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  1. #16
    New Law Regarding Collecting Sales Tax By On Line Retailers
    chscag's Avatar
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    I think in Canada one pays the sales tax of the destination province - at least it used to be like that.
    It works pretty much the same way here in the US. However, as you pointed out above, it's quite a bit more complicated since we have 50 states all with different tax laws. There are some states that have no sales tax (see above) but it seems to me that it is going to be a bookkeeping nightmare for most on line sellers.

    Of course the large corporations have everything automated and lots of personnel to handle those things, but I really feel for the small guys.

    What we haven't thought about is the increased cost of doing business on line now that this new law has been implemented. I suspect it will mean that cost will be passed on to you and me, the consumer.

  2. #17
    New Law Regarding Collecting Sales Tax By On Line Retailers
    krs's Avatar
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    For the REALLY small guys, there is a $30,000.- sales threshold in Canada.
    If one runs a small business and the sales per year do not exceed $30K, then one does not have to get a sales tax registration number and one neither collects nor submits any sales taxes to the government.

  3. #18
    New Law Regarding Collecting Sales Tax By On Line Retailers
    Slydude's Avatar
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    Part of the public justification for this has been that it encourages people to shop locally thus generating money for local economies. As usual you've hit on the flaw in that logic Charlie.
    “Hard work beats talent when talent fails to work hard.”
    Kevin Durant

  4. #19
    MBAmtloin
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    I think this tax just pads politicians accounts, nothing else.


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  5. #20
    New Law Regarding Collecting Sales Tax By On Line Retailers
    Cr00zng's Avatar
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    Quote Originally Posted by MBAmtloin View Post
    is this company amazon?
    I like this law, lots of stores shut down because their customers purchased items online instead while shopping at these store.
    well not being a pompous person, i try to buy locally with people i know, which gets harder by the year and avoid anything made in China.
    the only item i have my sights on is a larger SSD for my renewed macBook Air which turns 10 calendar years in a couple of hours.
    With today's economy in the US, where most people live "from-paycheck-to-paycheck", the 20 - 30% lower prices online plays a role in diminishing the number of brick & mortar stores. When "53 million Americans between the ages of 18 to 64—accounting for 44% of all workers—qualify as low-wage", 20 - 30% saving on merchandise certainly helps in going with online merchants. The brick & mortar stores' lack of selection also plays a role, at least for me...

    I've been building PC since the Windows 3.0 times, initially, started with local suppliers. As parts availability dwindled, started to use eBay initially, then NewEgg online and Amazon. Yes, there's a Best Buy close to me, but... Why would I pay $50 more for the very same Samsung 970 EVO SSD 1TB - M.2 NVMe? Not to mention that Best Buy does not have the Sabrent 1TB Rocket NVMe PCIe, same performance as the Samsung, but Amazon does have it and saves me close to $100. I install two of the M.2 drive, that saves me $200 vs choosing Samsung, to use it for better video card, memory, etc. It's all about return on investment...

    Yes, I have Prime with Amazon, like the selection and the two days free shipping. Some of orders comes from an in-state Amazon warehouse that arrives on the next day. Alternatively, I could just drive up to pick up my order, but never done that. I had been paying state taxes for my orders for years; this new federal law does not change anything for me...

  6. #21
    New Law Regarding Collecting Sales Tax By On Line Retailers
    Slydude's Avatar
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    You're right about about the 20% or more price difference being a significant draw for most people (myself included). Although folks living paycheck-to-paycheck are more likely to look for savings out of necessity I think human nature enters into the equation more often than people realize. Assume for a moment that economics didn't enter into the equation snd the person in question has several options for where to purchase something. Here's what I think happens:

    1. For some purchases we're willing to pay more for the purchase because we get something of perceived value for the extra cost. I'm thinking here of situations such as purchasing wedding dresses, shopping assistants, etc. The special treatment is part of the sales experience. This is especially true for purchases we don't expect to make often.

    2. When the same good/service can be purchased from more than one vendor, and it is relatively easy to find the vendor, most folks will chose to save money. I suspect that's true to one extent or another across the board. Even the affluent among us will likely do this. Most folks don't enjoy paying more than we have to for something regardless of our income. If you're going to point to the financial excesses by celebrities/professional athletes, I'll point out that many of those folks do not remain affluent for very long.
    “Hard work beats talent when talent fails to work hard.”
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  7. #22
    New Law Regarding Collecting Sales Tax By On Line Retailers
    krs's Avatar
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    Quote Originally Posted by Slydude View Post
    2. When the same good/service can be purchased from more than one vendor, and it is relatively easy to find the vendor, most folks will chose to save money. I suspect that's true to one extent or another across the board. Even the affluent among us will likely do this. Most folks don't enjoy paying more than we have to for something regardless of our income. If you're going to point to the financial excesses by celebrities/professional athletes, I'll point out that many of those folks do not remain affluent for very long.
    That is certainly true in out family.
    The only difference is that the more affluent ones buy better quality products where that is available, in clothing for example, but even then they go for the best price or wait for a sale.

  8. #23
    New Law Regarding Collecting Sales Tax By On Line Retailers
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    I buy online for convenience. Whether or not I pay sales tax never crosses my mind when making a purchase. When online sellers are forced to charge sales tax for hundreds of jurisdictions (their problem to solve, not mine) it won't really make a difference to me. Obviously, I'm not in the 44% mentioned above. In many of those cases, the problem is indeed low wages. For others, it's a lack of common sense and discipline. Having limited resources, but enough to get by or even save some money, they make bad decisions and purchase things they would be better off financially without, and their "quality of life" would actually improve because of the choice to conserve those limited resources.

  9. #24
    New Law Regarding Collecting Sales Tax By On Line Retailers
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    Having to pay taxes for online purchases is not something new. They have been around for real long time. For the US market, consumer demand and sales is HEAVILY dependent on price changes.
    People shop where they can get the best prices, even if it changes sway by pennies. Shoppers are ADDICTED to saving. This creates a volatile market where demand of a certain item can DRASTICALLY differ between online and in person sales.

    Online sellers have always had some sort of tax that was owed based on a sale. Most people don't know this, but just about EVERY SINGLE online store has had "buyers paying tax."
    You might be thinking "ugggh hold up Iggi! I din't pay tax on this or that!"
    And to that I would say "Yes, you are right!"

    That is because the the US government has allowed a practice where the seller could cover the tax from the buyer and reduce it from their net profits annually. On sales, the buyer DID pay taxes. It just wasn't itemized on the sales end from the buyer's point-of-view.
    As an EXAMPLE in very simple terms:
    *This is how Amazon was working until it started "collecting" tax from the buyer at time of purchase.*
    HomeDepot might have a Dewalt drill selling for $100, which doesn't include the 8% tax that would put the total cost of purchase at $108.
    "Amazon" might have that same drill selling for $90. This ALREADY has tax added to it. It's just not advertised. Really, the cost of the drill through Amazon is $83, and your tax brings it to $90.
    Amazon is/was the largest online store that did this. They have slowly started rolling sales tax over to the buyer over the past 2-3 years.
    This is why sometimes you will have problems ordering something online and not being able to buy the same thing for the same price at a store.

    To make this even WORSE, Amazon can claim these taxes against their "profits" effectively reducing their tax burden. I'm sure you've all heard of how little Amazon pays in taxes.....ZERO!!! You can thank Uncle Sam!

    This is a practice that was suppose to be ending, but I'm skeptical because of how much money it allowed companies to write off.

    The US has always tried to leverage anything possible to try and create some sort of equilibrium between brick-and-mortar and online store so that they can both thrive. It used to be pretty easy to maintain that balance when each choice had its positives and negatives.
    For example:
    Brick-and-mortar stores- you cna get your items instantly, but pay a higher price.
    Online stores- you pay a lower price, but have to wait for your items.

    However, what's throwing a HUGE monkey wrench into this equation is AMAZON! They have DESTROYED the competitive market by drastically reducing delivery times. In a study I read last year, over 90% of random people polled said they don't mind waiting 1-3 days for an item to be delivered if it meant they can save AT LEAST THE COST OF TAX.
    So, on a $100 item, they don't mind waiting 3 days if they can "save" $8 dollars(what my tax burden is).
    This is the leverage that online companies like Amazon have held for a few years, and it's why Amazon is doubling down on their own shipping and handling techniques. Their fast shipping times is what helps them gain a critical advantage.

    My take on all of this:
    In the end, I believe we all would prefer to save money if we had the chance.
    But at what cost?
    Rarely would someone pay extra for the same thing without good reason.
    But, I have seen way too many good brick-and-mortar stores shutting down because they can't compete with online shops.
    And for me, that is a good reason why I have a few local places I shop at even though I know I could find something cheaper online. I prefer the whole experience of being able to shop in person, and to me, that's worth the drama of online stores having to post/shift the tax burden onto the buyer. In almost all cases, even after paying taxes, online purchases are usually a little cheaper. If that's what it takes to balance the shopping market, I'm for it.
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  10. #25
    New Law Regarding Collecting Sales Tax By On Line Retailers
    krs's Avatar
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    That is because the the US government has allowed a practice where the seller could cover the tax from the buyer and reduce it from their net profits annually. On sales, the buyer DID pay taxes. It just wasn't itemized on the sales end from the buyer's point-of-view.
    How does that actually work in practice?
    To start with, someone posted that there is no country-wide US government sales tax like the GST we have in Canada, and second
    The sales tax is based on the delivery destination of the product - some states have 0 sales tax and others, with state and local taxes, have a tax in excess of 10%

  11. #26
    New Law Regarding Collecting Sales Tax By On Line Retailers
    MacInWin's Avatar
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    My wife actually has had an online company, so I can speak from experience with reality. Until recently she collected taxes when she sold a retail product within our home state of Virginia. She paid those taxes to the state government using their forms on their schedule. A few months back the Supreme Court ruled that entities could demand that sales taxes be collected from ALL online sales, and that the seller would have to then transmit those collected taxes to the localities, using whatever mechanism, rules, limits the localities decided to implement. The court set no lower limit on the size of the business, leaving that to the localities. So now she would have to track not just the 50 states, but the localities within the states. For example, we live in Winchester, VA. The Virginia sales tax is 4.8%, but the city tacks on an additional 0.5%, so the total tax for a product sold to anyone living in the city is 5.3%. However, if that person lives in the surrounding county, where there is no sales tax, she should collect 4.8%. We live about 1 block from the city line, so two different neighbors would now be charged different rates, based on where THEY live. For simplicity, she just collected 5.3% from every sale in the state and let the state sort it all out. Out of state sales she did not collect any taxes, at least until the Supreme Court decision.

    Now, however, she would have to track 100's, maybe 1000's, of locations (states, cities, counties, parishes, whatever) for what their tax rules are--what to collect, who to send it to, when to send it in, what paperwork to file, what registration she would have to do to send it in, etc, etc. And also track for any and all changes in any and all of those locations. And she would be liable for any failure to follow all of those rules in all of those locales, paying whatever penalties and fines they choose to establish because of that failure. It would be a nightmare for a small business like hers (one woman operation).

    Iggibar was incorrect in saying, "To make this even WORSE, Amazon can claim these taxes against their "profits" effectively reducing their tax burden." That is not accurate. What actually happens is that the collected taxes are not considered a part of the profit because they are NOT part of the profit. They are taxes collected on behalf of the locality government. Amazon is just a tax collector. So when they file their income taxes as a business, they report revenue (that is, the money they collected, which is their sale price + sales tax), then remove the sales tax and pay income tax on the revenue - sales tax - cost of goods sold, as that is all they actually made as profit. That's very simplified, of course, as there are lots of other parts of calculating taxes owed on income. It would hugely unfair to ask a business to pay income taxes on sales taxes collected and turned over to the government as they are very definitely not part of income. It is not that Amazon is somehow avoiding paying income taxes by substituting sales taxes, it's that sales taxes are NOT part of income of Amazon because they are collecting it for the state. BTW, that is exactly the same for my wife's business. She collected taxes on behalf of Virginia, sent those funds to the state but did not pay income taxes on those sales taxes because she was just a collector.

    Amazon, before the Supreme Court decision, collected and paid sales taxes in all states/localities where it had a physical presence. That was how the system worked as defined by law, previous court decisions, and IRS regulations. As Amazon moved distribution centers closer to the customer by creating more and more of them, they collected taxes in more and more states. So, using the $90 drill example, if they sold into a state where they had a physical presence, they would charge $90+sales tax, but if the sale was into a state that had no Amazon physical presence, they would charge $90. I know that is how it worked because when Amazon added a distribution center here in Virginia (about 15 miles from my home, in fact), they started to charge Virginia sales tax on all purchases we made to comply with state law. Prior to that distribution center, Amazon did not collect any sales tax from Virginia buyers, hence it didn't send any sales taxes to Virginia. It's not that Amazon avoided taxes, it is that it didn't collect any taxes by law and regulation. What way too many people don't understand is that businesses don't PAY taxes, they COLLECT taxes from buyers and send it to the states. By the way, if Home Depot sold you that drill online and did not have a store in your state, it, too, would not have had to collect sales taxes on that drill for that online sale. But HD has a lot of stores in just about every state, so they end up collecting and sending to the states those taxes.

    Don't know if you noticed, but in discussing my wife's business, I used past tense. That's because the tax changes are driving her to get rid of it. The cost of paying for an accounting service to track all of the sales taxes in all of the locations in the US and Canada would be more than her profit last year. She can't really pass the cost on to customers as that would almost double the price, which would drive away customers, so she's just walking away. She won't be the only small business owner to do that.

    What do I think should/could be done? Given that the Supreme Court mucked everything up, what would be good would be for the states to agree that each business should collect sales taxes on all sales based on where the BUSINESS is, not where the customer is. So if you buy from a business in Virginia, you pay Virginia taxes. If you buy from California, you pay California taxes. If a company has multiple outlets, like Amazon or Home Depot, you pay the taxes based on where the business has physical presence, so if I order from HD, I pay VA taxes and if I order from Amazon, because they have VA presence, I pay VA taxes. If I order from a company in California that has no physical presence in Virginia, I pay California taxes. In practical terms, if I order from OWC, in Illinois, I would pay Illinois tax, whatever that is. If I order from B&H in NYC, I pay NYC taxes. Will that make a difference in where I decide to buy? Sure, I'll pay the same price for products from lower tax locations if the shipping is equal. Bottom line, I look at the final price and how long it will take to get to me and pay whatever is minimally acceptable.

    In addition to paying at the SELLER location tax rate, I think there should be a national business size minimum to collect sales taxes. Base it on retail sales since that is where sales taxes are collected. it doesn't have to be high, maybe annual revenue of $50,000 or more, but for a really small business it takes a long time to file the forms the states require because they want to know a lot of data about how you calculated the amount you are sending in. It's not just "what did you collect" but what was revenue you sold, what was in-locality and what was not and other details about the revenue and taxes collected that you are reporting. For my wife, it took hours to fill in the forms. So let a really small business have a break. The states won't go broke with that little bit of tax not coming in.
    Jake

  12. #27
    New Law Regarding Collecting Sales Tax By On Line Retailers
    krs's Avatar
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    Thanks for the explanation, Jake.
    All makes perfect sense.

    In Canada there is a business size threshold of $C 30,000 annual sales - if you fall below that you don't have to collect any sales taxes.
    I assume the $30K threshold was established years ago and is pretty low since it was never adjusted for inflation.
    Although the sales taxes in Canada are also determined by the buyer location, there are only 10 provinces and thus at most 10 different tax rates - municipalities cannot collect any sales tax here. All that makes things a bit more manageable.

  13. #28
    New Law Regarding Collecting Sales Tax By On Line Retailers
    Slydude's Avatar
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    @Jake. Thanks for such a clear explanation of the problems this ruling creates. Sorry to hear that this decision will cause you guys to shut down.

    I know it's somewhat fashionable to bash online sellers such as Amazon because of their impact on smaller brick and mortar stores (especially local ones) but one thing that rarely get mentioned is how often the vendor supplying the goods I order from Amazon are themselves small businesses. Amazon isn't small but some business they provide the front door for are small businesses.
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  14. #29
    New Law Regarding Collecting Sales Tax By On Line Retailers
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    @krs, the challenge in the US is that the court didn't set any lower limits on collecting taxes. And they should not, it is up to the local jurisdictions under our legal system and constitution. However, that is just another thing to track as a small business owner because some local governments set a limit, some didn't and the levels are all over the place. And again, if the seller makes a mistake, they are the ones who pay fines and penalties. Basically the Supreme Court, in trying to allow states to collect from behemoths like Amazon, Etsy and others, opened Pandora's box for small businesses and startup businesses. We will all pay for it sometime down the road. What I think will happen is some enterprising folks will offer to handle all of that if you use them as a clearinghouse for your sales (for a fee, of course). They will look at the buyer's zip code, determine if sales taxes are required to be collected and tack it onto the sales price online, then as the payment is processed, skim off the sales tax to put in an escrow account to pay later on in bulk to the local government for the seller, take a cut for themselves and send the residue to the seller. What the seller will do is raise price to cover the clearinghouse costs to pass that on to the buyer, as much as the market will allow.
    Jake

  15. #30
    New Law Regarding Collecting Sales Tax By On Line Retailers
    Cr00zng's Avatar
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    @Jake...

    The "clearinghouse" idea might be a business opportunity for and existing and/or new entity, despite its initial startup cost that is high. The viability depends on the small entities profit margin on the goods sold. The cost of this service, as part of the overhead of doing business, would lower the small business tax liability.

    In the US, there are a number of clearinghouses utilized by small medical practices for filing medical claims on their behalf. The usual cost of this service is 10 - 15% of the payment by the insurance companies. While medical practices can absorb this cost that lower their tax liabilities, I am just not certain that small businesses could.

    On the other hand, small businesses selling goods do have the opportunity to sell their goods at Amazon, that already does this for them. Admittedly, I do not know what Amazon charges for its service; the chances are that it is less, than any other specialized entity would charge for it.

    My small IT business provides services in my county for other small businesses; Amazon keeps inviting me to sell my services at their platform. Maybe I should look in to this, if for nothing else, just to see what Amazon would charge for it.

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