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Author Topic: SCOTUS decision on state tax for online purchases  (Read 1628 times)

Chris Kern

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Re: SCOTUS decision on state tax for online purchases
« Reply #40 on: June 24, 2018, 10:26:39 PM »

Nope, I only have to report sales tax in the state I reside in, do business in, no matter where my customers come from.

This is what may change as a result of last week's Supreme Court ruling—assuming other states besides South Dakota enact laws requiring out-of-state retailers to collect sales tax on their behalf for purchases made by their residents.

In theory, if all 49 eligible jurisdictions* passed such laws, sellers who exceeded a certain threshold of sales to residents of a jurisdiction would be required to (1) account for and report all sales to residents of that jurisdiction and (2) collect the applicable sales tax for that jurisdiction and remit it to the jurisdiction.

The Court's opinion acknowledged that the reversal of the former "physical presence" rule may expose Internet retailers to an additional administrative burden.  The South Dakota law that was the subject of the litigation was cited approvingly by the Court for mitigating that burden.  The opinion also predicted that software might soon be available to help merchants deal with the administrative overhead, and noted that Congress can at any time legislate a national regime for interstate tax collection:

Quote
[The retail sellers that were parties to the litigation before the Court] argue that “the physical presence rule has permitted start-ups and small businesses to use the Internet as a means to grow their companies and access a national market, without exposing them to the daunting complexity and business-development obstacles of nation­wide sales tax collection.” . . .  These burdens may pose legitimate concerns in some instances, particularly for small businesses that make a small volume of sales to customers in many States. State taxes differ, not only in the rate imposed but also in the categories of goods that are taxed and, sometimes, the relevant date of purchase. Eventually, software that is available at a reasonable cost may make it easier for small businesses to cope with these problems. Indeed, as the physical presence rule no longer controls, those systems may well become available in a short period of time, either from private providers or from state taxing agencies them­selves. And in all events, Congress may legislate to ad­dress these problems if it deems it necessary and fit to do so.

In this case, however, South Dakota affords small mer­chants a reasonable degree of protection. The law at issue requires a merchant to collect the tax only if it does a considerable amount of business in the State. . . .

Unless Congress acts (I guess it's possible, but I'm not holding my breath), future litigation will no doubt be required to clarify the parameters of the authority of the states to require retailers to collect sales taxes on their behalf.

_____
* I.e., the 46 states which have some form of sales tax, the District of Columbia, and the U.S. territories of Puerto Rico and Guam.  Delaware, Montana, New Hampshire, Oregon, and the territories of the U.S. Virgin Islands, American Samoa, and the Northern Mariana Islands currently have no sales tax.  Alaska has no state-level sales tax, but permits municipalities to tax sales.

(Correction: this post has been edited to correct the number of U.S. jurisdictions that are potentially affected by the Supreme Court's ruling.)
« Last Edit: June 25, 2018, 06:23:17 AM by Chris Kern »
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digitaldog

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Re: SCOTUS decision on state tax for online purchases
« Reply #41 on: June 24, 2018, 10:54:39 PM »

I'm retired now.  But I had a specialty contracting firm that mainly installed and serviced BAS and EMS systems in NY.  Our offices were in NYC and all our employees worked out of NY.  However, we had customers in NJ.  So when we did work there, we billed them including NJ sales tax which I reimbursed to NJ having to file NJ State Sales Tax forms.  If I recall correctly, it was on a quarterly basis, but it could be monthly if the sales tax was over a certain limit.  I had both NJ and NJ Certificates of Sales Tax that allowed me to collect sales tax in both states even though my company had no physical presence in NJ.  It would not have been legal to do my work in NJ without it. 
I can only report how I and other's did business (24 years on NM, 15 in CA) in terms of the collection of sales tax and how long it takes/took. Therefore this statement today and in the past isn't the case: But if another state, let's say 25 states, where you sent your products out requires paperwork too, the time you'd have to work at it will go up considerably.
IF another state let's say 25 states where I sent my products/did my services required XYZ paper work, and they don't, that comment might have a leg to stand on assuming I was doing this on a paper ledger. I'm simply telling you how this stuff works today and has for 35 years in TWO states.
And no, I'm not an internet or mall company, I'm a company that did business in two states and in terms of the collection of sales tax, I only need to report that income to the state I do business in. I could NOT avoid paying sales tax for supples like Polaroid, film etc, because that was part of what I 'manufactured' but that has nothing to do with collecting and paying sales tax, rather what goods I can purchase without paying sales tax. IF I do work for an out of state company, I do not bill, collect or pay sales tax. IF I were required to do this, it would still take 5 minutes to have my banking program print out a report AND fill out the form for me, twice a year!
What MAY happen in the future, I cannot predict. It will still take the banking application mere seconds to draw up a report (I have templates, I simply enter date ranges). So there's no need to look at what SCOTUS did and place a political slant via FUD about what may happen in the future and how much time you assume it will take to report sales tax. 2 or 25 or all 50 states, it is still going to be, for me, a 5 minute operation.
« Last Edit: June 24, 2018, 11:07:20 PM by digitaldog »
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Andrew Rodney
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Re: SCOTUS decision on state tax for online purchases
« Reply #42 on: June 24, 2018, 10:56:44 PM »

This is what may change as a result of last week's Supreme Court ruling—assuming other states besides South Dakota enact laws requiring out-of-state retailers to collect sales tax on their behalf for purchases made by their residents.
Yes, it may. It will still take minutes to figure out and report the sales tax for me; I use a computer to do this. I can't speak for other's in differing states, using other methods of calculating and reporting sales tax. But my main point is, in terms of what SCOTUS did, I applaud it and it will not be any kind of a burden for me or my business, nor produce any additional time reporting the tax. It's not rocket science.  ;D
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Andrew Rodney
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digitaldog

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Re: SCOTUS decision on state tax for online purchases
« Reply #43 on: June 24, 2018, 11:00:10 PM »

Another interesting point.  IF you're a company that have customers buy things in your store and then have them shipped to their home in another state, will you have to start collecting sales tax for that state too just like internet sales?  That hasn't been the case.
Where? IF I go into a store here Santa Fe and have the thing I purchased sent out of state, at least here, pretty sure I'll get changed sales tax. Even if not, IF I were to sit outside that store today and if they had internet sales, got onto the wifi and ordered a product to be shipped out of state, currently they would not change me sales tax. That outlines why I feel what SCOTUS did seems reasonable and fair.
« Last Edit: June 24, 2018, 11:05:15 PM by digitaldog »
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Andrew Rodney
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Slobodan Blagojevic

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Re: SCOTUS decision on state tax for online purchases
« Reply #44 on: June 24, 2018, 11:06:50 PM »

One question: is there really a state sales tax? In my experience, it is a municipal sales tax, county based,  therefore there might be thousands of different sales taxes to deal with. Illinois has 102, Florida 67.

Just checked: there are 3,007 counties in the U.S.
« Last Edit: June 24, 2018, 11:10:22 PM by Slobodan Blagojevic »
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digitaldog

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Re: SCOTUS decision on state tax for online purchases
« Reply #45 on: June 24, 2018, 11:11:03 PM »

One question: is there really a state sales tax? In my experience, it is a municipal sales tax, county based,  therefore there might be thousands of different sales taxes to deal with. Illinois has 102, Florida 67.
Metaphorical question. Literal answer. Yes there are state sales taxes and those of us in business often collect it and then send that to our state taxation board. The rate does vary here in NM based on the location of the county the business resides. IF you had two locations, each site would fill it's own report based on the taxes in that county. At least in NM.
Do you actually have your own business, file sales tax? What state? Literal question if you can answer it without metaphor....
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Andrew Rodney
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Re: SCOTUS decision on state tax for online purchases
« Reply #46 on: June 24, 2018, 11:12:41 PM »

Just checked: there are 3,007 counties in the U.S.
So what?
In 2010 there were 27.9 million small businesses, and 18,500 firms with 500 employees or more.
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Andrew Rodney
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donbga

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Re: SCOTUS decision on state tax for online purchases
« Reply #47 on: June 24, 2018, 11:16:42 PM »

One question: is there really a state sales tax? In my experience, it is a municipal sales tax, county based,  therefore there might be thousands of different sales taxes to deal with. Illinois has 102, Florida 67.

Just checked: there are 3,007 counties in the U.S.
Every state has their own rules plus each jurisdiction may have additional taxation and fees depending upon the type of business. So from a sellers perspective things will become a total mess for the businesses that have not administered sales taxes. My wife is a CPA and Controller for a large company that sells in all 50 states and every state / jurisdiction have the possibility of imposing their own taxes and fees.

From a buyers perspective the taxes are paid at the time of purchase in essence making the selling entity a tax collector for the state.

It's not pretty and I'm sure congress won't do shit to simplify things since this ruling presents a new revenue stream for local jurisdictions.
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Slobodan Blagojevic

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Re: SCOTUS decision on state tax for online purchases
« Reply #48 on: June 24, 2018, 11:16:52 PM »

Yes there are state sales taxes ... The rate does vary here in NM based on the location of the county the business resides...

That answer is contradictory... if the sales tax rate varies based on the county, then those are county sales taxes, not state. In other words, there is no single state sales tax, at least not in the state of Illinois where I had a business and paid sales taxes (which I already stated in my post #33 in this thread).

Slobodan Blagojevic

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Re: SCOTUS decision on state tax for online purchases
« Reply #49 on: June 24, 2018, 11:21:48 PM »

So what?...

So it means that if someone has a nation-wide business of sufficient volume, they would have to maintain a data base of potentially 3007 different sales tax rates. Also, some of those rates might change mid-year, so there needs to be a system of monitoring that constantly.

digitaldog

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Re: SCOTUS decision on state tax for online purchases
« Reply #50 on: June 24, 2018, 11:29:36 PM »

That answer is contradictory... if the sales tax rate varies based on the county, then those are county sales taxes, not state. In other words, there is no single state sales tax, at least not in the state of Illinois where I had a business and paid sales taxes (which I already stated in my post #33 in this thread).
Nope! It all goes to the NM state and one NM tax agency. It’s called sales tax through out the state; literally!
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Andrew Rodney
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Re: SCOTUS decision on state tax for online purchases
« Reply #51 on: June 24, 2018, 11:34:11 PM »

So it means that if someone has a nation-wide business of sufficient volume, they would have to maintain a data base of potentially 3007 different sales tax rates. Also, some of those rates might change mid-year, so there needs to be a system of monitoring that constantly.
Again, so what? We just trading factoids or you have a non metaphorical point to make about the new decision to tax online stores? Damn question marks! You can’t seem to tell us if you have a company, collect sales tax and IF SO what state.
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Andrew Rodney
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Slobodan Blagojevic

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Re: SCOTUS decision on state tax for online purchases
« Reply #52 on: June 24, 2018, 11:39:28 PM »

... You can’t seem to tell us if you have a company, collect sales tax and IF SO what state.

Answered twice already:

... in the state of Illinois where I had a business and paid sales taxes (which I already stated in my post #33 in this thread).

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Re: SCOTUS decision on state tax for online purchases
« Reply #53 on: June 24, 2018, 11:51:53 PM »

So it means that if someone has a nation-wide business of sufficient volume, they would have to maintain a data base of potentially 3007 different sales tax rates. Also, some of those rates might change mid-year, so there needs to be a system of monitoring that constantly.

A trivial computing problem. I would guess that many if not most of those businesses are already using a third party payment processing system for security reasons. To add a sales tax calculator would not be a major problem. I would also guess that taxing authorities would be happy to send updates of their rates.

Allan
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Alan Klein

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Re: SCOTUS decision on state tax for online purchases
« Reply #54 on: June 25, 2018, 12:50:35 AM »

If states refuse to simplify the way sales taxes are collected from sellers in other states, they just won't get them to comply.  Since the state must be so disorganized, they never figure out how to prosecute.  I suspect, once this thing get going, states will change their laws to make it easy for internet companies to file and pay sales taxes to their states.   

Regardless, sales tax packaging companies will start providing software and processing of payments to provide a simple on-shop sales payment capability.  If you're that small that you won't be able to pay for it, the level of your sales to the various states will be lower then the trip point anyway.  So you won't have to collect the sales charge anyway. 

Alan Klein

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Re: SCOTUS decision on state tax for online purchases
« Reply #55 on: June 25, 2018, 01:00:43 AM »

Another problem I see is companies charging the buyers sales tax with no intention of forwarding the money to the states.  Just keeping it for themselves.  Of course that's illegal. 

On the legal side, how does an internet company know that they are going to go over the limit set by the state when they have to pay?  They have to charge the sales tax just in case.  How do they handle the money if the sales tax collection if the minimum is not reached?  DO they return it to the customers/ Do they forward it to the states regardless.  What if they don't start collecting until the minimum is reached.  Do they go back and charge the earlier buyers?  There's no process indicated by SCOTUS, another reason Congress should get involved. 

How do states go after companies in other states that don't pay them?  How would they even know?  A Texas tax agent can't go into Idaho and demand to see some company's books to see where he shipped his products.  They have no legal authority.  Only Idaho tax department has the authority to see Idaho books.  Congress could clarify this I suppose.  But it will become another SCOTUS issue.

Alan Klein

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Re: SCOTUS decision on state tax for online purchases
« Reply #56 on: June 25, 2018, 01:05:23 AM »

...It's not rocket science.  ;D
If paying taxes was as simple as rocket science, we wouldn't need accountants.  :)

Alan Klein

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Re: SCOTUS decision on state tax for online purchases
« Reply #57 on: June 25, 2018, 01:14:38 AM »

Where? IF I go into a store here Santa Fe and have the thing I purchased sent out of state, at least here, pretty sure I'll get changed sales tax. Even if not, IF I were to sit outside that store today and if they had internet sales, got onto the wifi and ordered a product to be shipped out of state, currently they would not change me sales tax. That outlines why I feel what SCOTUS did seems reasonable and fair.
My wife and I bought something in Santa Fe in April at the Georgia O'Keeffe museum (nice place for photographers to visit) and had them ship it to our home in NJ,  We did not pay sales tax.  They only collect sales tax if you take the purchase with you or ship it to an address in New Mexico.  .


My question is will they have to charge sales tax when they ship to other states going forward because of the SCOTUS decision?  That would apply to sales in all 50 states.  Interesting side question is that five states have no sales tax.  Therefore they have no interest at all whether other states collect their sales tax.  So internet companies will move their headquarters where payment is made to one of these five states.  Then they will ignore collecting sales taxes.


This thing is going to get very messy.  SCOTUS opened Pandora's box and I doubt Congress can put Humpty Dumpty together.

Slobodan Blagojevic

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Re: SCOTUS decision on state tax for online purchases
« Reply #58 on: June 25, 2018, 01:17:02 AM »

A trivial computing problem...

Anyone who has worked with computers and numbers would know that there is no such thing as a trivial computer problem.

I am generally in favor of leveling the playing field. Given the examples mentioned so far (volume and monetary thresholds), it looks like small businesses would be spared. Big online businesses have the resources to deal with the complications.





Alan Klein

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Re: SCOTUS decision on state tax for online purchases
« Reply #59 on: June 25, 2018, 02:17:36 AM »

Anyone who has worked with computers and numbers would know that there is no such thing as a trivial computer problem.

I am generally in favor of leveling the playing field. Given the examples mentioned so far (volume and monetary thresholds), it looks like small businesses would be spared. Big online businesses have the resources to deal with the complications.






SCOTUS should have deferred.  This is a question for the people to decide through their representatives in Congress.  The Constitution gave the power to regulate interstate commerce to Congress, not the courts.  SCOTUS should have minded their own business.  They're not legislators and should not interfere with the people's will. 

All they've done is create a requirement with no way to enforce it.  Without Federal legislation that apply to all states, along with enforcement rules and penalties, there's no requirement because there's no clear way of handling it and can not be any enforcement. Everyone will ignore it except the very big internet companies.  Even they may ignore it. 

For example,  New York Tax auditors cannot go into California to demand to see a California company's books.  They have no legal authority in that state.  They can slam the door on them.  How will they even know if that company is selling in their state much less that they've met some arbitrary level that kicks it in? There has to be some Federal law to set this whole thing up, or leave it the way it was. SCOTUS is putting the cart before the horse and made a mistake

This change requires Congress to legislate first. 
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