Days numbered for tax-free Net sales

[Hilarious Clinton 452]

The halcyon days of tax-free Internet shopping may be about to end.

A powerful alliance of politicians, including key U.S. senators and the National Governors Association, is arguing that out-of-state retailers must be required to charge sales taxes on purchases. At the moment, for instance, companies like Seattle-based Amazon.com are not required to collect sales taxes on shipments to millions of its customers in California.

This is hardly a new debate: officials from the governors' association have been pressing Congress to enact such a law for at least six years. They invoke arguments, which have been unsuccessful so far, like saying that reduced sales tax revenue threatens budgets for schools and police.

What has changed, however, is the political dynamic. While its precise contours are difficult to map, a Democrat-controlled Congress is seen as more likely to agree to the idea than one controlled by Republicans.

"When you have a Democratic majority in Congress, that Congress will be more friendly to imposing new burdens on business if it means additional tax collection," said Steve DelBianco, executive director of the NetChoice coalition, which counts as members eBay, Yahoo and the Electronic Retailing Association and opposes the sales tax plan.

Another factor that could tip the scales in Washington in favor of the pro-sales tax forces is a concept called the Streamlined Sales Tax Agreement, invented in 2002 by state tax officials hoping to straighten out some of the notorious convolutions of state tax laws. If that happens, they believe, it will be easier to convince Congress to make sales collection mandatory for out-of-state retailers.

"Without any doubt, Congress will eventually approve legislation to give states that comply with the (agreement) mandatory collection authority for out-of-state transactions," said Neal Osten, federal affairs counsel for the National Conference of State Legislatures. "We expect that the legislation will be introduced shortly in this Congress."

So far, 22 states have signed onto the project by enacting legislation to simplify their tax codes, Osten said. "We believe that with the system operational, with software and online collection available, sellers volunteering and revenues being collected, Congress will consider the legislation and indeed approve it," he added in an e-mail message.

Sticky debate over "candy" definition

A simplification effort is key because of the dizzying complexity of state tax laws. One example is the Streamlined Sales Tax Project's "Proposed Amendment to Definition of 'Candy'"--which is marked "not for publication" and tries to draw the line between when candy is food (and therefore exempt from tax) and when candy is not (and therefore can be taxed).

Flour as an ingredient became a sticky point. In 2003, a representative of Indiana, James Turner, noted that a proposed definition of candy would have taxed the Milky Way Midnight candy bar but not the original Milky Way bar. But further investigation showed that Turner's counter-proposal would have treated "certain flavors of Pop Tarts" and Cookies and Twix Crunchy Cookie Bars as candy--but not Cookies and Snickers Crunchy Cookie Bars. Peanut butter Girl Scout cookies would be candy, but Thin Mints or Caramel deLites would be classified as food.

Bizarre distinctions like this, coupled with the existence of more than 7,000 different tax agencies, explain why the U.S. Supreme Court ruled, in a 1992 case called Quill v. North Dakota, that out-of-state retailers generally couldn't be obligated to collect sales taxes unless Congress changes the law. The justices noted: "Congress is now free to decide whether, when, and to what extent the States may burden interstate mail order concerns with a duty to collect use taxes."

One exception to that is a legal concept called "nexus," which means a company can be forced to collect sales taxes if it has a sufficient business presence. A second exception is cigarette sales, which are covered by the Jenkins Act.

http://news.com.com/Days+numbered+for+tax-...amp;tag=nl.e703

[sereia 0]

nooooooooooooooooooooooooooooooo...

[Dr_LHA 3]

In many states you're supposed to declare out of state purchases and pay local taxes on them when you file, for example recently California's tax form asks you to declare out of state purchases that you did not pay sales tax on. Of course nobody does declare it, but that doesn't make it any less tax evasion.

[Hilarious Clinton 452]

In many states you're supposed to declare out of state purchases and pay local taxes on them when you file, for example recently California's tax form asks you to declare out of state purchases that you did not pay sales tax on. Of course nobody does declare it, but that doesn't make it any less tax evasion.

The second page of the article mentions that if CA has a 7% tax and you pay 5% out of state when you bring the item back to CA you own them the 2%. No one ever does this I'd guess.

[Niels Bohr 72]

Dammit. No more ebaying!!!! J/K.

[mawilson 2,133]

In many states you're supposed to declare out of state purchases and pay local taxes on them when you file, for example recently California's tax form asks you to declare out of state purchases that you did not pay sales tax on. Of course nobody does declare it, but that doesn't make it any less tax evasion.

Exactly - I'm already supposed to pay NY state tax on out-of-state purchases (such as Amazon.com.)

Of course, I disagree with this tax and never declare it, but that doesn't make it any less tax evasion.

[almaty 19]

thgank god, i was feeling so guilty of not paying taxes on my internet purchases

[sereia 0]

so even though they don't charge you tax on your order, when you file, you are supposed to pay those taxes anyway by saving all your receipts and adding up the tax you owe later? HAHA

[Hilarious Clinton 452]

so even though they don't charge you tax on your order, when you file, you are supposed to pay those taxes anyway by saving all your receipts and adding up the tax you owe later? HAHA

Yes, for most states.

[sereia 0]

i doubt most people even realize you are supposed to do that..... let alone anyone who KNOWS you are, actually does it. lol

[Dr_LHA 3]

i doubt most people even realize you are supposed to do that..... let alone anyone who KNOWS you are, actually does it. lol

Well as I pointed out, some state tax forms do have a section asking you about out of state taxes now, because state governments clearly realised that people had no idea. Even with these new tax forms I read that they only estimate a 1-5% of people will fill in anything other than zero, but at least they get some revenue back!

[sereia 0]

on the form, does it mention online tax-free shopping? if it says "out of state tax" on the form and nothing else, i'm sure most people still wouldn't put two and two together.

[Dr_LHA 3]

I dunno, I haven't filed CA taxes for a year, but when I last did I did it online and was asked "Have you purchased any items from out of state that you did not pay sales tax on"? Or something similar.

[Trumplestiltskin 5,791]

I'm glad I'm not the only one who didn't know that you're supposed to declare it

[mawilson 2,133]

they only estimate a 1-5% of people will fill in anything other than zero, but at least they get some revenue back!

Why should NY state get any revenue for the things I bought from other states?

What did they do to deserve the money?