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back to article US Senate vote to add internet sales tax this week

The US Senate is set to vote on the Marketplace Fairness Act (MFA) on Monday, legislation that would force internet retailers to collect state and local sales taxes while giving overseas online sellers a financial leg-up. MFA, a bill (for once) not tortuously reworded to a snappy acronym, gives businesses 90 days to set up …

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Anonymous Coward

Of course Amazon support it. A tax like this will destroy all their competition online and won't give any boost to brick-and-mortar retailers because they're geographically limited.

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Anonymous Coward

I'm confused

"A tax like this will destroy all their competition online"

How do you work that out?

If no one is paying taxes now, it's a level playing field (sale price - costs).

If everyone pays taxes it's a level playing field (sale price - tax - costs).

In fact it gives smaller companies an advantage.

Of course Amazon may move abroad or offshore, a lot of the op's, but that's another matter and many companies will of course trade under dozens of names to avoid the $1m threshold, but hey, that's capitalism (as we're told).

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Re: I'm confused

"How do you work that out?

If no one is paying taxes now, it's a level playing field (sale price - costs).

If everyone pays taxes it's a level playing field (sale price - tax - costs).

In fact it gives smaller companies an advantage."

Not quite. If all companies have to deal with 9,600 separate taxing districts, there's a certain overhead involved. The costs of preparing for such a thing are fixed (get lists of tax rates, setup software, etc) so someone like Amazon would hardly notice it, but it could be a massive chunk of the profitability of a smaller firm.

Generally speaking, regulations favour the bigger companies.

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@Matt Siddall - Re: I'm confused

Wrote :- "If all companies have to deal with 9,600 separate taxing districts"

Don't be ridiculous. There may be 9,600 separate tax entities in the US in total, but any one company will only need to deal with those relevant to its district.

The "9,600 entities" is parly an effect of USA administration in its regard of each State being somewhat like a separate nation. So there are redundant layers in there. Perhaps it's time the USA recognised that they are no longer some of coastal colonies separated by impenetrable forest and Red Indians, like it was in 1780.

And how will this be different from a bricks and mortar business? If the USA is anything like the UK, internet businesses are killing many bricks-and-motar businesses (just take Comet as an example) and do not need the playing field tilted their way any more.

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Re: I'm confused

>> Don't be ridiculous. There may be 9,600 separate tax entities in the US in total, but any one company will only need to deal with those relevant to its district.

But the whole point of this act is to make the online seller deal with all the taxes relevant to where the **customer** lives. That means being able to identify the taxes applicable to any (potentially all) of those 9600 tax entities, collect the taxes, account for them, and hand them over.

The alternative is that the seller identifies and collects the taxes, but then goes through some clearing house to get them to the right entities. Perhaps someone will step in and set this up - Amazon or eBay would probably be happy to do it as a bureaux service ... for a modest fee plus getting to know who is selling what to who.

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Long live...

NAFTA. Yes, shops will setup in Canada, and Mexico. The problem is that credit card companies will charge a "tax" on foreign currency transactions. Then the local governments will charge the taxes in Canada and Mexico.

Note that Widen is from a no sales tax state (Oregon). He doesn't want (or need) his companies charging sales tax. So, he is a politician that actually looks out for his constituency (a miracle!).

So, it is death & taxes forever!

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Happy

Re: Long live...

Sales taxes are not going to make a company setup an international presence if they don't already have one or heading in that direction anyway.

The vast majority of online retailers do far less than $10mil annually (most do less than $300k) so they'll be exempt. Large retailers won't be impacted because they already have a physical presence in most states anyway so they're already collecting the taxes.

This law would not have much impact, it's nothing to get worked up about.

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Re: Long live...Die poor.

"This law would not have much impact, it's nothing to get worked up about."

Nothing to get worked up about? Well if you consider billions of online transactions per year nothing, then we have nothing in common. Look at it this way: If you bought milk over the internet, then you would be taxed for it. I'm not saying I buy milk over the internet, but if I did, it would be like $4 + $5 Shipping = $9 USD. So how would that help anyone?

I read the bill in full. Now maybe I missed something, but I do not see ANY exemptions for consumers outside what lies in state governance. Let me explain: I do not see exemptions for things like iTunes downloads, video streaming services, or even the latest trendy "cloud" services. Technically, buying an e-mail account will be taxable, which could mean ISP's that give their customers one for "free", can now charge you extra or be forced to.

What doesn't affect me is large spending (yeh, I'm poor). Here is a very wild, over reaching example: If I bought a car over the internet, who do I pay the taxes too, and do I need a new tax form for doing so? At some point all changes to tax law (especially one this big), require new E-xxx forms or whatever, so I expect the current honer system will have to go. Again, not sure about big spending in e-commerce, but no doubt the filing system will change.

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Happy

Re: Long live...Die poor.

You would only be paying the tax you would be owe if you purchased the item in any brick and mortar store. What's the problem with that?

-Your email account is not free, it is a part of your access fee. No additional tax there.

-There is already a place on your tax forms to report online purchases. If you're not filling it out you're already dodging taxes.

-If you bought a car online the merchant/seller would collect sales tax per their states laws from you & you would pay registration & title fees in your state of residence. Assuming you bought it from someone who sold more than $10mil worth of car a year (that's a lot of cars).

-Getting worked up over something without really understanding its practical implications leads to a lot of poor/emotional decision making at the polling place...

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Re: Long live...Die poor.

"You would only be paying the tax you would be owe if you purchased the item in any brick and mortar store. What's the problem with that?"

No, you pay twice in delivery. 1 to the online vendor, another to you. You can't download milk.

My email account is said to be free, access fees are not mentioned. And no, no additional tax yet.

Apparently you live in another state, I am not required to report these for state taxes. And I assume you don't believe this bill will birth a new tax form? O.K.

I don't know how large purchases work, so I'll take your word. However 10 million a year in automobiles does not seem like a lot.

I have no idea how you couldn't care less that ALL e-commerce sites in the USA are now going to be forced to tax, I wish I could find it as welcoming as you. Apparently you vote for higher taxes, read my lips...

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Happy

Re: Long live...Die poor.

Dude. I live on planet Earth. You should try it sometime.

If you stop paying your ISP fees & want to keep your address you have to pay for it. If you are paying for access the address is included at no extra charge.

As for the rest of your (deliberate?) misreading of the legislation, apparently you're too far gone to help.

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Re: Long live...Die poor.

"-If you bought a car online the merchant/seller would collect sales tax per their states laws from you & you would pay registration & title fees in your state of residence. Assuming you bought it from someone who sold more than $10mil worth of car a year (that's a lot of cars)."

Actually you pay the taxes in the state you live in, not the state you bought the car from. In the US you are suppose to pay the sales tax to the state you live in, not the state you buy from. Realistically there is no system set up for this.

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Re: Sales taxes are not going to make a company set up an international presence

It already happened in the UK - some major online retailers have benefited from offshoring their tax liabilities for several years, although more recently the loopholes are being closed. Imagine large US companies leaving the USA for Puerto Rico (I have no idea whether US/PR law creates a situation analogous to the UK one, but hopefully you get the general idea).

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Re: Long live...Die poor.

The state where the car is purchased collects the sales tax. The state where you register & title it gets those taxes. You're getting your taxes confused.

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Anonymous Coward

Re: Long live...Die poor.

I buy my milk online... along with most of my groceries... you know what? it all comes in a van, from the retailer, who would have already had it delivered to their store whether I picked it up or not...

And the shocking thing.. its cheaper in time & fuel to get delivered than drive to the shop!!

I don't get this whole sales tax issue... just set ONE sales tax for the whole bloody country, or don't you have a central government who can manage things like that?

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Re: vast majority of online retailers do far less

blah, blah, blah

The Income Tax was setup as a temporary tax on only the top 1% of income earners to pay for the Civil War/War Between the States. Seems to me it has been neither temporary nor limited since then. Even a Supreme Court ruling was only a temporary obstacle when there was money to be grabbed from the working people.

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Re: Long live...Die poor.

No, he's not. Having bought a car across state lines I can attest to the real world way in which car sales work.

This is the sort of mistake Progressives/Socialists/Communists with no real world experience frequently make. Because you think it is logical that the point of sale should always be the location at which the sales tax is collected you assume nobody has managed to lobby for special exceptions. Car sales are one of those areas, precisely because their unit cost is so high. If I have a dealership that's close to a state line and the other state has a 1% lower tax rate, I'm going to lose sales unless I can drop his rate by 1%. So I lobby my political critters to grant an exception. Since I've joined up with my competitors to ask for this break, and we account for 20-40% of the local economy, they give us the exception.

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Devil

Re: Long live...

to avoid shops setting up in Canada and Mexico, they should do what Canada does. Canada Customs (or whatever it is called now) collects taxes for the Federal and Provincial governments as product is shipped into the country. We don't, so far have sales taxes in lower jurisdictions.

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Re: Long live...Die poor.

If you purchase a car out of state, you'll be charged your home states Sales Tax rate. If that wasn't the case, a state like Delaware would be completely paved over with car dealerships catering to NY, NJ, PA, MD, VA, WV and DC car buyers, and there wouldn't be a new car dealership within a 5 hour drive of the state.

At $1K-$3K in taxes per transaction, the States sorted that particular issue out a long time ago. (I have no idea what Delaware got out of the deal - though it may simply have been that other states refused to register cars bought in Delaware, which tends to put a damper on customer satisfaction).

Try registering your brand new out-of-state car without showing proof that you've paid your Sales Tax/Use Tax to your home state if you don't believe me.

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Re: Sales taxes are not going to make a company set up an international presence

Um you do know that Puerto Rico is US territory and subject to federal law right ?

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Re: Long live...Die poor.

@AC I get the feeling you don't quite understand how a federal government is supposed to work.

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Re: Um you do know that Puerto Rico is US territory and subject to federal law

Um, I did write "I have no idea whether US/PR law creates a situation analogous to the UK one". The comparison was geographical as much as anything - the Channel Islands are British Crown Dependencies but not part of the United Kingdom, Puerto Rico is an island that is part of the United States but not a state.

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LOL

"Level the playing field" != get rid of the tax on domestic sales.

LMAO. Fuck these guys are idiots thinking that consumers don't see it that way.

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What did people expect?

You're supposed to pay sales tax already. No one wants to report it, they're shopping online more so they will come after you. They're not going to just give up the majority of their sales tax income.

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Facepalm

unfair burdens?

Eh? What is hard about adding a percentage to a sale based on the delivery address, and keeping a record of it?

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Holmes

Re: unfair burdens?

You no read article? "... to over 9,600 state, regional, city and town tax authorities ..."

That means someone has to keep track of what the particular sales tax is on particular classes of items on particular days depending on which state, city, local district someone is ordering from. They have "tax holidays" for back-to-school for 2 separate weeks of the year round these parts. That's for the state tax, or is it the state and city but not the local, or is it...

So someone has to offer the 'service' (thus at a price) of letting you fire off a query based on delivery address, for them to then respond with how much and how to split it up. Everytime someone hits your front door waving money, you have to run out the back door and ask someone how much to charge them. Retrofit this!

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Happy

Re: unfair burdens?

In fairness it can get pretty complicated. Each state taxes things differently, depending on what it is. Some states don't tax foods, some only tax certain foods, some don't tax shoes, some do, with each 'family' of items having different codes in each state. Plus some have internal zones that are different. Then you get into tax exempt entities (churches, hospitals, schools, governments, etc) and all kinds of other stuff. On top of all that some states collect different taxes through different agencies depending on the item sold.

In short, sales tax laws in the U.S. are really complicated and it will be difficult to deal with; But seeing as how they have to be doing over $10mil in annual revenue to begin with I don't feel sorry for them.

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JDX
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Re: unfair burdens?

$10m in REVENUE is pretty small fry really, that is not a big company by any stretch of the imagination.

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Re: unfair burdens?

"$10m in REVENUE is pretty small fry really, that is not a big company by any stretch of the imagination."

No, it is not. I don't think people understand the difference between revenue and profit. At 10 million revenue, companies are starting to sweat either due to lower revenue, or finding ways to increase it. Considering that, now the heat is really on for them, because now they might have to work with this outrageous tax law that could cost them a large hit in profit to hire an accounting services.

Is $10 million a conspiracy number by big business? Don't care, because it is obviously a very stressful one.

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Happy

Re: unfair burdens? @JDX

$10 in annual revenue is NOT small fry. Only about 3% of U.S. businesses meet or exceed $10mil annual revenue. The tech industry throws lots of big numbers around and people mistakenly believe that those kinds of figures are 'normal' but that simply isn't correct, about 28% of businesses have revenues of less than $100k...

The U.S. economy is driven by shed loads of small businesses, not large corporations. Laws like the one being discussed will have little impact on most people or companies.

Here's some stats: http://www.entrepreneur.com/sbe/glance/index.html#

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Re: unfair burdens?

I am by no means wealthy, but between income tax, property tax, sales tax, airport tax, license plates and drivers' licenses (which I consider fair use taxes, but still), and extra taxes on gas, restaurants, tickets, .... we probably spend over half of our income on taxes. And I do not think the US taxpayers are getting value for money.

Enough is enough. Our government has been getting more and more expensive, evasive, and big brotherish since 1912, with a brief respite during the 20s. And I for one would be happy to spend a winter or three at Valley Forge in an attempt to get rid of the political fatcats and their bureaucratic drones.

The scary thing is we live in a relatively low-tax area; for having an NBA and NFL team, good museaums, good restaurants, etc, Indianapolis is quite affordable and taxed pretty lightly. I know the offers I've had in places like Boston, New York, and San Francisco; I have no idea how middle class people live there.

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@Notas Badoff

And that's just the level of complication when you assume it's static. Now add in the complexity of all 9,600 of them changing their rules whenever they want to...

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Re: unfair burdens?

"... to over 9,600 state, regional, city and town tax authorities ..."

aye, yeah, missed that somehow - I'd been under the impression since this was first mooted that it just applied to state taxes.

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Not takings sides one way or the other, but

For all sales involving credit cards or processed via a Visa/MC-like infrastructure, those two companies already KNOW the local tax rates. All they have to do is implement a "VPOS" or "Virtual Point-of-Sale", and assign to the recipient's address the tax the state is after.

If the shipper is required to collec information about the ultimate recipient and use, say:

Business -- Personal Property of Business/Depreciated on a Schedule

Person/Individual/Non-Business -- Personal Property/Gift/Donation

Non-Profit/School/Trust Account -- blah blah blah

then the local jurisdiction would get the money or get the stats/metadata about the taxes they are exempting.

I imagine that that bill will have some clause (and, "claws") about keeping tabs on the flow of money.

As a shipper, shippers might want to collect the info just as a hedge against governments demanding they pay or collect more taxes from the declared (under threat of perjury) destination so that the businesses can say, "THAT tax is NOT ours -- you allowed the below-cutoff-line businesses and individuals to not pay this/that tax...."

Just some thoughts...

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Re: Not takings sides one way or the other, but

Good thoughts, but remember, the IRS won't come for Visa or MasterCard, they'll come for the business. Now I assume Visa/MC could set up "audit protection", but that would be one hell of an audit protection. I'd feign if I saw the cost of it, but even with said protection, I bet the interest would still be out of pocket.

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Re: those two companies already KNOW the local tax rates

Huh?

Why?

Have you ever actually setup processing with them? They take a flat fee plus a percentage of your transaction. They don't care about sales tax.

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Re: those two companies already KNOW the local tax rates

Wait what? Yeh I'm confused now too! I thought you meant that Visa/MC could implement the mechanism for the new bill. If I'm wrong, ignore the rest of this :-).

If Visa/MC setup a mechanism for this new bill, they would take on the liability of handling your personal taxes. Like H.&R. Block, they would only cover mistakes on your behalf if you paid for "audit protection". Well, that is obviously not a fact, but I don't think they would offer such protection for free, so you'd have to pay more in the long run. If you pay H&R block to handle your taxes, but you didn't pay them extra for the audit protection, then you're left to deal with the I.R.S. all on your own.

In a nutshell, if Visa/MC fumbled your tax rate, you won't be calling Visa/MC customer support, you'll be calling the I.R.S.

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Happy

Is there a limit on number of businesses?

"If you have a business you can have $10m business, $1m of which can be in remote sales over the internet, and you're exempt."

What's to stop me from setting up a bunch of (for example) IT companies under one website? Company A deals with HDD sales, Company B sells processors, Company C sells peripherals, etc. and each one has less than $1m in "remote sales".

It's a bit of effort, but if people like the prices... plus it means that if one company goes over $1m in sales, the other areas aren't affected by the tax, and my website's prices still "seem" low.

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Anonymous Coward

Re: Is there a limit on number of businesses?

I am guessing groups... the same way the UK deals with separate companies or VAT and corporation tax...

If there is enough of a shared ownership then your liable for the rate of the whole entity...

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well guess I'll have to go back to ordering my parts I need from china, and having them marked "present cost $2"

Or like others said Canada if I can find any distributors there.

I order online as my state, city, and county taxes are friggin ludicrous(some of the highest in the country), and honestly these SOB's don't deserve a single damn penny for the crappy job they do, and the retarded laws they pass.

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Devil

Re: SOBs

That's your own fault. Do something about the SOBs rather than whinging about them.

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Holmes

But the owners of the politicians LIKE regressive taxes

You don't seem to understand how the American system works. Most businesspeople are fine and upstanding and just want to play the game of business fairly and by the rules. However the rules of the game are encoded into laws written by the most cheaply bribed professional politicians and they are being bribed by the few GREEDIEST businessmen. There is no such thing as enough money for these blocksuckers.

Having said that, I still don't understand their self-defeating stupidity in this case. Increasing the use of sales taxes just has the effect of increasing effective prices and thereby discourages sales, hurting the economy all around. I understand that they do favor regressive taxes that squeeze the poor people more heavily, but you've already squeezed them to the point you rich bastards can't get any more money out of them. All you do is persuade (or force) them to buy less stuff, which doesn't actually help anyone. Even your own essentially fascist companies would benefit from broadly increased demand in the economy.

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Wrong solution, as usual

The problem is not that online vendors do not collect sales tax but the sales tax itself is a problem. I have to pay income tax on the funds used to pay sales tax. Eliminate the sales tax, don't add Yet Another Tax.

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Re: Wrong solution, as usual

exactly

About 25% of my paycheck is already stolen by the government for them doing jack shit for me. I also have to pay ludicrous taxes on everything else I can't buy online like gasoline (our taxes are over 30% of the price), juice is considered a sin, and has like a $15 cent additional tax on the dollar. Hell we have a tax on bottle water cause its a sin to drink water...

Any wonder people shop heavily online to avoid taxes?

I bet after this is passed you will hear all politicians give themselves a pay raise across the board like the last time my state raised taxes cause we were so broke, the govenor, and all the state legislators gave themselves a 15% raise... While the taxpayers got a 1% cut of pay due to them

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Anonymous Coward

Re: Wrong solution, as usual

Yup, that durn government, taking all that money and not even spending it on a police force or justice sytem or fire department or building roads or anything like that. Nope, certainly don't have any of that anywhere in the US.

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Anonymous Coward

Re: Wrong solution, as usual

"gasoline (our taxes are over 30% of the price)"

SOunds like you've got it made - my tax rate is something like 30% on my wages, and things like petrol are far worse. We pay something like 140% in tax on petrol at present.

see http://www.thisismoney.co.uk/money/cars/article-1633430/Petrol-diesel-tax-costs-calculator.html (and this is over a year old - we probably pay more now).

For every £1 I spend on petrol (currently around £1.39 per litre) 42p goes in fuel duty and 17p in Value Added Tax.

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Anonymous Coward

Taxes?

What about the other 49 States?

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Tortuous

The current tax system does not work for a globalised market. Those wealthy enough have been always able 'optimise' their tax affairs. That's why super tax is so high. Not to take a large percentage but to take a large percentage of the small amount left exposed to tax after off-shoring salaries and purchasing through dummy businesses.

The problem now is that the internet has made the threshold for these type of schemes is much lower and they are now available to the huddled masses. The powers that be can't have that! Something must be done! This is just an attempt to stop the proles doing it but allow the nobs to carry on as before.

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Anonymous Coward

I thought our tax system was bad... but at least it works... from what I hear, the US tax system is just not fit for purpose.... seriously separate sales taxes per state etc??? mad... sure the EU has different Sales taxes (VAT) but we have a nice simple system set up to deal with it, i.e. I Charge the VAT from my country to consumers in the EU and then don't charge VAT to businesses outside my country, simple to manage, no need to even consider another country (it is their responsibility to pay the VAT)

the US could learn a lot about managing taxes by looking at the EU....

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