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Archive for Monday, October 17, 2011

Tax fairness

A battle between Amazon.com and the state of Connecticut again points out the need for a federal action on collecting sales tax on online purchases.

October 17, 2011

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It’s likely the last time you purchased something online you didn’t pay any sales tax. That’s because in Kansas unless the company has a physical presence in the state, the seller isn’t required to collect state or local sales taxes. Both the seller and the customers get the benefit of a final price that is lower than what the customer would pay if he or she walked into a brick-and-mortar store and bought the item.

That’s costing states serious money. For example, someone purchasing a $499 iPad at a store in Lawrence would pay an 8.85-percent sales tax, or an additional $44.16. Buy the same iPad online and the item costs $499, maybe with free shipping thrown in, and no sales tax. There is a definite advantage to the online seller.

Lawmakers in Connecticut, a state with close to the same population as Kansas, are requiring online sellers nationwide to collect state sales taxes from Connecticut residents under its new Internet tax law. The state could expect up to $152 million a year in additional revenue if all remote sellers comply with the new law, the Associated Press reported last week.

Some companies — including Amazon.com — are balking at Connecticut’s law. Amazon charges sales tax to Kansas customers because it has a distribution center in Coffeyville, but company officials say they don’t have to collect state sales taxes in Connecticut because the company doesn’t have a physical presence there.

Since June, at least six states have enacted laws similar to Connecticut’s, according to the National Conference of State Legislatures. NCSL estimates states are losing a combined $23 billion of sales taxes each year from online purchases, a figure that climbs annually as online shopping grows.

As more states make this a battleground, a national standard is needed. In July, the Main Street Fairness Act was introduced in the U.S. Senate. Supporters say the measure is designed to simplify and modernize sales tax collections to make it easier for online retailers, but it doesn’t provide the teeth to insure the collections are made.

This is an issue that should be settled in Congress. With a federal election on the horizon, and reluctance to create new taxes, expect feet dragging over the issue.

In the meantime, more states, including Kansas, should push for laws similar to Connecticut’s, and fight to make sure they are upheld.

Comments

just_another_bozo_on_this_bus 3 years, 2 months ago

"For example, someone purchasing a $499 iPad at a store in Lawrence would pay an 8.85-percent sales tax, or an additional $44.16. Buy the same iPad online and the item costs $499, maybe with free shipping thrown in, and no sales tax."

I believe that if you order it directly from Apple, you will be charged sales tax (likely because of the existence of Apple stores in Kansas.)

jafs 3 years, 2 months ago

Also, many places will charge shipping, which eats into the savings.

And, it would make a little more sense for the sales tax to be charged in the state the item is shipped from, instead of the destination state.

texburgh 3 years, 2 months ago

The tax needs to be collected for the destination state. The biggest problem in all of this after the lost revenue to the state is the unfair advantage that online retailers have over instate brick and mortar retailers. Unless there is a destination based sales tax requirement states lose and businessmen and women in your state lose.

In these days of powerful personal computers, there is no excuse. A sales tax database can be developed for access by all retailers online or brick and mortar.

jafs 3 years, 2 months ago

Online and bricks and mortar businesses are two different animals, with differing pros and cons.

The fact that some choose to buy online, and some bricks and mortar businesses feel that's unfair is not a good enough reason to charge sales tax on online purchases that go to the destination state.

If the rationale for charging sales tax in the first place has to do with infrastructure used by businesses, then the seller's state would be the one that applied to the most, since they use the infrastructure there for their business.

3 years, 2 months ago

As an additional bit of information, Coffeyville, KS is amazon.com's largest distribution center and the largest employer in the city (reference: http://www.amazon.com/gp/feature.html?ie=UTF8&docId=165194).

So how is this so different than trade practices run by say, Wal-Mart, that receives grand support from both political parties for making cheap purchases from countries that prop up their currency so the can resell locally--running locally owned businesses into the ground in the process--while providing poor paying jobs? Seems to me the amazon.com is likely to become the next cause célèbre for our politicians. Funny how things work. OK, not really.

headdoctor 3 years, 2 months ago

I suppose it depends on what you are buying or where your online purchases are completed but I haven't purchased anything online for quite sometime that didn't have sales tax added. My biggest concern is if we are charged sales tax how do we know that it is actually being paid to the state and credited to the correct county location. Especially if the company you are buying from doesn't have a presence in Kansas. As far as I am concerned I have no choice but to think that I just added to the sellers profit by 8.85%.

headdoctor 3 years, 2 months ago

You may believe that the Kansas sales tax rate is to high but sales tax is not really the first type of tax that comes to mind when one thinks of confiscatory tax. The real problem with noncompliance in collection and remitting sales tax from internet sales is as it has always been. The internet is very hard to track and the State does not do a lot of auditing or even have the staff to keep up with it. They don't even keep up with compliance from Kansas merchants that aren't even on the internet. Not to mention Kansas does not have the authority force compliance in all locations where sales are made. It wouldn't surprise me to find out that Kansas loses out on more tax every month than what is actually collected. We already know that there are millions owed by just the ones they know about but haven't been able to collect from.

tolawdjk 3 years, 2 months ago

Remember, under the 9-9-9 that online iPad is gonna hit you for $45 more.

Richard Heckler 3 years, 2 months ago

Which way do we want it?

Sales taxes collected from every source or higher local taxes and user fees?

Liberty275 3 years, 2 months ago

"are requiring online sellers nationwide to collect state sales taxes from Connecticut residents under its new Internet tax "

Blatantly unconstitutional.

Article 1 - The Legislative Branch Section 8 - Powers of Congress To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

Amendment 10 - Powers of the States and People. Ratified 12/15/1791. The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

Article IV - The States Section 10 - Powers prohibited of States No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.

Article VI - Debts, Supremacy, Oaths This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.

Centerville 3 years, 2 months ago

Yes, a national standard is needed: states should take the hint and eliminate their sales taxes. Their citizens are trying to tell them something. They refuse to listen.

gr 3 years, 2 months ago

Simple solution. Taxes are collected at the rate of and submitted to the state where the business is located at. None of this gibberish that one person buying the same item pays one tax rate and another pays another. Otherwise, the same argument holds that some businesses may not be able to attract customers from one area as another. Also, none of this gibberish of you paying the rate where you live unless you buy within the state, then you pay the rate where the business is. A bunch gibberish complex foolishness. Everyone pays the same rate where the business is and at that location's rate. Those states which are hostile towards businesses, may not get much.
That's fair.

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