SCOTUS decision on state tax for online purchases

[jeremyrh]

Slightly OT but...

When I buy stuff from the US by Internet (software etc) they charge me VAT based on the country I order from. Does that company send one cent of that money they collect to the tax man in Europe?

[Chris Kern]

When I buy stuff from the US by Internet (software etc) they charge me VAT based on the country I order from. Does that company send one cent of that money they collect to the tax man in Europe?

The short answer is yes.  I'm hardly an expert on international commerce, but my understanding is that the shipping entity which seeks to import the goods is required to demonstrate that all applicable taxes have been paid before the shipment can clear customs in the destination country.  Major American retailers such as Amazon-US apparently pay the foreign taxes at the time of purchase for products that they fulfill and provide the shipper with the necessary documentation, so the purchaser sees the tax charge at the time of sale.  However, a German purchaser recently described a different scenario for a purchase that was made through Amazon from a third party.  The product was sold and fulfilled by a small U.S. company that used Amazon only as an intermediary.  The merchant apparently did not have a mechanism in place to pay foreign taxes, so the German VAT did not appear in the Amazon "shopping cart."  Before it would deliver the product, the shipper (I don't recall whether it was UPS or DHL) required the purchaser to reimburse it for the VAT the shipper had paid on the purchaser's behalf at the time of importation, plus a hefty "service" fee (€50, I think) for advancing the funds for the VAT.  Needless to say, the purchaser was rather miffed at the added expense, but apparently this was part of an arrangement the shipper had made with the German government.

[Alan Goldhammer]

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.

I'm not so sure.  Pennsylvania passed a law earlier in the year addressing this:  http://www.mcall.com/news/nationworld/pennsylvania/mc-nws-pennsylvania-online-sales-amazon-20180307-story.html

Addressing Slobadan's point about sales tax and whether it is state or local.  Maryland administer's its sales and liquor tax at the state level.

[RSL]

It depends. When I was dealing with the tax situation in Manitou Springs, Colorado, Manitou's sales tax collections were handled by the state -- at Manitou's request. County sales tax was separate from that. So you had at least two sets of forms to fill out and two checks to write. This is a case where, had Manitou not opted for the state to do the collecting, a sale to somebody in the relatively small city of Manitou Springs from a Florida company could require keeping track of three separate sales taxes. It's a potential nightmare.

[petermfiore]

It depends. When I was dealing with the tax situation in Manitou Springs, Colorado, Manitou's sales tax collections were handled by the state -- at Manitou's request. County sales tax was separate from that. So you had at least two sets of forms to fill out and two checks to write. This is a case where, had Manitou not opted for the state to do the collecting, a sale to somebody in the relatively small city of Manitou Springs from a Florida company could require keeping track of three separate sales taxes. It's a potential nightmare.

Now remember Russ, all business have a staff of employees to handle such non creative issues... Oh wait I'm self employed, I have no such staff. This will be a nightmare.

Peter

[RSL]

Yeah, I used to do it for my wife's gallery. It was bad enough when you were dealing with local sales. If the feds don't come up with a way to combine everything into a single pot, a small business could end up with thousands of tax forms to do quarterly or even monthly. It could put a bunch of small businesses out of business.

[Slobodan Blagojevic]

... Addressing Slobadan's Slobodan’s point about sales tax and whether it is state or local.  Maryland administer's its sales and liquor tax at the state level.

Let me clarify what I was asking or saying. In my experience (Illinois) sales tax was undeed administered at the state level, meaning you report it to a single authority and send a single payment to them. However, to arrive to that single sum, I had to calculate my sales in about a dozen different counties, each having their own, different, sales tax rate.

Further complications: as I was selling prints at art fairs, the promoters will tell you which sales tax to apply. At the time of paying it to the state, you often discover that the tax rate for that county in the state’s database is different. Sometimes, it would happen that, if you go to that county’s web site, they’d have a third rate. Great! So much for a “trivial computer problem.” So, you either overcharged or undercharged your customer and is now left to deal with the difference.

I was participating in art fairs only in Illinois and only in summer, thus had to register and pay only in one state, one or two times a year. A lot of people are traveling to art fairs across the country all year long. They need to register and pay to each state, and calculate different county taxes each time.

[petermfiore]

Yeah, I used to do it for my wife's gallery. It was bad enough when you were dealing with local sales. If the feds don't come up with a way to combine everything into a single pot, a small business could end up with thousands of tax forms to do quarterly or even monthly. It could put a bunch of small businesses out of business.

That's my biggest concern...Ever notice how the Government treats you like your in business for them.

Peter

[RSL]

Peter, you just caused me to remember something that really, really, really pissed me off at the time. I once called the tax office in El Paso county, Colorado to ask a question about sales tax. I don't remember exactly what the question was, but the answer I got was: "Well, since you're in business. You should already know that."

When the government is trying to "help" you, you're probably in deep trouble.

What really bugs me, and there's a lot of it right here in The Coffee Corner, is pronouncements about business from academics who've never been anywhere near a business. I've forgotten which Democrat presidential candidate it was who made all sorts of left-wing pronouncements about business, and then, when they threw him out of politics he went into business and fell on his keister. He at least had the grace to admit he'd been wrong. I doubt you'd find that kind of honesty among our current crop of leftists.

[digitaldog]

A trivial computing problem.

It is indeed, despite Slobodan's metaphorical like FUD that is literally wrong in calculating sales tax. To fill out state sales tax, one needs simple addition and division. At least in those two small sates I've done it in (California and New Mexico). One can do this on a computer, a calculator or on paper. Well some might be able to do this on paper if they have the concepts of basic math and can pull themselves away from telling us how SCOTUS and the Gov will ruin everything. In terms of taking 5 minutes to file sales tax, I've ben doing it over 30 years, and it takes ME five minutes. No, I do not need an accountant to do this, maybe some here do. Filing state sales tax reports isn't the same as filing federal income taxes despite a retired poster here suggesting it is necessary to involve an accountant. Maybe for him, not for me, perhaps not for others. The FUD-mongers are predicting nightmares and massive problems but until then, it's more of the political FUD we see in this forum. Some are more concerned and find more nightmares in filling sales sales tax than they do in our climate changing as indicated again in this forum. And as we see in this forum, everything has to be reduced to how awful government is, with a political slant to blast out the FUD.

Let's see what happens before all the doom and gloom because unless you've experienced, you're only imagining it! If you've experienced it, tell us actual experiences, not metaphorical FUD about what might. What the ruling does is level a playing field and will generate more funds for the states. I see that as a good thing THUS FAR. You old white guys can complain, predict, spew FUD and maybe some of that will result; come back when it does and tell me so. Until then, I can't understand the obsession with a utter lack of following the spirit of THIS web site; photography! Maybe because some here are less photographers than professional FUD-mongers.

[Alan Goldhammer]

Let me clarify what I was asking or saying. In my experience (Illinois) sales tax was undeed administered at the state level, meaning you report it to a single authority and send a single payment to them. However, to arrive to that single sum, I had to calculate my sales in about a dozen different counties, each having their own, different, sales tax rate.

Further complications: as I was selling prints at art fairs, the promoters will tell you which sales tax to apply. At the time of paying it to the state, you often discover that the tax rate for that county in the state’s database is different. Sometimes, it would happen that, if you go to that county’s web site, they’d have a third rate. Great! So much for a “trivial computer problem.” So, you either overcharged or undercharged your customer and is now left to deal with the difference.

I was participating in art fairs only in Illinois and only in summer, thus had to register and pay only in one state, one or two times a year. A lot of people are traveling to art fairs across the country all year long. They need to register and pay to each state, and calculate different county taxes each time.

Sorry for the misspelling.  I will also clarify that Maryland sales tax is a statewide tax and I don't think municipalities can add their own on top of it.  the problem as with a lot of regulations is that local rules and regulations are usually much more difficult to deal with than those at the Federal level.  One would think that collection of tax revenue would be easy to accomplish but it often is not.

[Alan Klein]

The short answer is yes.  I'm hardly an expert on international commerce, but my understanding is that the shipping entity which seeks to import the goods is required to demonstrate that all applicable taxes have been paid before the shipment can clear customs in the destination country.  Major American retailers such as Amazon-US apparently pay the foreign taxes at the time of purchase for products that they fulfill and provide the shipper with the necessary documentation, so the purchaser sees the tax charge at the time of sale.  However, a German purchaser recently described a different scenario for a purchase that was made through Amazon from a third party.  The product was sold and fulfilled by a small U.S. company that used Amazon only as an intermediary.  The merchant apparently did not have a mechanism in place to pay foreign taxes, so the German VAT did not appear in the Amazon "shopping cart."  Before it would deliver the product, the shipper (I don't recall whether it was UPS or DHL) required the purchaser to reimburse it for the VAT the shipper had paid on the purchaser's behalf at the time of importation, plus a hefty "service" fee (€50, I think) for advancing the funds for the VAT.  Needless to say, the purchaser was rather miffed at the added expense, but apparently this was part of an arrangement the shipper had made with the German government.

Couldn't the purchaser prepay the VAT to the seller at the time of purchase to avoid the shipper's €50 handling fee?  Shipper's are spending time and money.  What if the purchaser is not there for delivery?  They've risked their money and may not get paid back the VAT they paid for the purchaser.

[RSL]

I will also clarify that Maryland sales tax is a statewide tax and I don't think municipalities can add their own on top of it.

In other words, Alan, you don't actually know what the law is in Maryland. In most states each taxing authority can levy its own sales tax. In Colorado the state specifies the combined limit for sales tax, but stays out of the local details. When I was mayor of Manitou Springs it appeared the county was about to raise their sales tax a penny, which would have brought the total to the state limit, and would have left us holding the bag if we had to raise our local sales tax a penny because of the burdens the state and the county were putting on small cities. I got my council to vote for a one cent raise on first reading. We never had a second reading to pass the increase, but the fact that if the county passed an increase on first reading we could go ahead on second reading and beat them to the punch put a screeching halt to the problem. I wasn't very popular with the county commission after that, but that's life in the fast lane.

[Alan Klein]

I'm not so sure.  Pennsylvania passed a law earlier in the year addressing this:  http://www.mcall.com/news/nationworld/pennsylvania/mc-nws-pennsylvania-online-sales-amazon-20180307-story.html
....

The article says nothing about how Pennsylvania will enforce collecting taxes from out of state companies.  Here's what their tax official said.  It sounds very weak to me. 

"Q: Historically, consumers don’t file use taxes on their own. How will your department police this law and track down consumers using the records the companies provide the state?
A: What we are hoping for is that the companies will start to collect the tax. They will see this is a lot of trouble — ‘We don’t want to bother our customers with this, it will be easier just to remit the tax on their behalf.’."

[RSL]

That's a hoot, Alan. This is gonna be another job fair operation for attorneys.

[Alan Klein]

Yeah, I used to do it for my wife's gallery. It was bad enough when you were dealing with local sales. If the feds don't come up with a way to combine everything into a single pot, a small business could end up with thousands of tax forms to do quarterly or even monthly. It could put a bunch of small businesses out of business.

Exactly, we need Congress to pass legislation.  Of course, they will defer and leave the whole thing as a mess because getting involved will mean that their voters will be paying more taxes.  Politicians don't like raising taxes.  So, let the Supreme Court figure out how to handle it.  Those dummies created the mess by in effect legislating interstate commerce which is reserved for Congress to do.  Without Congress, how will it be enforced?

[Alan Klein]

Let me clarify what I was asking or saying. In my experience (Illinois) sales tax was undeed administered at the state level, meaning you report it to a single authority and send a single payment to them. However, to arrive to that single sum, I had to calculate my sales in about a dozen different counties, each having their own, different, sales tax rate.

Further complications: as I was selling prints at art fairs, the promoters will tell you which sales tax to apply. At the time of paying it to the state, you often discover that the tax rate for that county in the state’s database is different. Sometimes, it would happen that, if you go to that county’s web site, they’d have a third rate. Great! So much for a “trivial computer problem.” So, you either overcharged or undercharged your customer and is now left to deal with the difference.

I was participating in art fairs only in Illinois and only in summer, thus had to register and pay only in one state, one or two times a year. A lot of people are traveling to art fairs across the country all year long. They need to register and pay to each state, and calculate different county taxes each time.

You have to go over a certain limit for the requirement to kick in.  $100,000 in South Dakota.  $10,000 in Pennsylvania.  If you were doing that kind of business, you'd be thrilled to collect and pay those sales taxes.

[Alan Klein]

Peter, you just caused me to remember something that really, really, really pissed me off at the time. I once called the tax office in El Paso county, Colorado to ask a question about sales tax. I don't remember exactly what the question was, but the answer I got was: "Well, since you're in business. You should already know that."

When the government is trying to "help" you, you're probably in deep trouble.

What really bugs me, and there's a lot of it right here in The Coffee Corner, is pronouncements about business from academics who've never been anywhere near a business. I've forgotten which Democrat presidential candidate it was who made all sorts of left-wing pronouncements about business, and then, when they threw him out of politics he went into business and fell on his keister. He at least had the grace to admit he'd been wrong. I doubt you'd find that kind of honesty among our current crop of leftists.

I feel your pain.  I was once audited for sales tax in New York. It's very complicated because being in construction, some Capital Improvement isn't taxed nor are Non-Profits and government work.  So I had to track which work was for what and pay sales tax accordingly.  Well, the moron they sent from the sales tax bureau for the audit demanded that I pay more tax that really wasn't owed. She quite frankly didn't understand the law.  I knew more than she did.  So I had to call her supervisor and demand they straighten her out or send someone else who knew what they were doing.  Well, it finally got resolved.  But that's why I said the complication on a national basis could become a nightmare.  I'm glad I'm retired. 

[RSL]

I've forgotten which Democrat presidential candidate it was who made all sorts of left-wing pronouncements about business, and then, when they threw him out of politics he went into business and fell on his keister.

I finally got time to look him up. It was George McGovern. He was sure he knew all about what businesses should do until he finally went into business and found he didn't know squat. At least he was man enough to admit it. But it was too late for him to undo the damage he'd done as a left-wing politician.

[Slobodan Blagojevic]

You have to go over a certain limit for the requirement to kick in.  $100,000 in South Dakota.  $10,000 in Pennsylvania.  If you were doing that kind of business, you'd be thrilled to collect and pay those sales taxes.

Would that be $10,000 in sales? That's not such a high bar, I had that at times (in Illinois only, though). But you rightly noted the complications with the thresholds: what happens before one reaches it? You charge it to the customer but do not transfer to the state? Or you don't charge it until you reach the threshold in sales?

In illinois, I had to charge sales tax for every sale, with no thresholds. And if I collect only $1.00 I had to transfer that one dollar to the state.