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  1. #31
    New Law Regarding Collecting Sales Tax By On Line Retailers
    MacInWin's Avatar
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    Cr00zng, I'm not sure Amazon "does this for them." At least completely. Amazon does charge state sales taxes, but I'm not sure it does locality taxes. Other "markets" like Etsy, Mercari, etc, have pretty high fees for using the service. And if one has a dedicated website, I suspect the fee for having your payment system account for all of the complexity will be significant. In addition, there is no transfer of responsibility when a company uses a third-party service. If the service fails to collect, or pay, or report as the locality demand, it falls back to the owner to pay the liabilities and penalties for such failure. I'm sure some localities will find a way to make this whole process into a moneymaker (Can you say "speed trap?") by either being very arcane in how the taxes are assessed, or by making frequent changes to the regulations so that store owners are constantly off balance in trying to comply. These localities can always exempt their own brick and mortar stores (for "fairness") and levy these taxes only on internet sellers, so there won't be any local impact by this chicanery. (No, I'm not paranoid, the legal traps to any small business are pretty prevalent out there already.)

    As for selling IT services, generally services are exempt from sales taxes, I think. At least they used to be.

    All that said, will some clearinghouse type cottage industry pop up? Sure, but it will be an additional cost to the small business already operating on a razor-thin margin.
    Jake

  2. #32
    New Law Regarding Collecting Sales Tax By On Line Retailers
    PGB1's Avatar
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    A few posts back someone asked if, in the US, someone buys something while in one state from a vendor in another state and ships it to a third state - what happens with sales tax. I just did this type of purchase from Michigan. The sales tax collected was Michigan 6% sales tax. I don't know if this is the situation 100% of the time.

    In Michigan, we also have a law that if you buy something on line and are not taxed, at the end of the year you must submit what is called "Use Tax" for those purchases. (Businesses and individuals)
    Additionally, if you own just about any kind of business in Michigan you can get out of paying sales tax by getting a sales tax license & complying with the rules for exempt purchases. I've only used it for parts going into a church (exempt) or that I am going to sell and collect, then remit, sales tax on. I'd imagine one could give the exemption form to eBay or Amazon and buy tax free everything. (Dishonest, but I suppose some people try this.)

    The record keeping & sales tax submissions must be quite complex & costly for a small on-line business, as mentioned earlier. I feel bad for the poster's wife, trying to run a business and being regulated out of business.

    I read an article about eBay that said they handle all of this distribution to the various states for the seller (probably because they then get to keep and use a whole bunch of tax money for a while). In my very small business, when I collect sales tax I get to keep it in the bank (earning interest) until the end of the year before I have to give it to the state. If my business did more volume in taxable sales, payments would be quarterly. I picture the local giant grocery chain holding a million or more dollars for 3 months. That's a lot of interest.

    On To Amazon- (Caution! Preaching Ahead...)
    I don't necessarily dislike Amazon. We just try to buy from Mom & Pop Amazon sellers while there. We won't, however, buy from a business that competes with a local, small business.

    I do have a couple of Amazon dislikes:
    A) When I buy something the box is always huge for the item. Last week I bought a gasket for a dishwasher that measured 5" x 3" x 0.060". It was flexible foam, so no padding was necessary. The factory put it in an envelope. Amazon put the envelope in a 12 x 12 x 8" box. The box was filled with paper.

    Yes, cardboard recycles (using energy), but this volume waste fills the truck or plane faster. Multiply this over-size box by 1000 over size boxes and it is simply causing another fuel eating, polluting device to be dispatched. Yes- they use some electric vehicles (more to come soon) but energy is used generating the electricity to charge them (ca. 10 pounds of coal per Kw). Energy is used making the tires that are wearing out, fixing the roads the trucks use, etc.

    B) Amazon Prime, while a great convenience for many, is not terribly eco-friendly if misused. Prime makes it too convenient for people buy several times per day and get several individual deliveries. For example, while working on my car the other day, I signed for 5 separate Amazon Prime deliveries for the neighbor within 2 hours. (Five different trucks & 5 different drivers) That's a lot of gasoline, since the nearest Prime warehouse is over 20 city driving only miles away.
    We don't have Prime, so when shopping at Amazon we gather all of our needs together to avoid the shipping fee. Prime would void that incentive.

    One positive note is that Prime provides lots of driving & mechanic jobs.

    At my age, I won't need the planet for too many more years, but I look around and see lots of young people. (No kidding!) They will need the planet, so why wreck it for them?

    Sorry I went waaaay off topic and preached like a crazy person. We just have to value the gift that this planet is and keep it nice for others.

    Enjoy This Day!
    Paul

  3. #33
    New Law Regarding Collecting Sales Tax By On Line Retailers

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    Sales tax
    [QUOTE=




    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. TE] If that's the case I would buy everything from Amazon in Oregon. Pete

  4. #34
    New Law Regarding Collecting Sales Tax By On Line Retailers
    Cr00zng's Avatar
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    @Jake...

    I didn't know much about Amazon's tax collection, but looked it up. Basically, Amazon is a "marketplace facilitator" that required to collect and remit taxes to the state, on behalf of the seller, based on the customer's address. If the state law includes local taxes, Amazon will collect and remit local taxes as well. At least that's my understanding of this help page. The actual seller at Amazon does not get involved with paying sales taxes, other than the various seller fees listed in the link paid to Amazon.

    This new law will just enforces collecting state, and local taxes if applicable for all online merchants. There's no more exception for merchants not having a store and/or warehouse in the state in question. In my view, this actually makes sense, at least without looking at this law in more details.

    Taxes for IT services depend on the state. In my state, I charge 1% sales tax, there is no local taxes. Paying this sales tax at the end of the year is pretty simple, but certainly, having QuickBook helps a lot.

  5. #35
    New Law Regarding Collecting Sales Tax By On Line Retailers
    MacInWin's Avatar
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    If that's the case I would buy everything from Amazon in Oregon. Pete
    You wouldn't have the choice. It would probably default to where the product was stored, or where the website was supported or even where the headquarters of Amazon is located.

    As for business-to-business, yes most states allow B2B tax free. The sales tax is collected at the retail level. But that's not consistent across all states/locales either. And the process to use B2B varies from locale to locale. To use B2B, you have a Federal Tax Id number that is associated with either the business or the owner, depending on the type of business. In her case, it's an LLC, so the FEIN, as it is called, is associated with her SSN and gets reported to the IRS for our individual tax filings. And in Virginia the filing for sales tax is done once each quarter. She does hold the taxes for that quarterly report, so theoretically she gets the use of the funds while waiting for the filing date, but for a small business that's not much compensation for the time it takes to do the accounting and fill out the forms that are required. I suppose that for Amazon it's in the millions, so perhaps it's a fair trade, but for a one woman shop, the interest on less than $1000 of held taxes over three months is pretty pitiful for the two to three hours it takes to do the reporting. Even at 3% interest (assuming you could find that somewhere), that $1000 will yield about $7-8 interest, max. (That's $1000*3/4 because you only have it for three months before it is sent in.)

    Cr00zng, Virginia requires taxes to be sent in quarterly. Most local government follow the state schedule as well. Once a year would be easier, and maybe a bit more compensating if you put the funds in an interest account and could keep the interest as compensation for the free labor of being the agent of the state, but at quarterly payments the numbers don't work so well for the labor required.

    But the issue is not the labor, it is the complexity and liability this ruling from the Supreme Court has created. It is not a new law, just a new interpretation of what is existing law/regulation. Someone mentioned that it is the responsibility of the buyer to pay the taxes and that some states (including ours in Virginia) require that you report purchases from out of state to pay the sales taxes. Most people ignore that requirement, or lie about it, I suspect. That requirement, by the way, is not new, either. Theoretically if you drive to another state and purchase a product there you are required to report that purchase to your home state for tax purposes, even if you paid sales taxes there (again, that varies from state to state as well). By ruling the way they did, the Justices have thrown a huge wrench into the mechanism of small businesses, particularly those on the internet, but also brick and mortar. According to the ruling, if you own a brick/mortar shop and someone from out of state comes in to purchase an item, you are supposed to collect the sales tax of the buyer's state and report/pay that to that state and locale. I suspect just about every store owner will ignore that provision of the ruling and the focus will be on those nasty internet businesses.

    I am sure someone will bring a lawsuit seeking to overturn this ruling, or at least gain some relief for small businesses. We personally just can't wait for that. Dec 31 we closed.
    Jake

  6. #36
    New Law Regarding Collecting Sales Tax By On Line Retailers
    chscag's Avatar
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    I am sure someone will bring a lawsuit seeking to overturn this ruling, or at least gain some relief for small businesses. We personally just can't wait for that. Dec 31 we closed.
    I'm not sure a lawsuit would suffice. I would think this is something that would have to be legislated by Congress in order to negate the Supreme Court ruling. And the way our Congress is lately, there is very little or no chance that will happen.

  7. #37
    New Law Regarding Collecting Sales Tax By On Line Retailers
    PGB1's Avatar
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    From MacInWin: As for business-to-business, yes most states allow B2B tax free.
    In Michigan, it gets a little goofy:
    A) If the item is installed, such as if I install a bunch of conduit, I have to pay sales tax when I buy the conduit, but not collect sales tax as a separate item on the invoice to the business. The wholesaler where I bought the conduit pays the state.
    B) But if I buy the conduit and drop it off at the business to be installed by others, I don't pay sales tax when I buy it and do charge sales tax as a separate line item on the invoice. I pay the state on my return.
    C) If the business has an exemption certificate on file with me, I skip the sales tax when I buy and when I sell to them.

    From Pete: 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.
    What would be good would be for the states to agree on anything...


    From MacInWin: 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).

    It is no wonder so many small businesses fail. This is very unfair to people such as your wife, MacInWin. I am sad that she had to close the business that she worked hard building and operating.
    The risk of simple mistakes invoking expensive penalties is huge. Hopefully if she re-opens, her business will be set up as an LLC, or your local state's version, so that if there ever is a penalty the governing entity can not take the money from your personal accounts- only the business. Sadly, this could bankrupt the business. (Your personal funds will technically be protected due to LLC status- unless they prove willful intent.)

    I can guess that USA small business web sites will close and opt to sell via eBay or Amazon. This lets eBay or Amazon deal with the tax mess. But, now the vendor has to pay commissions & fees.

    From SlyDude: 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.
    The pending demise of small on-line businesses is very sad. Even small, family owned brick-and-mortar small businesses who rely upon on-line sales to supplement walk in traffic sales will suffer. It's important for us all to, when at eBay or Amazon, buy from small businesses whenever possible.

  8. #38
    New Law Regarding Collecting Sales Tax By On Line Retailers
    MacInWin's Avatar
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    It is no wonder so many small businesses fail. This is very unfair to people such as your wife, MacInWin. I am sad that she had to close the business that she worked hard building and operating.
    The risk of simple mistakes invoking expensive penalties is huge. Hopefully if she re-opens, her business will be set up as an LLC, or your local state's version, so that if there ever is a penalty the governing entity can not take the money from your personal accounts- only the business. Sadly, this could bankrupt the business. (Your personal funds will technically be protected due to LLC status- unless they prove willful intent.)
    It was an LLC. The challenges are not just the penalties, but the fact that some locales also have affiliated criminal provisions. It ranges from being banned from conducting business in that local to actual criminal charges. And although it seems unreasonable to punish a simple mistake with criminal proceedings, that action is not beneath some localities. It was just easier to go out of business. We could have moved to Amazon, which would have significantly cut into the margins (Amazon ain't cheap), but then the returns on time and effort get simply ridiculously small, well below minimum wage level for the hours invested.

    As for law changing, I think the small business advocates need to take it to Congress, if Congress ever gets back to actually doing business...
    Jake

  9. #39
    New Law Regarding Collecting Sales Tax By On Line Retailers
    PGB1's Avatar
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    Jake, I didn't even think about criminal penalties. That is a very important & scary point.
    I could not imagine how to handle the challenges of the many, many entities for which one would have to get licensed and then collect & remit sales tax.

    How could someone even keep track of what is taxed and what is not taxed? In Michigan, some things are sales tax free, most are not. Example: If I go into a grocery store and buy a fresh chicken from the meat counter, it is exempt for sales tax. If I buy a cooked chicken from the same store's deli counter, it is taxed.

    Some services are subject to sales tax, some not. Then we have to look at individual local governments. Detroit, for example, has an extra tax on certain items- as does Wayne county. I spoke yesterday with the owner of a local brick-and-mortar knick-knack store. She has to now stop on-line selling for the same reasons as Jake's wife. She will lose much revenue, as on line sales pretty much kept the business afloat in weak months.

    I'd lose my mind trying to keep track. This new enforcement is going to ruin small businesses and be a boon to large entities such as Target, Walmart, eBay, etc.

  10. #40
    New Law Regarding Collecting Sales Tax By On Line Retailers
    MacInWin's Avatar
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    Your example of varying taxes based on the state of the product is right on (cooked vs. not cooked). But you can't work on an assumption that cooking is the criteria in every locale. You have to KNOW what is taxed and what is not for every locale.

    I don't think the intention of the Supreme Court was to create this havoc. It is simply that in making a ruling on a lawsuit brought to get Amazon, et. al., to pay sales taxes on their billions of sales, they ended up using the same sledgehammer on the small businesses all across the country, inadvertently driving a lot of them into the waiting arms of Amazon. Amazon doesn't really care about sales taxes, they can still undercut the small stores by volume buying, and it's a win for them when small business pay them to take care of the arcane laws and rules now unleashed. Basically, the "win" for the states will turn out to be a loss for the citizens of those states.

    This whole flail is one reason I believe in less regulation and less government. It is that governments are made up of people who have no clue how the real world actually works. In their quest to "solve" the problem of them not getting paid by Amazon what they think they "deserve" from them, they trampled their own small businesses. The Supreme Court decided a case brought by a collection of states' attorney generals, all of whom thought they were doing the right thing for their small businesses by forcing Amazon to collect sales taxes. But the backlash kills the small businesses, even in the states that brought the suit. Stupid, stupid, stupid.
    Jake

  11. #41
    New Law Regarding Collecting Sales Tax By On Line Retailers
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    From Jake: "...all of whom thought they were doing the right thing for their small businesses by forcing Amazon to collect sales taxes."
    Once again, the government acted without considering ALL of the consequences. Sometimes this can't be avoided, but this one was in the "Plain Sight" category.
    If "we the people" act without considering the consequences, we pay the penalties. What about government actions? Real people, like your wife, pay the penalties for their mistakes.

    From Jake: "It is that governments are made up of people who have no clue how the real world actually works."
    So Very True!
    PS: Are the black helicopters circling your house yet? They can come to mine, because I 100% agree with what you said.

    I believe this is primarily a fine country in which to live. Heck, my parents, along with many thousands of others over centuries, fought for the chance to escape their homes and live here. But I think it's time for a total political "Do Over". Let's real people think on our own and elect real people next time around. Can't hurt! (Sorry- Preaching again! And way off topic!)

  12. #42
    New Law Regarding Collecting Sales Tax By On Line Retailers
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    @Jak and PGB1 You're both right that decisions made by leaders often have unintended consequences and this is a great example. I have no doubt that the attorneys in question had two objectives in mind:

    1. Protect whatever sales tax revenue which wan't already being collected. and
    2. Protect small businesses in their loyalties.

    The order I put those in is no accident.

    I suspect that neither objective will be achieved to the extent they expect. Some of the projected revenue increases will never materialize due to the number of business which will choose to close rather than tackle the regulatory burdens this decision creates. Sadly I think you can point to situations where members of either party have taken actions with negative unintended (and sometimes intended) consequences.
    “Hard work beats talent when talent fails to work hard.”
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  13. #43
    New Law Regarding Collecting Sales Tax By On Line Retailers
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    Can't work out why the U.S. Federal Government does not do what happens here. Federal Government collects a 10% Goods and Services Tax on all sales, goods and services by tradies etc., then pays back to the States where sale/service took place less a small amount to compensate the smaller populated states.

    Charitable bodies, churches, schools etc can claim the GST back quarterly.
    Using OS X.7 or later make a bootable USB thumb drive before running Installer!

  14. #44
    New Law Regarding Collecting Sales Tax By On Line Retailers
    MacInWin's Avatar
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    @harryb2448, the difference is that our founding process was that 13 at-the-time-independent states, each of whom though of themselves as a "nation," bonded together for mutual defense and support, but did not opt for a strong federal central government because each of the independent states wanted to be free to do what they wanted to do. Hence, the "United States" was considered plural, as in, "The United States are sending a representative to the United Kingdom to discuss...." However, the American civil war changed the nature of the role of the Federal Government to a more central controller. When Lincoln decided that the union of the states was more important than the sovereignty of the states and invaded Virginia to enforce that, the die was cast that the individual states surrendered that independence to the central government and the "United States" became singular, as in "The United States is sending a representative..." And the Constitution says that Congress is to be made up of people who represent the people (House of Representatives) and the states (Senate). Although today the Senators are elected by popular vote, originally as representatives of the state, the Constitution says:
    The Senate of the United States shall be composed of two Senators from each State, chosen by the Legislature thereof, for six Years; and each Senator shall have one Vote.
    Amendment seventeen changed the process to popular vote, leaving the States no direct representation in the government at all.

    Amendment 10 to the Constitution says:
    The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
    Since the only reference to taxation in the Constitution is in Article 1, Section 8.1
    The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
    the state of affairs is that each individual state is free to tax its people as it wishes, with the only central taxation by the Federal Government being that approved in Amendment 16, namely, Income Tax. So, no national sales tax exists. The states are all independent. And most states allow local governments autonomy in taxes as well, so you can have a locale where both State and Local taxes are collected on sales.

    So, unlike Australia, which started with a strong Federal government and weak state authority, the US started the other way. And today I think most states would fight hard against the Federal Government trying to impose a national sales tax, even if it was to be shared with the states. To make a national sales tax would require a constitutional amendment, which requires two thirds of both houses of Congress to approve and then two thirds of all states to approve, all of which makes it highly unlikely to happen.
    Jake

  15. #45
    New Law Regarding Collecting Sales Tax By On Line Retailers
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    Hi Harry:

    A national sales tax has been proposed before by various politicians over the years. However, it seems the idea was always shot down for one reason or another. With 50 states here in the US all with different tax laws, it gets to be a real mess. Lucky for me I live in a state that has no state income tax but does impose a sales tax. Some states like Alaska have no taxes at all; neither sales or income.

    Hope the wildfire situation gets under control soon and you guys down below get some cooler and wetter weather.

    Regards.

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