States Pay the Price When You Buy Online – The New York Times

Can online retailers be compelled by law to collect a sales tax? According to the Supreme Court, no — but that could change if, in the next few weeks, it decides to take up a case challenging the current rule.

The court should reconsider the prohibition, because the law takes a hammer to the fiscal health of states, which lose out on millions, if not billions, of dollars in sales tax revenue. Staggering amounts of digital transactions occurred this year: an estimated $6.59 billion in digital transactions on Cyber Monday (which would be a record), and an estimated $100 billion for the holiday season.

Customers may be confused: Some online retailers do collect sales taxes, at least sometimes. Amazon, for example, collects them on Amazon transactions, but not on third-party-vendor transactions sold through Amazon.

The reason why these taxes are not paid is because the courts have ruled that the record-keeping requirements “were indeed undue burdens that would ultimately harm the national economy.”

Really? Is it that hard? Yes, filing sales tax in 50 states – well, not exactly, since some states don’t have sales tax – takes time, but if you’re selling to a state, why shouldn’t you be required to do so? In the EU, there are 28 states, and you have to collect VAT and file reports. Sure, it’s a bit complicated, but it’s the cost of doing business. When you think of the unfair advantage that online sellers have, if they’re not charging sales tax, and the amount of money your state is losing, it’s worth a bit of processing to even things out.

Source: States Pay the Price When You Buy Online – The New York Times

40 thoughts on “States Pay the Price When You Buy Online – The New York Times

  1. They are not using the resources of the state in the transaction. They pay taxes in the states where they are located, and the delivery companies indeed pay local taxes.

    What serivce is the “state” providing for that it needs to be compensated for? Actually, none. It is (information) highway robbery. And please do not say that
    the “States are suffering”. What you mean is the bloated sate governments are hungry for more taxes. They should be starved of taxes: it is the only way to get them to reduce their absurd expenditures. The actual citizens of the states are not suffering, other than paying too many taxes.

    BTW, the “Undue burden” was only part of the findings.

    (and why in the world would you use the example of the socialist EU, and their awful Vat? A complete red herring–and a straw man to boot. BTW, you understand that all these taxes get passed on to the consumer right? the companies do not in the end end up “paying” the tax. We do and in the form of increased prices? And, to offset costs put the system in place, everyone, even people in no tax states will see am increase in prices. For what reason? So bloated state governments can further build out their wasteful bureaucracies?)

    Here again, as with the Net neutrality nonsense, we see you trotting out the same old thread worn Left wing arguments for more government control and more government theft. It is the grossly inflated government budgets that is the problem.

    • Harumph indeed. I’m willing to listen to you until you start spouting things like “thread worn Left wing arguments.”

      Instead of trying to make your libertarian mind fit around this type of concept, look at the angle that really matters. There in unfair competition by out-of-state companies, making it harder for local business to thrive.

      • Unfortunately, while I would love to buy local, it is far too expensive. There are several donut shops that sells their items for $3 a donut — for the cheaper ones. Don’t get me started on the guy selling his leather items. It’s like when I needed to buy an SSD drive. Apple’s are far too expensive, and most of the local shops in my location only sell one, low-rated brand. To the online company I ordered from, I paid shipping costs and the price of the product, and some sort of tax. I don’t want to pay any more!

  2. They are not using the resources of the state in the transaction. They pay taxes in the states where they are located, and the delivery companies indeed pay local taxes.

    What serivce is the “state” providing for that it needs to be compensated for? Actually, none. It is (information) highway robbery. And please do not say that
    the “States are suffering”. What you mean is the bloated sate governments are hungry for more taxes. They should be starved of taxes: it is the only way to get them to reduce their absurd expenditures. The actual citizens of the states are not suffering, other than paying too many taxes.

    BTW, the “Undue burden” was only part of the findings.

    (and why in the world would you use the example of the socialist EU, and their awful Vat? A complete red herring–and a straw man to boot. BTW, you understand that all these taxes get passed on to the consumer right? the companies do not in the end end up “paying” the tax. We do and in the form of increased prices? And, to offset costs put the system in place, everyone, even people in no tax states will see am increase in prices. For what reason? So bloated state governments can further build out their wasteful bureaucracies?)

    Here again, as with the Net neutrality nonsense, we see you trotting out the same old thread worn Left wing arguments for more government control and more government theft. It is the grossly inflated government budgets that is the problem.

    • Harumph indeed. I’m willing to listen to you until you start spouting things like “thread worn Left wing arguments.”

      Instead of trying to make your libertarian mind fit around this type of concept, look at the angle that really matters. There in unfair competition by out-of-state companies, making it harder for local business to thrive.

      • Unfortunately, while I would love to buy local, it is far too expensive. There are several donut shops that sells their items for $3 a donut — for the cheaper ones. Don’t get me started on the guy selling his leather items. It’s like when I needed to buy an SSD drive. Apple’s are far too expensive, and most of the local shops in my location only sell one, low-rated brand. To the online company I ordered from, I paid shipping costs and the price of the product, and some sort of tax. I don’t want to pay any more!

  3. I don’t mind paying taxes when I get what I pay for or I can see the benefit. If I pay a gas tax to fill my car and that tax pays for roads, I’m cool. I also don’t mind paying taxes to help out those in need or those unable to care for themselves.

    I have trouble paying taxes for my Apple Music subscription. My state doesn’t deserve any part of that digital transaction and service.

    One other point is that inside each state there are many city taxes. This makes collecting the correct tax very difficult because the number of tax locations could be 1000, not 50.

    • I think it could be limited to only state tax; that would be fair, and much less complicated.

      I do agree about digital. Unlike here in the EU, where digital sales from one country to another do make a difference, it’s less of an issue in the US. It would be the same for Netflix, apps, ebooks, and more.

      But, do Amazon’s ebooks compete unfairly with brick and mortar bookstores? One could argue that they do. It’s a thorny issue, to be honest.

  4. I don’t mind paying taxes when I get what I pay for or I can see the benefit. If I pay a gas tax to fill my car and that tax pays for roads, I’m cool. I also don’t mind paying taxes to help out those in need or those unable to care for themselves.

    I have trouble paying taxes for my Apple Music subscription. My state doesn’t deserve any part of that digital transaction and service.

    One other point is that inside each state there are many city taxes. This makes collecting the correct tax very difficult because the number of tax locations could be 1000, not 50.

    • I think it could be limited to only state tax; that would be fair, and much less complicated.

      I do agree about digital. Unlike here in the EU, where digital sales from one country to another do make a difference, it’s less of an issue in the US. It would be the same for Netflix, apps, ebooks, and more.

      But, do Amazon’s ebooks compete unfairly with brick and mortar bookstores? One could argue that they do. It’s a thorny issue, to be honest.

  5. Amazon is perhaps the most highly-visible example of a larger, complex and politically-divisive issue. National govt’s, states and municipalities have long operated disparate tax practices, for example by taxing physical goods more highly than services. Where I live (the USA), taxi and limo companies face higher taxes and regulations than do Uber and Lyft. I favor a consistent playing field for all, but what that playing field looks like is (for many) a function of one’s political outlook.

    Good post Kirk.

  6. Amazon is perhaps the most highly-visible example of a larger, complex and politically-divisive issue. National govt’s, states and municipalities have long operated disparate tax practices, for example by taxing physical goods more highly than services. Where I live (the USA), taxi and limo companies face higher taxes and regulations than do Uber and Lyft. I favor a consistent playing field for all, but what that playing field looks like is (for many) a function of one’s political outlook.

    Good post Kirk.

  7. My wife owns a small one-woman internet business selling to the US and Canada. The paperwork burden on her is already crushing. To have to file sales taxes in 50 states would be simply impossible. While I appreciate that large companies like Amazon are popular targets for states to tax, the impact of internet sales tax would hit the small mom-and-pop stores the hardest, just giving Amazon another way to drive out all of the competition. The real issue with Amazon competing with brick and mortar is not the sales tax, it’s the expense of that brick and mortar. Amazon has huge fulfillment centers so the infrastructure costs per item are very small. That’s what makes them so aggressive in pricing.

    • What is so “crushing” about the paperwork? The fact that she sells to Canada? How much more paperwork is there?

      If Amazon can undercut a local store by, say, 10%, then you might still buy locally. But if you then have to pay 5, 7, or 8% sales tax on top of that, you are less likely to buy from local stores. It’s not about brick and mortar infrastructure, it’s the sales tax that can tip the balance.

      • She already files sales tax reports for the state in which we live, Virginia. That report takes a couple of hours to prepare with the details that the state demands. To repeat that process 50 times would consume an entire work week. Is that crushing enough? She’s a one-person company, losing an entire week of business to process paperwork is not feasible. She would simply go out of business instead.

        And compared to the brick and mortar expenses, sales taxes are a tiny fraction of the differences. You really do need to study up on what it costs to run a business these days.

        • Nonsense. {point of sale systems can figure that out for you. Fund transfers obliterate the writing checks. Electronic filing will even save your stage.

          Your sense of entitlement and outrage is laughable. Republicans don’t want to pay any taxes at all. The are the ones living in entitlement heaven.

          • A one-woman online shop doesn’t have “point of sales systems.” Electronic filing would be great, if the state accepted it. I don’t know how you get “entitlement and outrage” or “Republican” out of what I posted. Maybe that’s your problem in discussion this issue reasonably. I’m just saying that a small business doing internet business having to track 50 states sales tax filing rules, forms, changes would be extremely burdensome. Not to speak of local sales taxes that cities add on as well. I live in a small city and when she sells in the city, she has to collect and account for that as well as the state. The bottom line is that for ONE state it takes her hours to fill in the forms with the details the state demands. Multiply that by 50 and she starts to lose weeks of productivity just filing forms.

      • I run a business. I file VAT quarterly. It takes me a few minutes, because I keep my books up to date as I work. I don’t sell retail, so I have fewer items to list, but it’s not that onerous, since the accounting software I do handles it.

        • Nice. You have ONE rate to submit, not 50. And that’s the point. Even if the books are up to date as you work, the time spent is exactly the same. Five minutes a day is still lost productivity time to a lone owner who has to track 50 independent states, plus another 50+ cities for tax rates/rules/filing procedures. Five minutes a day times 50 states is over 4 hours of tracking. Every day. Even if it’s possible to do one state every minute, that still 50 minutes a day spent in non-productive time. the US is not one monolithic entity like the UK or EU. It’s fifty independent states each with separate rules and regulations that don’t match in any way.

          • I don’t spend five minutes a day managing my VAT, that’s all my bookkeeping. I would expect there to be software solutions that can simplify any more complex tasks.

  8. My wife owns a small one-woman internet business selling to the US and Canada. The paperwork burden on her is already crushing. To have to file sales taxes in 50 states would be simply impossible. While I appreciate that large companies like Amazon are popular targets for states to tax, the impact of internet sales tax would hit the small mom-and-pop stores the hardest, just giving Amazon another way to drive out all of the competition. The real issue with Amazon competing with brick and mortar is not the sales tax, it’s the expense of that brick and mortar. Amazon has huge fulfillment centers so the infrastructure costs per item are very small. That’s what makes them so aggressive in pricing.

    • What is so “crushing” about the paperwork? The fact that she sells to Canada? How much more paperwork is there?

      If Amazon can undercut a local store by, say, 10%, then you might still buy locally. But if you then have to pay 5, 7, or 8% sales tax on top of that, you are less likely to buy from local stores. It’s not about brick and mortar infrastructure, it’s the sales tax that can tip the balance.

      • She already files sales tax reports for the state in which we live, Virginia. That report takes a couple of hours to prepare with the details that the state demands. To repeat that process 50 times would consume an entire work week. Is that crushing enough? She’s a one-person company, losing an entire week of business to process paperwork is not feasible. She would simply go out of business instead.

        And compared to the brick and mortar expenses, sales taxes are a tiny fraction of the differences. You really do need to study up on what it costs to run a business these days.

        • Nonsense. {point of sale systems can figure that out for you. Fund transfers obliterate the writing checks. Electronic filing will even save your stage.

          Your sense of entitlement and outrage is laughable. Republicans don’t want to pay any taxes at all. The are the ones living in entitlement heaven.

          • A one-woman online shop doesn’t have “point of sales systems.” Electronic filing would be great, if the state accepted it. I don’t know how you get “entitlement and outrage” or “Republican” out of what I posted. Maybe that’s your problem in discussion this issue reasonably. I’m just saying that a small business doing internet business having to track 50 states sales tax filing rules, forms, changes would be extremely burdensome. Not to speak of local sales taxes that cities add on as well. I live in a small city and when she sells in the city, she has to collect and account for that as well as the state. The bottom line is that for ONE state it takes her hours to fill in the forms with the details the state demands. Multiply that by 50 and she starts to lose weeks of productivity just filing forms.

      • I run a business. I file VAT quarterly. It takes me a few minutes, because I keep my books up to date as I work. I don’t sell retail, so I have fewer items to list, but it’s not that onerous, since the accounting software I do handles it.

        • Nice. You have ONE rate to submit, not 50. And that’s the point. Even if the books are up to date as you work, the time spent is exactly the same. Five minutes a day is still lost productivity time to a lone owner who has to track 50 independent states, plus another 50+ cities for tax rates/rules/filing procedures. Five minutes a day times 50 states is over 4 hours of tracking. Every day. Even if it’s possible to do one state every minute, that still 50 minutes a day spent in non-productive time. the US is not one monolithic entity like the UK or EU. It’s fifty independent states each with separate rules and regulations that don’t match in any way.

          • I don’t spend five minutes a day managing my VAT, that’s all my bookkeeping. I would expect there to be software solutions that can simplify any more complex tasks.

  9. Ultimately, It is the consumers that are breaking the law by not paying the ‘use’ tax. California has made it very easy for people to pay an estimated use tax. There is no excuse for not doing so. States should enforce their current tax laws.

    Also, the above commenter was right when he said this would lead to having to track shipments to many more than the 50 states. Every city and county with a tax would be involved. You couldn’t just ‘limit it to the 50 states’. That’s not how court decisions work.

  10. Ultimately, It is the consumers that are breaking the law by not paying the ‘use’ tax. California has made it very easy for people to pay an estimated use tax. There is no excuse for not doing so. States should enforce their current tax laws.

    Also, the above commenter was right when he said this would lead to having to track shipments to many more than the 50 states. Every city and county with a tax would be involved. You couldn’t just ‘limit it to the 50 states’. That’s not how court decisions work.

  11. The idea that paying taxes to 50 states is ludicrous. Any retail point of Sale system could figure that out in less than one second.

    This is the era of electronic banking and compliance.

    Retailers are like republicans, hand full of gimme, mouth full of much obliged.

    Pay your taxes (including you (apple).

    • Given your hatred of retailers, where do you get stuff? What “handful of gimme” do you think a retailer who works those long hours to be open when YOU want to shop, to be there when YOU want to call, to ship the product to be there when YOU want it there really has in mind? If you had a brick and mortar shop as a mom and pop operation, you would need to be open for business 7 days a week, 10-12 hours a day (lets say from 9AM to 7PM daily) to serve your customers plus time outside those hours to do paperwork, clean, restock, order from your wholesalers. No holidays, no vacation days, no sick days, no “mental health” days. Every day you aren’t open you not only lose business but you lose reputation. Remember, you don’t have a “staff,” you ARE the staff. Retailers, particularly small retailers, work for results that in many cases are below the poverty line, but they keep at it. My wife enjoys her business, even if the returns, considered in an hourly rate, are well below any minimum wage. All she wants is for the government to not add to the burden and drive it from below minimum wage to practically zero.

  12. The idea that paying taxes to 50 states is ludicrous. Any retail point of Sale system could figure that out in less than one second.

    This is the era of electronic banking and compliance.

    Retailers are like republicans, hand full of gimme, mouth full of much obliged.

    Pay your taxes (including you (apple).

    • Given your hatred of retailers, where do you get stuff? What “handful of gimme” do you think a retailer who works those long hours to be open when YOU want to shop, to be there when YOU want to call, to ship the product to be there when YOU want it there really has in mind? If you had a brick and mortar shop as a mom and pop operation, you would need to be open for business 7 days a week, 10-12 hours a day (lets say from 9AM to 7PM daily) to serve your customers plus time outside those hours to do paperwork, clean, restock, order from your wholesalers. No holidays, no vacation days, no sick days, no “mental health” days. Every day you aren’t open you not only lose business but you lose reputation. Remember, you don’t have a “staff,” you ARE the staff. Retailers, particularly small retailers, work for results that in many cases are below the poverty line, but they keep at it. My wife enjoys her business, even if the returns, considered in an hourly rate, are well below any minimum wage. All she wants is for the government to not add to the burden and drive it from below minimum wage to practically zero.

  13. Yeah, it’s not just 50 states. It’s all of the counties and cites in each state too. On top of the state sales tax rate, each jurisdiction can add it’s own local sales tax, sometimes only on certain items. So in WA, King County has an extra general sales tax that goes to transit, plus Seattle (which is in King County) has an extra smidge of tax on hotels and restaurants, and as of yesterday another one on sugary drinks.

    Who actually gets the revenue is a problem too. Several (20?) states do reciprocally collect sales taxes from each other, including WA. But the state gets the state rate for the general fund, and the minor jurisdictions don’t get their additions. Also, why use the buyers’ tax rate, not the stores’ tax rate as if it were a walk in sale? The accounting would certainly be easier if you just used the sellers’ tax rate, though then you’d have to figure out what to do about the mega stores such as Amazon that have one home city, but have infrastructure all over the place.

    On the other hand, computers. If you allow all states and jurisdictions to collect sales tax, there would presumably be an up to date central database of all of the jurisdictions and a way to tap into them, and it would become common for business software to handle the matching of recipient (or payer) address with jurisdiction and take care of the accounting and reporting. The transition would be a pita, but worth it in the long run.

  14. Yeah, it’s not just 50 states. It’s all of the counties and cites in each state too. On top of the state sales tax rate, each jurisdiction can add it’s own local sales tax, sometimes only on certain items. So in WA, King County has an extra general sales tax that goes to transit, plus Seattle (which is in King County) has an extra smidge of tax on hotels and restaurants, and as of yesterday another one on sugary drinks.

    Who actually gets the revenue is a problem too. Several (20?) states do reciprocally collect sales taxes from each other, including WA. But the state gets the state rate for the general fund, and the minor jurisdictions don’t get their additions. Also, why use the buyers’ tax rate, not the stores’ tax rate as if it were a walk in sale? The accounting would certainly be easier if you just used the sellers’ tax rate, though then you’d have to figure out what to do about the mega stores such as Amazon that have one home city, but have infrastructure all over the place.

    On the other hand, computers. If you allow all states and jurisdictions to collect sales tax, there would presumably be an up to date central database of all of the jurisdictions and a way to tap into them, and it would become common for business software to handle the matching of recipient (or payer) address with jurisdiction and take care of the accounting and reporting. The transition would be a pita, but worth it in the long run.

  15. This situation is not new. 50+ years ago, when I subscribed to Doubleday’s science series, I was charged sales tax because Doubleday had a business presence — bookstores — in my state.

    Otherwise. the idea of paying sales tax to the state in which the seller is located, makes little sense. What do I receive in return for the tax?

    If states want this tax, they need to set up a coherent, universal system in which a computer program keeps track of out-of-state sales, and the seller is billed monthly.

  16. This situation is not new. 50+ years ago, when I subscribed to Doubleday’s science series, I was charged sales tax because Doubleday had a business presence — bookstores — in my state.

    Otherwise. the idea of paying sales tax to the state in which the seller is located, makes little sense. What do I receive in return for the tax?

    If states want this tax, they need to set up a coherent, universal system in which a computer program keeps track of out-of-state sales, and the seller is billed monthly.

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