Taxing of Internet Purchases

[Kevy Baby]

Originally Posted by Ghoulish Delight

The reason it was that way is because it raises difficult Constitutional questions regarding inter-state trade. Does California have the authority to do this?

It isn't as through California is a trailblazer on this; from the article I linked to:

California is the seventh and largest state in the country to pass a law to collect taxes on out-of-state Internet sales. Illinois, Arkansas and Connecticut acted earlier this year, North Carolina and Rhode Island in 2009 and New York in 2008. Amazon sued to overturn the New York law and lost in the lower courts. The company is paying sales taxes into an escrow account pending an appeal.

Stores argue that they can't possibly be experts in collecting and dealing with taxes for every jurisdiction that one of their customers might transport the purchased goods to. Especially if they don't otherwise have any presence there (the argument being that there really isn't any fundamental difference between me driving to Vermont and driving back with a pint of Ben & Jerry's vs. them mailing it to me).

As far as to which locality to base the tax on, I think the simple answer is the shipping address. While some might find loopholes, I think this is a simple and safe way to determine the tax base.

And the implementation of assesing, collecting and distributing the taxes, in the grand scheme of things, wouldn't be that difficult. It is simple enough to maintain a database of tax rates by Zip Code, including the entities that need to get what portion of that tax (the California State base rate is 7.5% and various counties and/or cities add their portion on top of that).

There is the added complexity of what is taxable as different states have different tax laws. However, it would be simple enough to add classifications to the lookup tables.

not to mention all the sales tax revenue to be lost when most of those affiliates move to others states in order to get back together with Amazon

According to the article in my OP, this new demand would "raise an estimated $317 million a year in new state and local government revenue" while "the affiliates combined paid $152 million in state income taxes last year..." While this is by no means a complete analysis, I personally would be willing to give up $152 to gain $317