Free Markets, Free People


Tax Internet Sales – “Fiscal Relief” For The States

Down economy? Tax revenues in the toilet? Don’t worry Bunky, government will always find a way to keep it’s revenue stream full:

The days of buying online to avoid paying sales taxes may soon be over.

A bill is expected to be introduced to Congress this week that would force retailers like eBay and Amazon.com to start collecting sales taxes on behalf of states from people who shop online or through mail order.

Of course if you know anything about government you also know this was inevitable. However, it is lines like the following which make my blood boil:

“This would be fiscal relief for the states that wouldn’t require any money from the federal government,” said Neal Osten, a senior policy analyst with the National Conference of State Legislatures, which is drafting the bill.

Osten pointed to a recent study that said state sales tax collections fell to their lowest levels in 50 years at the end of 2008.

My earnings are not there to be “fiscal relief” for profligate states who find themselves with budget shortfalls due to poor budgetary practices. Osten seems to think this is some sort of money tree he’s discovered. More importantly, he seems to view the money as rightfully the government’s, not that of the wage earner. And notice, it is a lobbying group with a vested interest in the outcome writing the legislation. What happened to that promise about “no lobbyists” the new administration made? Special interest democracy is alive and well.

Of course a recession is a great time to pass tax legislation like this – why not cool another segment of the economy by giving priority to government tax collections over spurring economic growth?

The more I observe these lunatics and consider their blinkered and ignorant view of the economic world, the less confidence I have that they’ll figure out that the way out of a recession is to cut taxes, not pass new ones.

~McQ

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24 Responses to Tax Internet Sales – “Fiscal Relief” For The States

  • Not being a conservative maybe I’m missing the point, but I do have to ask:

    Aren’t sales taxes generally considered the “most fair” method of taxation from the conservative point of view?  If so, why is this an issue.  Is it because it compounds existing taxes in other forms?

    • If the discussion were substituting one tax for another, your point would have some relevance. But in this case, it’s just a mechanism to raise more tax money.

      The average middle class family now pays somewhere around 40% of their income into taxes to all levels of government, and it’s been rising steadily for a century. Is that not enough?

      Government officials obviously don’t think so. They’ve always got something critical to spend that money on, and any number of excuses why they need more of it. So libertarians (and many conservatives) reflexively oppose any effort for government at any level to suck more money out of them. They’re taking enough already! 

      • “I don’t know many libertarians who would tout a tax as ‘good’ simply because it is “the most fair”. Tax is a necessary evil with the sole purpose of funding the legitimate functions of government.”

        Most leftist statists don’t particularly “enjoy” paying taxes either, even when they consider it a social responsibility of theirs (or perhaps more to the point, others) to do so.  I think the key to your statement is in the answer to what the “legitimate functions” of government are, and how much money is needed to fund them.  That’s essentially what the left wants to use taxes for as well, only they view each of those things in significantly larger terms than a Libertarian would.

        • The legitimate functions of government for this nation are pretty specifically outlined in a document that everyone seems to roundly ignore these days – the Constitution.

          • They don’t exactly ignore it, as much as interperate it  in a way that aligns it with their own worldview.

    • I don’t know many libertarians who would tout a tax as ‘good’ simply because it is “the most fair”. Tax is a necessary evil with the sole purpose of funding the legitimate functions of government. Like I said in the post, my earnings aren’t there to rescue profligate states with broken budgetary systems that overspend for things that any reasonable person would find to be illegitimate.

  • >>>Not being a conservative maybe I’m missing the point, but I do have to ask:

    Not being a conservative site, the author of this particular post would have to guess like you

  • He’s not, true.  However, you can’t deny that many of the readers here are conservative, as opposed to libertarian, and I just thought someone might offer a bit of perspective…

    • true, I leaned left before 9/11 and right afterwards (like Card and Silver). 

  • Flak, I’ll speak for myself since I can’t speak for McQ.

    If sales taxes were all I had to worry about, then yes. Unfortunately, my taxation is spread out over my paycheck, my purchases, the land I live on, the healthcare I receive, etc. Continually adding on more and more taxes isn’t conservative in the slightest. You could implement a flat tax, but if you don’t take away all the other taxation schemes, it doesn’t do a lick of good.

    The problem isn’t that the states / feds aren’t getting enough revenue, it’s that they’re not responsible with what they have. I can’t just declare that my company start paying me more, I have to limit what I spend my money on in order to make do with what I have. I expect those who get my tax money to do the same thing. If that requires cutting services, so be it. Efficiency isn’t feasible if you think money is infinite.

  • Fair enough.

  • Hell, let’s just work of the left’s own assumptions.

    Keynesism works. We just did a whole bunch of it.

    Why would you go an spoil the stimulus this way?

  • “Why would you go an spoil the stimulus this way?”

    I’m a bit unsure as to how as sales tax would “spoil” Keynesism, as long as the government kept it’s foot on the spending pedal at the same time (which it is likely to do).

    • 1. Because the stimulus is supposed to short term until we are out of the recession. Why not wait until then to raise a new tax? (p.s. Japan raised taxes too early, supposedly, during their attempt at Keynesism, in order to reduce their deficit, but it did not work well.

      2. Because one of the reasons for the stimulus is to raise the flagging “animal spirits” of consumer confidence.  Often, consumers when faced with uncertainty, oh, and some new taxes, will tend to save more instead of spending it. If I think I will have to pay extra sales tax on products, I will save even more, so I can afford them. (See also the UK stimulus of reducing VAT taxes during this crisis to stimulate consumer spending.)

  • So, under this proposal, what prevents the businesses that operate over the internet from operating out of states with the lowest sales taxes?  We already have an somthing like that happening with corporations in NV and DE.  For a big purchase like a computer or car, a difference of 4-6% could be major bucks and could easily determine where the consumer buys the product.  So, what does NY or CA do when the business packs up and moves to some other state?  They not only lose the sales tax, they lose the jobs and other economic benefits that go along with having the company actually employing  people in the state.  Doesn’t sound like a very good deal, particularly if the state has very aggressive corporate and/or income taxes.

    In a related matter, I also wonder exactly where the sales tax accrues.  For instance, I just ordered a graphics card from an outfit in CA.  When I received it, I noticed that the card was actually shipped from a warehouse in MO.  Don’t you think MO is going to want a cut of that money, considering that the card probably never actually crossed the CA state line?  Is MO going to be happy providing all the infrastructure and other assorted government services to the bulk of the employees in the company while CA gets away with serving one guy with a computer and collects all the sales tax?

    And notice, it is a lobbying group with a vested interest in the outcome writing the legislation. What happened to that promise about “no lobbyists” the new administration made?

    Although I agree with the overall thrust of the post, what does this have to do with it?  The administration has no control whatsoever over what Congress does with respect to lobbyists.  It cannot refuse to allow Congress to consider the measure because it was written by lobbyists, nor can it prevent Congress from consulting with lobbyists, special interests, family pets, or lizardoid aliens from Rigel IV in its deliberations.  All the administration did and could promise was that lobbyists were verboten at the Executive level.  It is true that the Administration has broken that careless and insincere promise dozens of times already, but this is not an example of it doing so.

  • “So, under this proposal, what prevents the businesses that operate over the internet from operating out of states with the lowest sales taxes? ”

    As I  understand the proposal, the bill would make internet retailers collect the applicable sales tax for each buyer’s home state, as opposed to tax for the retailer’s state.  (Someone correct me if I’m wrong here.)

    • I figured that since the traditional justification for sales taxes was all the state services the businesses benefitted from, then the sales tax would actually be assessed where, you know, the state services are actually provided to the business.

      Silly me.  I forgot that the new justification for taxes is simply “We want your money” or, rather, “We need our money, so you just can’t be allowed to keep any more of it.”

  • <blockquote>“So, under this proposal, what prevents the businesses that operate over the internet from operating out of states with the lowest sales taxes? ”
    As I  understand the proposal, the bill would make internet retailers collect the applicable sales tax for each buyer’s home state, as opposed to tax for the retailer’s state.</blockquote>

    I believe that is correct, the state the item is being shipped to.

    What lots of people always fail to realize is that what is actually taxable can vary considerably from state to state.  In addition, it is more than just dealing with 46 or47 states, it is dealing with the local taxation rates within a state.  IIRC South Dakota has something like 213 different sales taxation districts.  So depending on where the item is being shipped, the rate is different, and district boundaries do not follow zip codes.

    While E-bay and Amazon may be able to afford a software solution, lots of smaller companies would not be able to and would either be forced to limit sales to their own state, or be at risk of being shut down by any of 46 states which decide to focus on them.

    Basically, this would toss out any idea of nexus, and make all companies subject to taxation by any state that they may ship product to.

    • Yes, the general principle is that sales tax inheres in the buyer’s location, not the seller’s.

      Trying to sales-tax the internet on that basis is going to have the exact opposite effect that those proposing it think it will– it will reduce tax revenues.  There are a few large businesses out there like eBay and Amazon, but untold numbers of tiny home-based and small businesses sell niche products online.  Many mom-and-pops that couldn’t cut the mustard when the big box store moved into town, turned to online sales to keep their businesses going.  These places don’t have the resources to devote to compliance with the byzantine sales tax structure.  They will either fold or change their business practices so that their compliance needs match the resources they have available for compliance.  Either way, they’ll be selling less, and the impact to their income will make it so any gain from sales tax on eBay will be more than offset by loss of income taxes, and sales taxes on things these businesses would have bought locally, like shipping supplies.  That doesn’t even begin to touch the problem of unemployment– small businesses provide the majority of jobs in this country.

      In Utah alone, each county, and sometimes cities within counties, has a different sales tax rate, and they change every quarter.  The table of sales tax rates for Utah is nine pages long in tiny type.  At least once a quarter I get a notice that there’s going to be a change in this county or that city.  When I report my sales taxes, I have to aggregate sales by locality.  If I had to add even one state to that mix, even if it wasn’t California or New York, I would seriously have to either stop selling outside of Utah (tantamount to going out of business) or start lying and claiming all the sales are local and paying Utah sales tax for simplicity.

      Of course, no one wants to seriously entertain the idea of making sales tax inhere in the location of the sale or the FOB location.  That would make states with no sales tax into online business havens, and Heaven forbid companies might move there…

    • “While E-bay and Amazon may be able to afford a software solution, lots of smaller companies would not be able to and would either be forced to limit sales to their own state, or be at risk of being shut down by any of 46 states which decide to focus on them.”

      Nah.  They can stay fully compliant for as little as $100 per month, based on 3300 annual transactions.   Same thing for you, Wacky – you can fix your problem, you just aren’t looking in the right place.  <cough>  Why yes, I do sell that software, as a matter of fact.

  • I don’t understand how a liberal reconciles these two points:

    1.) The belief that it is possible to ‘dis-incentivize’ things like smoking or others deemed acceptably repugnant to the liberal by imposing “sin taxes”, which have the intended effect of decreasing spending in those areas.

    2.) They seem also to believe that raising taxes during a recession is acceptable, and will not adversely affect recovery. For example, this internet sales tax, or the cigarette sales tax hike signed by President Obama (which disproportionately affects the poor as they smoke more and have less money to spend, despite promising: “let me be perfect clear, if your family earns less than $250,000 a year, you will not see your taxes increased a single dime. I repeat: not one single dime.”), or raising taxes on the wealthy who are disproportionately responsible for economic growth (as entrepreneurs, investors, patrons, etc.).

  • They seem also to believe that raising taxes during a recession is acceptable, and will not adversely affect recovery. For example, this internet sales tax, or the cigarette sales tax hike signed by President Obama (which disproportionately affects the poor as they smoke more and have less money to spend, despite promising: “let me be perfect clear, if your family earns less than $250,000 a year, you will not see your taxes increased a single dime. I repeat: not one single dime.”), or raising taxes on the wealthy who are disproportionately responsible for economic growth (as entrepreneurs, investors, patrons, etc.).”

    I think it comes down to incrementalism. (for lack of a better term.)  After a point, raising taxes may effect the productivity of certain sectors, but increases under that point will mostly lead to grumbling as opposed to actual decreases.  The trick is correctly estimating the tipping point.

    • So, how is…

      1) Taxing the richest (and most productive) sector of our country something like 43% not going to discourage them producing, spending, or even working at all (they are, after all, rich enough to not work for a few years if it’s going to cost them disproportionately through taxes) , while…

      2) A $0.61 cigarette tax (to pay for socialist pet project SCHIP) is going to discourage the poorest sector from smoking?

    • Let me be straightforward: The fact is that no rational person can really believe those two things are compatible, but liberals are populists and they know that most people in America hate “the rich” (however they define it), and don’t really give a damn how much they are taxed.

      The middle-class liberals don’t seem to realize it is quite a sliding scale that is used to define “the rich”, nor the consequences of over-taxing the rich, nor the fact that the rich, no matter how wealthy, are not a bottomless reservoir of money.

      It is mathematically impossible for America’s “rich” to pay for the government’s current and proposed spending. Add on top of that ‘cap and trade’, which is the equivalent of a de facto tax on every American’s gasoline and electricity bills. The middle-class is going to be subsidizing this flirtation with socialism sooner or later — a lot of them just don’t seem to realize this yet.