[RD] Taxing the Internet

[Timsup2nothin]

Whether or not the reasons for the increased complexity stateside are well-founded doesn’t make the collection of sales tax stateside any less complicated.

You have yet to offer any explanation as to how collection of sales taxes for a US state is more complicated than collecting sales taxes for any other entity.

 

[BvBPL]

Merchants claim, correctly, that remitting sales taxes to a remote jurisdiction is a daunting technical challenge. In addition to imposing sales taxes themselves, many states also permit local jurisdictions to impose their own sales and use taxes. This can get really granular with some areas subject to state, county, city, and district sales and use taxes, all of which need to be sent to different agencies. Not every merchant is capable of maintaining those distinction in its sales.

There are over fifteen thousand different sales tax jurisdictions in the United States.

 

[Timsup2nothin]

Oh. Right. Let me rephrase.

You have yet to offer any believable, realistic explanation as to how collection of sales taxes for a US state is more complicated than collecting sales taxes for any other entity.

Are you saying that "remitting sales taxes to a remote jurisdiction is a daunting technical challenge" because they are remote? Do you think that taxes are remitted in precious metals delivered on camel back?

As to your "but it gets granular" complaint, you include a statement that is patently false; "all of which need to be sent to different agencies." Sales taxes collected on transactions in California are remitted to the Franchise Tax Board and distributed to all those "granular" units by them, not by the vendor. All that the vendor has to do is use information provided by the FTB to collect the correct amount based on the address of the purchaser.

So any merchant that is "incapable of maintaining those distinctions" is not getting basic location information from their customers. While this may be the case in some transactions involving not only a digital product but a digital form of payment, I'd guess that is pretty rare. Almost all transactions require a delivery address or a billing address, if not both.

 

[BvBPL]

So any merchant that is "incapable of maintaining those distinctions" is not getting basic location information from their customers. While this may be the case in some transactions involving not only a digital product but a digital form of payment, I'd guess that is pretty rare. Almost all transactions require a delivery address or a billing address, if not both.

The difficulty is not in obtaining the address of the purchaser, the difficulty is determining how much sales tax to charge given the address of the purchaser.

 

[Timsup2nothin]

The difficulty is not in obtaining the address of the purchaser, the difficulty is determining how much sales tax to charge given the address of the purchaser.

Enter location into chart provided by Franchise Tax Board, output applicable tax rate. Yeah, that's an incredible burden in an on line transaction. It's so much easier for the clerk at the counter of a brick and mortar store to pull out the paper tables.

 

[EnglishEdward]

The difficulty is not in obtaining the address of the purchaser, the difficulty is determining how much sales tax to charge given the address of the purchaser.

So if all items are taxable at same rate, someone in US government has to maintain
a spreadsheet with a few thousand records on a web server which has three columns:

State
Zip Code
Per Centage Sales Tax

Problem I suspect is that the eligibility of items for taxation varies according to locality and that many localities have different tax rates for different items.

Taxation for Internet purchases would work, but it would likely require some standardisation.

 

[EnglishEdward]

Not at this time. Why?

Well I am a retired civil servant and I do not have commercial business experience.

My reasons for being sceptical are that in my own observations of other people's business operations in the UK:

(a) the quantities of applicable law are such that it is very nearly impossible to be complaint with them all

(b) trying for full compliance renders one's business uncompetitive against competitors who are less fastigious

(c) for small companies and individuals it is often all about:

(i) finding a slot in the market
(ii) obtaining contacts and presence
(iii) achieving critical turnover
(iv) breaking even and hopefully
(v) actually making a profit)

with worrying about being taxed being left until later.

After all if they can not do the former (i to v), there is no profit to be taxed and what with limited
liability the tax man only has an insolvent company that can not pay forwards the sales tax.

(d) for large companies, risk management is applied to the possibility of infringements:

(i) how much will it cost to comply
(ii) how likely are we to be caught and
(iii) what is the penalty for non complaince

Unless (ii) x (iii) divided by (i) reaches a threshold they may not bother trying for compliance.

 

[Bamspeedy]

Question. What is the calculation for "x% above cost" based on? In the example the pirate station was certainly selling at a very high percentage above "cost" if you define cost as what they paid per gallon at the refinery. They were even charging a very high percentage above cost if you define cost as what they paid per gallon on delivery. They were not charging a high percentage above cost when you add in their overhead costs; ie facilities leasing and transaction service contract; but it seems unlikely that such a law would be based on such considerations.

Taxes are not technically a "cost" for the vendor, at least in California. They are paid by the consumer. The vendor merely collects the taxes as an (unpaid) agent of the applicable agency. Is your law based on "wholesale purchase price plus tax to be collected"? Or does your state have taxes collected at the refinery? That second one is a potentially good solution, since the number of refineries is small so monitoring compliance becomes much easier. Unfortunately refineries belong to oil companies, and when it comes to a fight over who is going to have to do the "unpaid agent of tax collection" labor they are far better equipped to say "not us."

As to the idea that "the money is made on the stuff they sell in their store" that is true if you look only at margins. But my friend's business was much more dependent on the ten cents a gallon that they made on a million gallons of diesel every month than it was on the fifty cents a can that they made on a few hundred cases of sodas.

I always assumed it was the cost the refinery charges them (or the transportation company that delivers the gas from the refinery to the gas station). The gas station chain that shut down the mom and pop gas stations in this area had their own transportation for the fuel.

Upon researching the law, even I learned a few things I did not know about it. I worked at a gas station twenty years ago, and some of the things the owner told me are untrue (he wasn't the only source for the things I thought about the law, so I wasn't basing it all on what he said).

-The law is much older than I thought.
-The markup on gas is higher than I had been told (he said "a nickel a gallon" (this was back when gas was not much more than $1/gallon), and the "gas stations make most of their money from the high priced snacks and drinks" was also told to me by a high school teacher, and perhaps others).

The argument against the law is basically it reduces competition. I say it is intended to prohibit someone from moving into an area, selling things at a loss to kill the competition before moving the prices back to normal (think of what Walmart is always accused of doing). Of course, Walmart is just as common in Wisconsin as it is anywhere else.

Edit: Forgot a link:
http://www.gmtoday.com/news/local_s...inimum-markup-law-antiquated-or-necessary.asp

 

[Zelig]

Whether or not the reasons for the increased complexity stateside are well-founded doesn’t make the collection of sales tax stateside any less complicated.

It means you can just uncomplicate it.

 

[Timsup2nothin]

The argument against the law is basically it reduces competition. I say it is intended to prohibit someone from moving into an area, selling things at a loss to kill the competition before moving the prices back to normal (think of what Walmart is always accused of doing). Of course, Walmart is just as common in Wisconsin as it is anywhere else.

You are correct. Because demand for gas is relatively inelastic the market requires this kind of regulation to prevent monopolization. Hasn't been terribly effective, generally, but the intentions are good.

Also note that since it is based on the cost paid at the refinery it does nothing to eliminate the example shell game, unless the taxes are collected at the refinery rather than at the point of retail sale.

 

[BvBPL]

Enter location into chart provided by Franchise Tax Board, output applicable tax rate. Yeah, that's an incredible burden in an on line transaction. It's so much easier for the clerk at the counter of a brick and mortar store to pull out the paper tables.

That’s nice of California. California’s behavior is not reflective of other state. Many states require local sales tax to be remitted directly to the municipality (or what-have-you) rather than through the state department. Many other states also do not have charts as California does.

An additional concern is what is and what is not taxable varies significantly. Pixie Stix, for example, are not subject to New Jersey’s candy sin tax. Kit-kat bars are subject to the candy sin tax in some states and not in others.

So if all items are taxable at same rate, someone in US government has to maintain
a spreadsheet with a few thousand records on a web server which has three columns:

State
Zip Code
Per Centage Sales Tax

Problem I suspect is that the eligibility of items for taxation varies according to locality and that many localities have different tax rates for different items.

Taxation for Internet purchases would work, but it would likely require some standardisation.

A problem with that is that the federal government of the United States doesn't have any say in how sales tax is applied on a local level. The federal government defines under what conditions a remote seller can be made subject to local sales tax, but not what that sales tax is. The information in the hypothetical spreadsheet you discuss is actually maintained by various private concerns that subsequently sell it on to merchants.

 

[Timsup2nothin]

That’s nice of California. California’s behavior is not reflective of other state. Many states require local sales tax to be remitted directly to the municipality (or what-have-you) rather than through the state department. Many other states also do not have charts as California does.

Name one. Give me one state where businesses submit collected sales taxes directly to city administrations rather than through a state agency. Provide the address of one city or county sales tax collection office.

Cities and counties do not have the manpower to operate such a system. Economies of scale make the state the only viable agent for managing the sales tax system...and that's in California where there are counties that are themselves bigger than numerous states. The day Peoria says "We are going to impose a quarter cent sales tax in our city of 115,000 and hire sufficient people to administer it!" is the day Peoria starts spending more money than they would collect. And you know what they say about things that won't play in Peoria.

 

[BvBPL]

Colorado.
City of Aspen Sales Tax, PO Box 912513, Denver, CO 80291-2513

 

[Timsup2nothin]

Colorado.
City of Aspen Sales Tax, PO Box 912513, Denver, CO 80291-2513

Well done.

Solution...don't extend your business into backwards states like Colorado. Notice that Aspen charges 2.4% sales tax above the state rate...an amount that probably barely covers their cost of administration. By centralizing administration of collection at the state level a city the size of Aspen in California can get a very nice return on a half cent local tax.