Tim Carter, author of the Ask The Builder web site and newspaper column comments:
An Internet Sales Tax will happen. I am not saying I am happy about it, but it is inevitable. Hundreds of Millions if not Billions of dollars are being lost to the states. They must get this money back.
What I want to see as a small business person is a single clearing house to send the money to along with a UNIFORM and single tax rate for all states. I can easily create a spreadsheet in Excel that shows total quarterly sales in each state and the pro-rata share each state gets.
Trying to adapt a shopping cart to charge a different rate for each state may be too expensive and TOO costly to maintain as tax rates change in each state. Can you imagine the hassle of sending money to 50 states? Can you imagine the hassle of trying to keep up with all of the turn-in dates and the different forms for each state? It would be Madness! A Flat Tax that all states MUST AGREE on and be happy with is the only way to go.
Michael Worth, founder of Crew Tags, which sells colorful luggage tags online, writes:
The big problem I see with an Internet Tax imposed on a small business such as myself would be the manpower required to complete and submit the 50 different tax reports and 50 different checks to 50 different states. I'd have to hire someone to do nothing but submit taxes to the different states, and that is something that I simply can not afford. Requiring me to pay taxes to the 49 other states that I don't have a physical presence in could very likely drive me out of business.
The way I see it, I don't have any responsibility to a state that I don't have a physical presence in. Mail order companies have been operating under the existing state tax rules quite profitably for many years. Why should the Internet change all that? If the states want to collect tax from the people making these purchases they should pursue the people making the purchase. The current laws support that. And so do I.
John Schulte, of the National Mail Order Association, offers this suggestion:
The NMOA Solution to the Sales Tax Issue.
Ever since I’ve been in this business the tax mongers have been hounding the mail order industry in one way or another over the collection of sales tax. It is clear that they will not give up until they get their way.
And for the same reasons as everyone has heard before “and more” the NMOA is against all new forms of the extortion called sales tax. But it is evident that a fair and simple solution must be reached so this issue can be put to rest and we can get back to doing more constructive things. Like selling!
The main concern of the NMOA is how the chosen solution will affect small mail order businesses. And one of our worries is that the government people making the rules don’t have a clue about the normal day-to-day headaches of running a small business. And I don’t want to hear that running a government body is like running a business, because if there were any relation to fiscal responsibility in government they would not be seeking more tax money in the first place.
I am also leery of some of the big business people they have giving them advice. They only see what’s in it for them. What ever is put in place must be fair and easy for all, including the consumer.
We have all heard of the unnecessary burden that would be placed on small direct marketers concerning the collection, tracking and disbursement of sale tax, but there is another costly problem you don’t hear much about….consumers that can’t add. And there are a lot of them.
Anybody that works in mail order knows about the problem of under and over paying by customers. I don’t have any statistics on how much money and manpower companies waste each year sending out small refunds or trying to collect small deficiencies in payments, but I can assure you that once people have to start figuring in sales tax on every sale (if it’s not easy) the problem will get worse.
Now I may be naïve, but it seems to me there is a simple and fair solution that exists for all. Large mail order firms, small mail order firms, the consumer, and the states.
I learned long ago the first thing to do when tackling problems is simply to simplify. After thinking about this I feel there is a simple solution. One that many of you may have had yourself.
What key elements must be included? The solution must make it easy for businesses to collect and distribute tax collected. It must be easy for the consumer. And each state must get their fair share.
So what is the NMOA solution? We propose a national flat tax of 2% on US mail order and Internet sales. The collected sales tax from each company will be sent quarterly to a single sales tax clearing house. The clearing house (less administration costs) will then divide the total amount collected and give an equal share to each state. The state can then do whatever they want with it. Any sales in or out of the USA would be exempt.
Having a single clearing house saves money for all states by eliminating redundancy, and it can be run by a handful of people. The tax of 2%, or “two cents extra” on each dollar spent is easy for consumers to figure. It’s good for all size businesses because they only have to keep track of one tax rate and send out a single check. Each state gets an even split of the pie. A tax rate of 2% is high enough because we have the efficiencies of scale and more businesses will comply, thus adding to the tax base.
There you go, taxing authorities, a simple and fair solution is on the table. Take advantage of it or leave us alone.
Khim Dirks, who is the owner of The Flying Teapot posted the following comment to the Etailers Digest discussion list.
If the government decides to collect sales tax, they need to implement a friendlier more efficient system compared to what they currently have in place to collect the tax from business. I was an accountant for a large business that ships out to many states and it was a nightmare preparing sales tax due to following:
- different states have differently reporting periods depending on the company's sales volume. Some require monthly, some quarterly, semi yearly, annually etc.
- some states imposed sales tax at county level e.g. California while some at city level e.g Texas
- small business does not have the resources to purchase sophisticated software to accommodate all the different rates imposed by the different states. Even when equipped with the right software to handle the different state taxes. Filing returns to that many states can cause undue hardship on small business.
- states like Texas (imposed at city level) is especially complicated e.g Acme city sales tax is 6.265 %. You don't just remit 6.265 % to Texas state. On the tax schedule, you are supposed to break it down into different components as follows: state 6.25 %, city .0025 %, county .005 %, mta .0025 and special district tax .005. And you have to do it for each individual city. Imagine the nightmare.
- you may only have 1 or 2 sales to certain states but you still need to file the return. Imagine filing a return to a state where you only have low volume or low dollar value sale. Is that cost effective?
The Flying Teapot
Jim Straw, publisher of the “Business Lyceum e-Letter”
also posting to the Etailers Digest wrote:
The question of “sales tax” on mail order sales has been a bone of
contention, nationwide, for the past 40 years. -- Now, the question of "Internet Sales Tax" is in vogue - but - unless the Internet Sales Tax is enacted as a Federal law it has little chance of success.
The states, of course, want to extract every penny of taxes they can from the businesses in their state, but they are forbidden by the U.S. constitution from levying taxes on citizens of other states. -- In the case of “sales taxes,” businesses are required by the laws of the state in which they exist to “collect and pay-over to the state” the taxes levied by the state on all “sales” made within that state. Thereby, the businesses in that state become “tax collectors” for the state. -- Therefore, the businesses in one state, selling and delivering their products in another state (i.e., “interstate commerce”), cannot ‘legally’ impose and collect their state’s taxes from the citizens of the other states. Neither can they collect the sales taxes imposed by the state of residence of the buyer in Interstate Commerce because a business in one state can not be legally bound to operate as a taxing representative of another state.
Seems simple, doesn’t it? But, it ain’t.
Almost every year, at least one case of “failure to collect and pay-over sales taxes” is brought against some BIG mail order company when some ‘greedy’ state taxing agency sees big dollars they might be able to get their grubby paws on. -- So far, those states have lost every case ... except where the mail order company has a physical “presence” (office, warehouse, or other facility) within the state; then, and only then, have those states been allowed to collect (extort) “sales tax” revenue from those mail order companies on sales made to ‘residents’ of that state.
Some few years ago, the state of Texas actually sent out notices to almost every mail order business in the country instructing those businesses to collect and pay-over sales taxes on every sale made to a resident of the state of Texas. -- I got one, took it to our attorney, and was advised to ignore it because the state of Texas had no taxing authority over businesses in our state.
Although the “sales tax” laws in the states that impose a sales tax are all very similar, they are not all the same. Therefore, you need to check-out the sales-tax law in your state or, better yet, have your attorney do it.
-- Pay special attention to the provisions for “exempt” sales, sales in interstate commerce, and any exclusions or exemptions for companies that are primarily involved in interstate commerce ... some states even exempt collecting sales tax on sales within the state IF the ‘company’ generates most (usually 90%) of its gross revenue from sales in interstate commerce.
J.F. (Jim) Straw
And finally, one Business Know-How reader, sent an email in all caps that said:
IF THEY PUT A TAX ON THE INTERNET. I WOULD STOP USING THE NET. STOP STOP STOP STOP STOP AND I MEAN IT .....PERIOD!