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Sales Tax on online purchases?


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Saw this article in the LA Times today:

 

http://www.latimes.com/business/la-fi-cover-internet-tax-20110227,0,7636764.story

 

I'm sorry, but personally I don't feel like I should have to pay sales tax if I buy something from Amazon. It takes approx. a week for my purchases to be delivered to me, so that's the trade-off for buying something online. If I need something right away then I would go to Walmart, but then I get dinged for sales tax.

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In Minnesota, depending on where you live, it's around 8% of the price of most products that you buy. It's extra money you pay that is supposed to go for important things. But here, it also goes for things like sports stadiums - a complete waste! With the money athletes and team owners make, let them build their own stadium!

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In California (and perhaps other states) the law is very clear. To quote the L.A. Times article:

 

The state has long had a back-up tax. A 35-year-old statute requires both businesses and individuals to pay a use tax on purchases when sales taxes aren't collected. While businesses have shown spotty compliance, individuals almost universally ignore the use tax, experts said.

If you ever have your California state income tax return audited by the Franchise Tax Board, you'll be glad that you paid the use tax for out-of-state internet purchases from companies like Amazon.com. If they find that you failed to pay the use tax in one year, they can go back seven years and estimate what you should have paid, and penalties will be added that you'll find are impressive.

 

The argument of online retailers,

 

"To try to force a marketer not located in the state to learn the tax rates for 7,500 jurisdictions within the United States would constitute a burden on interstate commerce," said Jerry Cerasale of the Direct Marketing Assn., an Internet, television and catalog sales trade group.

is nonsense. If I buy something online from Barnes and Noble or Target or Macy's or Gap they bill and I pay my state and local sales tax. If these retailers can calculate sales taxes for every state where they do business, so can Amazon.com. For small internet retailers here's an opportunity for someone to provide a service so each retailer won't have to maintain all of the the state and local sales tax rates and do the calculations themselves. (Any budding entrepreneurs out there?)

 

I'm willing to pay sales taxes on what I buy over the internet. It would simplify my life because I would no longer have to accumulate my online purchases and calculate the use tax for my California state income tax return each year. Yes, I pay the use tax. It's the law and I'm a law-abiding citizen. And I really don't want to be penalized by the Franchise Tax Board for not paying the use tax.

 

Colin B)

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In Minnesota, depending on where you live, it's around 8% of the price of most products that you buy. It's extra money you pay that is supposed to go for important things. But here, it also goes for things like sports stadiums - a complete waste! With the money athletes and team owners make, let them build their own stadium!

I agree, Tipdin. It's similar here in California (except our rate is typically 8.25% to 9.75%, and the highest rate is 10.75% in two cities in the L.A. area). The sales and use taxes go for things I want, including K-12 schools and the community college and state university systems. I'm a fan of the A's and 49ers and go to some of their games, but I want them to pay for their own new stadiums if they want to build them. All they have to do is raise their ticket prices a couple of bucks.

 

Colin B)

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I agree, Tipdin. It's similar here in California (except our rate is typically 8.25% to 9.75%, and the highest rate is 10.75% in two cities in the L.A. area). The sales and use taxes go for things I want, including K-12 schools and the community college and state university systems. I'm a fan of the A's and 49ers and go to some of their games, but I want them to pay for their own new stadiums if they want to build them. All they have to do is raise their ticket prices a couple of bucks.

 

Colin B)

 

Raise ticket prices a couple of bucks? Some of the players in this state could build a new stadium with their pocket money!

 

The 8% sales tax here is in addition to income tax, education tax, property tax, gasoline tax, and a whole list of incognito taxes called fees. There were many years when the total amount of tax I paid out of my gross income for one year was nearly 50%. (I think they should call the leftover income gross!)

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Raise ticket prices a couple of bucks? Some of the players in this state could build a new stadium with their pocket money!

 

The 8% sales tax here is in addition to income tax, education tax, property tax, gasoline tax, and a whole list of incognito taxes called fees. There were many years when the total amount of tax I paid out of my gross income for one year was nearly 50%. (I think they should call the leftover income gross!)

California has about the same set of taxes except there's no education tax.

 

The University of California system has per-semester or per-quarter "fees" (instead of tuition) that they can (and do) raise whenever they want. Take one 3-unit course or five 4-unit courses this semester at UC Berkeley and the fee is the same. Of course, there are also lab fees and the student services fee and the educational fee and the campus fee and the late registration fee and the health insurance fee and the transit fee and parking fees and probably some program-specific fees that I haven't heard of. If you're curious, here's the link to the fees schedule for 2010-2011.

 

The California State University system has "tuition" in addition to most of the fees listed above all of which they can (and do) raise whenever they want. But the tuition is really a two level fee structure (instead of the educational fee) that is set for up to 6 units and over six units. Again, if you're curious, here's the link to the fees schedule for 2010-2011.

 

Our community colleges, on the other hand, have fees based on the number of units of a course. Right now it's $26.00/unit -- very reasonable and one of the lowest for community colleges in the country.

 

Oh... I forgot about gasoline prices. California has the highest gasoline prices in the 48 states. Our local station in Berkeley has regular at $3.79/gallon.

 

Colin B)

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"To try to force a marketer not located in the state to learn the tax rates for 7,500 jurisdictions within the United States would constitute a burden on interstate commerce," said Jerry Cerasale of the Direct Marketing Assn., an Internet, television and catalog sales trade group.

 

is nonsense. If I buy something online from Barnes and Noble or Target or Macy's or Gap they bill and I pay my state and local sales tax. If these retailers can calculate sales taxes for every state where they do business, so can Amazon.com. For small internet retailers here's an opportunity for someone to provide a service so each retailer won't have to maintain all of the the state and local sales tax rates and do the calculations themselves. (Any budding entrepreneurs out there?)

 

I'm willing to pay sales taxes on what I buy over the internet. It would simplify my life because I would no longer have to accumulate my online purchases and calculate the use tax for my California state income tax return each year. Yes, I pay the use tax. It's the law and I'm a law-abiding citizen. And I really don't want to be penalized by the Franchise Tax Board for not paying the use tax.

 

Colin B)

 

You miss the point that Macy's, Barnes & Noble, Target and Gap all have a presence in CA and that is the crucial distinction. The biggest argument from the online retailers isn't that it is too hard to maintain that database, that is a secondary concern. The main argument is that only Congress can regulate interstate commerce. If you go to Reno for the weekend and buy a book at Barnes & Noble in Reno, should California be able to collect sales tax for that? No, you didn't make the purchase in CA, you made it in NV. Congress, despite their money hungry ways, have several times specifically decided not to tax Internet purchases. It doesn't give Amazon an advantage over local retailers since they have to charge shipping and handling and that is usually the same or more than taxes.

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Sales tax? Rarely ever had to pay it. One of the few perks of living in New Hampshire. The New Yorkers and Massies always come up to our liquor stores and fill UHaul trailers full of liquor because it is so much cheaper without tax here.

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California has about the same set of taxes except there's no education tax.

 

The University of California system has per-semester or per-quarter "fees" (instead of tuition) that they can (and do) raise whenever they want. Take one 3-unit course or five 4-unit courses this semester at UC Berkeley and the fee is the same. Of course, there are also lab fees and the student services fee and the educational fee and the campus fee and the late registration fee and the health insurance fee and the transit fee and parking fees and probably some program-specific fees that I haven't heard of. If you're curious, here's the link to the fees schedule for 2010-2011.

 

The California State University system has "tuition" in addition to most of the fees listed above all of which they can (and do) raise whenever they want. But the tuition is really a two level fee structure (instead of the educational fee) that is set for up to 6 units and over six units. Again, if you're curious, here's the link to the fees schedule for 2010-2011.

 

Our community colleges, on the other hand, have fees based on the number of units of a course. Right now it's $26.00/unit -- very reasonable and one of the lowest for community colleges in the country.

 

Oh... I forgot about gasoline prices. California has the highest gasoline prices in the 48 states. Our local station in Berkeley has regular at $3.79/gallon.

 

Colin B)

 

A year at Cal is still cheaper than one quarter at Stanfurd. A year at Stanfurd is $38,700 ($12,900 a qtr) vs, $12,461.50 for the year at Cal. You are getting an Ivy League education at bargain basement prices.

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You miss the point that Macy's, Barnes & Noble, Target and Gap all have a presence in CA and that is the crucial distinction. The biggest argument from the online retailers isn't that it is too hard to maintain that database, that is a secondary concern. The main argument is that only Congress can regulate interstate commerce. If you go to Reno for the weekend and buy a book at Barnes & Noble in Reno, should California be able to collect sales tax for that? No, you didn't make the purchase in CA, you made it in NV. Congress, despite their money hungry ways, have several times specifically decided not to tax Internet purchases. It doesn't give Amazon an advantage over local retailers since they have to charge shipping and handling and that is usually the same or more than taxes.

My point related to the argument that the online retailers make that the cost of calculating and charging sales tax is a nearly impossible burden thus it's a deal-breaker. I was pointing out that it's not a deal-breaker for other retailers that have online sales and collect sales taxes.

 

The government agencies that support internet sales taxes say that the argument that you're buying from a Nevada or Washington state retailer is countered by the fact that you don't go to Nevada or Washington state to make the purchase. They say that the point of delivery is the point of sale, i.e. your home or place of business. You and I would disagree with that, but government agencies do agree. There have been court judgments in New York that support that position, and that these agencies including the State of California are taking the position that this establishes precedence. Of course, the online retailers and their lawyers are fighting that with lobbying campaigns to legislators in states like California.

 

None of this, whether it passes or not, prevents the State of California from requiring that its residents who make internet purchases from retailers who do not charge California sales tax must pay the equivalent use tax when they pay their state income tax. You and I might not like that either, but it's the law and if you're audited and get caught it won't result in a happy time.

 

Colin B)

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Sales and use tax laws vary all over the place in the various states. I have to pay our astounding 9.25% sales tax (we have no income tax) on online purchases if the seller has a physical presence in Tennessee. So, if I buy a book from Barnes & Noble via the internet, I pay the sales tax because they have retail stores in the state. I can buy the same book from Amazon at a lower price with no sales tax and, sometimes, with no delivery charge. Guess where I buy books?

 

Now enter the politicians and bureaucrats. Amazon has announced it will build two distribution centers near Chattanooga and employ 1,500 people. The Tennessee Department of Revenue has announced that all sales by Amazon to Tennessee residents will be subject to the sales tax. I know who will win this fight. No one. Tennessee will not get the new jobs and Tennessee will not get the additional tax revenues. Everyone loses...that's only fair, right?

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The government agencies that support internet sales taxes say that the argument that you're buying from a Nevada or Washington state retailer is countered by the fact that you don't go to Nevada or Washington state to make the purchase. They say that the point of delivery is the point of sale, i.e. your home or place of business. You and I would disagree with that, but government agencies do agree. There have been court judgments in New York that support that position, and that these agencies including the State of California are taking the position that this establishes precedence. Of course, the online retailers and their lawyers are fighting that with lobbying campaigns to legislators in states like California.

 

 

The Pennsylvania sales tax rate is 6 percent. By law, a 1 percent local tax is added to purchases made in Allegheny County, and 2 percent local tax is added to purchases made in Philadelphia.

 

For Allegheny County read Pittsburgh. Apparently, in PA point of sale is where the store is located. If I buy online, by phone or mail from a Pittsburgh or Philadelphia store, I pay the sales tax for Pittsburgh (7%) or Philadelphia (8%) even though I live in the 6% part of the state. The result is that I no longer buy from online sources located in either city. I used to be able to drop over the state line into Maryland and pay their 5% sales tax but they have raised it to 6% so I no longer make the drive.

 

And thank you amazon.com. No sales tax. No shipping or handling over $25. 4 for 3 deals. A larger selection than Barns & Nobel or Borders. And all from the comfort of my PC!

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If you ever have your California state income tax return audited by the Franchise Tax Board, you'll be glad that you paid the use tax for out-of-state internet purchases from companies like Amazon.com. If they find that you failed to pay the use tax in one year, they can go back seven years and estimate what you should have paid, and penalties will be added that you'll find are impressive.

It's not our fault that the states have been very shoddy at this sort of enforcement since the dawn of online purchasing, which has been ongoing for like 10-15 years now.

 

9-10% is something I would love to pay now since I have to deal with 5% GST (federal tax) PLUS 8.5% TVQ (Quebec sale tax) on top of the total after GST. So, the combined taxes are at 13.925%, not 13.5%. Oh sod off Quebec. Then if you go to Europe, it's not too hard to find countries with 20% -/+ sale taxes, but they're already included in the price and not calculated at the register. I wonder for a long time why the US and Canada cannot include them in the price (apart from alcohol and gas) so I don't have to figure out if I should pay a bit more or not on some goods. It would save us a bit of time and it would tell us what we should have the right to know before going to the cash... knowing the final price. And saving me some trouble saying "sorry, darn... I'm missing a nickel".

 

Oh yeah, I know why... it would make goods look "more expensive", something the retailers would be so opposed, so that's why sale taxes aren't included in the prices here and in the States. But what's the point? It would be a bit more expensive anyways at the cash. A retarded logic.

Edited by Jack Frost
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