The issue of whether a state can levy taxes on “non residents” is raised in this proposed law. Obviously those who are now forced to collect taxes are lobbying hard in favor of this. Received the following from Ebay Government Relations today (I bolded the part this is of most interest in terms of tax policy):
Congress is considering online sales tax legislation that is wrongheaded and unfair, and I am writing to ask for your help in telling Congress “No!” to new sales taxes and burdens for small businesses.
Whether you’re a consumer who loves the incredible selection and value that small businesses provide online, or a small-business seller who relies on the Internet for your livelihood, this legislation potentially affects you. For consumers, it means more money out of your pocket when you shop online from your favorite seller or small business shop owner. For small business sellers, it means you would be required to collect sales taxes nationwide from the more than 9,600 tax jurisdictions across the U.S. You also would face the prospect of being audited by out-of-state tax collectors. That’s just wrong, and an unnecessary burden on you.
Big national retailers are aggressively lobbying Congress to pass online sales tax legislation to “level the playing field” with Amazon. And, as they compete with big retail, Amazon is advocating for this legislation too, while at the same time they are seeking local tax exemptions across the country to build warehouses. This is a “big retail battle” in which small businesses and consumers have a lot to lose. But eBay is fighting, as we have for more than 15 years, to protect small online businesses and sellers and ensure healthy competition, value, and selection that benefit consumers online.
The solution is simple: if Congress passes online sales tax legislation, we believe small businesses with less than 50 employees or less than $10 million in annual out-of-state sales should be exempt from the burden of collecting sales taxes nationwide. To put that in perspective, Amazon does more than $10 million in sales every 90 minutes. So we believe this is a reasonable exemption to protect small online businesses. That’s what we’re fighting for, and what big companies such as Amazon are fighting against.
I hope you agree that imposing unnecessary tax burdens on small online businesses is a bad idea. Join us in letting your Members of Congress know they should protect small online businesses, not potentially put them out of business. Click here to make your voice heard. Together, I believe our voices can make a difference.
US states have long pushed for this internet sales tax but it’s a nightmare for small businesses and that’s why the USG hasn’t really cooperated with state efforts.
They would be better off with some sort of VAT but Americans associate that with “socialism” and would go crazy.
The states are starving for revenue. They are legally bound to balance their budgets every year even if the Feds don’t have to, so it was inevitable, but it’s net effect in terms of money taking in and damage to small/local business is likely to be a wash.
This bill would not allow states to tax nonresidents. Currently, on a remote sale where the buyer and seller are in different states, the seller doesn’t collect any sales tax, to either state, and the buyers are often supposed to declare and pay the tax themselves to their own state of residence, but rarely do that. The bill would simply make the seller collect the sales tax and send it to the buyer’s state of residence. It’s like the EU savings directive, but on sales instead of income.
Compare these systems with citizenship-based taxation and FATCA. Citizenship-based taxation does tax nonresidents on foreign income. And even if the system were only based on residence, FATCA wouldn’t actually collect the tax on foreign income, it would only collect information, and penalize the banks who don’t send the information with a tax on their transactions, most of which are not even income and don’t belong to taxable people. Does this makes any sense?
In this case, there is some fairness to this law. I always thought that it is somewhat unfair to stores in your state that you can buy the same article online from another state for cheaper. This increases artificially interstate commerce. The question is that phenomenon neutral at the scale of the US?
As Shadow Raider pointed out, we can find a parallel with citizenship based taxation. Is citizenship based taxation necessary when there might be roughly the same number of citizen from a specific country in the US, who pay taxes here, than there are US citizen in that other country. The loss of tax base by emigration might be cancelled out by the immigration.
To go back to the internet sales tax, one must be careful to try to enact laws like that without a careful macro economic study of their impact. This law is going to make internet interstate commerce a lot less attractive to many people. What is going to be the impact of such a reduction in interstate commerce. Are the consequences going to be worse than the loss of tax by the states that claim such. A concrete example might be that Fedex, UPS, and USPS can lose a significant amount of revenue, and in consequence, pay quite a bit less tax in the respective states and that the bottom line for these states is going to be negative.
It would be interesting to use probability and statistics math models to analyse that and try to analyse the impact that such law might have. In the end, the result might be worse that the status quo.
Wouldn’t the big winners in all this be small Canadian internet companies that exist primarily to export products to the U.S.? I own one such company.
When I sell to U.S. customers I don’t have to charge them HST because they are foreign and I don’t have to charge them any U.S. state taxes because my company has no footprint in the U.S.
So offshore it then. Simple
LOL. I have one Chinese supplier who ships alot of products directly to US customers and she offers FREE shipping. It’s via postal service and takes 2 to 3 weeks but it gets there.
The dirt cheap shipping from China, yea, it’s slow as all hell. Once you go up a notch, you can ship out for cheap anyways. A send out monthly shipments to people here that average ~15kg. Shipping cost is like $40ish and they show up in 3~4 days. For smaller shipments, around $5~10 is pretty standard. Cheaper than sales tax, and when dealing in volume, far far cheaper.
I would assume customs would be applicable on Products shipped in from outside country. Don\t know if there is a minimum prior to it being applicable and apparently it isn\t enforced.
Anything I receive in Sweden gets whapped by customs and VAT.
Certainly the sales tax is fair but certainly it is a beurocratic nightmare.
I Think that bill was initiated by Enzi, who is supposed to be a champion of tax reform. He responds favorably to all my letters on FATCA, as does his legislative assistant.
I’ve been shipping products to US customers from Canada since 1998 and not once has a customer complained they had to pay customs or any other taxes. I love NAFTA (that’s the free trade agreement between Canada, US and Mexico). Since the US doesn’t have anything equivalent to HST or VAT, the customer ends up paying nothing.
@Mark Twain, The Senate Finance Committee scheduled an internal meeting to discuss “international competitiveness” for May 23. I sent an email to Mike Enzi’s assistant Eric Oman and asked him to try to include the international taxation of individuals, not just corporations, in the meeting. He didn’t respond (well, I didn’t really ask him a question). Since you’re Mike Enzi’s constituent, I think it would be good if you could ask the same thing to his assistant, if you want.
I don’t have a view one way or the other but I thought the Baucus quote was priceless for other reasons.
“This bill is bad for business and bad for jobs,” said Senator Max Baucus, a Montana Democrat and chairman of the Senate Finance Committee, who said the measure wasn’t ready to debate yet. “It is full of unintended consequences.” (http://www.bloomberg.com/news/2013-04-23/norquist-joins-banks-opposing-online-sales-revenue-grab.html)
Right, thank goodness FATCA was debated and free of unintended consequences before being enacted.
Online sales tax bill could crash in the House…
Supporters of a bill that would broaden states’ ability to collect sales tax on online purchases acknowledge they face a tough battle in the House.
The measure, called the Marketplace Fairness Act, appears on a glide path toward passage in the Senate, with a final vote likely in early May.
But while Democratic leaders in the Senate supported the bill enough to bypass the Finance Committee and bring it straight to the floor, the GOP brass in the House has so far shown little interest in the measure.
We are ALL tax cheats now… the unintended consequences of US taxation laws spread. I am positive the EU will love it and copy it.
Shopping on the Internet without paying sales taxes makes you a tax cheat in almost all states
WASHINGTON — Buy anything on the Internet lately without paying sales tax? In all but a few states, you’re probably a tax cheat.
That’s right, even if Internet retailers don’t collect sales tax at the time of the purchase, you’re required by law to pay it in 45 states and the District of Columbia.
Here’s the problem for states: hardly anyone pays the tax, and there’s not much states can do about it.
Then this out of the UK…
Online retailers facing chaos over shock American taxes ruling
British retailers could be forced to complete dozens of American tax returns every month under new laws being introduced for online stores selling goods to customers in the US.
The legislation, facing a Senate vote tomorrow, will require any retailer with online revenue from the US of more than $1 million (£643,000) a year to collect state sales taxes from customers and pass them on to the American state where the customer lives.
Having visited Cheyenne and lived in downtown Laramie last year, I can picture how this developed. Both have classical Americana downtowns in their smalltowns, and both are fighting for relevance versus online shopping. In both cases, they are showing some progress. But like said, Walmart and Office Depot at the city limits could be the real winners for shopping.
The EU confiscates every incoming box and slaps 25% VAT plus a penalty upon it. You have to go down to box-jail (the post office) and pay before your prisoner gets released. If your mother sent it to you as a gift (or says so), it is your responsibility to prove yourself innocent.
Thought some readers might be interested in this Tax competition article by Dan Mitchel on the Sales Tax…
Why the So-Called Marketplace Fairness Act Is a Misguided Expansion of Power for State Governments
The fight is really about whether a state government has the right to force out-of-state merchants to act as deputy tax collectors. If you believe that borders should limit the power of governments, the answer is no.
But that rubs politicians the wrong way.