New Law Regarding Collecting Sales Tax By On Line Retailers

[Slydude]

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.

 

[krs]

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.

 

[toMACsh]

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.

 

[iggibar]

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.

 

[krs]

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%

 

[MacInWin]

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.

 

[krs]

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.

 

[Slydude]

@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.

 

[MacInWin]

@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.

 

[Cr00zng]

@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.

 

[MacInWin]

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.

 

[PGB1]

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

 

[Bill Gates Jr.]

Sales tax

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

 

[Cr00zng]

@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.

 

[MacInWin]

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.

 

[chscag]

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.

 

[PGB1]

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.

 

[MacInWin]

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...

 

[PGB1]

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.

 

[MacInWin]

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.