Arthur Laffer explains online sales taxes. Updated

posted at 11:31 am on July 20, 2013 by Jazz Shaw

Lost among many of the big stories this week was a rather uncomfortable moment on Fox News when Arthur Laffer went public with a study which claimed that the Marketplace Fairness Act was actually a net plus for fiscal conservatives. This immediately drew the ire of popular conservative leaders, including Ted Cruz, but Laffer has been approaching the study of this issue from a perspective of necessary evils. (You can see a lot of our previous coverage of the MFA here.)

Laffer says the bill offers cash-strapped states a shot at beefing up their budgets and argues the plan doesn’t create a new tax but instead gives states the opportunity to go after taxes they were already owed.

“All taxes are bad, some are just worse than others,” Laffer told FoxNews.com during an interview on Wednesday. “When you look at this carefully, this is exactly what you want. The lowest tax rate on the broadest possible base.”

Arthur Laffer is perhaps most famous for his “invention” (though he admits he didn’t actually create the idea) of the Laffer Curve. (A novelty item, still quite popular among fiscal conservatives, which demonstrates an undeniable truth about tax rates and taxpayer participation. Unfortunately, it immediately makes itself completely useless since you can never accurately determine precisely where you are on the curve nor the human response to the next change in rates in either direction unless you are at or very near one of the extremes on the axis.) Still, Laffer remains a venerable voice in the ongoing tax debates, so it was very interesting to see him go so far as to pen an editorial on the subject of the MFA.

Because state sales taxes generally have fewer loopholes and lower rates — and therefore have a lesser impact on growth and employment — pro-growth policies should favor sales over income taxes where possible. True reform should include addressing the online sales tax loophole.

A move towards e-fairness would give states an opportunity to use additional online sales tax revenues to lower rates on more burdensome taxes, such as the personal income tax. This would create a more efficient tax system and correct a fundamental distortion of the retail marketplace, where traditional retailers must collect the sales tax and their online competitors don’t.

Sadly, Laffer’s article doesn’t really touch on the question of the administrative burden the MFA would presumably place on small businesses dealing with the vagaries of tax law across multiple state lines. (This is a valid concern which Hot Air readers have discussed at length when I’ve written about this in the past, and definitely a question which deserves an answer from the act’s proponents.) But, unfortunately, people arguing Laffer’s position rarely get far enough in the debate to give it a full airing. The entrenched fiscal conservative position often begins and ends with, “Ugh. Taxes bad. Hulk smash taxes.” And there the conversation tends to stop.

UPDATE: (Jazz) A reader writes in with the following information regarding the tax collecting burden on small businesses. Apparently virtually all of the actual “small businesses” who would struggle the most with collection are exempted, and the bill requires that free software which calculates the tax for other states must be provided for those complying. Any of you legal eagles want to take a crack at it? You be the judge. (Emphasis from sender.)

From the text of the Senate bill.

SEC. 2. AUTHORIZATION TO REQUIRE COLLECTION OF SALES AND USE TAXES.

(a) STREAMLINED SALES AND USE TAX AGREEMENT.—Each Member State under the Streamlined Sales and Use Tax Agreement is authorized to require all sellers not qualifying for the small seller exception described in
subsection (c) to collect and remit sales and use taxes with respect to remote sales sourced to that Member State pursuant to the provisions of the Streamlined Sales and Use Tax Agreement, but only if any changes to the Streamlined Sales and Use Tax Agreement made after the date of the enactment of this Act are not in conflict with the minimum simplification requirements in subsection (b)(2).

(b) ALTERNATIVE.—A State that is not a Member State under the Streamlined Sales and Use Tax Agreement is authorized notwithstanding any other provision of law to require all sellers not qualifying for the small seller exception described in subsection (c) to collect and remit sales and use taxes with respect to remote sales sourced to that State, but only if the State adopts and implements the minimum simplification requirements in paragraph (2). Such authority shall commence beginning no earlier than the first day of the calendar quarter that is at least 6 months after the date that the State—
(1) enacts legislation to exercise the authority granted by this Act—
(A) specifying the tax or taxes to which such authority and the minimum simplification requirements in paragraph (2) shall apply; and
(B) specifying the products and services otherwise subject to the tax or taxes identified by the State under subparagraph (A) to which the authority of this Act shall not apply; and (2) implements each of the following minimum simplification requirements:
(A) Provide—
(i) a single entity within the State responsible for all State and local sales and use tax administration, return processing, and audits for remote sales sourced to the State;
(ii) a single audit of a remote seller
for all State and local taxing jurisdictions within that State; and
(iii) a single sales and use tax return to be used by remote sellers to be filed with the single entity responsible for tax administration.
A State may not require a remote seller to file sales and use tax returns any more frequently than returns are required for nonremote sellers or impose requirements on remote sellers that the State does not impose on nonremote sellers with respect to the collection of sales and use taxes under this Act. No local jurisdiction may require a remote seller to submit a sales and use tax return or to collect sales and use taxes other than as provided by this paragraph.
(B) Provide a uniform sales and use tax base among the State and the local taxing jurisdictions within the State pursuant to paragraph (1).
(C) Source all remote sales in compliance with the sourcing definition set forth in section 4(7).
(D) Provide
(i) information indicating the taxability of products and services along with any product and service exemptions from sales and use tax in the State and a rates and boundary database;
(ii) software free of charge for remote sellers that calculates sales and use taxes due on each transaction at the time the transaction is completed, that files sales and use tax returns, and that is updated to reflect rate changes as described in sub- paragraph (H); and
(iii) certification procedures for persons to be approved as certified software providers. purposes of clause (iii), the software provided by certified software providers shall be capable of calculating and filing sales and use taxes in all States qualified under this Act.
(E) Relieve remote sellers from liability to the State or locality for the incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of an error or omission made by a certified software provider.

UPDATE 2: (Jazz) There’s not only been a lot of informative feedback in the comments, but this thread led to a couple of contacts from both the small business community and online shoppers from rural areas who would be most affected by this legislation. There are some eye opening observations of how the promises in the bill don’t work out as billed. Rather than making a late addition after the piece has headed toward the bottom of the page, I’ll put them in their own separate post tomorrow. If you know of any other folks who would like to contact us from verifiable sources with their own experiences along these lines, let me know.


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Enzi, the fool…

Schadenfreude on July 20, 2013 at 11:36 AM

Companies like Avalara are going to boom.

Meanwhile, companies like mine are going to go under.

p0s3r on July 20, 2013 at 11:39 AM

The entrenched fiscal conservative position often begins and ends with, “Ugh. Taxes bad. Hulk smash taxes.” And there the conversation tends to stop.

Well yes, of course. Because of the possibility of hijinks inherent in them. But we also agree they are a necessary evil, and we are actually willing to be convinced.

Jeff Weimer on July 20, 2013 at 11:39 AM

It will just be another nail in the coffin of the little guy while big online retailers already have the resources to comply.

Southernblogger on July 20, 2013 at 11:41 AM

I’ve never understood why internet sales taxes aren’t simply charged in the SELLER’s locality? Treat it as though the consumer is coming to the seller, rather than the somewhat more absurd notion that the seller is building a tiny little shop in each consumer’s living room.

This has the added advantage of letting states compete for big retailer employers by keeping their sales taxes low.

SoRight on July 20, 2013 at 11:42 AM

A move towards e-fairness would give states an opportunity to use additional online sales tax revenues to lower rates on more burdensome taxes, such as the personal income tax.

This part was really funny though.

Southernblogger on July 20, 2013 at 11:43 AM

Sadly, Laffer’s article doesn’t really touch on the question of the administrative burden the MFA would presumably place on small businesses dealing with the vagaries of tax law across multiple state lines. (This is a valid concern which Hot Air readers have discussed at length when I’ve written about this in the past, and definitely a question which deserves an answer from the act’s proponents.)

I’m an Ohio resident who frequently travels to New York for my work. While in New York, when I visit a retail establishment, I pay New York sales tax (regardless of my state of residency). If I make an online purchase from an Ohio online retailer (shipped to my Ohio home address), I must pay Ohio sales tax. So, why can’t the online retailers charge customers the sales tax rate of the state they exist in (regardless of the shipping address of the purchaser)? I know that becomes an issue with large enterprises that may ship products from any number of warehouses in different states but those large retailers have the resources to work that out. Perhaps sales tax should be collected from the state where the particular warehouse shipping point is located.

Bitter Clinger on July 20, 2013 at 11:47 AM

Perhaps sales tax should be collected from the state where the particular warehouse shipping point is located.

Well many states use that to define “Economic Nexus”, basically any state you have some sort of economic base in you must collect sales tax for customers from that state.

p0s3r on July 20, 2013 at 11:48 AM

E-tax. Internet tax. Pffffttt… #@!&%$###@!!! And then some.

If I have to hire an accountant to keep all my sales and purchases straight, and make sure that every jurisdiction to which I was liable for tax was included, and paid to the penny, as required by law….I’d stop selling anything, go back to school, become a tax accountant and make lots of money (while it lasted) driving a lot of small entrepreneurs out of business.

A bottom threshold…a million in overall gross sales, maybe, or even $250,000 in gross sales….but all internet sales?

That Laffer Curve suddenly comes alive…

I operate on a small percent margin…basically a hobbyist selling historic military and philatelic finds and extras, duplicates and other assorted items to an international market. It covers costs of my other hobbies, and once in a while I can purchase something awesome with my proceeds.

If I had to account for, document, file and pay to all or most of the 1000-plus jurisdictions across the United States the taxes demanded by this internet law…at my level of sales?

I’d be a lot better off selling only to overseas markets, international only…and refuse to sell anything to an American at all.

Then deal with solely the tax laws in my own state…and ignore the tax laws abroad…out of jurisdiction and all that.

Gotta find those loopholes.

Congresscritters do, all the time…so why can’t I?

Besides…Chinese, Indians, Russians and a few others have money, cash…and pay quickly and come back to buy again.

Most American customers do not, of late. No cash. Apparently.

Must be the economy.

Somebody offended The Economy.

coldwarrior on July 20, 2013 at 11:49 AM

I’ve never understood why internet sales taxes aren’t simply charged in the SELLER’s locality? Treat it as though the consumer is coming to the seller, rather than the somewhat more absurd notion that the seller is building a tiny little shop in each consumer’s living room.

This has the added advantage of letting states compete for big retailer employers by keeping their sales taxes low.

SoRight on July 20, 2013 at 11:42 AM

I’m an Ohio resident who frequently travels to New York for my work. While in New York, when I visit a retail establishment, I pay New York sales tax (regardless of my state of residency). If I make an online purchase from an Ohio online retailer (shipped to my Ohio home address), I must pay Ohio sales tax. So, why can’t the online retailers charge customers the sales tax rate of the state they exist in (regardless of the shipping address of the purchaser)? I know that becomes an issue with large enterprises that may ship products from any number of warehouses in different states but those large retailers have the resources to work that out. Perhaps sales tax should be collected from the state where the particular warehouse shipping point is located.

Bitter Clinger on July 20, 2013 at 11:47 AM

What you said, LOL.

Bitter Clinger on July 20, 2013 at 11:49 AM

The entrenched fiscal conservative position often begins and ends with, “Ugh. Taxes bad. Hulk smash taxes.”

Yeah. Those neanderthals probably don’t want amnesty or a national gun registry, either. Thanks, Jazz!

MadisonConservative on July 20, 2013 at 11:51 AM

Well many states use that to define “Economic Nexus”, basically any state you have some sort of economic base in you must collect sales tax for customers from that state.

p0s3r on July 20, 2013 at 11:48 AM

So why couldn’t that be extended to online customers from other states? Just like as if the customer had traveled to that state to purchase the product.

Bitter Clinger on July 20, 2013 at 11:51 AM

While I agree that all taxes suck, the challenge is not that there are 50 states to pay taxes to.

The programming is not that difficult to add to a website. It is much more complicated to do shipping fee calculations. (Total weight, number of boxes, number of shipping locations, number of destinations etc.)

In Louisiana, there is a service which does the taxes for you for all 67 parishes. I have not looked but I am sure there are services that do all 50 states. Just like ADP handles all my payroll taxes, these services will handle all your sales taxes. If you pass the law, you should mandate that taxes can be filed electronically or you cannot collect. It should also be based on a single standard location; either billing address or shipped to address (not both.)

I would much rather have a national sales tax and nationwide state sales taxes than Federal Income Tax and State Income Tax.

However, I do agree that big leftist democrook infested cities like Detroit, NYC, Chicago, SanFran etc. will try to impose city sales taxes on top of the Fed and State.

barnone on July 20, 2013 at 11:55 AM

Sadly, Laffer’s article doesn’t really touch on the question of the administrative burden the MFA would presumably place on small businesses dealing with the vagaries of tax law across multiple state lines.

One solution would be to just charge a national sales tax, say 5% and then apportion it among the states that charge sales taxes. Exclude food, clothing and medical stuff even though some states do charge for the first two. It is using an axe instead of a scalpel, but it does have the advantage of being simple, cutting down on the administration of a complex solution.

rbj on July 20, 2013 at 11:55 AM

Small foreign sellers will also benefit at the expense of American ones. It will be very difficult to detect these shipments and enforce collections against companies with no U.S. assets.

RadClown on July 20, 2013 at 11:56 AM

A bottom threshold…a million in overall gross sales, maybe, or even $250,000 in gross sales….but all internet sales?

coldwarrior on July 20, 2013 at 11:49 AM

I like that. You could also state that the minimum payment should be $100 to any jurisdiction in any month. If you are below that, it isn’t worth writing the check. It costs between $15 and $35 to process a check on both ends.

barnone on July 20, 2013 at 11:59 AM

Good to see somebody encouraging the idea of online sales tax, yes taxes are bad, but voluntary sales taxes are far better than the mandatory and fascistic income tax and if we want to get rid of the income tax (and i certainly do) there’s going to have to be a tax structure in place to fill the void. Having said that though, i also think that any online sales tax should be coupled with at least the beginning of the removal of the income tax, if it’s not then there’s no point.

clearbluesky on July 20, 2013 at 12:00 PM

Laffer says the bill offers cash-strapped states a shot at beefing up their budgets and argues the plan doesn’t create a new tax but instead gives states the opportunity to go after taxes they were already owed.

States always had that opportunity. Cross-state purchases and shipping is nothing new. No state has the power to demand that an out-of-state transaction collect taxes for it and its municipalities. Neither does the feral government have the power to demand that. If a state thinks that its citizens are not paying appropriate taxes all it has to do is ask them on the state tax forms. There’s a penalty for lying. But, the idea that every mom and pop store in every state has to worry about all the taxes for every county, city and state in the nation, collect the appropriate amounts, send them off to the appropriate agencies … is INSANE.

ThePrimordialOrderedPair on July 20, 2013 at 12:02 PM

You want to explain the impossible?

Start with the point of this post.

Jazz hits Laffer for backing online tax, then ends it with a note that implies he agrees with it, but since it can’t get a fair hearing, there’s no point in trying to debate it.

Somewhere in the middle of that, he concedes opponents are correct that smaller business will get slammed harder.

How about a simple declarative as to where the writer stands on the issue, if they’re going to write this as an opinion piece.

budfox on July 20, 2013 at 12:03 PM

rbj on July 20, 2013 at 11:55 AM

Meh. The feds have enough income streams as it is.

I like the idea of charging seller-area sales taxes to all purchasers better. It has the virtue of simplicity, obviates the joke of “use taxes”, and corrects for the market distortion. The mechanisms for collection are already in place, too.

There will probably have to be federal legislation for it though, as they are the gatekeepers for intrastate commerce.

Jeff Weimer on July 20, 2013 at 12:05 PM

The only fair tax is one which is levied at the exact same dollar value on every single adult in the taxing authority region. Any other tax is unfair. Each person gets the exact same value from their vote. Any progressiveness or regressiveness in the taxes causes the voters to change their votes based on how to steal money from other people either to keep it from being taken from themselves or to actually be given to themselves.

astonerii on July 20, 2013 at 12:06 PM

would give states an opportunity to use additional online sales tax revenues to lower rates on more burdensome taxes, such as the personal income tax.

I live in a state without an income tax. How does this help me?

This would … correct a fundamental distortion of the retail marketplace, where traditional retailers must collect the sales tax and their online competitors don’t.

Online retailers either have to absorb or charge shipping fees. Sounds like parity to me.

Kafir on July 20, 2013 at 12:07 PM

Disagree strongly, the logistics of collecting sales taxes for Maine from your business in Arizona and then trying to figure out the rules of what to charge, when to charge how to file with that state and when, yadda, yadda is just hubris.

Internet companies should charge taxes for the state they’re charted in or reside in (if they’re not chartered) period.

Skywise on July 20, 2013 at 12:07 PM

The prefix inter- means between or among. The prefix intra- means within.

There will probably have to be federal legislation for it though, as they are the gatekeepers for intraerstate commerce.

Jeff Weimer on July 20, 2013 at 12:05 PM

astonerii on July 20, 2013 at 12:08 PM

Economists don’t have to be so politically naive do they? They have to know that statements in favor of certain taxes will be used to enact them. Hoping that other taxes will be reduced to balance the increases is a childish dream.

Perhaps he should make these arguments in the context of reality?

An internet sales tax will kill the lowest tier of on-line businesses and force prices up across the board for all consumers. More unemployment. Less consumption. Is that what we want?

And what do we think this money is needed for? The current funds are being wasted by government, so giving them more is not going to help. The problem is spending. It always was.

virgo on July 20, 2013 at 12:12 PM

How about a simple declarative as to where the writer stands on the issue, if they’re going to write this as an opinion piece.

budfox on July 20, 2013 at 12:03 PM

Follow the link to previous pieces on this subject and you’ll find that I’ve never settled on totally supporting the bill or completely opposing it as proposed. I do agree with the overarching idea that the tax holiday for online sales was useful initially, but has lasted far too long and the brick and mortar stores are being forced to compete on an uneven playing field. However, the implementation of it still has a lot of question marks attached. A bill designed to do something I may personally agree with is still not a good bill if it leaves a lot of additional new damage in its wake. I was closer to agreeing with the bill when I initially found out about it and began writing on the subject here, but the objections of a number of readers have given me pause. They bring up some very valid points, and maybe this bill is too damaged to go through as currently structured. Doesn’t mean I wouldn’t support doing *something* to address the situation, though, and I’m not immediately stiffening my back against anything and everything that may involve the word “tax.”

Jazz Shaw on July 20, 2013 at 12:14 PM

For anyone who is taken with the un-Constitutional idiocy of federal legislation that forces sellers to collect state, municipal and county sales taxes for every purchase that is being shipped out of state, why isn’t the shipping charge deductible from that tax??

I find it amazing that so many people seem to forget how things have worked for so long. People have long crossed state lines to make purchases in other states to be shipped home – so that they didn’t have to pay that state’s sales tax at the transaction. They were and are still responsible for paying whatever taxes the state shipped to required. It is that state’s responsibility to collect their own taxes, not everyone else’s to collect it for them.

People act as if this is something totally new. It isn’t, as anyone who lives near state lines has known for a long, long time.

ThePrimordialOrderedPair on July 20, 2013 at 12:18 PM

I’ve never understood why internet sales taxes aren’t simply charged in the SELLER’s locality?

SoRight on July 20, 2013 at 11:42 AM

Which state/city charges tax in this sale:

- seller is the US sub of a French company
- The US sub is incorporated in FL where there is no sales tax
- the admin offices are in CA
- the mfg plant is in TX
- the warehouse it’s stored in is in NY
- the buyer is in WI
- the buyer is shipping it directly to his mother as a gift who is on vacation in HI
- his mother lives in AK
- he uses a credit card that is a US company based in NY, HQd in ID, billed to him from TN

faraway on July 20, 2013 at 12:19 PM

I do agree with the overarching idea that the tax holiday for online sales was useful initially,

Jazz Shaw on July 20, 2013 at 12:14 PM

There was no such “tax holiday” for forcing every transaction across the nation to collect every sales tax for the place items were shipped to. That is the way things have always been. You know, people have long bought things in other states and had them shipped home.

ThePrimordialOrderedPair on July 20, 2013 at 12:20 PM

Companies like Avalara are going to boom.

Meanwhile, companies like mine are going to go under.

p0s3r on July 20, 2013 at 11:39 AM

when I hear the ads for Avalara I wonder how much they paid to the lobbyists to get the tax through congress. how many millions did they spend in DC to get their moat.

I wish some journalist would investigate that.

unseen on July 20, 2013 at 12:22 PM

Laffer wants to implement a system more flawed than ObamaCare, and will add taxes to everyone.

He’s a dangerous man.

faraway on July 20, 2013 at 12:23 PM

A neighbor told me recently, when he first heard about this idea of internet tax, that he thought it was a great idea…more income for government, so they could spend more to help more.

I pointed out two individuals in this community who started out on the internet…one selling beads and jewelry…the other a related consumer-oriented service…but they both started out a number of years ago sitting in their kitchens or living rooms…and selling…low-end, inexpensive stuff…but selling it…to a growing consumer base.

Got to the point that the both of them now have brick and mortar stores in town…still selling on the internet, but each have hired several people, younger folks, a few retirees, part time, to take care of a lot of details…buying supplies, maintaining inventory, shipping, accounting…advertising…you name it.

Two people…paying others to work for them…when a few years ago none of them were earning anything at all….employees included.

Two people who are now scared to death that they will get too large….have too many employees…may get hit with an internet tax along with a possible demand that they pay all sorts of benefits to their employees…currently mostly part time…and all sorts of other possibilities, none of them good.

Government and Taxes, Obamacare, progressives and liberals trying to help everybody except those who are actually helping everybody…

My neighbor’s reaction?

Well, when they started a business they should have thought of that beforehand…

Yep.

College professor.

Liberal arts.

Trey Parker and Matt Stone are right…

No wonder The Economy is offended.

coldwarrior on July 20, 2013 at 12:26 PM

the administrative burden the MFA would presumably place on small businesses dealing with the vagaries of tax law across multiple state lines.

This is why, in repealing the 16th-Amendment, it needs to be replaced by another Amendment that limits financing of the Federal Government to a Consumption (sales) Tax – which would be currently legal under the Excise Tax clause IMO – but more importantly, would nullify all State and Local Sales Taxes, reserving this tax to the Federal Government only – thereby establishing a nation-wide, uniform, tax on economic activity. Savings and investment would not be taxed, but would be encouraged; you would only be taxed when you spent the proceeds of your saving or investment.

Another Drew on July 20, 2013 at 12:26 PM

Delaware and Oregon have no sales tax
Set up all internets there

losarkos on July 20, 2013 at 12:29 PM

The entrenched fiscal conservative position often begins and ends with, “Ugh. Taxes bad. Hulk smash taxes.”

Nothing like a sweeping and simple-minded generalization of those with differing opinions. How progressive of you.

RadClown on July 20, 2013 at 12:30 PM

Texas Tennessee Washington New Hampshire Wyoming have no income tax soa vat would be hard on Tennessee which already has high sales tax

losarkos on July 20, 2013 at 12:30 PM

The entrenched fiscal conservative position often begins and ends with, “Ugh. Taxes bad. Hulk smash taxes.” And there the conversation tends to stop.

You have to get rid of the income tax BEFORE you implement the sales tax. Otherwise, once the new cash starts flowing in, you will have both sales tax AND income tax. A tax, once enacted, is never repealed. This applies as much at the federal “national sales tax” level as it does at the state “online sales tax” level.

tdarrington on July 20, 2013 at 12:32 PM

The entrenched fiscal conservative position often begins and ends with, “Ugh. Taxes bad. Hulk smash taxes.”

The entrenched leftist radical position begins and ends with “Ugh. Taxes good. Hulk increase taxes.”

This is a fun game.

faraway on July 20, 2013 at 12:33 PM

losarkos on July 20, 2013 at 12:29 PM

But I live in Ohio. My bank account is in Ohio. The state of Ohio will collect whatever in accordance with law even if I somehow establish an “internet store” in Oregon or in Addis Ababa.

I have no intention of moving to Oregon. Less reason to move to Delaware…and if I have to move out of the country…well…

And any taxes they thus steal from me is given to whom?

I already tithe…give a lot more each year than that guy from no-tax Delaware..that idiot VP of ours…Biden?

coldwarrior on July 20, 2013 at 12:34 PM

A move towards e-fairness would give states an opportunity to use additional online sales tax revenues to lower rates on more burdensome taxes

Yeah. Therein lies the rub, huh. IF states lower their other taxes or rates. Show of hands… how many people think THAT will happen ?

Didn’t think so.

deadrody on July 20, 2013 at 12:34 PM

OT: ding dong the witch is dead … Helen Thomas has passed away.

M240H on July 20, 2013 at 12:40 PM

Post updated with information from the bill regarding the burden on small businesses.

Jazz Shaw on July 20, 2013 at 12:41 PM

TEA

Bmore on July 20, 2013 at 12:42 PM

Follow the link to previous pieces on this subject and you’ll find that I’ve never settled on totally supporting the bill or completely opposing it as proposed. I do agree with the overarching idea that the tax holiday for online sales was useful initially, but has lasted far too long and the brick and mortar stores are being forced to compete on an uneven playing field. However, the implementation of it still has a lot of question marks attached. A bill designed to do something I may personally agree with is still not a good bill if it leaves a lot of additional new damage in its wake. I was closer to agreeing with the bill when I initially found out about it and began writing on the subject here, but the objections of a number of readers have given me pause. They bring up some very valid points, and maybe this bill is too damaged to go through as currently structured. Doesn’t mean I wouldn’t support doing *something* to address the situation, though, and I’m not immediately stiffening my back against anything and everything that may involve the word “tax.”

Jazz Shaw on July 20, 2013 at 12:14 PM

Absolute rubbish. There was never any real “holiday”. Instead, the federal gov’t prevented the 50 individual states from all jumping in to fill the vacuum of “no internet sales tax”.

The simple fact is, the state of NY is no more entitled to have an internet company in TX collect its sales tax for them than they are entitled to literally ANYTHING of a resident of TX. Period.

And please, for the love of god, stop pretending that attaching the word “fairness” to a bill means it has anything to do with “fairness”. You really think making people pay 5% more for stuff online is going to actually allow brick and mortar stores to compete better ? Please. This effort was dead in the water for YEARS until Amazon got big enough that they couldn’t locate all their facilities in states that don’t have sales tax. So now there grand scheme is to force EVERYONE to pay that sales tax, thus reducing the competition so they can expand to every state and locality and offer free same day delivery.

This bill has nothing to do with fairness and everything to do with Amazon trying to kill off its competition.

And yet you bought it hook, line, and sinker. And now I’m supposed to be impressed with your “gosh, I’m not sure if I support it or not” act ? Whatever

deadrody on July 20, 2013 at 12:43 PM

Laffer is right in that taken in isolation, a low tax rate on the most people is best thing for everyone.
But MFA is not in isolation, there are other secondary effects like cost of compliance, and additional regulatory and inspection burdens that will be passed on to the consumer.
Small biz will be hurt, the state will grow in size which means they will need even more money in the future, and the consumer will pay more for their goods.

LincolntheHun on July 20, 2013 at 12:43 PM

Didn’t think so.

deadrody on July 20, 2013 at 12:34 PM

When they established a lottery in this state [Ohio] one of the selling points for passage was that the proceeds from the lottery would go toward education…new schools, new books and buses, better teachers…all sorts of goodies local communities just could not afford.

It passed.

And ever since, each year, whatever the proceeds of the lottery (and now casinos) are dedicated toward “education” are subtracted from the general fund…thus,”investments” in schools has pretty much stagnated. Instead of being a flush add on to the education budget, it had pretty much become the education budget.

Money is fungible.

This internet tax…if enacted…will never never ever allow for the reduction of other taxes…ever.

They will just keep spending on other, more important “investments” until there is an opportunity to enact yet another tax.

And people are amazed that Detroit, the Motor City, MoTown, home to once some of the finest orchestras, theaters, museums, soaring architecture, cutting edge innovation, established multi-ethnic neighborhoods, and stores and restaurants of all description…died.

If you build it, they will come.

If you tax it, they will go.

coldwarrior on July 20, 2013 at 12:45 PM

Oh, BTW, the current threshold for “small business” is $1 million in annual sales.

Not profit, sales.

So, you sell a product for $50. You only have to sell 2-3 per hour to meet that threshold.

How about we use a REAL threshold. Maybe $10 million.

deadrody on July 20, 2013 at 12:47 PM

Unfortunately, it immediately makes itself completely useless since you can never accurately determine precisely where you are on the curve nor the human response to the next change in rates in either direction unless you are at or very near one of the extremes on the axis.)

this isn’t really true at all.

the curve is nothing more then a sort of bell curve. from the link :

It postulates that no tax revenue will be raised at the extreme tax rates of 0% and 100% and that there must be at least one rate where tax revenue would be a non-zero maximum.

So basically it states that as tax rates go up from 0 tax revene will increase until a certain point where the next increase in rates will decrease tax rev. It’s easy to tell which half of the curve you are on. If you lower rates and tax rev go up you are on the right side of the curve if you raise rates and tax rev goes up you are on the left side.

however the graph also shows a linear correlation between tax rates and economic activity. at 0% tax rate you have 100% economic activty and at 100% tax rates you have 0% economic activty. thus as you increase taxes regardless of where you are on the curve you will decrease economic activty. the curve simply tries to find where that decreasing economic activty will spell decreased tax revs.

In other words the Sales tax on internet sales will decrease economic activty on the net. or in other words the Congress decided to decrease jobs in a recession for fairness.

So while the curve is kind of useless in determining exact rates it does give a overview of tax policy and economic activty and allows policy makers quickly to understand where on avg they are on curve by the effects of changes in tax policy.

When bush lowered tax rates it increased tax revs by almost a trillion dollars thus it showed that we were on the right hand side of the curve. and needed additional tax cuts to continue to increase tax revs.

the fact that the tax cuts expired doesn’t so promise at this point of increasing rev from the tax hikes.

unseen on July 20, 2013 at 12:48 PM

So… the takeaway of this article is that online sales taxes are something that “fiscal conservatives” should support because Laffer supports online sales taxes. But unfortunately, said “fiscal conservatives” wont listen to Laffer because “fiscal conservatives” refuse to listen to (or debate) the merits of more taxes.

H’okay, Jazz!

Jeddite on July 20, 2013 at 12:50 PM

Steve Stanek: Internet sales tax unfair
Orange County Register

“OK, let’s have true marketplace fairness. We’ll require every retailer – online as well as brick-and-mortar – to determine where each shopper who comes in the door lives, collect the appropriate sales tax amount, and then send the money to the appropriate tax jurisdiction.

Surely they would have no problem submitting themselves to audits from tax jurisdictions across the country.

opaobie on July 20, 2013 at 12:52 PM

If a federal law has to include handing out free software to make the law work, then it is a horrible law.

rock the casbah on July 20, 2013 at 12:55 PM

astonerii on July 20, 2013 at 12:08 PM

I stand corrected. Intra is what I meant.

And yes, this would hit the no income tax/high sales tax states hardest, and Oregon could very well get an influx of new retailers.

Jeff Weimer on July 20, 2013 at 12:56 PM

Others have noted this already, but this:

A move towards e-fairness would give states an opportunity to use additional online sales tax revenues to lower rates on more burdensome taxes, such as the personal income tax.

is not reality-based. The govt. entities will simply collect the online tax, without a corresponding reduction in other revenue.

cs89 on July 20, 2013 at 12:57 PM

The entrenched fiscal conservative position often begins and ends with, “Ugh. Taxes bad. Hulk smash taxes.” And there the conversation tends to stop.

it isn’t taxes its what the taxes are funding. If you believe that government is too big, too bloated and too powerful then you have to believe that taxes are too high. That there is plenty of room to cut spending to make government smaller and still have the money it requires to fund government functions. No small government fiscal conservative could at this stage of our national history make the case that the bloated out of control federal or state government needs more tax rev to continue its power grab.

unseen on July 20, 2013 at 12:59 PM

What is the incentive for states with no income tax? What other tax(es) do they reduce to offset the new Internet sales tax to make it palatable to the taxpayers in their state?

opaobie on July 20, 2013 at 1:03 PM

The idiot polidicks who’ve run Illannoy into the ground have consistently over decades proven they can’t handle the sales tax money (or any money–taxes or otherwise) they’re handed handily. Why should they be the beneficiaries of more money that must be burdensomely collected just so they can squander it?

BTW, Illannoy unemployment up, bond rating down.

stukinIL4now on July 20, 2013 at 1:04 PM

Since this legislation originated in the Senate, how does it pass Constitutional muster since tax and revenue bills must originate in the House?

opaobie on July 20, 2013 at 1:06 PM

The entrenched fiscal conservative position often begins and ends with, “Ugh. Taxes bad. Hulk smash taxes.”

Right. It’s more like the entrenched ignorant position often begins and ends with, “The entrenched fiscal conservative position often begins and ends with, ‘Ugh. Taxes bad. Hulk smash taxes.’”

But thanks for your “STFU and STFD” manner of debating the subject anyway, Jazz.

Dusty on July 20, 2013 at 1:07 PM

unseen on July 20, 2013 at 12:59 PM

Good point, and add to it the wealth transfer cited below, and how can any fiscal conservative support it?

(From the Orange Counter Register Op-ed I linked earlier): “Backers of the federal Marketplace Fairness Act estimate it would generate another $23 billion of annual revenue for states. Of course, another way to look at the law is to say it would take $23 billion away from consumers. That’s $23 billion less money consumers would be able to spend shopping.”

opaobie on July 20, 2013 at 1:10 PM

A move towards e-fairness would give states an opportunity to use additional online sales tax revenues to lower rates on more burdensome taxes, such as the personal income tax.

that’s a huge qualifying statement. and since we know states wont use this as an opportunity to lower more burdensome rates that impede growth its moot. laffer is talking in a theoretical situation. the real world wont work that way.

also the issue of which rate to collect is still backwards. traditional brick-mortar tax is based on the sellers locale. the internet tax should be the same way.

it all boils down to crony capitalism and too many GOPers are participating under the guise of being business friendly. well if it’s only friendly to some businesses than it shouldn’t be done.

chasdal on July 20, 2013 at 1:10 PM

One could collect the sales tax from the jurisdiction of the warehouse from which the item is shipped.

I assume this has been suggested. Will go look.

goatweed on July 20, 2013 at 1:13 PM

opaobie on July 20, 2013 at 1:06 PM

Harry Reid is trying to abolish the House…except that his buddy, Nancy would have to find a job, can’t let her move in with him, you know.

Constitutional muster, according to the Left, should be kept right next to the Constitutional ketchup and mayo…and refrigerated after opening.

Yes, this lack of understanding of our Constitution, and its simplicity is singularly frustrating…and when our President engages in it, and elected officials do likewise, as if it is simply one of those “pathways,” a mere road map, a suggestion of how governance would be in a perfect world…

And they all took an oath…

coldwarrior on July 20, 2013 at 1:13 PM

A move towards e-fairness would give states an opportunity to use additional online sales tax revenues to lower rates on more burdensome taxes, such as the personal income tax.

Hahahahaha!!

Yeah, and how many state legislatures would actually do that?

Most would do this, and Laffer is a fool if he thinks otherwise.

Hey! We got MORE money to spend!

Just look at The People’s Republik of Kalifornia. Income tax (on the rich) and increased sales tax “for the children”, “for public safety”.

Uh, what UNION just got a 4% pay raise?

GarandFan on July 20, 2013 at 1:15 PM

coldwarrior on July 20, 2013 at 1:13 PM

Oh, well, I guess when Mark Levin’s new book on amending the Constitution arrives, I can channel Jefferson and Madison and Adams and try to help glue the pieces back together.

opaobie on July 20, 2013 at 1:18 PM

Laffer and Donna Arduin, president of Arduin, Laffer & Moore Econometrics, say closing the online sales tax “loophole” is key to building a more robust economy. They say the Marketplace Fairness Act would help states level the playing field for local retailers — which are already subject to sales tax in most states — and would create a more efficient system that would lead to a bump in the GDP by $563.2 billion and add more than 1.5 million jobs over the next 10 years.

Really. When considering this assertion, please keep in mind that if a woman engineer is hired at the beginning of the year at an annual salary of $100k by an private oil firm in the capacity of finding new sources of drilling and after one year finds none, her contribution to the GDP is zero. If, however, this woman is hired by the government at the same time, at the same salary, and for the same purpose, and achieves the same result, her contribution to the GDP is $100k.

Dusty on July 20, 2013 at 1:20 PM

is not reality-based. The govt. entities will simply collect the online tax, without a corresponding reduction in other revenue.

cs89 on July 20, 2013 at 12:57 PM

http://www.nbcnews.com/id/52482201/ns/local_news-raleigh_nc/t/mccrory-gop-plan-cuts-taxes-individuals-companies/

unseen on July 20, 2013 at 1:21 PM

Taxes are like Obama. We have learned from past experiences that they can’t be trusted.

Wondering about exemptions now. Going to check that out. Thanks, Jazz!

tuffy on July 20, 2013 at 1:22 PM

What is the incentive for states with no income tax? What other tax(es) do they reduce to offset the new Internet sales tax to make it palatable to the taxpayers in their state?

opaobie on July 20, 2013 at 1:03 PM

they could always set up a fund like AK has with oil revs to send rebate checks back to the citizens.

unseen on July 20, 2013 at 1:27 PM

It appears that Laffer has also bought into the unicorn pooping skittles view of reailty:

“By broadening the tax base and using the increased revenues to lower marginal tax rates, we can reinvigorate the U.S. economy and increase overall national wealth,” he said.

Dusty on July 20, 2013 at 1:28 PM

That’s $23 billion less money consumers would be able to spend shopping.”

opaobie on July 20, 2013 at 1:10 PM

increasing taxes decreases economic activity.

The biggest con the elites pulled was including gov spending in the GDP equation.

unseen on July 20, 2013 at 1:31 PM

opaobie on July 20, 2013 at 1:18 PM

Did not start out as a fan of Levin…but the more I read….

It often worries me, must be a sign of the times, but when somebody makes good sense…I wait for the other boot to drop.

Cynic?

Just have been burned a few times too many by a lot of pols, and pundits, and others who had a good line or two then turned out to be in league with the devil…or Obama…wait, redundancy?

I just wish more would actually read…on their own…and maybe try to understand that there is good and there is evil in the world…the good is hard, boring, difficult, too often thankless to accomplish….the evil…instant gratification, honors, fame, and a seat at a White House dinner.

Is Levin coming out with a book on the Constitution?

coldwarrior on July 20, 2013 at 1:32 PM

Wow, a new tax! Why hasn’t Jazz written about this great idea before now!!

Why, I’d have thought forty five or six posts on this subject would be in order!

Oh, he has done that? Four hundred and forty five prior times, you say?

Oh well, then, lets say it for the four hundred and forty sixth time too: NO NEW TAXES. As in, NONE. ZERO.

Arthur Laffer isn’t speaking out in favor of on line taxes in isolation, you fool, he is saying they are preferable to income taxes. Its a comparison he is making.

What are the chances New York, or any Democrat state, are going to drop an income tax and substitute a regressive sales tax? How small a number exists in the world, because the chances are smaller than that number. It’ll never happen Señor Quixote.

So just shut up with your semi-constant call for new incremental taxes. If you want to pay more money to Cuomo or Obama, please feel free to mail them checks. But leave us out of it!

MTF on July 20, 2013 at 1:33 PM

A novelty item, still quite popular among fiscal conservatives, which demonstrates an undeniable truth about tax rates and taxpayer participation.

A novelty item?

Unfortunately, it immediately makes itself completely useless since you can never accurately determine precisely where you are on the curve nor the human response to the next change in rates in either direction unless you are at or very near one of the extremes on the axis.

Absolutely idiotic. I suppose the supply and demand curve is also “a useless novelty item” because it functions in the exact same way, except that it describes supply and demand.

NotCoach on July 20, 2013 at 1:40 PM

…Having said that though, i also think that any online sales tax should be coupled with at least the beginning of the removal of the income tax, if it’s not then there’s no point.

clearbluesky on July 20, 2013 at 12:00 PM

“Ugh. Taxes bad. Hulk smash taxes.”
And that is the exact reason for a general dislike of new taxes. It just increases the taxes, they never decrease. Its always in addition to . . .

i’m in favor of a federal flat tax. but if it were implemented at 10%, how long before it was raised to 17% or 22% or . . ???

countmein on July 20, 2013 at 1:40 PM

Two thoughts:
-that “free” software isn’t free; somebody, somewhere pays for it. Who and how much does it cost?

-

“All taxes are bad, some are just worse than others,” Laffer told FoxNews.com during an interview on Wednesday. “When you look at this carefully, this is exactly what you want. The lowest tax rate on the broadest possible base.”
…A move towards e-fairness would give states an opportunity to use additional online sales tax revenues to lower rates on more burdensome taxes, such as the personal income tax.

I would tend to agree with Laffer here BUT, politicians don’t say “hey we have a new revenue stream let’s lower another more burdensome tax.” They tend to try to figure out how they can spend more tax money. Usually by trying to buy votes.

hopeful on July 20, 2013 at 1:41 PM

Because state sales taxes generally have fewer loopholes and lower rates — and therefore have a lesser impact on growth and employment — pro-growth policies should favor sales over income taxes where possible. True reform should include addressing the online sales tax loophole.

There’s a simple solution here without raising taxes: Cut spending. I know, I know, it’s a useless novelty to suggest, but I’m rather quaint that way.

NotCoach on July 20, 2013 at 1:42 PM

Is Levin coming out with a book on the Constitution?

coldwarrior on July 20, 2013 at 1:32 PM

It’s called “The Liberty Amendments”.

http://www.marklevinshow.com/common/page.php?pt=Reserve+Your+Copy+of+The+Liberty+Amendments&id=4183&is_corp=0

He seems to be the “real deal”. He is intolerant of fools and seems to be a true originalist. He often quotes the great freemarketeers and lovers of liberty and includes their ideas (with citation) in his books. I have all of them, and I find no fault with any of them. He was in Reagan’s Administration under Ed Meese I believe. He operates Landmark Legal Foundation…law degree from Temple.

opaobie on July 20, 2013 at 1:43 PM

I suppose the supply and demand curve is also “a useless novelty item” because it functions in the exact same way, except that it describes supply and demand.

NotCoach on July 20, 2013 at 1:40 PM

good point. You can never know what price is the “correct” price by using the graph. you can only ge tto the correct prices by observing the interaction between supply and demand. The same goes for tax rates for tax revs. Great way of looking at it. thanks.

unseen on July 20, 2013 at 1:43 PM

Dusty on July 20, 2013 at 1:28 PM

Yep. Nobody’s rates will be cut when they implement a national sales tax.

NotCoach on July 20, 2013 at 1:44 PM

I am not in favor of sales taxes on the internet, that said it sure is funny that liberals don’t want to pay sales tax on the internet and do think their online business is holier than thou’s and shouldn’t be taxed. They do that with all their non profit businesses too. You should pay taxes but their pet thing should not pay taxes even though it looks an awful lot like a business to you or me.

It’s just the hypocrisy. If sales taxes are too much for the internet stores, maybe they are too much paperwork for the regular stores too.

Fleuries on July 20, 2013 at 1:44 PM

This is one topic on which I changed my mind a few years back.

As a consumer, I liked it when stuff was cheaper.

However, it is unfair to brick and mortar stores when they have a legally imposed cost that online retailers can ignore.

Mister Mets on July 20, 2013 at 1:47 PM

As much as I agree with the Laffer curve, Laffer is inspecting the bark on a tree whilst denying the forest around him.

Yes, some taxes are worse than others and the government will leave them in place while it adds this NEW tax onto its income stream.

Sorry but the ‘starve the beast’ strategy beats your ‘oh the poor poor states need money’ arguments.

DavidM on July 20, 2013 at 1:51 PM

I’m an Ohio resident who frequently travels to New York for my work. While in New York, when I visit a retail establishment, I pay New York sales tax (regardless of my state of residency). If I make an online purchase from an Ohio online retailer (shipped to my Ohio home address), I must pay Ohio sales tax. So, why can’t the online retailers charge customers the sales tax rate of the state they exist in (regardless of the shipping address of the purchaser)? I know that becomes an issue with large enterprises that may ship products from any number of warehouses in different states but those large retailers have the resources to work that out. Perhaps sales tax should be collected from the state where the particular warehouse shipping point is located.

Bitter Clinger on July 20, 2013 at 11:47 AM

One argument is that it becomes too easy to circumvent the taxes. A consumer can sit in their house and just buy from the retailers that are located in states with lower sales taxes.

Mister Mets on July 20, 2013 at 1:52 PM

He seems to be the “real deal”. He is intolerant of fools and seems to be a true originalist. He often quotes the great freemarketeers and lovers of liberty and includes their ideas (with citation) in his books. I have all of them, and I find no fault with any of them. He was in Reagan’s Administration under Ed Meese I believe. He operates Landmark Legal Foundation…law degree from Temple.

opaobie on July 20, 2013 at 1:43 PM

Levin sold me when he was one of only a handful of pundits that came out strong in support of Gov Palin while others like fox news took the occasion to attack her. over the last 5 years I have noticed you can see the people who have good judgement and character by the way they treat or interact with Gov Palin.

Just look at Rubio during his campign in 2010 he kept his distance from Palin even finding “other scheduling events” so he wouldn’t have to be on the same stage as her. whereas Ted Cruz went out of his way to thank Gov Palin for her endorsement and help winning his race. After 4 years Rubio showed he can’t be trusted, Cruz continues to show he is a stand up guy. and its goes on and on. each time those that attacked Palin have proven on other subjectas not to be trusted where those that defended her have shown over time they are trustworthy to the conservative cause. It’s kind of weird how such a simply thing has proven true again and again over time.

unseen on July 20, 2013 at 1:52 PM

the bill requires that free software which calculates the tax for other states must be provided

No software can determine which state this stuff can be taxed in.

Again, try to run this typical sale through. (Remember, the seller and buyer will not have access to most of this info.)

Seller
- seller is the US sub of a French company
- The US sub is incorporated in FL where there is no sales tax
- the admin offices are in CA
- the mfg plant is in TX
- the warehouse it’s stored in is in NY

Buyer
- the buyer is in WI
- the buyer is shipping it directly to his mother as a gift who is on vacation in HI
- his mother lives in AK
- his mother is getting the gift to give as a gift to a homeless person in OK getting cancer treatment in UT
- he uses a credit card that is a US company based in NY, HQd in ID, billed to him from TN

Product Sold
- the product is shipped in 2 pieces from 2 states. One piece was made in the USA, one made in Mexico
- Half of the first product is a product that is taxable in 38 states, depending on which state, which buyer, what percent of the product was made in the USA, and what portion of it is recyclable.
- A third of the invoice price relates to services like installation which will be performed in AK where the mother lives.
- $100 of the price is for shipping charges which may or may not be taxable depending on state shipped, received, etc.

faraway on July 20, 2013 at 1:53 PM

I don’t have the citation at my fingertips, maybe Cornyn or Cruz, but one of our esteemed members of Congress said something like “you don’t eat one tapeworm to try to get rid of another tapeworm.”

opaobie on July 20, 2013 at 1:54 PM

This is one topic on which I changed my mind a few years back.

As a consumer, I liked it when stuff was cheaper.

However, it is unfair to brick and mortar stores when they have a legally imposed cost that online retailers can ignore.

Mister Mets on July 20, 2013 at 1:47 PM

so your answer to fairness is to raise the taxes on the web sellers instead of lowering the taxes on the brick and mortar stores?

if you want fairness how about outlawing state sales taxes?

so that the brick and mortar stores can compete with web stores?

unseen on July 20, 2013 at 1:55 PM

A move towards e-fairness would give states an opportunity to use additional online sales tax revenues to lower rates on more burdensome taxes, such as the personal income tax.

I think we’ll see an actual increase in border security after passing amnesty before we’ll see our income tax get reduced after a new tax is put into effect. Oh, er, “Hulk smash,” I guess.

DrAllecon on July 20, 2013 at 1:55 PM

Mister Mets on July 20, 2013 at 1:47 PM

There is no fairness in taxation. None. Whatsoever.

And, internet merchants can and do move to brick and mortar stores…and brick and mortar stores actually do a lot of business via the internet.

I pay taxes to my state by virtue of my computer sitting on my desk in that state and my inventory being in the room right next to me.

Why should any other state be able to come into my home, via the internet, and take what I have earned, from sales made in my state, in my home?

If this internet tax thing actually comes to fruition…I will immediately begin to sell exclusively to those residing outside the jurisdiction of the United States. They’ve been my best customers over the years, anyway.

Xin loy…

coldwarrior on July 20, 2013 at 1:56 PM

The problem is the spending, not the amount of taxes or where they collect them.

JimK on July 20, 2013 at 1:59 PM

This is also why there can’t be national sales taxes. All national sales taxes that are naively tried in various countries, are immediately converted to VAT tax systems. VAT is easier to implement (one page per month, 3 lines), and avoids double/triple taxation (tax owed minus taxes paid)

faraway on July 20, 2013 at 1:59 PM

Fairtax.org

JimK on July 20, 2013 at 2:08 PM

I’ve never understood why internet sales taxes aren’t simply charged in the SELLER’s locality?

SoRight on July 20, 2013 at 11:42 AM

Which state/city charges tax in this sale:

- seller is the US sub of a French company
- The US sub is incorporated in FL where there is no sales tax
- the admin offices are in CA
- the mfg plant is in TX
- the warehouse it’s stored in is in NY
- the buyer is in WI
- the buyer is shipping it directly to his mother as a gift who is on vacation in HI
- his mother lives in AK
- he uses a credit card that is a US company based in NY, HQd in ID, billed to him from TN

faraway on July 20, 2013 at 12:19 PM

Probably the NY sale taxes… Since it’s where the product is stored snd ships from. But I find this whole thing totally ridiculous. They will just burden small businesses even more, this tax is the definition of insanity, as your example clearly suggests. And how is it going to apply to ebay purchases/transactions, since they sell used/old/antiques stuff too…

jimver on July 20, 2013 at 2:15 PM

[Mister Mets on July 20, 2013 at 1:47 PM]

I agree that it is unfair to some brick and mortar businesses in-state, though it isn’t confined to those and it is better to just describe it as in-state business, since it is fairly common for internet purchases of out-of-state goods to actually be transactions with brick and mortar businesses out-of-state.

And I’m not sure that implementing the MFA will solve the dilemma brick and mortars face. The problem B&M’s have is the significantly greater overhead costs that must be recouped in order to make a profit, thereby not being competitive with the warehouse based systems of sales. Implementing the legislation will reduce/eliminate an extraneous issue to that problem, reducing the issue to, say personal time & travel, versus shipping costs but I have no way to evaluate that outcome and a lot will depend on the inherent price and weight of the good purchased.

Like I said, I sympathize with in-state brick and mortars and mom and pops as well, and at one ime I was where you were, but in weighing all the issues involved in I’m against the MFA, not only but primarily based on not believing the Federal government should be requiring, by law, that a sovereign citizen of one state collect taxes for the government of different state. Individual states can come to that agreement, however they wish, but the federal government shouldn’t be allowed to.

Dusty on July 20, 2013 at 2:20 PM

Internet sales taxes are an idiotic attempt to balance an equation that is already balanced.

First of all, they’re ridiculously complex to implement and enforce, allowing both sides to abuse the hell out of the system. You will have to force a company to report every transaction to the appropriate entities in order to be sure they’re complying, and there’s still nothing stopping them from flat out lying about it.

Then, imagine if you’re a company in Texas and California decides they don’t like your politics and complains that you’re didn’t remit enough sales taxes on orders that went there? How does that get adjudicated? Do you have to send somebody to CA? Think of all the BS that can come about from that kind of abuse, which the IRS scandal proves can and will happen.

Secondly, this canard that “brick and mortars are at a disadvantage” needs to die. They’re not at a disadvantage, it’s just that their advantage is not about price. They cost more due to being a physical location, but they have the advantage of instant gratification. You walk out of the store with what you bought. Online you’re waiting 24 hours or more for your good, and the faster you want it, the more you have to pay.

Further, the B&M has an actual physical location in the state, using the public resources of the state, and therefore if the state wants to tax it, that’s the state’s purview. The Internet seller may not even have a facility in the country, and thus it is no more using the state’s resources than a person randomly driving through a state is.

And lastly, if you really think the balance is unfair, then the solution should not be to tax online sales, but to tax B&M’s less.

CrankyTRex on July 20, 2013 at 2:36 PM

unseen on July 20, 2013 at 1:21 PM

Yeah, NC is trying to reduce taxes. However, it’s an outlier, and the Dems sure are raising a ruckus about what those evil republicans are doing…

My point is that almost all of the time, govts. tend to increase spending & taxes rather than reduce them.

Doubt this situation would be any different…

cs89 on July 20, 2013 at 2:46 PM

No wonder the UPS and Fedex delivery guys around here look so pissed off.

Oh well, soon they’ll be on food stamps and stimulating the economy.

WryTrvllr on July 20, 2013 at 2:53 PM

US Constitution, Art. I, Sec. 9:

No Tax or Duty shall be laid on Articles exported from any State.

Separate clause.

Passive clause.

It pertains to all governments in the US and all branches thereof.

It is not part of a State restrictive Section, either.

ajacksonian on July 20, 2013 at 2:55 PM

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