Tag Archives: sales tax

Senate GOP Supports Remote Control Taxation

Mark Twain on Tax ManThe next time you see any of the following Senate Republicans:

Lamar Alexander (TN), Roy Blunt (MO), John Boozman (AR), Richard Burr (NC), Saxby Chambliss (GA), Dan Coats (IN), Thad Cochran (MS), Susan Collins (ME), Bob Corker (TN), Mike Enzi (WY), Deb Fischer (NE), Lindsey Graham (SC), Chuck Grassley (IA), John Hoeven (ND), Johnny Isakson (GA), Mike Johanns (NE), John McCain (AZ), Rob Portman (OH), Jeff Sessions (AL), Richard Shelby (AL), John Thune (SD), Roger Wicker (MS)

Ask them why they joined tax–and–spend Democrats and voted for the disingenuously named “Marketplace Fairness Act” that expands the size of government and extends crony capitalism by allowing states to force online and mail order retailers to collect sales tax from shoppers that don’t live in the state where the retailer is located.

When does a conservative philosophy include coercing retailers based in a state with no sales tax into collecting sales tax for states that do? How can the laws of Virginia apply to a company doing business in New Hampshire?

As of now a state can only require a company headquartered elsewhere to collect sales tax if the firm has a physical presence (a store, warehouse, distribution center) in the state that wants the tax collected. Obviously Wal–Mart, Sears, Home Depot and so on already collect sales tax because they are located nationwide. Amazon and eBay only charge sales tax in California where they’re located and a few states where distribution centers are located.

Consumers who buy from out–of–state online stores are supposed to send a check to their state revenue service each year in the amount of sales tax they would have paid locally, but the honor system for tax payments does not seem to be working.

States could withhold a percentage of your paycheck each year to cover the estimated amount you would pay in online sales tax. (Does term ‘withholding’ ring a ball?) At the end of the year you could file a return with receipts from online purchases and if you spent less than the state estimated, you would get two refunds, instead of just one!

Somehow state politicians don’t think this idea would be too popular. Instead they want the federal government to force online retailers who don’t have a location in their state, don’t use any services in their state and don’t have any representation in their state to collect taxes for their state. And if they don’t, the state will seize the company’s property through court proceedings in a state where the company isn’t located. It’s remote control taxation without representation.

I can understand why Democrats support this, it’s right up their alley. What I can’t understand is how a Republican that’s supposed to support limited government can vote for it. The rationalization they use is “fairness,” which is the handmaiden of “share the wealth.”

Proving he can string clichés with the best of them, Sen. Enzi says, “This bill is about fairness. It’s about leveling the playing field between the brick and mortar and online companies and it’s about collecting a tax that’s already due. It’s not about raising taxes.”

So the fact you will now be paying more tax is just an unfortunate byproduct that can’t be blamed on Enzi.

I’m with the folks at Catholic Online who describe the bill thusly: “There’s nothing fair about a tax whose sole purpose is to punish businesses that employ an efficient business model. The tax does nothing to improve consumer choice, rights, or value. It’s another case of big business using its influence in Washington to compete by legislation against small, private retailers.”

Enzi can spout “fairness” all he wants, but the bill is about revenue.

This bill will cripple smaller online operations that have created a niche business on eBay. The magnanimous potentates in the Senate have graciously agreed to exempt businesses that don’t gross $1 million in yearly sales, but that just proves how ignorant politicians are regarding the market. A business that grosses $1 million might net 10 percent of that amount if they’re lucky. There’s no room in $100,000 to hire someone to manage sales tax collection for the 50 states.

The bill also requires states to provide “free” software to help retailers become revenuers. We all know how well that’s going to go. For a look at Virginia’s adventures in software see here. And if the state can’t get the software to work, there’s no penalty. But if the company can’t get the software to work it wins a nice tax lien.

This bill is crony capitalism attracting Republicans who confuse being “pro–business” with being “pro competition.” They are dupes of businesses that want to limit competition rather than compete.

Local retailers already have an advantage over online retailers. The product is in stock. The customer can examine it. If the customer has a question, there should be an informed salesperson nearby ready to provide information (I realize you can fire a howitzer in Wal–Mart, Sears, Best Buy, Home Depot or Costco and not hit a salesperson, much less an informed one, but we’re talking an ideal competitive situation here). Even better there are no shipping charges when one buys locally. And if the product is defective or the buyer changes their mind, it’s returned locally.

Meddling in the market on behalf of favored businesses is second nature for Democrats, but you would think GOP members would know better. Here in Washington, DC an out of control city council is busy writing regulations to ruin the business of lunchtime food trucks in downtown DC. The justification is identical to that of the “Marketplace Fairness Act.”

Brick and mortar restaurants are complaining that food trucks are stealing customers and they don’t have to pay property taxes like the restaurants do. Sound familiar? But even if the council banned food trucks altogether — and with this council you never know — there would not be a boost in lunchtime restaurant business because the restaurants and the food trucks serve a different customer base.

Food truck customers are in a hurry. They line up; they grab the food and head back to the office. Or sit on a park bench and fight the pigeons and the homeless for their fish taco. The food trucks don’t take credit cards and the prices aren’t all that cheap. But the process is faster than a sit down restaurant and there’s no tip.

If food trucks vanish, customers will bring their lunch or visit a deli or sandwich shop that is faster than a restaurant. They won’t be filling a table at whatever uppity lunch spot is hot this month.

A conservative would hope the “Fairness” the bill is DOA in the House, but there are dupes everywhere. Rep. Steve Womack (R–Wal–Mart) explains, “Obviously there’s a lot of consumers out there that have been accustomed to not having to pay any taxes, believing that they don’t have to pay any taxes. I totally understand that, and I think a lot of our members understand that. There’s a lot of political difficulty getting through the fog of it looking like a tax increase.”

If the esteemed representatives really want to “level the playing field” with online merchants, then lets go all the way. Charge the sales tax but require local merchants to make the following changes:

  • Customers in the store can’t actually hold the merchandise; instead they must examine a series of small photos.
  • If customers have a question regarding a product, they are required to email or call customer service for information. Hold time must be at least five minutes and you have to press three numbers to guarantee an answer in English.
  • Customers won’t be able to get buying advice from salespeople, but they can go through a box of 3X5 cards filled with poorly spelled recommendations from anonymous random people who may or may not actually own the product.
  • Customers may buy the product at the store, but they must wait five days to pick it up and they must pre–pay a pickup fee. If the customer wants the product sooner, they must pay a larger pickup fee. In no case can the customer get the product in less than 24 hours.
  • If the product is defective or the customer changes their mind, they must ship the product back to the store, rather than take it themselves.

Brick–and–mortar stores with high prices and disinterested staff deserve to lose out to online merchants. It’s what happens in a competitive marketplace, unless Big Government politicians start interfering.

VA Gov. McDonnell Suffering from Legacy Fever

VA Gov. Bob McDonnell does not see any reason why a comprehensive transportation package should not include corduroy roads.
VA Gov. Bob McDonnell does not see any reason why a comprehensive transportation package should not include corduroy roads.

VA Gov. Bob McDonnell does not see any reason why a comprehensive transportation package should not include corduroy roads.

Judging from Gov. Bob McDonnell preoccupation with liquids one would almost think he’s a naval man, rather than an Army reservist. First he tried to free demon rum from state control by privatizing Virginia’s liquor stores.

ABC privatization was DOA even with a Republican House of Delegates for reasons outlined here. Now Gov Bob is intent on reinforcing failure with his latest proposal to free gasoline from Virginia’s fuel tax.

Doesn’t the governor realize that as far as legacies go drinking and driving don’t mix?

Initiatives like these are the result of a severe case of legacy fever — a condition characterized by a politician’s feverish attempt to pass a law voters will remember after their term ends. Symptoms include policy delirium, proposal vomiting and head–count headaches.

Legacy fever doesn’t confine its damage to the infected politician. Visible scars include Obamacare, No Child Left Behind and The Great Society.

This is the last session of the legislature for McDonnell. And unless he wants to be smeared as “Gov. Ultrasound” for all time, he must convince the House and Senate to pass a major legislative proposal.

McDonnell wants his legacy to be a major transportation package that will inject $3.2 billion into Virginia’s transportation fund and give the Commonwealth enough money to both build and repair roads — a twofer that’s been missing in recent years.

The governor’s proposal eliminates the tax on gasoline, increases vehicle registration fees by $15, raises the sales tax by 0.8 percent, increases the portion of sales tax revenue dedicated to transportation by 50 percent and slaps a $100 fee on pretentious alternative fuel vehicles that burn French fry oil mixed with taxpayer subsidies.

In addition, Gov Bob is hoping for some kindness from strangers in DC. Part of the money comes from a tax he hopes Congress will authorize on internet sales, meaning those lazy shop–at–homers (who by the way aren’t cluttering up the roads) will be paying sales tax AND shipping on their purchases.

Unless additional money is found the fund for new construction will be completely empty by 2017 as every last penny goes to maintenance on roads already built.

Fortunately there is a simple solution to this problem. First index the state’s gas tax to inflation, since it has not been increased in 27 years. Then the increase from the gas tax should be offset by a decrease in the income tax making the result revenue neutral.

This also has the advantage of being the responsible conservative solution since people who buy gas tend to burn it on highways, in effect making it a user tax paid by those using the roads.

Unfortunately, we have a legislature dominated by irresponsible conservatives that refuse to raise any tax, regardless of need or justification. Grover Norquist speaks for them when he issued a fatwa against raising the gas tax ruling that voting in favor of indexing violates the No Tax Pledge.

Instead, Norquist says plenty of money for roads can be found by cutting spending in other areas of the budget. This is the policy equivalent of saying, “God bless you” after a sneeze. It does nothing to prevent the spread of germs but gives the speaker a benevolent glow without spending any time in theology school.

If it were possible to cut spending elsewhere to fund roads, it would have been done before now. The potholes you dodge and the gridlock you endure proves this is easier said than done.

McDonnell is obviously appreciates the value of a revenue neutral bill, but removing the tax from gasoline is a ham–handed attempt and profoundly unconservative. It means out of state drivers — which constitute 30 percent of the traffic on Virginia roads — pay nothing for the use of Virginia roads. In effect Virginia taxpayers will be subsidizing the beach traffic jamming our highways on summer weekends.

Transportation is a core government function, and if Gov Bob was certain Republicans would be in charge of government from now on, funding roads from the general fund might be marginally acceptable. But there is no guarantee Virginia voters won’t lose their mind and put Democrats back in charge.

Once you mingle transportation money with the rest of the general fund, it means that money is no longer earmarked for roads. Democrats have no problem raiding the transportation trust fund to spend on their social justice priorities, and they have done it in the past. Tinkering with the percentage of the sales tax that goes to roads will be child’s play for them.

On the other hand, when Republicans want to reverse the process and use general fund money on roads, the likes of Majority Leader Dick Saslaw (D–Spending) will accuse you of wanting to boil school children in asphalt.

My suggestion is the GOP leadership put a cold compress on the governor’s forehead and urge him to lie down in a darkened caucus room. Meanwhile, they can put all their efforts behind a transportation solution like mine that has the twin virtues of being both simple and conservative.

Cyber Monday: Online Deals Have Tax Consequences

Cyber Monday: Online Deals Have Tax Consequences, Says CCH

CCH Outlines Taxes Consumers Face as They Shop Online for Holidays; Chart Shows States with Sales Tax and Online Sales Tax Rules

RIVERWOODS, Ill., Nov. 15, 2011 — This holiday season, online shoppers will find more states are looking to make sure gift givers also give their state its fair share – in terms of sales tax for online purchases, according to CCH, a Wolters Kluwer business and a leading global provider of tax, accounting and audit information, software and services (CCHGroup.com). Last year, online shoppers spent more than $1 billion just on Cyber Monday, and online shopping this holiday season is expected to continue to grow at a double-digit rate.

“Whether people shop online or in stores, states expect them to pay sales tax on their purchases,” saidDaniel Schibley, JD, CCH Senior State Tax Analyst. “However, few online shoppers comply, unless the tax is collected by the merchant.”

Under existing laws, retailers are required to collect sales taxes for purchases made in states in which they have a physical presence, or nexus. As more sales head online, it is projected that states are losing billions of dollars annually in sales tax revenue they once collected from local retailers, and they are increasingly looking for ways to shore up their tax base.

Two ways to do this, according to CCH, are to require more online retailers to collect sales tax through broader nexus rules and to require consumers to pay the required use tax portion of sales tax. Sales tax has two parts – the sales portion paid by the retailer and the use portion paid by the consumer. Under existing rules, individuals are required to pay use tax in states with a sales tax if the retailer does not collect the tax.

State Sales Tax Collection Approaches

Overall, 45 states currently have a sales tax. This includes every state with the exception of Alaska,Delaware, Montana, New Hampshire and Oregon. The District of Columbia also imposes a sales tax.

Eleven states have enacted broader nexus rules that require online retailers to collect sales and use tax even if the retailer does not have a physical presence in the state but does solicit sales through online links or pays commissions to an in-state business (known as click-through nexus); or if the retailer has an affiliation with a company doing business in the state (known as affiliate-nexus laws).  These states include: Arkansas, California, Colorado, Connecticut, Illinois, New York, North Carolina, Rhode Island,South Dakota, Texas and Vermont. The California, Texas and Vermont provisions are not yet in force, however. Four other states have legislation for these rules pending: Massachusetts, Michigan,Pennsylvania and Tennessee.

“Each of these laws increase the likelihood that if you live in these states, some online retailers will be charging you sales taxes when you make online purchases,” said Schibley.

Additionally, Colorado law requires retailers selling into the state but not collecting sales tax to send the state an annual reporting notification statement of everyone in the state it shipped to and the value of those purchases so that it can pursue collection of use taxes. However, a federal court in Denver has put enforcement of this law on hold for now.

Several states also require online retailers to provide explicit notifications on their websites letting consumers know about their obligation to pay their state sales tax. States with these website notification rules include Colorado, Oklahoma, South Dakota and Vermont.

States collecting sales tax also have information on their websites about how to pay uncollected use tax. Many states provide a line item on their income tax return where consumers can report the amount of use tax they owe.