Same everything, except tax treatment (2)

October 31, 2012

 

Sales tax shown is based on delivery to a Connecticut address. Connecticut sales tax rates are among the lowest in the nation.


Round-up of recent press on online sales tax collection

October 3, 2011
Recent press

Recent press on online sales tax collection

We’ve been looking at the recent editorials and news articles on online sales tax collection, and we’re encouraged to see that most of them are in favor of it—a position that we’ve long argued to be practical, sensible, and simply right.

From the Tulsa World, “Only fair: Online sales tax is necessary”:

No one likes paying taxes. They are, however, necessary to keep a city and state running. You might not like a sales tax, but you certainly like good roads.

If we’re going to have taxes, it is imperative that everyone pays their share. For years, some shoppers have been skirting local and state sales taxes by purchasing items online that are available locally. That is not fair to those who support local businesses and keep their cities running with local sales taxes. . . .

States and cities . . . need the income that they have coming. Local merchants, who choose to do business here and employ Tulsans and spend their hard-earned money with fellow local merchants and pay their sales taxes, deserve a level playing field. 

From the Bismarck Tribune, “Main Street Fairness Act: A bill to close the sales tax loophole”:

Studies show that states are losing about $23 billion annually in sales taxes. The tax is legally due on purchases but goes uncollected because the seller is not required to collect the tax and the purchaser fails to report and remit the tax due. This situation creates a huge disparity and an extreme disadvantage for our main street retailers who are competing with retailers selling over the Internet or by some other remote means. . . .

The Main Street Fairness Act addresses the issue of fairness and levels the playing field for all retailers. . . .

Cities, counties and state government rely on sales and use tax revenue to provide services to our residents and to build and maintain a high quality infrastructure for the businesses operating here. The Main Street Fairness Act is an important bill for the retail industry and states—it provides for fairness across the retail industry while permitting individual state sovereignty and supporting a fair sales tax system. . . .

The proposed legislation will go a long way to support and encourage growth in our local North Dakota businesses along with main street retail industry across the country. We encourage Sens. Kent Conrad and John Hoeven and Rep. Rick Berg to sign on to the legislation and support it when it comes up for a vote.

From the Detroit Free Press, “Online sales tax collection rules would level playing field and add funds to state”:

Main Street retailers, the backbone of America, stimulate local economies, build communities and provide good, stable, local jobs. In July retailers added 26,000 jobs to the national economy.

However, these jobs are being threatened by online retailers fighting to preserve an unfair price advantage of 6% over brick-and-mortar stores in Michigan. . . .

In today’s marketplace, the shape of commerce is changing, but the rules remain stuck in 1992—well before the era of the iPad, smart phones and even home Internet access. Online-only retailers are exempt from collecting sales tax at every point of purchase. . . .

Many consumers are often unaware that the tax on online and catalogue purchases already exists. When an online retailer fails to collect the sales tax, it falls to the consumer to report that tax directly to the state, which is often not done.

The Center for Business and Economic Research estimates that this year Michigan will lose more than $125 million in revenue due to the Internet sales tax loophole. As legislators grapple to fill budget gaps, this revenue would go a long way toward adequately funding essential public services: paving roads, keeping police and firefighters on the job, and providing our children with a quality education.

States have been compelled to take action in the absence of a national approach to sales tax collection. But a possible solution is the Main Street Fairness Act, introduced in Congress in July. The bill is designed to grant states the authority to set up a simple and equitable system of tax collection on remote sales and, ultimately, the ability to collect these taxes at the point of purchase. . . .

We need a 21st Century framework to ensure a marketplace that benefits online retailers in addition to brick-and-mortar retailers, who provide good local jobs, support our communities and drive America’s economy.

Our country is overdue for a national solution to the issue of sales tax collection.

From Gazette.net (Maryland), “Inaction on Internet sales tax hurts states”:

For Maryland, collecting sales tax on Internet purchases could yield additional revenue estimated to be in excess of $200 million annually, which the state sorely needs to bring budgets into balance given the lagging condition of our local economy and continued structural deficit.

Without this revenue, which is rightfully owed to the state, programs such as Medicaid, K-12 education and our transportation infrastructure needs will be unmet without additional tax increases. . . .

More importantly, though, such a policy change would level a slanted playing field for bricks and mortar retailers who invest in our local communities and currently charge and collect taxes on sales via the Internet. . . .

Moving forward . . . our federal representatives and Congress as an institution should end this debate and do what’s right for state governments and more importantly for countless mom-and-pop retailers that serve as the backbone of our nation’s economy.

From the Midland (MI) Daily News, “Local businesses like proposed Internet sales tax legislation”:

Legislators hope a newly proposed online sales tax bill will equalize what they consider an unfair playing field between Web retailers and small businesses. . . .

Michigan would save up to $141.5 [million] in lost sales tax revenue if the [state] bill becomes law, improve sales at brick-and-mortar retailers by as much as $126 million and create up to 1,600 jobs, according to a report from the Lansing-based Public Sector Consultants.

Jerry Meier, owner of Meier Camera Shop, 122. W. Main St. in Midland, said he cannot believe the state has chosen to miss out on those tax dollars for so long.  “We’ve wondered about this for some time. I think it’s going to make a difference,” Meier said. “Everyone says ‘buy local,’ but when it gets right down to it, they look at (online retailers) as an advantage.”

A 6 percent disadvantage when it comes to sales taxes makes a large difference in the long run, he said. . . .

“Legislators we’ve talked with understand that a sale is a sale is a sale regardless of where it takes place,” said Tom Scott, senior vice president of the Michigan Retailers Association. “Government should not be picking winners and losers by favoring one type of retailer over another — especially when it’s our hometown Michigan retailers who are being hurt by the current situation.”


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.


Response: Online sales cut into Michigan revenue

December 23, 2009

Christine Rook of the Lansing State Journal in Michigan just wrote “Online sales cut into Michigan revenue – Holiday shoppers avoid sales tax by buying online

After reading a few of the reader comments, we felt an important distingtion was being lost on the LSJ.com readers, so we commented:

TaxCloud wrote:

I think it may be appropriate to point out that the sales taxes due on Internet purchases are not a new taxes. Sales and use tax have been Michigan law since 1937!

Although taxes are unpopular, voters routinely approve *local sales taxes* to pay for schools, police, and other local services. It is unfair to require local businesses to collect and remit local sales taxes, while not requiring so-called “remote sellers” to do the same.

Historically remote sellers were mail order catalog merchants. In 1967 & 1992 the US Supreme 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 the success of the Internet over the last 25 years, it is time to revisit exactly how difficult it is for remote sellers to keep track of just over 10,000 jurisdictions.

Unfortunately, the posting rules were rather strict, so we couldn’t go into much more detail without posting a series of comments, but hopefully if any of LSJ.com readers have any questions they will find us.