation based upon a marketing practices. And, with TaxCloud, any merchant can easily comply with all the requirements of the Streamlined Sales Tax Agreement — at no cost to the merchant, and in less than 20 minutes!

Moreover, Illinois (and all states) should urge legislators in Washington D.C. for a national solution (the Main Street Fairness Act) that would require all out-of-state merchants to collect sales tax on behalf of all states that participate in the Streamlined Sales Tax Agreement. Failure by Congress to act at a federal level has forced state after state after state to invent varied forms nexus expansion such as this proposal. Enacting federal legislation would ensure that all businesses collect the appropriate and due tax, without the need for consumers to track, report, and file (or face penalties).


Connecticut’s new Governor turns his attention to internet sales

December 30, 2010

Recent articles about the budget shortfalls in Connecticut prompted a round of discussion on whether the state should raise the state sales tax rate from 6% to 6.5%.  Since many of us at FedTax.net live and work in Connecticut, we were preparing to send out a letter to Governor Malloy and our state Representatives suggesting there is an easier way to raise money without raising the tax rate. Governor Malloy beat us to the punch by announcing that he has already identified online sales as a challenge that his administration is going to take on.  The Governor was quoted in the Connecticut Mirror as saying: “We can’t afford it,” referring to projected $48.3 million annual loss Connecticut faces from missed taxes on Internet sales.  (The $48.3 billion is from a study by researchers at the University of Tennessee.  In fact this study did not take telephone order or mail order sales into account, so it would be reasonable to expect that much more sales tax is going uncollected through these channels).

In announcing his appointment of Former Lt. Governor Kevin Sullivan as the new commissioner of the Department of Revenue Services, Malloy made it clear that taxing online sales will be a high priority for Sullivan:  “Malloy, who takes office on Jan. 5, said his administration is looking at ways to tax Internet sales, a hot button issue this holiday shopping season.  The state is in dire need of more revenue …and he wants Sullivan to go after those not paying their required taxes.”  (nbcconnecticut.com)

Connecticut is very familiar with the Streamlined sales tax initiative, having participated in the process as an Advisory member state since 2002.  In 2007 Connecticut conducted a study on whether to join the Streamlined Sales Tax Agreement but decided to wait for Federal legislation.  (Which is ironic because it appears that Federal legislation has been ‘waiting’ for more states to join in).  Last year the state introduced a bill into committee that would have enacted an ‘affiliate tax law’ similar to New York’s.  The bill died in committee due to concern that Amazon would drop its Connecticut affiliate relationships if such a bill was passed.

The momentum at the federal level in support of the Main Street Fairness Act, combined with Governor Malloy’s determination to address the challenge at the state level, could result in Connecticut being the 25th state to join the list of Streamlined states.


Smartphone technology hastens the shift of sales from local to online

December 17, 2010

This Wall Street Journal article highlights the use of smart phones by in-store shoppers to find the best deal — and very often the best deal is from an online retailer.  The article notes that “The retailer’s advantage has been eroded,” says Greg Girard of consultancy IDC Retail Insights, which recently found that roughly 45% of customers with smartphones had used them to perform due diligence on a store’s prices. “The four walls of the store have become porous.”  The article goes on to cite statistics from Coremetrics that:  “On the Friday after Thanksgiving a year ago, consumers using mobile devices accounted for just 0.1% of visits to retail websites…[t]his Black Friday, they accounted for 5.6%, for a 50-fold increase.”

Unfortunately, the article mistakenly leaves the reader with the impression that the sale is tax free (it is not):  “Tri Tang, a 25-year-old marketer, walked into a Best Buy Co. store in Sunnyvale, Calif., this past weekend and spotted the perfect gift for his girlfriend.  Last year, he might have just dropped the $184.85 Garmin global positioning system into his cart. This time, he took out his Android phone and typed the model number into an app that instantly compared the Best Buy price to those of other retailers. He found that he could get the same item on Amazon.com Inc.’s website for only $106.75, no shipping, no tax.”

The perceived price advantage enjoyed by online retailers makes retail stores more vulnerable to shifts in purchasing habits driven by the new smartphone technology.  The Main Street Fairness Act now pending before Congress would eliminate this structural imbalance.


MA Senator Richard Moore: Any extension of tax cuts should include the provisions of the “Main Street Fairness Act

November 23, 2010

Politico.com published a blog post today by Massachusetts State Senator Richard Moore which gave a ringing endorsement for the Main Street Fairness Act, and which advocates for including provisions of the Act in any extension of tax cuts (generally referring to the extension of the so-called Bush Tax Cuts).
The post closes with the following sobering assessment: The national recession is still threatening America at the state and local level. Without the benefits of H.R. 5660, states will be forced to lay off more teachers, public safety personnel and others in the next two or three years and reduce state and local purchases of private sector services. The resulting increase in unemployment and decrease in state and local government purchases of goods and service could harm the recovery and even lead to a “double-dip” recession.”