Amazon settles sales tax spat with Governor Moonbeam California governor Jerry Brown and Amazon have settled their long-running dispute over the state’s urge to charge the etailer sales tax. In June Governor Brown, who is seeking to tackle California’s staggering debt problem, passed AB X1 28 - a bill to collect sales tax from online etailers like Amazon. The company vowed to …
If states want to collect interstate sales tax, they need to make the system less insane.
Imagine every postcode with it's own sales tax rate 0.25% different from the next one. And having also depend on what's being taxed, like books might not be taxed in one county but milk is taxed double for some reason.
Sure, Amazon can afford a system to deal with this, but the guy that sells bits he makes in his garage is screwed.
........the only practical answer to all those locally varying sales taxes would be a federal sales tax which would then be redistributed back to the states. Problem with that is that the individual states would sooner gnaw their own legs off than surrender *any* control over sales taxation.
The Supreme Court ruled ages ago that sales tax did not have to be collected by the retailer for out of State buyers (it was about mail order back then but it has been decided that the same rules apply if the order is placed via the internet instead of snail mail). It did not rule that the tax was not due. The buyer is required to declare these things on their State tax return and pay the sales tax to their home state then. At least this is how it is in New Jersey.
It seems the issue is that the State tax collectors can't be bothered to collect the tax and enforce their own laws and want Amazon to do it for them. What makes it worse is people supposedly knowledgable in finance like Tom Keene and Ken Prewitt on Bloomberg Radio keep saying internet retailers have a price advantage because their products are tax free. WRONG! The tax is due in the State where the items are bought, not where they are sold.
Technically its not a sales tax, its a 'use' tax. Its not collected for small purchases because of the hassle involved but if you buy something like a car the tax will be collected on, and routed to, where you live, not where you bought the car. Its no different than VAT rates in different EU countries.
Internet retailers have had a pass for decades because of the need to built up this business. its now established so it needs to operate on the same basis as the bricks 'n mortar stores. I was very annoyed by Amazon's stance over this; like everyone else I don't like paying taxes but at the same time that money needs to come from somewhere.
There's no guarantee that Amazon's initiative would have qualified for the ballot, much less been approved. California voters have a history of turning down this type of initiative. I think Amazon recognized the negative image this was giving them and sought a deal.
Actually, it is still collected for out of state purchases, but it's collected by the BUYER not the seller (in theory). Most states have a form you are supposed to fill out (almost no one does, but that's not exactly Amazon's fault). They "get a pass," not because they needed to build up business, but because the seller isn't who is being taxed, the buyer is. Brick and mortor stores collect it as a convince. The buyer is taxed because California has no right to tax someone from Texas.
Amazon's stance isn't that the taxes shouldn't be paid, it's that they are not who it gets collected from and not their responsibility to collect it, and according to US (federal) law (which trumps California law), they are right. In the end, they would likely win as this is a logical extension of the catalog-sales ruling, but it's probably cheaper to get a clarification from the legislature, and it's too bad. I hate to see a new law written when there is a perfectly good old one.
In the EU, Amazon, who are based in Luxembourg, do have to collect VAT on sales to all countries in the EU. The difference is that there are only 27 different VAT regimes to deal with, not about 5000 as in the US where town councils can set their own rates and county and state governments can add their sales taxes on top of that. The rules about how to calculate it are harmonised across the EU. Each country is allowed 3 different rates of VAT but can chose to put different items in each band. You can get a single document from the EU website detailing the rates in all the EU countries and another document telling you which countries have changed their rates recently, so you don't need to check regularly with each national tax authority to find out what is happening.
Actually it is a perfectly legitimate approach in the EU to exempt such of VAT on grounds of cross-border billing and leave it to the purchaser to declare and pay VAT. Pretty much the same as the US systems if you substitute "country" for "state". I suspect this may only apply when the purchasing entity is VAT registered. Makes sense.
Also Amazon don't appear to be doing this at all. There is no "amazon.${ISOC}" where I am. If I buy from amazon.co.uk, I get charged UK VAT. If I buy from amazon.de, I get charged DE VAT. Thus I reckon they're just running seperate Billing and not handling multiple VAT rates at all. Most serious stuff (e.g. Kindle etc) they won't ship intra-EU but insist I go to amazon.com, at which point VAT and such gets levied by customs at import and it's Not Their Problem.
Finally, if you think that complying perfectly with EU central diktat as regards VAT is in any way a "get out of jail free" card with the individual countries' various weird and wonderful interpretations, you are living in lala land.
This just means that Amazon has a really good 12 months coming up as every Californian tries to buy as much as possible to get in under the wire. Let's see, I think a new ginormous panoramic flat screen tele could easily be in the cards in the next 12 months 'cause after that I won't be buying diddly.
The sales tax you don't pay is mostly eaten up by the shipping costs. The real advantage e-tailers have over brick and mortar retailers is availability and a wider customer base; and the advantage buyers get is that it's easy to search the internet for the best price.
Collecting those sales taxes is not going to save the family store. It'll only bloat the government a bit more.
I never buy online due to a lack of sales tax on out of state purchases. I buy because it's convenient. As noted the shipping costs often offset any tax savings. If a local store has the same product online at a competitive price then I'd buy from them just to support local Biz.
I think customers are getting shafted by paying both shipping costs and sales tax when the sale never took place in their home state. States twist the laws for profit so they can piss away more money on foolishness because they aren't any more accountable than the criminals in DC.
It's convenience and the fact that they have what I'm looking for - and for larger items the shipping costs can be significant.
My state has a form they want me to fill out - I'm supposed to record all of my out of state purchases and then figure out what purchases did not charge sales tax and remit them 8% of the cost of those purchases if the retailer did not charge sales tax - some do, some don't. This law appears to apply to anything that I purchased outside the state - even if I'm visiting the UK and pay VAT on my purchases I'm supposed to record the purchase and then send the state its 8%
Can you even begin to imagine the book-keeping nightmare that this presents? I'm a law-abiding citizen - Hell, I even drive at the speed limit in school zones (much to the annoyance of just about everyone it seems) but what they are proposing is completely insane.
Do you think the politicians who complain about out-of-state sales tax revenue even fill in these forms themselves?
There's a simple solution that is true to both the spirit and the letter of the Constitution:
Did the purchase cross state lines? If so, then it is a FEDERAL issue, and ONLY the federal government gets to collect a sales tax, at a fixed, nationwide level.
If the purchase did NOT cross state lines, then ONLY the state it occurred within may levy a sales tax.
If I buy something online from a nationwide retailer, federal tax ONLY. If I buy locally, state tax ONLY. If I physically travel to another state and buy something there, then only THAT state gets to tax it, and my state is out in the code.
Then a retailer need only know 2 tax rates: federal, and local.
Simple. Easy. Wholly within the Constitution and the concept of the Interstate Commerce clause.
Amazon was only costing California 83 million in sales tax revenue?!? You notice I don't say "lost" revenue. Amazon won't be the one paying it anyhow, it'll be the already cash strapped California citizens paying it. To put it in terms the California state gov't. can understand: DUDE! With a state deficit of TEN BILLION DOLLARS, that's only 8/10ths of ONE PERCENT of your freakin' deficit. At that rate you only need to screw over (ooops, I mean find) another TWELVE THOUSAND and 48 Amazon's to close the gap. Good luck with that, boneheads.
I'd prefer the internet for most of my tech. shopping with a tax because of the following:
1. better selection. I live in a decent sized city, but none of the computer stores, Best Buys, or others can compete with a NewEgg. On-line can carry rare or hard to find items that are easier to locate.
2. better prices, even after a tax is levied. Shipping is usually free.
3. convenience. I don't have to drive all over to see if a store may have something in stock or call to verify that they really have it.
4. purchasing hours. I shop when I want to, not when the county says I can because of blue laws.
5. I can ship to family without having to mess with it myself.
6. I can be out of my residential location on vacation, purchase an item and it will be waiting for me when I get home.
7. I can check a feature on-line if I have a question rather than have some saleperson blow smoke my way. Reviews and the manufacturer's websites are great. I'd do the same in stores, but I can't afford the smart phone data rates.
Let your business try to tell the state of California or any other state when it wants to pay taxes. Let your business tell a state that if it's taxed it won't hire and if it's not taxed it will.
Just try it and see what happens.
Every company in California should band together and refuse to collect taxes.
What's good for one should be good for all.
Brick/Mortar stores collect sales tax at time of transaction as a matter of convenience and because they are required to by law. Putting the burden of record-keeping on the taxpayer to pay "use tax" is probably a big reason why most(presumably) don't pay it on their tax returns. Sending state Department's of Revenue after all the records they need to go after the ones that don't seems like an invasion of privacy and an enormous bureaucratic/administrative (ie expensive and inefficient) hassle. I maintain it is best and fairest to require the likes of Amazon to collect it like Brick/Mortar stores; however, when it's an out-of-state transaction I think it should fall under Federal jurisdiction. A law requiring sales tax collection of, say, 4-5% on these transactions and which monies go into the fund for Transportation/Highway building/maintenance AND prohibits states from collecting more seems the best solution to me. After all, the product purchased is usually delivered, ultimately, by a truck/van which uses said highways to get to the delivery point.
Unfortunately I agree with the poster that said such an elegant, simple solution is probably doomed from the start.
btw, that $83 million CA would have collected is a drop in the bucket compared to their debt - they need to quit wasting so much time/energy going after the Amazons and their own citizens and REDUCE GOVERNMENT SPENDING/WASTE!!!
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