Taxing of Internet Purchases

[Alex]

Part of it is

a) It isn't just 50 states (minus the ones without sales taxes) but much more local than that (as evidenced by sales tax being different depending on which side of the Walt Disney Resort you're on.

b) Having to maintain the information to allow audit by whatever number of taxing authorities that would be.

Obviously they could do this if they had to, but they don't want to. Plus consumers, for the most part, don't want them to have to do it either. It is hard for me to imagine a huge groundswell for the feds to figure out how to make us have to pay sales taxes that we're currently quite content avoiding (see, for example, the indignant outrage in Vancouver, Washington, any time there is something that cracks down even a little bit on people not paying taxes on large purchases in Portland).

But Amazon has said that if there is a policy, it should be a federal one so they just have to deal with it once.

[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

[Alex]

Originally Posted by Kevy Baby

"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

I think the point is that if in response to this Amazon simply eliminates the affiliate program California is giving up $152 million to gain nothing (since they won't be getting any sales tax from Amazon) and then if large successful affiliates move to Nevada to stay in business California also loses additional income tax from whatever additional they would have paid.

And again, while maintaining differentiation for each tax jurisdiction may not be that difficult in the grand scheme of things, it also is still a pain in the ass and not particularly cheap to comply with on the purchase end and an even bigger pain in the ass to comply with on the audit end. But I'm not so much arguing for why Amazon shouldn't have to do this, but for why Amazon will not want to do it if they can at all avoid it.

But for anybody who thinks Amazon should have to do this, I would be curious to know how consistently they pay use taxes on purchases from out of state?

[Stan4dSteph]

There is a space to pay sales tax from mail order purchases on the NY state income tax form. It's up to you to determine how much you want to pay in. Any store that has a physical location inside NYS must charge sales tax on a mail order purchase if shipping to an address in NY. We started having to pay sales tax on LL Bean after they built stores here.