New Sales Tax Rules

[ghostcount]

https://www.nbcnews.com/politics/supreme-court/supreme-court-rules-states-can-require-online-retailers-collect-sales-n873416

Time to buy some film (I hope it's not too late).

[Tin Can]

Not the end of the world. I already pay sales tax on many Internet purchases.

Years back my accountant insisted I pay retroactive Use Tax which is similar.

I have bigger issues to bitch about.

[Leigh]

Wise ruling by the Supreme Court.

States have been losing gigabucks in lost tax revenue to online sellers.

Things have changed a lot since 1992 when that "physical presence" rule was passed.

- Leigh

[Tin Can]

And it may help local stores compete

[Willie]

So if we sell a print or gear how does the sales tax get paid?
Will everyone who uses eBay, CraigsList or this site have to get a State ReSale number for where they live and for where the buyer lives?

[Tin Can]

No and no

[Bob Salomon]

So if we sell a print or gear how does the sales tax get paid?
Will everyone who uses eBay, CraigsList or this site have to get a State ReSale number for where they live and for where the buyer lives?
Easiest would be for eBay to add the required tax and charge the buyer.

[Corran]

Tax documents are already mailed to eBay and PayPal users who exceed a certain amount of sales/transactions.

You see plenty of larger users charging tax within their state already. Will not be hard to implement a global tax addition to eBay sales (on the buyers end).

Small-timers will continue be no different than local yard sale vendors. Your tax burden is your problem to figure out (and is mostly ignored).

Don't forget that increase in complexity = increase in compliance costs = less taxes used for actual public good.

[consummate_fritterer]

Fortunately, this probably won't affect small sellers... yet.

[BrianShaw]

Not the end of the world. I already pay sales tax on many Internet purchases.

(snip)

I have bigger issues to bitch about.
Amen. Since when is a civic responsibility a bad thing?

[Jim Jones]

Amen. Since when is a civic responsibility a bad thing?

Yes, indeed. As a strong leader said, ". . . ask not what your country can do for you — ask what you can do for your country." After all, it is our home.

[Corran]

Nothing wrong with questioning what gets taxed, how much it is taxed, what the tax is used for and how it is distributed, etc.

[Drew Wiley]

Here in Calif. you just declare on your resale filing when something is shipped out of state. As it is, it is now mandatory to file sales taxes for in state transactions via web because it's so darn complicated already, with every county and even every different city potentially having a somewhat different sales tax rate, and even variations of rate within the same jurisdiction for different kinds of items, with all kinds of potential exceptions just like on income taxes.
It would therefore be a logistical nightmare to have to constantly update the many thousands of different requirements across the country. That's one reason it's never been implemented at the small seller end. Darn near impossible. But out-of-state sellers with any tangible business presence in Calif (like Amazon)
are required to charge the specific Calif rates when shipping here. But policing everything else is a whole other story; and there's been a long-running squabble between CA and NY over the issue. But there are far more blatant ways the playing field has been kept from being level than mere sales taxes, as significant as they can be. I'll stop at that, or I'll be crossing a red line past photographic output per se.

[Bob Salomon]

Here in Calif. you just declare on your resale filing when something is shipped out of state. As it is, it is now mandatory to file sales taxes for in state transactions via web because it's so darn complicated already, with every county and even every different city potentially having a somewhat different sales tax rate, and even variations of rate within the same jurisdiction for different kinds of items, with all kinds of potential exceptions just like on income taxes.
It would therefore be a logistical nightmare to have to constantly update the many thousands of different requirements across the country. That's one reason it's never been implemented at the small seller end. Darn near impossible. But out-of-state sellers with any tangible business presence in Calif (like Amazon)
are required to charge the specific Calif rates when shipping here. But policing everything else is a whole other story; and there's been a long-running squabble between CA and NY over the issue. But there are far more blatant ways the playing field has been kept from being level than mere sales taxes, as significant as they can be. I'll stop at that, or I'll be crossing a red line past photographic output per se.

Our company was in NJ. We had no properties outside NJ. We had one employee who lived in MN. All of our sales reps were independent contractors. We never could control who they saw and when, unless we were on a sales trip with them.
We had one warehouse in NJ, we had no satellite sites that we shipped from.
We only sold to camera stores, luggage stores and photo labs.
The state of WA decided that we were subject to a tax of 0.005% on all shipments that we made into the state of WA as our independent sales rep lived in WA state and because we periodically made trips to WA to visit and train our Rep and our dealers!

Our attorneys told us it would cost us far more to fight this tax then to pay it. So we finally paid the tax quarterly plus the interest and penalties they added on for not paying the tax for the previous 5 years before they decided that we owed the tax. Our competitors were never charged the tax. Only the companies represented by our rep were charged the tax! We even switched to a rep from OR that called on our dealers and the state still charged us the tax!
In the end it didn’t make much of a difference as we were able to deduct those payments from our local state tax.

[williaty]

The threshold, IIRC from reading the NPR story earlier today, is $100,000 per year per state or greater than 200 transactions per year per state. If a seller is below those limits, the current ruling doesn't apply.


It's actually not quite as bad a ruling as I at first thought. Basically, the argument is that, without nexus, taxing everyone for out of state sales imposed an undue burden on the seller. The specific case that came before SCOTUS was for a state where these limits were in effect and the state provided a program for sellers where they could sign up to the program, the state told them how to tax the sales, took the money, was responsible for disbursing it to local entities, and indemnified the seller against any potential errors in taxation or distribution. The SCOTUS held, basically, that with the state providing that level of service and it only applying to businesses above that size/scale, it did not constitute an undue burden. SCOTUS didn't say that taxing all out of state sales was reasonable, only that taxing out of state sales when the destination state made it really easy and the rule only applied to companies operating at scale was reasonable.

One would expect that if a state tries to tax every little hobby-mom Etsy seller we'll see the case going back to SCOTUS so they can say "no, in fact THAT is an undue burden".

[Nodda Duma]

Yeah I woke up to this little gem this morning, after getting only two hours’ sleep from staying up to coat plates last night to get them out to people.

My first thought: When the hell am I going to find time to keep track of the ~50,000 tax codes across the country? How much *more* sleep am I going to lose out to being a tax collector for locations I derive no benefit from?

That $100k limit is the North Dakota law. A greedy state like CA or MA would have no problem sucking up every possible dollar below that threshold for the several years it would take for a challenge to make its way through the courts (if you don’t think that happens now with other obviously unconstitutional law, think again).

There will be talk of “a precedent” being set. What that means is that the lawmakers are now thinking of the possibilities of billions of dollars going to state coffers without considering the ramifications of the economic loss of those billions of dollars staying in comsumers’ pocket and being directly injected into the economy. THAT’s what precedent means.

If you didn’t already realize that the government think of us as no more than tax crops, then maybe you will realize it now.

[Tin Can]

Illinois for one has Use Tax laws where the buyer is legally responsible for paying sales tax. Not the seller.

http://www.revenue.state.il.us/Individuals/FAQs-Use-Tax.htm

I advocate USA VAT as a way to eliminate loopholes and enhance compliance.

AI will Police it all soon.

Buy now!

[Dan Fromm]

So now we have an opportunity for an enterprising person to collect state and local sales tax rules and rates and create a database with software that will match buyer's address and the product(s) purchased to the appropriate rates and tell the seller how much to charge and where to remit. CCH used to have something like this, but on paper. eBay should do this as a service to sellers. Whether they will is an interesting question. I'm sure that Amazon will do it and make the service available to their sellers.

In spite of all the wailing, this is a problem that has to be solved only once.

[Nodda Duma]

Depending on your viewpoint Dan, this is actually an ongoing problem with no end in sight. Taxes always go up, they never go down.

[Dan Fromm]

Depending on your viewpoint Dan, this is actually an ongoing problem with no end in sight. Taxes always go up, they never go down.

Jason, what you say might be true. Or not. But it has nothing to do with the mechanics of collecting sales taxes on, um, imports.

[Corran]

The threshold [...] is $100,000 per year per state or greater than 200 transactions per year per state.

200 transactions seems small. For the equivalent $100k threshold, that is an average of $500 per item. How many small-time sellers are selling $500 items? $50 average (2,000 transaction threshold) seems much more reasonable but well I'm not the one making the rules.

[Nodda Duma]

Jason, what you say might be true. Or not. But it has nothing to do with the mechanics of collecting sales taxes on, um, imports.

You might just see it as senseless whining because it doesn’t affect you, but I’m the guy staying literally up all night already to provide something kinda cool to the community. When does all the governmental burden no longer make it worthwhile?

[Sal Santamaura]

...being a tax collector for locations I derive no benefit from?...You apparently don't perceive locations providing you customers / a market as beneficial to your business. Interesting perspective.

[Oren Grad]

Folks, posts clarifying the factual details and operational implications of the Supreme Court ruling are fine, but this is not the place to debate taxation policy or politics.

[williaty]

EDIT: Oren posted while I was writing and I think he'd want me to delete it.

[Nodda Duma]

You apparently don't perceive locations providing you customers / a market as beneficial to your business. Interesting perspective.

Sal, those are your words, not mine. The benefit between buyer and seller is mutual and doesn't need to be stated -- it's not a one-way street. Nor does the transaction, at a fundamental level, need to involve a third party.

But it's a red herring. I don't think you're *really* advocating for what is essentially an interstate tariff. Fundamentally, the drafters of the Constitution understood how detrimental interstate tariffs would be to the nation's economic growth (and raise in the standard of living and all the other benefits). It was a compromise to get the states to sign on to the formation of a strong central government. This decision entirely ignores that history.

If you've followed my venture (which I'm guessing you haven't), you would know that I basically only cover my material costs. I don't need to earn a living off this, which keeps the cost down. I want to make dry plates available to the community *for* the benefit of the community. If it were to become too much of a burden to keep making plates (right now it isn't), then I would simply halt the venture. But that would be unfortunate.

By the way, in New Hampshire, there is no sales tax (except on prepared food, go figure) or use tax.

To Oren's point above .. the implications are that as time goes along I spend less time sleeping and more time dealing with red tape, or I just stop selling plates because it becomes too much of a pain in the ass to make them available to the community.

[williaty]

But it's a red herring. I don't think you're *really* advocating for what is essentially an interstate tariff.
No, it's not. You misunderstand what taxes are then. An interstate tariff would be if I (as an Ohio resident) could buy a camera without any additional fees if that camera were made and sold in Ohio but, if that camera were made or sold in another state and shipped to me, I'd have to pay an additional fee on the camera. This situation is very different. If I buy a camera made and sold in Ohio, I pay Ohio sales tax. If I buy a camera made and sold in another state but delivered to Ohio, I still pay Ohio sales tax.

Interstate tariff: different fee schedule depending on where camera comes from
State sales tax: identical fee schedule regardless of where camera comes from

[Nodda Duma]

No, it's not. You misunderstand what taxes are then.

Please be respectful. We are all adults here. I've been paying my fair share taxes for decades, just like any other law abiding citizen should, and understand them very well.


An interstate tariff would be if I (as an Ohio resident) could buy a camera without any additional fees if that camera were made and sold in Ohio but, if that camera were made or sold in another state and shipped to me, I'd have to pay an additional fee on the camera. This situation is very different. If I buy a camera made and sold in Ohio, I pay Ohio sales tax. If I buy a camera made and sold in another state but delivered to Ohio, I still pay Ohio sales tax.

Interstate tariff: different fee schedule depending on where camera comes from
State sales tax: identical fee schedule regardless of where camera comes from

What you are missing is the burden it places on the seller. The law ruled on by USSC required the out-of-state business to collect the taxes for ND, then send in a check (essentially). For now it's limited to min $100k income, but that will surely be tested by state governments eager for more tax dollars. The other aspect is enforcement: How is North Dakota justified enforcing their state tax law outside of their jurisdiction (the other original debating point regarding taxation of interstate commerce). It would have been *much* better to have drafted as a Use Tax, except they wanted to specifically challenge the restrictions on taxing interstate commerce.

Keep in mind that I am already taxed on sales. I will pay to the state and to the federal government. So this isn't a complaint about losing free money. Nothing's free, even in New Hampshire.

This is not a big burden for a company like Amazon or Overstock.com. Not at all. The burden will fall on the very small cottage industries and side businesses which are far more common than you probably think, and which won't have the resources themselves to track all the new tax laws we will undoubtedly see in the coming years. As Dan said, certainly software will be written to handle it, but that is still a burden.

[williaty]

What you are missing is the burden it places on the seller. The law ruled on by USSC required the out-of-state business to collect the taxes for ND, then send in a check.

This is not a big burden for a company like Amazon or Overstock.com. The burden will fall on the very small cottage industries and side businesses which are far more common than you probably think.

Again, you need to read the actual decision. One of the key factors of the decision was that the state in play had a service that made it easy for out of state sellers to pay state sales tax and indemnifies them against errors in the paying or distribution of the collected tax. The decision also protects cottage businesses by noting the threshold as a key decision point. The wording of the decision indicates that, absent that and some other seller... safeguards... I guess... they would not have found in favor of the state. So the burden is no larger than paying sales tax for in-state sales.

I am one of the cottage businesses you're worried about. As far back as 2007 my payment processor would flag sales that required sales tax based on the address and add the tax to the total. For as long as I've been in business, some piece of software has always tracked if tax was necessary, what the tax rate was on that day, how much tax to assess, and spit out a report quarterly on how much tax I'd collected and who to send the check to. The SCOTUS decision will change nothing in that process for me other than the software will tell me to send out one check for each state in which I have a customer. I can handle that.

[Oren Grad]

It's understandable that people have strong concerns about how this ruling may affect them. But evidently this means that even a discussion about implementation details becomes a debate about rights and wrongs of policy. The Forum is not an appropriate venue for such a debate.

EDIT: I've merged with the new thread started by MikeH.

[MikeH]

I'm posting this in the "business" section, and, hopefully we can keep opinions on taxes, etc., out of it so Oren doesn't need to lock it. :-)

For those of you that need to collect sales tax:

From what I'm reading in the Tax forums that I subscribe to, and the Wall Street Journal, and other sources, here's what seem to be the new rules. I make no guarantees, and I will post corrections and updates as I see them. If you have better info, please post.

• Not being said, but the old rules on nexus must still apply. If you have employees, operations, etc. in a state, you must collect sales tax for that state.
• The Justices spoke very favorably of South Dakota's law (which is the law that was challenged & upheld.) Many people think that something close to South Dakota's law will become the standard. North Dakota passed a law identical (?) to their neighboring state, effective the day after the Supreme Court ruling was issued. So, that's today.
• The South Dakota law says you must collect sales tax if either of the following 2 events happen (I'm assuming this is an annual test... I do not know what happens if you pass the test for a while, then drop below the limits.):
• Sales into South Dakota exceed $100,000, or,
• You have more than 200 shipments into South Dakota.

• There are 16 states with laws similar to South Dakota's. If I find a list, I will post it here. Many states will need to pass enabling legislation before it becomes effective in their state.

If you PM me with questions, I will most likely respond to them here.

[Tin Can]

Just got an email from eNay begging for help...

[MikeH]

One thing I forgot to mention: South Dakota's law was specifically not retroactive, in that it did not require new registrants to go back and collect on transactions prior to the law. I have no idea whether the effective date of this law is when it was passed, or yesterday.

[Alan Klein]

Congress will step in with legislation. The Constitution charges them with regulating interstate commerce. Let's hope they do their job.

[Sal Santamaura]

...hopefully we can keep opinions on taxes, etc., out of it so Oren doesn't need to lock it...To quote my favorite observed bumper sticker, "You'll feel much better when you give up hope." It only lasted through post #3. Better luck next time.

[neil poulsen]

What happens with states that do not collect any sales taxes? (e.g. Oregon)

[j.e.simmons]

Some states, such as Florida, dont have any such small business exemption. They also make compliance difficult and time consuming. I know because I once collected and paid sales tax in that state. First you have to get a sales tax number. Then you have to file a return (monthly or quarterly depending on the business) whether you sold anything or not. If you fail to file, you are fined.

The state sales tax laws are not set up for the convenience of the seller, and I see no reason the states would change things for people like me who sell w few prints on the Internet. I certainly don’t make enough to hire an accountant who could be sure I complied with all the different state regulations.

[Drew Bedo]

I am experiencing consternation: The commerce clause of the constitution requires congress to regulate inter-state commerce. I don't see how North or South Dakota has any business trying to regulate internet commerce from a location outside their respective states. . . .yet SCOTUS says they can. Seems like things just get more complicated every time you turn around.

How can someone attempting to moperate in good faith figure out the appropriatye tax to collect for every jurisdiction? Here at home, If I buy something at one convenience store in the country, only state tax applies. However, if I go into town there is both a state and local sales tax . . .and if I go into the city, they add a Metro Transit increment to be collected as sales tax. This decision may only affect state sales taxes just now, but just wait till some little speed-trap village somewhere decides they can collect something from every on-line transaction that happens out in their county.


Whew!...I'm done just now. Hope that last paragraph isnot considered opinion.

Moot point for me anyway: I have never done that volume of business anywhere. Not sure if that's good or bad.

[Leigh]

• The South Dakota law says you must collect sales tax if either of the following 2 events happen (I'm assuming this is an annual test... I do not know what happens if you pass the test for a while, then drop below the limits.):
• Sales into South Dakota exceed $100,000, or,
• You have more than 200 shipments into South Dakota.
One obvious problem is some dealers will not know until year's end whether or not they're over the limit.
But states commonly(?) collect sales tax quarterly.

So if you end up over the limit, will you be penalized for not filing?

- Leigh

[Tin Can]

Ignorance of a law is not an excuse.

[MikeH]

One obvious problem is some dealers will not know until year's end whether or not they're over the limit.
But states commonly(?) collect sales tax quarterly.

So if you end up over the limit, will you be penalized for not filing?

- Leigh

Good question. I probably did not word my original post correctly. Sales taxes are usually assessed on the consumer, and collected by the retailer on a "real-time" basis. It's different than income taxes. Usually, these laws have thresholds. Until you hit the threshold, you don't collect tax. Once you hit the threshold, you start from that point on. No going back. The courts have been fairly consistent with not allowing retroactive assessment. Sometimes, there's a "lookback" period. Rules for 2018, for example, may be determined by the 12 month period 10/1/16 - 9/30/17. I have seen NO details of these laws. Eventually I'll see a good recap, and will post it here. The Supreme Court praised the SD law... many states' internet-sales-tax laws are in dire conflict with the philosophy of what the Supreme Court showed. It will be several months before this all gets sorted out.

[j.e.simmons]

Please do help us posted.

[Leigh]

Good question. I probably did not word my original post correctly. Sales taxes are usually assessed on the consumer, and collected by the retailer on a "real-time" basis. It's different than income taxes. Usually, these laws have thresholds. Until you hit the threshold, you don't collect tax. Once you hit the threshold, you start from that point on. No going back. The courts have been fairly consistent with not allowing retroactive assessment.Hi Mike,

Thank you very much for the commentary.

We're unaccustomed to folks posting here who actually know what they're talking about.

Please keep us informed as to any details you might obtain.

Many of our members sell on the internet, though I doubt any hit the $100,000 threshold.

Thanks again.

- Leigh

[jp]

I fully expect the ecommerce marketplace/finance services that we love+hate such as Ebay, Paypal, Square, etc.. will figure this out and offer sales tax calculation/collection/processing if you use their service for the transaction. Credit card processors could do likewise but will probably be late to the game. The rules are complicated, but we have the technology and competitive options to make this happen.

Personally, I'm disappointed in the ruling because I don't like to see the sprawl of taxes to every part of our lives, but big online retails already charge me sales tax. As a small business owner, it's a mixed bag. I might get more business because there is no sales tax disincentive to shop local, and I might lose some out of state business growth as I have more Massachusetts customers enjoying the lack of sales tax.

[MikeH]

Leigh:

Thanks for the comments. Most of you have far more experience with photography than I have, and I usually "take" much more than I can give here. So this is my way to try and balance the scales.

There has been a very good attempt by some of the states to simplify reporting for out-of-state retailers. I'm a native Southern Californian... spent 3 years with a CPA firm that was called Ernst & Ernst when I was there... then spent 20+ years in big business accounting. I always had a large tax department to turn to who handled sales tax matters. So, I never needed to get into the details. I'm semi-retired, and my practice the last 20+ years has been small, California-only businesses, so I have not followed what is called the "Streamlined Sales Tax" project. (California has not really participated in it.)

There are companies that will handle all of your sales tax filing needs... probably not cheap. The one that I looked at, Avalara.com, doesn't seem to show prices - never a good sign, in my book, and they do not seem to readily discuss whether you NEED to file. One of them, TaxCloud.net says they are free, so, it makes me wonder if the "Streamlined" states (there are 24 of them), let these people take a commission off the top before forwarding payment? (Hard to believe.... maybe there's another answer.)

I've attached a PDF map of the 24 states... the link is here in case you'd rather do that:
http://www.streamlinedsalestax.org/uploads/images/maps/Map%20of%20States%201-1-17.pdf

There's also a list of "Certified Service Providers" here that will also get you to the Streamlined home page if you are so inclined:
http://www.streamlinedsalestax.org/index.php?page=Certified-Service-Providers

This still does not answer the question: "Am I on a state's radar screen?" We will know more in several months. I may be forced to read the Supreme Court's decision, because I'm starting to read suggestions that the Court "approved" the simplified method of SD's law, which would mean that, to follow the Court's intentions, many states will need to change their laws before they can avail themselves of using the Court's opinion...

I have one small client that ships out-of-state. He will never hit SD's limits, but I will probably need to learn more about the "Streamlined" project just to be safe.

[Bob Salomon]

Leigh:

Thanks for the comments. Most of you have far more experience with photography than I have, and I usually "take" much more than I can give here. So this is my way to try and balance the scales.

There has been a very good attempt by some of the states to simplify reporting for out-of-state retailers. I'm a native Southern Californian... spent 3 years with a CPA firm that was called Ernst & Ernst when I was there... then spent 20+ years in big business accounting. I always had a large tax department to turn to who handled sales tax matters. So, I never needed to get into the details. I'm semi-retired, and my practice the last 20+ years has been small, California-only businesses, so I have not followed what is called the "Streamlined Sales Tax" project. (California has not really participated in it.)

There are companies that will handle all of your sales tax filing needs... probably not cheap. The one that I looked at, Avalara.com, doesn't seem to show prices - never a good sign, in my book, and they do not seem to readily discuss whether you NEED to file. One of them, TaxCloud.net says they are free, so, it makes me wonder if the "Streamlined" states (there are 24 of them), let these people take a commission off the top before forwarding payment? (Hard to believe.... maybe there's another answer.)

I've attached a PDF map of the 24 states... the link is here in case you'd rather do that:
http://www.streamlinedsalestax.org/uploads/images/maps/Map%20of%20States%201-1-17.pdf

There's also a list of "Certified Service Providers" here that will also get you to the Streamlined home page if you are so inclined:
http://www.streamlinedsalestax.org/index.php?page=Certified-Service-Providers

This still does not answer the question: "Am I on a state's radar screen?" We will know more in several months. I may be forced to read the Supreme Court's decision, because I'm starting to read suggestions that the Court "approved" the simplified method of SD's law, which would mean that, to follow the Court's intentions, many states will need to change their laws before they can avail themselves of using the Court's opinion...

I have one small client that ships out-of-state. He will never hit SD's limits, but I will probably need to learn more about the "Streamlined" project just to be safe.

Mike,

In this thread is a rehash of my company’s experience with the WA state tax people. I paid them quarterly with an Amex card and since the amounts were trivial we elected to do it even though WA used a company to handle CC payments. That company tacked a small % onto our payment. WA did not pay them a commission.

[MikeH]

Bob:

Thanks for that. Makes me wonder what "free" means? :-)

[Willie]

If you are looking at hitting the $100,000 mark can you form a new small Corporation and start using it for sales so you say under it with any particular business?

[Bob Salomon]

If you are looking at hitting the $100,000 mark can you form a new small Corporation and start using it for sales so you say under it with any particular business?

Wouldn’t you then be defrauding a government entity?

[MikeH]

If you are looking at hitting the $100,000 mark can you form a new small Corporation and start using it for sales so you say under it with any particular business?

I'm not experienced enough to handle this question. There's usually rules about common ownership that make this kind of stuff difficult, if not impossible. When you sign up for a sales tax permit in California, for example, they want to know everything about you, including your 1st-born child's name. :-)

[Jac@stafford.net]

Wouldn’t you then be defrauding a government entity?

Tax avoidance is not against the law.

[Bob Salomon]

Tax avoidance is not against the law.

Seems like the Mafia did something like this with gas taxes with gas stations in NY. Some of them served hard time for avoiding the taxes, both state and federal taxes in this case. Once they started getting dunned for the taxes they just opened a new gas tation and did it again.

Avioiding taxes as a business or and individual, I believe, is criminal. Paying the least amount of tax is legal. Just ask our President!

[MikeH]

"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."

Judge Learned Hand, Gregory v. Helvering 69 F.2d 809, 810 (2d Cir. 1934), aff'd, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596 (1935).


Seems like the Mafia did something like this with gas taxes with gas stations in NY. Some of them served hard time for avoiding the taxes, both state and federal taxes in this case. Once they started getting dunned for the taxes they just opened a new gas station and did it again.

Avoiding taxes as a business or and individual, I believe, is criminal.

Bob... *avoiding* taxes is legal, evading them is illegal. BTW, I'm far more likely to be on your side on this. :-) When one constantly does not PAY tax... at some point it becomes criminal. Also, Sales (and payroll) taxes are not your $$ in the first place... you are holding the taxes that you have collected from the consumer or the employee in trust, and failure to pay them (i.e., gas taxes) becomes a criminal act much faster than trying to change checking accounts all the time so the IRS can't attach for the balance due on your 1040.

Generally speaking, people that push the envelope like this will also push the envelope when it comes to my fees, etc. I don't like being around them.

[Jac@stafford.net]

Avioiding taxes as a business or and individual, I believe, is criminal. Paying the least amount of tax is legal. Just ask our President!

Taxes are so daunting that only the very rich can avoid them. Two months of my year's income is set aside to appease our government's kleptocracy.

[Alan Klein]

One obvious problem is some dealers will not know until year's end whether or not they're over the limit.
But states commonly(?) collect sales tax quarterly.

So if you end up over the limit, will you be penalized for not filing?

- Leigh

Do you start collecting on the first sale of the year? If so, what happens to that money if you don't go over the $100,000 or 200 sales? Do you have to return it to the customer or forward it anyway to the state? On the other hand, if you start collecting when the sales go over $100,000 (SD) or 200 sales, one has to assume no collection would have been required on the original sales. Or what?

[Sal Santamaura]

Tax avoidance is not against the law.

No, but tax evasion is. Specifics of laws to which SCOTUS' ruling is applied will determine whether the "approach" described in post #18 is avoidance or evasion.

[Drew Bedo]

There will be unintended and unforeseen consequences of this ruling. Folks will try to find ways around it with corporate dodges (multiple subsidiaries, off-shore incorporation etc) . Folks will get creative. There could be an impact, good ore bad, on eBay, Amazon.and other big internet sellers.

[Oren Grad]

Folks - I've merged the two threads. Thanks to MikeH for getting the renewed discussion off to a constructive and helpful start.

[Oren Grad]

Thom Hogan, who in addition to posting reviews and commentary on Nikon and mirrorless cameras runs a mail-order business selling his DSLR guidebooks, has posted an explainer about the Supreme Court ruling:

http://www.dslrbodies.com/newsviews/supreme-court-overrules.html

[j.e.simmons]

Very good article, Oren. It sounds like we need to learn more about this Marketplace Fairness Act that's before Congress, and if it's reasonable, push to pass it or something similar. We can't do business with more than 10,000 individual tax districts.

[Tin Can]

Well written Thom Hogan. Thank you.

I still don’t want my own bizzyness.

[MikeH]

Oren:

That's an excellent article. The complexities of the Sales Tax laws can be daunting. Justice Roberts New Jersey Yarn law is a classic. In California, for example, knowing a customer's city will get you the correct rate, probably 9,999 times out of 10,000. But... and these are the ones I know about through personal experience, there are addresses in Beverly Hills that are legally in the city of LA, addresses in Pasadena that are not legally part of Pasadena, and addresses in either Clovis (?) or Fresno that belong in the other city. Sometimes, this affects the tax rate, sometimes it doesn't.

It baffles me as to how New Jersey, with its "yarn" law, is part of the aforementioned "Streamlined" project, because their intent was to eliminate these weird differences.

[MikeH]

Do you start collecting on the first sale of the year? If so, what happens to that money if you don't go over the $100,000 or 200 sales? Do you have to return it to the customer or forward it anyway to the state? On the other hand, if you start collecting when the sales go over $100,000 (SD) or 200 sales, one has to assume no collection would have been required on the original sales. Or what?

Alan:

Does this post above:

http://www.largeformatphotography.info/forum/showthread.php?146681-New-Sales-Tax-Rules&p=1450283&viewfull=1#post1450283

answer your question?

[MikeH]

Not to hijack my own thread...

Leigh, if you are still reading this... did you get my PM several weeks ago re: the Riteways with dials?

[Willie]

Do you start collecting on the first sale of the year? If so, what happens to that money if you don't go over the $100,000 or 200 sales? Do you have to return it to the customer or forward it anyway to the state? On the other hand, if you start collecting when the sales go over $100,000 (SD) or 200 sales, one has to assume no collection would have been required on the original sales. Or what?

Is it $100,000 or 200 sales Per State, or in total?

If Per State you might find it easy to put a tracking program in place so if you are getting near the end of Tax reporting year you limit or stop sales to that State. If you regularly go over to a particular State you keep on selling and pay the taxes. If not - why push it?

[faberryman]

If not - why push it?
More sales, more profit. If you are doing well, collect and remit sales tax.

[consummate_fritterer]

More sales, more profit. If you are doing well, collect and remit sales tax.

Not if your profit margins are low, after eBay and PayPal take their cuts. It may be better to take a break from selling.

[MikeH]

Is it $100,000 or 200 sales Per State, or in total?

I'm fairly certain it's $100k / 200 shipments per state. You don't start collecting until you hit the threshold. Then, you're probably stuck for a while. This is one of the things that Justice Roberts was talking against... most likely, each state will have its own rules. Maybe, just maybe, the 24 states in the "Streamlined project" will have the same rules. All bets are off though, right now.

[MikeH]

Not if your profit margins are low, after eBay and PayPal take their cuts.Remember, this tax gets added to the purchase price. It does, from an economic theory, make things more difficult depending on where your prices are compared to the competition. But, I'd much rather deal with Jeff @ Badger Graphics, who, IMHO, is probably far more interested in 4x5 film than anyone @ B&H, although, don't get me wrong... I respect B&H.

[Bob Salomon]

I'm fairly certain it's $100k / 200 shipments per state. You don't start collecting until you hit the threshold. Then, you're probably stuck for a while. This is one of the things that Justice Roberts was talking against... most likely, each state will have its own rules. Maybe, just maybe, the 24 states in the "Streamlined project" will have the same rules. All bets are off though, right now.

Why not just qualify it by the previous year’s sales rather the confusing things?

[MikeH]

Why not just qualify it by the previous year’s sales rather than confusing things?
That would be the easiest answer. although there is usually a delay because, say, on January 1, you might not know what your sales were through yesterday (December 31) and you need time to react. I'm trying to avoid my personal opinions here. Let's just say some states are very aggressive in their tax collections and their laws and policies reflect that, while other states are more cooperative. From what I've seen so far, South Dakota would appear to be in the latter group.

To make a long story short, one of the large companies I was controller for was the major employer in a small town where their main source of revenue was an employee head tax. We were close to 1/2 of their tax revenues. They were very easy to deal with... adjustments and corrections normally were made over the phone. One year, they needed to buy an expensive piece of capital equipment, and they could save a lot of money if they bought it in the next few weeks, but they didn't have the cash. When this was brought up to our CFO, the very quick consensus was: "How much do they need? Let's send them an early tax deposit equal to what they need." This thought would never enter my mind for most of the tax agencies that I deal with today.

[Bob Salomon]

That would be the easiest answer. although there is usually a delay because, say, on January 1, you might not know what your sales were through yesterday (December 31) and you need time to react. I'm trying to avoid my personal opinions here. Let's just say some states are very aggressive in their tax collections and their laws and policies reflect that, while other states are more cooperative. From what I've seen so far, South Dakota would appear to be in the latter group.

To make a long story short, one of the large companies I was controller for was the major employer in a small town where their main source of revenue was an employee head tax. We were close to 1/2 of their tax revenues. They were very easy to deal with... adjustments and corrections normally were made over the phone. One year, they needed to buy an expensive piece of capital equipment, and they could save a lot of money if they bought it in the next few weeks, but they didn't have the cash. When this was brought up to our CFO, the very quick consensus was: "How much do they need? Let's send them an early tax deposit equal to what they need." This thought would never enter my mind for most of the tax agencies that I deal with today.
I am just as happy that I was just a technical, sales and marketing guy! My daughter is a JDMBA doing bankruptcies. I let her worry about those type of business decisions.

Just to be sure, my brother is a lobbiest, his daughter is an intellectual property attorney and my son in law is a family law attorney. So I can just worry about photo!

[consummate_fritterer]

Remember, this tax gets added to the purchase price. It does, from an economic theory, make things more difficult depending on where your prices are compared to the competition. But, I'd much rather deal with Jeff @ Badger Graphics, who, IMHO, is probably far more interested in 4x5 film than anyone @ B&H, although, don't get me wrong... I respect B&H.

I understand, but that wasn't my point, Mike. The tax will be added to sellers' sales. If, and I do mean IF, a threshold of 200 sales will cause taxation then many, and I do mean MANY 'small' sellers will either limit their selling or will take a terrible hit on their sale prices. This is a direct hit on their sales margins. From buyers' perspectives, average prices will rise a bit. From a small-time seller's perspective, it can be catastrophic, especially if they've accumulated a ton of inventory which is now (effectively) worth 10 percent less.

[MikeH]

I understand, but that wasn't my point, Mike. The tax will be added to sellers' sales. If, and I do mean IF, a threshold of 200 sales will cause taxation then many, and I do mean MANY small sellers will either limit their selling or will take a terrible hit on their sale prices. This is a direct hit on their sales margins. From buyers' perspectives, average prices will rise a bit. From a small-time seller's perspective, it can be catastrophic, especially if they've accumulated a ton of inventory which is now (effectively) worth 10 percent less.

There's more than one way to look at this, but I understand your point. This is not going to be easy for small businesses. Do you think most small businesses will not be able to pass most of this on?... in other words, the business will eat most of this? I only have one small client that this impacts, and it will not affect him, so I really have not feel for what will happen. But, I'm afraid you are far more likely to be right, than wrong.

And, on top of this, small business's administrative costs will go up.

[Tin Can]

New businesses don’t have a last year.

If you are small biz and not retailing with at least 30% markup you should quit.

States will audit, almost free money for them. We want compliance.

Cheat or ignore tax and you will regret it.

I ignored. I paid with a lein against my home despite having a repayment agreement in place. Surprise!

Get an honest accountant. They do save you money.

Done it all the wrong way and right way. The State always wins.

Peace


Why not just qualify it by the previous year’s sales rather the confusing things?

[consummate_fritterer]

There's more than one way to look at this, but I understand your point. This is not going to be easy for small businesses. Do you think most small businesses will not be able to pass most of this on?... in other words, the business will eat most of this? I only have one small client that this impacts, and it will not affect him, so I really have not feel for what will happen. But, I'm afraid you are far more likely to be right, than wrong.

And, on top of this, small business's administrative costs will go up.

This will most definitely affect small-time sellers. How could it not? I'm not talking about 'businesses'. I'm talking about very little guys just trying to raise a few dollars in order to survive.

[DrTang]

I just checked the price of 4x5 film locally..it is about 10 bucks more per box of 50 than B&H

B&H has free shipping and thus I save 10 bucks a box - which is a lot for me..specially if I buy two boxes and some other film..it might be a 40-50 dollar savings..but,

with the new tax system ..I will be buying local as it about evens up the price differential

so..I guess in my case..the new law is doing about what it set out to - level the playing field

[Drew Wiley]

Collecting out-of-state sales taxes could potentially be ruinous to relatively small web dealers who handle quite a bit of cumulative transaction volume. This could very well require extra staffing and expensive re-programming. I saw close-up what a nightmare was caused by a simple 1/4 % add-on recyclying fee for paint cans and treated lumber in this state. It amounted to almost $40,000 avg per dealer to implement - crippling for a nursery selling treated containers or for any small mom n' pop paint store. I doubt many photographers fall into this kind of category. Studios would charge local rates because clients come in. And if licensing fees for stock photos are taxable, I assume that the tax headache will fall mostly on intervening stock agencies. But there are just all kinds of potential questions that will take time to iron out. I presume a certain grace period will be allowed by the Court to outwork practical details. A family member of mine just argued and won an analogous SCOTUS case, and the ruling itself is just the tip of the iceberg, with much re-interpretation to follow down the line, state by state. Here in CA, the Board that controls resale permits is good at communicating updates.

[MikeH]

Badger Graphic is $2 less than B&H.

[Drew Wiley]

The law only levels one aspect of the playing field, but as I hinted, tilts it even worse in other ways. I know the game inside out, having successfully competed for decades against out-of-state dealers who neither collected sales taxes like we had to, and often used very deceptive modes of advertising and
eventually web baiting, or else were such big corporations that they routinely thumbed their nose at zoning and labor laws which visible mid-sized privately-held companies are expected to obey. But where there's a will, there's a way. If all you can offer is a generic commodity, and someone else can offer that
same things cheaper, the odds are against you. Hopefully, most of us don't offer generic images, but our own way of seeing things which people will either
gravitate toward or not, of which sales tax is a negligible component. Turn it the other way around - we pay tax on supplies we didn't used to - well, on a
resale permit basis, that kind of thing has already been stated in print for some of us all along, and little will change. My resale permit for paper, matboard, picture frames etc can simply be recorded with out-of-state suppliers just like it is here.

[Alan Klein]

Very good article, Oren. It sounds like we need to learn more about this Marketplace Fairness Act that's before Congress, and if it's reasonable, push to pass it or something similar. We can't do business with more than 10,000 individual tax districts.

Amazon is doing it now as are other companies who already collect sales taxes throughout the US. Someone will come along and for a relatively small fee will provide a central clearinghouse and simple software for smaller companies.

[Alan Klein]

I understand, but that wasn't my point, Mike. The tax will be added to sellers' sales. If, and I do mean IF, a threshold of 200 sales will cause taxation then many, and I do mean MANY 'small' sellers will either limit their selling or will take a terrible hit on their sale prices. This is a direct hit on their sales margins. From buyers' perspectives, average prices will rise a bit. From a small-time seller's perspective, it can be catastrophic, especially if they've accumulated a ton of inventory which is now (effectively) worth 10 percent less.
The problem is in the beginning of the year you don't collect sales taxes. Then you have to change your website to start collecting sales tax. But only in certain districts that have passed the state limit. But you don't know when that limit will happen. So your customers won't know either until they enter their ZIP code and hit the Total button whether they will get charged the sales tax or not. That's going to drive buyers nuts with angst. You might be better either charging everyone from the beginning or no one (eat the cost yourself) and keep your customers happier.

[Alan Klein]

New businesses don’t have a last year.

If you are small biz and not retailing with at least 30% markup you should quit.

States will audit, almost free money for them. We want compliance.

Cheat or ignore tax and you will regret it.

I ignored. I paid with a lein against my home despite having a repayment agreement in place. Surprise!

Get an honest accountant. They do save you money.

Done it all the wrong way and right way. The State always wins.

Peace
How will states audit companies in other states to even know if they shipped stuff into their states or, more importantly, if the company exceeded the limit. Just because they have knowledge you shipped into their state, until they audit you, they don't know if the limit was exceeded. It's going to wind up like the Use tax where the state will have to trust out-of-state companies. You know how well that's worked with Use taxes.

[Alan Klein]

The law only levels one aspect of the playing field, but as I hinted, tilts it even worse in other ways. I know the game inside out, having successfully competed for decades against out-of-state dealers who neither collected sales taxes like we had to, and often used very deceptive modes of advertising and
eventually web baiting, or else were such big corporations that they routinely thumbed their nose at zoning and labor laws which visible mid-sized privately-held companies are expected to obey. But where there's a will, there's a way. If all you can offer is a generic commodity, and someone else can offer that
same things cheaper, the odds are against you. Hopefully, most of us don't offer generic images, but our own way of seeing things which people will either
gravitate toward or not, of which sales tax is a negligible component. Turn it the other way around - we pay tax on supplies we didn't used to - well, on a
resale permit basis, that kind of thing has already been stated in print for some of us all along, and little will change. My resale permit for paper, matboard, picture frames etc can simply be recorded with out-of-state suppliers just like it is here.
Do other state sellers accept resale certificate from companies
9 states don't accept out-of-state resales certificates. What happens with internet sales in this area is anyone's guess. This is why we need Congress to create a level playing field.
https://blog.taxjar.com/9-states-that-wont-accept-your-out-of-state-resale-certificate/

[Drew Wiley]

Even if someome comes up with a national zip code data base allegedly linked to tax rates, it won't necessarily be reliable. For example, right around here several cities expanded in a haphazard way, almost like an amoeba ingesting parts of other amoebas. The result is that you've got certain neighborhoods which receive mail through a post office in another city, with its specific zip code or codes, yet they pay taxes to the city into which they're actually incorporated, whose sales taxes per se differ from the neighborhoods around them. No big deal for me as a seller - a print shipped here or there is easy to
manually add tax to. But for anyone dependent on doing thousands of internet transactions, it could be logistical hell.

[Bob Salomon]

Even if someome comes up with a national zip code data base allegedly linked to tax rates, it won't necessarily be reliable. For example, right around here several cities expanded in a haphazard way, almost like an amoeba ingesting parts of other amoebas. The result is that you've got certain neighborhoods which receive mail through a post office in another city, with its specific zip code or codes, yet they pay taxes to the city into which they're actually incorporated, whose sales taxes per se differ from the neighborhoods around them. No big deal for me as a seller - a print shipped here or there is easy to
manually add tax to. But for anyone dependent on doing thousands of internet transactions, it could be logistical hell.

When we first moved into our last house in NJ, 44 years ago, the post office caught fire and burned down. It was never rebuilt nor did we ever get a new PO, even though we were physically the largest town in NJ.

Instead they divided the township so it used the P.O. in the towns surrounding us. Plus the Army base.

So our town had mail addresses in Dover, Denville, Rockaway, Picatinney Arsenal, Randolph and Wharton.

Fortunately, except the folks that shopped at the Army base, we all paid the same sales tax.

[dsphotog]

I say, throw the tea overboard, into the harbor!

[rdenney]

There's more than one way to look at this, but I understand your point. This is not going to be easy for small businesses. Do you think most small businesses will not be able to pass most of this on?... in other words, the business will eat most of this? I only have one small client that this impacts, and it will not affect him, so I really have not feel for what will happen. But, I'm afraid you are far more likely to be right, than wrong.

And, on top of this, small business's administrative costs will go up.

Yes--the administrative costs will likely exceed the sales tax, and for sellers of large numbers of inexpensive items, by a healthy margin.

But there are many ways to resolve this legislatively. One would be for sellers to report their sales to a federal clearinghouse that states can refer to as part of their use-tax enforcement. That would put the burden on states to do the enforcement, and on buyers (who actually owe the tax) to be responsible. Few report income that is not reported to the IRS, but most pay income tax on income that is reported to the IRS, which is the point of the 1099--it tells the IRS what payments were made, and tells the recipients of that income that the IRS knows they were paid.

Shifting this to use tax places a large burden on buyers who buy many things online. But this could be mitigated by online sellers sending a notification during January to each of their customers who purchased more than a de minimis amount, say $250. That's just a report in their accounting program. That puts the burden of knowing what use tax is owed on the buyer, and it's easy for buyers to know the use tax amount where they live--they only have to know one, while the sellers have to potentially know thousands.

That reporting could also be done by credit-card companies--I doubt there are a significant number of online purchase made without using a credit card or account.

But crafting law is not the Supreme Court's job. Regulating interstate commerce is Congress's job.

Rick "expecting a range of challenges to this opinion" Denney

[Drew Wiley]

I doubt congress could even agree on where the place a water fountain in their own lobby at this point in history. As for the US Supreme Court, my sister was
there two months ago as an invited guest, and the judges got into a distinctly heated exchange among themselves, which she found especially humorous because one of them is so short, and another judge so slouched in his chair, that the gallery can't even see their facial expressions! (A distinctly non-partisan anecdote that has nothing to do with the ruling, so no need to raise a red flag). Here the State itself (Cal) does have legal authority to monitor whether or not sales taxes for out of state purchases have been voluntarily remitted by holders of resale licenses; but I've never seen it actually done except with conspicuous corporations with substantial sales volume - many millions per annum.

[BrianShaw]

I say, throw the tea overboard, into the harbor!

Now your talking. Let’s burn bras and draft cards too!

[Dan Fromm]

But crafting law is not the Supreme Court's job. Regulating interstate commerce is Congress's job.

Rick, levying a sales/use tax on out-of-state purchases has nothing to do with interstate commerce. Its about making sure that like transactions -- a state's resident buys something subject to sales tax in the state -- generate the same taxes due. Fair is fair.

Dan "challenge delivered as expected" Fromm

[Drew Wiley]

Such rulings basically hint at acceptable parameters and include darn little practical advice how to implement something compliant. This is just the way the
Supreme Court works - something is either deemed constitutional according to their majority opinion, or it isn't. Then it's left up to the individual parties or
states to figure out; and if someone thinks they have found a flaw in how this is done, the gripe proceeds back up the ladder. I state this a particular way due
to personal conversations with a family member who specializes in State and Federal Supreme court law. It's really a strange business, because many of these rulings have very little to do with what most of us would consider as either justice or even common sense, but about different competing philosophies
of how to interpret the Constitution as well as past judicial precedent. I've also learned that how the Supreme Court debates these things do not necessarily
give a firm clue to how they'll finally rule. Just like criminal lawyers carefully study the backgrounds and inclinations of potential jurors, those lawyers who
argue cases before the Supreme Court deeply study the individual personalities and philosophical, and alas, political, leanings of the Judges themselves. But
in this tax instance, there is bound to be quite a mess before the dust settles. Either be too small a businessman to worry about it, or big enough to let your
accounting dept do the worrying for you. But for the mid-sized business, don't expect some accountant down the block to figure it out. Large quantities of sales will require some kind of instantaneous computer program to be developed first. And
since many businesses require a degree of customization in their programs, trying to retrofit some kind of generic fix might
not be realistic at all. I've been through that twice - it was incredibly expensive and time-consuming; and I retired just on the
very brink of yet another trip through software hell that is still causing headaches at my former employer a year and a half
later.

[Tin Can]

Let's bring back Sunday morning swap meets.

Usually, work was complete before the swap opened to the public.

The guys with bodyguards and briefcases of cash were hilarious.

[pepeguitarra]

No and no

Correct. You need to be registered with the State to collect sales tax or use tax. You will not pay tax on items that are for sale. This is for businesses only. However, if you get payments over $20,000 in PayPal, you are considered a business and have to add a form in you income tax explaining and or paying the taxes.

[Alan Klein]

Rick, levying a sales/use tax on out-of-state purchases has nothing to do with interstate commerce. Its about making sure that like transactions -- a state's resident buys something subject to sales tax in the state -- generate the same taxes due. Fair is fair.
...

But there are requirements in sales tax states to collect the sales tax. Their own residents are required to reimburse the state the sales tax (called a use tax) for products they bought outside of their own states for use in their state where they live. Methods of purchasing could include: 1. they ordered it on line through the internet, 2. by phone with a placement of order using a credit card, 3. by sending a check and order to the out of state seller using the mail or by 4. telephone. The problem is the residents are illegally not complying with their own states' laws. They don't reimburse their states. The states claim they are incapable of enacting procedures to capture those missing sales taxes. That's the states' problem why they can't collect it. If they wanted to, they could simply add an additional charge on their own state's income taxes adding a small percentage against total income for sales not paid for each resident. Or use police methods to get the money. It's their problem not a seller in another state to collect the money for them.

The original supreme court rule said that a state cannot demand a seller in another state to enforce its tax rules unless they have a close nexus to the state they are sending the product too. But the supreme court just overruled their original judgment creating a mess. Since this involves trade between the state, not the tax itself, but product sold, Congress authority to create fair methods of handling it could be legislated. I don't think Congress has the stomach for it because no one likes to be taxed. Congress doesn't want to be seen as taxing people more. But that's what the people want. But the Supreme Court apparently knows better and legislated commerce on their own when they should have deferred. Without Congress writing law, I don't see how one state can enforce collections from another state? Plus there are 50 states. It's hard enough to know what's going on in your own state. How are you going to handle 50 states without common legal agreements that could be handled by Congress in setting up?

[rdenney]

Rick, levying a sales/use tax on out-of-state purchases has nothing to do with interstate commerce. Its about making sure that like transactions -- a state's resident buys something subject to sales tax in the state -- generate the same taxes due. Fair is fair.

Dan "challenge delivered as expected" Fromm

When I go online while in Virginia and buy something from a guy in California, and he ships is to me in Virginia, it's interstate commerce. If the Commonwealth of Virginia makes him collect sales tax on my behalf, and then submit it to Virginia, he has to have a Virginia sales and use tax permit, and he has to file monthly even if he has no sales. That is excessively burdensome by any definition, including the Court's. What makes it burdensome is that the seller doesn't know Virginia's rules without spending hours researching it, can't file for the permit (which must be signed, notarized, and filed in person at a Virginia county courthouse), and can't tell from addresses how much to collect. That's exactly the sort of burden that is the reason Congress is charged with regulating interstate commerce in the Constitution.

Paying use tax on out-of-state purchases is the buyer's responsibility, while collecting sales tax is the seller's responsibility. You cannot connect the two with a slash like they are the same thing, even if they are covered by the same bits of the state code. The former is difficult enough to enforce that few states including Virginia even attempt it, and the latter is expensive to implement and also difficult to enforce. Part of the reason why is that nobody think it's reasonable to expect individuals to have the sorts of personal accounting systems that let's them add up their out-of-state purchases in any sort of auditable way. Justice Roberts had it right. There are mechanisms that would relieve those difficulties, but it's not the Court's job to design those mechanisms.

Rick "it's fair to collect taxes that are owed, but it's not fair to require processes on the part of taxpayers that cost more than the taxes in so doing" Denney

[Dan Fromm]

Rick, sales tax and use tax are the same thing.

Your claim that when it comes to collecting and remitting sales tax on sales to out-of-state buyers will cost sellers more than the taxes collected is ridiculous. When all the dust settles and other states pass laws like the North Dakota one, each seller won't have to solve the problem for itself. Amazon has already solved it for state taxes (I'm not sure about local) and will happily sell rating and remitting services. CCH will do the same. What sellers will have to do is buy access to the service and install billing software that will do the lookups.

It will take a while for the dust to settle.

[faberryman]

Rick, sales tax and use tax are the same thing.

Your claim that when it comes to collecting and remitting sales tax on sales to out-of-state buyers will cost sellers more than the taxes collected is ridiculous. When all the dust settles and other states pass laws like the North Dakota one, each seller won't have to solve the problem for itself. Amazon has already solved it for state taxes (I'm not sure about local) and will happily sell rating and remitting services. CCH will do the same. What sellers will have to do is buy access to the service and install billing software that will do the lookups.

It will take a while for the dust to settle.

South Dakota had de minimus exemptions (200 sales/$100,000) and provided free software. Other states will need to follow suit to fall within the holding of the case.

[MikeH]

South Dakota had de minimus exemptions (200 sales/$100,000) and provided free software. Other states will need to follow suit to fall within the holding of the case.

I agree.

[rdenney]

It will take a while for the dust to settle.

Which was my point, along with the need for legislation.

What you think is easy may or may not be. Ask states how easy it is to collect use taxes, which are already owed. If sales and use taxes are the same (especially in how they are implemented), then why is it states work out their sales tax collection so carefully but have all but abandoned hopes of enforcing use tax?

Amazon is vast, and has an army of accountants already. They also maintain the kind of detailed database they need, and they have an office in every state that can handle the local requirements. That's why they already collect sales tax--they can. So, are you suggesting rather than selling things directly to buyers, all smaller business without those resources will have to be represented by companies like Amazon? That sound very good for Amazon. But it doesn't sound so good for businesses running thin profits who don't have the margin for yet another middleman.

I have actually read the Virginia Code on sales and use tax--I just helped my wife set up a business. I am also familiar with the sales and use tax laws in Texas (at least what they were a three decades ago), where I used to have a business.

Rick "what is the same in the state code isn't the same in the accounting software" Denney

[rdenney]

South Dakota had de minimus exemptions (200 sales/$100,000) and provided free software. Other states will need to follow suit to fall within the holding of the case.

The ruling noted that the de minimis exemptions were key to overturning the prior decision, but did not legislate those exemptions, because they have no authority to legislate. States will write laws, and they will all be different, and lawsuits will arise from those laws where there is an argument to be made they are not consistent with this decision.

Rick "and who gets paid for that software, not just to write it but to maintain it?" Denney

[MikeH]

I agree with what Rick has said. To take it a step further, after reading the Opinion, it's very clear to me that the Court, essentially said:
"SD has attempted to simplify collection for out-of-state sellers, therefore this is not an unreasonable restriction on Interstate Commerce [in the 21st Century.]"

This is about as close to writing a law, without writing one, that I've ever seen the Court get. Not to say that this will be easy for small businesses. BUT: the concept inherent in California's philosophy to refuse Other State's Resale Exemptions runs 100% against the philosophy shown in the Court's opinion. It is a clear, unreasonable restriction on Interstate Commerce ... hence, to re-iterate what someone else said, there will be more lawsuits unless Congress steps in.

[consummate_fritterer]

IMO, most small-time sellers will just limit their sales to avoid this mess. It'll be difficult for folks who have a ton of small items they need to get rid of.

[Willie]

Here in North Dakota we just drive a few miles to a town on the Reservation. No sales tax, decent restaurants and Casino.

[Bob Salomon]

Here in North Dakota we just drive a few miles to a town on the Reservation. No sales tax, decent restaurants and Casino.

But then, in many states, you might be liable for use tax on your purchases

[Drew Wiley]

Here people sometimes drive to Oregon to make purchases, but it's rarely worth the expense of getting there just to save on taxes. Big purchases like cars
or boats have to be registered in CA anyway, so no loophole there. Don't want to say to much about the Res system; but it works both ways - if you get
seriously burned, even on a real estate swindle or major water dispute, you can't sue em. Happens all the time. I grew up with Indians so know quite a few
stories first hand. Don't assume those casinos are necessarily run by Indians; they often get burned too. But I better stop there; Rick might be awake.

[Bob Salomon]

Here people sometimes drive to Oregon to make purchases, but it's rarely worth the expense of getting there just to save on taxes. Big purchases like cars
or boats have to be registered in CA anyway, so no loophole there. Don't want to say to much about the Res system; but it works both ways - if you get
seriously burned, even on a real estate swindle or major water dispute, you can't sue em. Happens all the time. I grew up with Indians so know quite a few
stories first hand. Don't assume those casinos are necessarily run by Indians; they often get burned too. But I better stop there; Rick might be awake.
In NJ there was a big law suit involving the Ramapo Indian tribe that wanted to open casinos in the Ramapo mountains in northern NJ. They kept losing in all the courts that they sued in but one of the reasons that they kept losin was that the Indians filing the suits all had names ending in a vowel!

[Drew Wiley]

It's almost impossible to keep gambling and organized crime apart. But I dare not mention any specific names or all hell will break loose. I've seen both sides of the question up close: Indian health clinics getting funded and a few of them pulling out of poverty and violence, yet others left in the cold while gangsters without a drop of Indian blood in them take away hundreds of millions. Some of these operations are as big as anything in Vegas. And like I said, I grew up
with Indians; they were constantly over at our house, I rode the bus to school with them, climbed cliff and waterfalls with them, watched a few of them
become fabulously rich, while most died before they turned 30. But I view gambling as basically parasitic to overall state income, just like cannabis. It's just
a short term sugar high at best, then you have to raise taxes for the social consequences. Getting a bit off-topic; but it's been a big debate even here. The
next municipality just a few blocks away opted for an "Indian"casino with exactly zero Indians involved, but quite a few pimps and loan sharks on premises.
Prior to that it was a bowling alley. Indians never did live there.

[Bob Salomon]

It's almost impossible to keep gambling and organized crime apart. But I dare not mention any specific names or all hell will break loose. I've seen both sides of the question up close: Indian health clinics getting funded and a few of them pulling out of poverty and violence, yet others left in the cold while gangsters without a drop of Indian blood in them take away hundreds of millions. Some of these operations are as big as anything in Vegas. And like I said, I grew up
with Indians; they were constantly over at our house, I rode the bus to school with them, climbed cliff and waterfalls with them, watched a few of them
become fabulously rich, while most died before they turned 30. But I view gambling as basically parasitic to overall state income, just like cannabis. It's just
a short term sugar high at best, then you have to raise taxes for the social consequences. Getting a bit off-topic; but it's been a big debate even here. The
next municipality just a few blocks away opted for an "Indian"casino with exactly zero Indians involved, but quite a few pimps and loan sharks on premises.
Prior to that it was a bowling alley. Indians never did live there.

The Ramapo mountains in NJ were an inaccessible location that deserters from the British and American forces deserted to. They may have intermarried with some of the local Indians but there has always been a question if their decedents have any actual Native American Indian blood!

[Drew Wiley]

Here the bosses determine who belongs to the tribe and who doesn't. You can be born on the Res as a full-blooded Indian but not qualify; or you can be some Atlantic City or NYC or even Pakistan hood and get in on the act. Some of these tribes are fictitious to begin with - complete fabrications set up just
for purpose of gaming. But there are also some very gut wrenching stories. We had a long-time family friend in the position of deciding whether to open up
to gaming or not. He was personally against the whole idea, but was himself poor with a big family and desperately wanted enough income to move off the
reservation before one of them got killed. It was an incredibly violent place. He eventually opted for something relatively small catering to senior citizens
being bused in to gamble. But the very day it opened, Indians themselves were naively losing everything they had to loan sharks. Things are even rougher
here, with three people found face down in the Bay the day after that casino opened. Vietnamese and Cambodian mobsters basically have the run of that place. Someone in the neighborhood who protested it found a stack of dynamite piled against his front door. After incidents like that, Richmond, Berkeley,
and Oakland all turned down local gaming. There are Indians companions from my youth who are doing quite well, but they took the route of higher education and careers well away from the Res. But given the fact that many of the previous generation lived to be well over a hundred, the sudden drop of
average lifespan to under thirty years tells you an awful lot. Even at my tenth high-school reunion, half the class was already dead. So I never went to another one. Too depressing.

[Bob Salomon]

Here the bosses determine who belongs to the tribe and who doesn't. You can be born on the Res as a full-blooded Indian but not qualify; or you can be some Atlantic City or NYC or even Pakistan hood and get in on the act. Some of these tribes are fictitious to begin with - complete fabrications set up just
for purpose of gaming. But there are also some very gut wrenching stories. We had a long-time family friend in the position of deciding whether to open up
to gaming or not. He was personally against the whole idea, but was himself poor with a big family and desperately wanted enough income to move off the
reservation before one of them got killed. It was an incredibly violent place. He eventually opted for something relatively small catering to senior citizens
being bused in to gamble. But the very day it opened, Indians themselves were naively losing everything they had to loan sharks. Things are even rougher
here, with three people found face down in the Bay the day after that casino opened. Vietnamese and Cambodian mobsters basically have the run of that place. Someone in the neighborhood who protested it found a stack of dynamite piled against his front door. After incidents like that, Richmond, Berkeley,
and Oakland all turned down local gaming. There are Indians companions from my youth who are doing quite well, but they took the route of higher education and careers well away from the Res. But given the fact that many of the previous generation lived to be well over a hundred, the sudden drop of
average lifespan to under thirty years tells you an awful lot. Even at my tenth high-school reunion, half the class was already dead. So I never went to another one. Too depressing.

Boy, if 10 of my class had died by the 10th reunion there would have been a pretty small group! We only had 32 guys in my class!

[Drew Wiley]

Bob, my high school district was larger than six New England states! There were no large towns involved, but kids bussed in from up to two hours one-way.
There was a distance trophy each year. In my class, one student had to walk or ride a bike five miles to the road in the morning, then catch the bus for the two-hour ride across a steep canyon, then do it all in reverse in the evening. During the winter, some had to be dormed there due to the snow depth at higher elevations, at least until more modern versions of the snowplow arrived. I was one of the lucky ones and lived only fifteen miles away. But the way
tax revenues were allocated back then was according to district, and that particular district was extremely wealthy from the taxation of most of the state's
hydroelectric power. Later on, funds were more fairly allocated on a per-student basis, so that kind of infrastructure could no longer be supported. Population
increased and several school districts are now in place. It was a long way from any city, so we were free to climb around the hills or swim in the creek once
we had completed mandatory classes, but unfortunately weren't allowed to graduate early. Mostly cowboys and Indians, plus logging and hydroelectric. The
usual boneheads and bullies; but it was still a rather innocent era, prior to the drug epidemic. The violence of the Rancherias (little Reservations) was kept
to themselves. People just disappeared from time to time. Some ended up in prison, with several escaping and returning for violent clashes. But photographically, those places could also be incredibly beautiful. Life for Indians on their own private ranches was a completely different story, and quite
normal. Some very fine people. Three people in "Almost Ancestors", a book containing some of the oldest photographs of California Indians, I personally knew. Of course, their own pictures were as taken in childhood, and all were quite old when I was young. ..Well, guess I hijacked another thread...

[Bob Salomon]

Bob, my high school district was larger than six New England states! There were no large towns involved, but kids bussed in from up to two hours one-way.
There was a distance trophy each year. In my class, one student had to walk or ride a bike five miles to the road in the morning, then catch the bus for the two-hour ride across a steep canyon, then do it all in reverse in the evening. During the winter, some had to be dormed there due to the snow depth at higher elevations, at least until more modern versions of the snowplow arrived. I was one of the lucky ones and lived only fifteen miles away. But the way
tax revenues were allocated back then was according to district, and that particular district was extremely wealthy from the taxation of most of the state's
hydroelectric power. Later on, funds were more fairly allocated on a per-student basis, so that kind of infrastructure could no longer be supported. Population
increased and several school districts are now in place. It was a long way from any city, so we were free to climb around the hills or swim in the creek once
we had completed mandatory classes, but unfortunately weren't allowed to graduate early. Mostly cowboys and Indians, plus logging and hydroelectric. The
usual boneheads and bullies; but it was still a rather innocent era, prior to the drug epidemic. The violence of the Rancherias (little Reservations) was kept
to themselves. People just disappeared from time to time. Some ended up in prison, with several escaping and returning for violent clashes. But photographically, those places could also be incredibly beautiful. Life for Indians on their own private ranches was a completely different story, and quite
normal. Some very fine people. Three people in "Almost Ancestors", a book containing some of the oldest photographs of California Indians, I personally knew. Of course, their own pictures were as taken in childhood, and all were quite old when I was young. ..Well, guess I hijacked another thread...
Drew, my school had day students from Rye, NY; other local Westchester Ct homes; N Stamford, CT; Darien; CT, etc..
For me to get to school until I turned 16, I took a car ride to the Talmadge Hill RR station, took three train to Greenwich and the caught a school bus up the hill to the school!
Once I turned 16 we would just drive directly to Thorpe school and park in the senior lot. This was kind of a rated lot based on what you drove! Coco Chneitti drovrpe current Ferrari, Tony Goldschmitt drove a Mercedes gull wing coupe; Tony Meschermitts drove a Reynold; I had a 49 Stuedebaker; Mike Mckeever had the latest Chevy muscle car and Tony Radar had the hotteset Pointiac! And a kid named kernichen had an old Citrean 2cv with rattan seats! But we had fun!

[Alan Klein]

I agree with what Rick has said. To take it a step further, after reading the Opinion, it's very clear to me that the Court, essentially said:
"SD has attempted to simplify collection for out-of-state sellers, therefore this is not an unreasonable restriction on Interstate Commerce [in the 21st Century.]"

This is about as close to writing a law, without writing one, that I've ever seen the Court get. Not to say that this will be easy for small businesses. BUT: the concept inherent in California's philosophy to refuse Other State's Resale Exemptions runs 100% against the philosophy shown in the Court's opinion. It is a clear, unreasonable restriction on Interstate Commerce ... hence, to re-iterate what someone else said, there will be more lawsuits unless Congress steps in.

You don't need to furnish a Resale Certificate to California. Let's say you're a NY company. You bought a product from a California company. They charged the NY sales tax when you bought it and forwarded the sales tax to NY tax bureau. You would be able to apply an equal amount for credit against sales taxes owed in NY when you file your company's sales taxes in NY if the product was resold.

I would think most states have some sort of similar arrangement. Of course you have to upfront the sales tax payment. But at least you can get it back later.

[Alan Klein]

IMO, most small-time sellers will just limit their sales to avoid this mess. It'll be difficult for folks who have a ton of small items they need to get rid of.

How are the states going to know you sold products to residents of their states? How are they going to know if you exceeded the money limit or quantity of sales limits requiring collection of their sales taxes? If they don't know what their own residents bought so they can get the Use tax, they're not going to know what their residents are doing any better under the SCOTUS decision. Plus, the companies are out-of-state. Do they plan to travel to your state and ask to see your company's books? They don't have the authority right now to audit companies except those in their own states.

[Alan Klein]

The reason Amazon collects the sales tax is because they have physical locations in the states in the form of distribution sites. So they can be subpoenaed within each state. How does a state subpoena an out-of-state company in that state or demand that you show them your books for auditing? Any tax lawyers here?

[Alan Klein]

Here in North Dakota we just drive a few miles to a town on the Reservation. No sales tax, decent restaurants and Casino.

When I was in Monument Valley, owned by the Navajo Nation, I had to pay sales tax if I recall. Everyone's got their hand in your pocket. Why should they be different? :)

[Alan Klein]

In NJ there was a big law suit involving the Ramapo Indian tribe that wanted to open casinos in the Ramapo mountains in northern NJ. They kept losing in all the courts that they sued in but one of the reasons that they kept losin was that the Indians filing the suits all had names ending in a vowel!

Geronimo? Hiawatha?

[Bob Salomon]

Geronimo? Hiawatha?

More like Gambino, Costello, Frankie the Boot Boiardi.

[MikeH]

Alan: I'm a 3rd generation native Southern Californian CPA with some experience in California Sales Tax matters. I have no experience with other states. However, California is soooo aggressive, that, many CPAs refer sales tax issues to CPAs and tax lawyers who only handle CA Sales tax matters. That being said...


The reason Amazon collects the sales tax is because they have physical locations in the states in the form of distribution sites. So they can be subpoenaed within each state.

A number of Amazon's 3rd-party-sellers are located in CA. CA alleged that these 3rd-party-sellers were agents of Amazon, and that gave Amazon nexus in CA. Press reports, in the mainline media (which doesn't always get the details correct), indicated that Amazon capitulated. I do not buy through Amazon. Can anyone confirm that Amazon collects CA sales tax from CA buyers?


How does a state subpoena an out-of-state company in that state or demand that you show them your books for auditing? Any tax lawyers here?If you study the Case "Franchise Tax Board of California vs. Hyatt" [to the Supreme Court THREE(?) times] carefully, you'll realize that CA does what CA wants to do. There are enough ambiguities in SD vs. Wayfair for CA to drive a Mack Truck through. They have gone after former CA residents, many years removed from CA, for failure to file CA tax returns, and attached bank accounts 3,000 miles away. They taxed pensions, earned @ CA aerospace companies, after people moved out of CA, until Congress stepped in and said: "No More!." In Hyatt, they apparently libeled the taxpayer and went through his trash, then reportedly tried to justify it using a Supreme Court case from the 19th Century regarding cops on horseback chasing "the bad guys" across state lines.

Do you want me to go on? I could write a book.

There is a very good possibility that, if you sell ONCE into CA, that CA will be able to use that to audit you to see if you fit the "200 shipment" criteria. And, CA will do that. When you get audited, would you rather pay CA $1,000 - $5,000 in tax now and be done with it, or hire specialized CPAs and lawyers and pay them $1,000 - $5,000+ to fight it? IMHO, I call that "legal extortion." But, it's legal, at least in CA.

[MikeH]

More like Gambino, Costello, Frankie the Boot Boiardi.

:-)

[Drew Wiley]

Ha! One tribe actually legally adopted Gambinos to make them tribal elders. Another Atlantic City dude whose name is off limits simply built casinos outside the legal boundaries of small reservations and then leased them to the tribes with insanely inflated overhead, then finally ripped off the investors themselves by a serial bankruptcy stunt, which doesn't mean he didn't bag a lot of money himself first. That happened to a few of the Indians I grew up with; the others
were already up and running with their own mega-casino. But back to taxes which actually end up in the state coffer... Amazon has a huge shipment center in Calif and therefore is expected to collect Calif sales taxes. That still hardly levels the playing field, cause they got a huge state income tax break to set up here in the first plade, so still amount to a monopolistic Godzilla destroying local businesses right and left, just with one hand legally in a boxing glove now.

[MikeH]

For those of you that would either:

• Want to see how tax people look at this [including that it's an "Accountant's Full Employment Act :-) ], or
• Are looking for something to read when you are trying to go to sleep :-) ,

here's a discussion in a Tax Forum that I read, but do not post into:

https://www.taxprotalk.com/forums/viewtopic.php?f=8&t=12514

[MikeH]

The Amazon CA Distribution Center would have happened after Amazon & CA reached some kind of deal.

[Drew Wiley]

CA lost either way. Amazon got a huge tax break. More orchards got leveled and a number of so-so jobs were acquired in an admittedly difficult area to find
work, out in the Valley. But probably more overall jobs get lost with the demise of many private businesses, and hence their former employees often end
up paying considerably less personal tax. Yeah, I have an opinion, having successfully competed with Amazon from a one-location store - actually three city
blocks of property in a very expensive city, and with absolutely none of the freebie perks and routine cheating of workers the big box chains get away with. We were paid well and had full benefits, including traditional pensions. I visit them from time to time now that I'm retired. But generational and personnel changes, experience-wise, are always risky for family-owned businesses, even relatively large ones. It's a bare-knuckles world out there, but always has been
in terms of competition. Only the smart and adaptable survive.

[Alan Klein]

Alan: I'm a 3rd generation native Southern Californian CPA with some experience in California Sales Tax matters. I have no experience with other states. However, California is soooo aggressive, that, many CPAs refer sales tax issues to CPAs and tax lawyers who only handle CA Sales tax matters. That being said...



A number of Amazon's 3rd-party-sellers are located in CA. CA alleged that these 3rd-party-sellers were agents of Amazon, and that gave Amazon nexus in CA. Press reports, in the mainline media (which doesn't always get the details correct), indicated that Amazon capitulated. I do not buy through Amazon. Can anyone confirm that Amazon collects CA sales tax from CA buyers?

If you study the Case "Franchise Tax Board of California vs. Hyatt" [to the Supreme Court THREE(?) times] carefully, you'll realize that CA does what CA wants to do. There are enough ambiguities in SD vs. Wayfair for CA to drive a Mack Truck through. They have gone after former CA residents, many years removed from CA, for failure to file CA tax returns, and attached bank accounts 3,000 miles away. They taxed pensions, earned @ CA aerospace companies, after people moved out of CA, until Congress stepped in and said: "No More!." In Hyatt, they apparently libeled the taxpayer and went through his trash, then reportedly tried to justify it using a Supreme Court case from the 19th Century regarding cops on horseback chasing "the bad guys" across state lines.

Do you want me to go on? I could write a book.

There is a very good possibility that, if you sell ONCE into CA, that CA will be able to use that to audit you to see if you fit the "200 shipment" criteria. And, CA will do that. When you get audited, would you rather pay CA $1,000 - $5,000 in tax now and be done with it, or hire specialized CPAs and lawyers and pay them $1,000 - $5,000+ to fight it? IMHO, I call that "legal extortion." But, it's legal, at least in CA.

Thanks Mike for your response. But you seem to have described sellers that were in CA. The question is how does California go after a seller who's located in let's say New Jersey who does not have any people working in California or any address of business there? No Nexus. The companies that will fall under the new SCOTUS judgment currently do not file sales taxes there. They only ship their products there? How will California 1. Find those out of state companies that are selling in their state 2. Audit their books since they are not located in CA 3. Subpoena them?

Another question is 4. will California issue Sales Tax Certificates to everyone out of state who requests one? That's a very involved procedure multiplied by 50 states. In any case, why would a seller get a certificate until he makes a sales in CA above the limit (not yet established in CA)? I assume CA like other state will have to do what SD did and formulate reasonable requirements with sales limit, quantity of sales etc as well as how to issue Certificates to out of state sellers.

But could you answer my question 1,2 3, 4?

[tgtaylor]

Received this "Important Notice" from B&H this morning:


As you may know, based on a June 2018 U.S. Supreme Court ruling, California is now requiring out of state sellers to collect sales tax. As a result, B&H will begin to collect sales tax on shipments to California on April 1st. All reputable retailers are complying with the new laws and collecting sales tax.

That translates to a 10% price increase on stuff effective 1 April.

Thomas

[Vaughn]

That helps even the playing field between Freestyle and B&H. Not having to pay sales tax for out-of-state purchases was a weird little bonus we had.

[Tin Can]

Here in IL we have been paying B&H sales tax for a while, but not the full local amount.

[Bob Salomon]

Received this "Important Notice" from B&H this morning:


As you may know, based on a June 2018 U.S. Supreme Court ruling, California is now requiring out of state sellers to collect sales tax. As a result, B&H will begin to collect sales tax on shipments to California on April 1st. All reputable retailers are complying with the new laws and collecting sales tax.

That translates to a 10% price increase on stuff effective 1 April.

Thomas

Many dealers in CA, and other states, run special sales days where the dealer pays the tax, not the consumer. So now that mail order dealers will start collecting sales tax on out of state shipments where they do not have a physical presence will these tax free days end?

[pendennis]

It could be, as Randy Moe states, that the limit on sales tax liability is limited to the states' governments, not down to the county, city, etc., level.

The Supreme Court case was specifically about the State of South Dakota v. Wayfair and others. In its ruling, the Court mentions 10,000+ sales tax jurisdictions in the U.S., and cites some of the minutiae that covers taxable v. nontaxable sales. However, in the parts of the ruling I read, the Court doesn't mention the ability of "sub-state" jurisdictions to force retailers to collect sales/use tax on their behalf.

I noted that the dissenters bemoaned the broad expansion of the Commerce Clause, and that e-commerce was not a radical departure from the current models.

[pendennis]

Many dealers in CA, and other states, run special sales days where the dealer pays the tax, not the consumer. So now that mail order dealers will start collecting sales tax on out of state shipments where they do not have a physical presence will these tax free days end?

The retailers can't run specials where only the dealer pays the tax, unless there's a specific sales/use tax holiday granted by the taxing jurisdiction.

These are marketing/sales ploys to give an additional percentage off the sales price, and call it a "dealer pays the tax" sale. However, the dealer is always on the hook for the sales tax. Dealers are the collection agents for the government.

[Bob Salomon]

The retailers can't run specials where only the dealer pays the tax, unless there's a specific sales/use tax holiday granted by the taxing jurisdiction.

These are marketing/sales ploys to give an additional percentage off the sales price, and call it a "dealer pays the tax" sale. However, the dealer is always on the hook for the sales tax. Dealers are the collection agents for the government.

That may be true, but dealers still do it. And not all on the same days in the same areas.
Many times these tax free sales are run at trade shows.

[pepeguitarra]

Technically, it is not called sales tax. If purchased in California, yes, it is sales tax. If purchase outside California, it is called USE TAX. Which is the same thing, but with different name. In fact, if you do not pay use tax for your purchases, when you do your income tax, you have to declare what you bought over $1,000 and pay the tax then. For those who purchased less than $1,000 items, there is a formula that the State uses to calculate your use tax. California is the most taxed State in the US.

[Bob Salomon]

Technically, it is not called sales tax. If purchased in California, yes, it is sales tax. If purchase outside California, it is called USE TAX. Which is the same thing, but with different name. In fact, if you do not pay use tax for your purchases, when you do your income tax, you have to declare what you bought over $1,000 and pay the tax then. For those who purchased less than $1,000 items, there is a formula that the State uses to calculate your use tax. California is the most taxed State in the US.

Unless you live in a state without a state income tax, TX, for example. But you might still be liable to pay sales tax.

California is among the highest taxed states. It has a very low property tax. Try NY or NJ for highest taxes.
But outside the states with no sales tax or income tax CA is in the states with the highest total taxes.

[MikeH]

Although I live in California, I'm not a sales tax expert. But, I did receive a communication from the California Sales Tax people (CDTFA, formerly the Board of Equalization) that made it sound like they were going to acquiesce with the Supreme Court Wayfair decision, for now, with no change in CA law.

So, what they appeared to do, is to apply the $100,000 / 200 transaction minimum, to what are called Districts.

California Sales Tax law, as it currently exists, would never pass the "simplicity" test in Wayfair. However, applied by District, it probably would. A "District" is any county, *or* any city or cities, or group of counties, that has passed a sales tax that gets added to the State rate (which is actually 3 rates... most of it goes to the State, but the County and City where the sale takes place already gets about 20% of the tax). Probably the best known "District" is BART, i.e. Bay Area Rapid Transit, which, at one time, had a sales tax rate of 1/2/%.

So, if I'm B&H, I have the option of:
a) collecting only in the districts where my sales exceed the limit, which would probably exclude most of the smaller counties, and then try to figure out how to explain this to my customers, or;
b) Collect from everyone in California. If I were in their shoes, b) is the obvious answer.

Sooner or later, CA will need to re-write their Sales Tax laws, because their manner of acquiescence means that many smaller and medium-size retailers will still not need to collect.

[Bob Salomon]

Although I live in California, I'm not a sales tax expert. But, I did receive a communication from the California Sales Tax people (CDTFA, formerly the Board of Equalization) that made it sound like they were going to acquiesce with the Supreme Court Wayfair decision, for now, with no change in CA law.

So, what they appeared to do, is to apply the $100,000 / 200 transaction minimum, to what are called Districts.

California Sales Tax law, as it currently exists, would never pass the "simplicity" test in Wayfair. However, applied by District, it probably would. A "District" is any county, *or* any city or cities, or group of counties, that has passed a sales tax that gets added to the State rate (which is actually 3 rates... most of it goes to the State, but the County and City where the sale takes place already gets about 20% of the tax). Probably the best known "District" is BART, i.e. Bay Area Rapid Transit, which, at one time, had a sales tax rate of 1/2/%.

So, if I'm B&H, I have the option of:
a) collecting only in the districts where my sales exceed the limit, which would probably exclude most of the smaller counties, and then try to figure out how to explain this to my customers, or;
b) Collect from everyone in California. If I were in their shoes, b) is the obvious answer.

Sooner or later, CA will need to re-write their Sales Tax laws, because their manner of acquiescence means that many smaller and medium-size retailers will still not need to collect.

Like I said, I'm not a CA Sales tax expert. There's a lot more to this, but it starts getting political, so I'm not going to even start ti go there. Suffice it to say that some of my tax friends think that the California tax people border on criminal activity from time-to-time. I've heard it referred to as "legal extortion."

Since you are a CPA this is what happened to us as a distributor of photographic and high end luggage to WA state.

Are only office was in NJ.
We had no facilities of any kind in WA.
We had no employees in WA.
We had an independent sales rep in WA and he had an employee in OR.
All samples in their possession belonged to us and were in their possession on loan, for a specific timeframe.

I would make periodic trips from NJ to WA to display new products and to train dealers or customers.

The state of WA decided that we were liable for a Tax of 0.035% on all sales shipped into WA to retail dealers who collected state and local sales tax on those products, and our rep was also liable for the tax. In addition, they demanded 5 years of back tax + interest.

Now, how does that happen? WA claimed they were doing it and that we should have made it a point to have familiarized ourselves when their legislature passed this tax.
The tax liability was not that great and to hire a tax attorney would have been far more. And we claimed it off our tax returns but our competitors, with the exact same circumstances, were not found liable for that tax. Only the companies that used that specific rep were liable for the tax.

[MikeH]

Bob:

You may not like this answer, and this is part of the complexities that the Supreme Court addressed by talking about the simplicities of South Dakota. Both WA & CA law is complex, and they use a concept of "nexus" (which is when you have legal presence in a state, and nexus for tax purposes can be different than nexus to be able to sue...), but when you are in a state for more that a certain # of days training, you have Sales Tax nexus. I'm guessing that Wayfair did not change this. Wayfair was not about physical presence in a state; rather it was about when can a state force an out-of-state company, with no nexus, to collect tax.

Although I'm semi-retired and only taking on new clients "for a good reason," this is why I always referred Sales Tax issues to CPAs that only handle Sales Tax. It's very specialized.

[Greg Davis]

Kentucky has recently started charging sales tax on internet purchases as well. We’ve had them on Amazon purchases for a while, but that is because they have several warehouse, distribution centers, and photo studios here, so the physical presence made them a “local” retailer. Now anyone in the country counts and must charge KY sales tax if the buyer is in KY.

[invisibleflash]

BH started charging me on Jan 3, 2019. CA is late.

If I was an artist I give up photography. For what I pay in sales tax on a few hundred dollar purchase, I could draw for a year or two. You have to be rich to do photography with no concerns for $$ nowadays. I had put a little order together for BH the other day. Sales tax was about $16. I canceled order, will wait and make due. Brits got to pay 20% VAT, poor Brits, feel sorry for em.

[pepeguitarra]

In a way, it is bringing everyone on the level. Brick and mortars are closing and going down because they failed to use the Internet. Some people to the brick and mortar store to check the items and order it cheaper on line. Not fair.

[Bob Salomon]

Bob:

You may not like this answer, and this is part of the complexities that the Supreme Court addressed by talking about the simplicities of South Dakota. Both WA & CA law is complex, and they use a concept of "nexus" (which is when you have legal presence in a state, and nexus for tax purposes can be different than nexus to be able to sue...), but when you are in a state for more that a certain # of days training, you have Sales Tax nexus. I'm guessing that Wayfair did not change this. Wayfair was not about physical presence in a state; rather it was about when can a state force an out-of-state company, with no nexus, to collect tax.

Although I'm semi-retired and only taking on new clients "for a good reason," this is why I always referred Sales Tax issues to CPAs that only handle Sales Tax. It's very specialized.

Mike, most of my trips into WA were for only 2 or 3 days, unless there was a trade show like the old IPOSA show then 2 more days or so were added for set up, take down and recovery.

But WA specifically told us that they were not charging us for any type us sales tax. They called it a business and occupation tax.

My brother is a Chairman of a major DC law firm and he had one of his tax attorneys check and my daughter is a JD/MBA and she checked and all said that we did not have liability but to fight it would just be far too much.
Had they been charging all photo distributors or luggage distributors this tax the PMA or the TGA (Photo Marketing Association and the Travel Goods Association) would have fought it as a group. But there just not enough of us for them to get involved.

Similar thing happened to us in CA. A city of LA inspector went into a Samy’s store in LA and saw one of our light boxes. These had DIN compliant stickers and all electrical parts carried UL certification. But the City of LA decided that the specific box they looked at had to have a City of LA electrical sticker and to get that we needed to send them one for testing, schematics and had to buy LA stickers. The inspection and certification had to be renewed yearly and was very expensive!
However there were 5 different size boxes in this product series but only one had to be tested yearly.
After 8 or so years they finally told us that inspection was only required if there were any changes to the product and we only had to buy their sticker yearly.

This meant that beside sending a new unit to them for testing, paying the return shipping, paying their fees and charges, getting a uni5 back that could no longer be sold as new, our shipping department had to open every unit that we were shipping to LA county, unpack the unit, put the sticker on, repackage and then ship.

However, to remain competitive, we could not charge more for that unit shipping to a dealer in LA county and had to eat the expenses.

[faberryman]

In a way, it is bringing everyone on the level. Brick and mortars are closing and going down because they failed to use the Internet. Some people to the brick and mortar store to check the items and order it cheaper on line. Not fair.
I have a local brick and mortar shop and I never go there. It has nothing to do with price and everything to do with them not carrying the items I want to buy, and when they have what I want to buy, not having it in stock.

[Vaughn]

..If I was an artist I give up photography. For what I pay in sales tax on a few hundred dollar purchase, I could draw for a year or two. ...

I would say the opposite. An artist may scream about the tax, but s/he would pay it in order to make art.

[Drew Wiley]

Just get a resale permit. It exempts materials that go into the finished product that is being sold from taxation. This would include things like printing paper and ink, matboard, framing supplies etc, but not film, chemistry, or equipment. In turn, you are expected to collect appropriate taxes from whom you sell your artwork to, and remit these. Of course, specific state laws apply, so sorting this all out going forward might get a little complicated. And Bob, there is really no such thing as "we pay the sales tax". That is just a marketing gimmick by which certain stores temporarily reduce the price of something an equivalent percent, which is generally a lot smaller amount than during a normal sale. The sales tax still has to be factored.

[HMG]

BH started charging me on Jan 3, 2019. CA is late.

If I was an artist I give up photography. For what I pay in sales tax on a few hundred dollar purchase, I could draw for a year or two. You have to be rich to do photography with no concerns for $$ nowadays. I had put a little order together for BH the other day. Sales tax was about $16. I canceled order, will wait and make due. Brits got to pay 20% VAT, poor Brits, feel sorry for em.

You can't draw conclusions about a specific tax rate without understanding the overall tax burden as well as the services provided. Those Brits may or may not be paying as much in income and property taxes as we do in the US. And I suspect those Brits aren't complaining about the VAT when they're walking out of the hospital without a bill. (Well, they probably are but shouldn't.)

[pendennis]

That may be true, but dealers still do it. And not all on the same days in the same areas.
Many times these tax free sales are run at trade shows.

For a lot of folks at trade shows and gun shows, the dealers will sell something to you at a "bottom line" price. The dealer will remit the sales tax amount due, based on the total revenue for the show. For instance, if you paid $1000 for a camera and the state sales tax rate is 6%, the dealer will remit $60 dollars to the state, and his gross profit after sales tax remittance is $940. It just simplifies the bookkeeping, and keeps the state tax auditors happy when they audit dealers at the shows; and they do random audits.

When you go to a store, the seller breaks out the tax on the register receipt, and the dealer remits the amount of sales tax computed in the cash register. I used to do tax returns for several businesses, and the state auditors usually accepted the register "tape" amount of tax compared to the total sales.

[Bob Salomon]

For a lot of folks at trade shows and gun shows, the dealers will sell something to you at a "bottom line" price. The dealer will remit the sales tax amount due, based on the total revenue for the show. For instance, if you paid $1000 for a camera and the state sales tax rate is 6%, the dealer will remit $60 dollars to the state, and his gross profit after sales tax remittance is $940. It just simplifies the bookkeeping, and keeps the state tax auditors happy when they audit dealers at the shows; and they do random audits.

When you go to a store, the seller breaks out the tax on the register receipt, and the dealer remits the amount of sales tax computed in the cash register. I used to do tax returns for several businesses, and the state auditors usually accepted the register "tape" amount of tax compared to the total sales.

The dealer has large signs in their booths stating Tax Free Sale or We Pay the Tax.

[BrianShaw]

I don’t mind paying the sales taxes I’m obligated to pay... and totally bewildered by the notion that others feel it’s such a travesty to do so as well.

[Greg Davis]

I can only talk about Kentucky since the new laws went into effect after I left FL, but technically we were supposed to pay any sales tax for out of state internet purchases on our annual tax filing. I am unaware of anyone that actually marked the box “yes” on their state tax form when asked if they bought something online. The new tax laws just guarantees we pay by putting the responsibility onto the retailer to charge sales tax instead of trusting people to pay it once a year when they filed their income taxes.

[pendennis]

The dealer has large signs in their booths stating Tax Free Sale or We Pay the Tax.

They can post all the signs they like with those statements, but they still collect sales taxes if the jurisdiction requires it. Somewhere in the calculation of the dealer's profit margin, is a line where the seller calculates his profit margin. He may have $1000 on that camera, but he's already figured in the sales tax, table rental, sales overhead, etc. It may not be marked as such on your receipt, but in that $940 (net of $1000 - $60) you paid the sales tax.

Around here, and I'm quite sure it's the same way elsewhere, the appliance and furniture stores are always running sales that state what you cited. However, they're still paying taxes to the state on their gross taxable sales.

The same holds true for pro athletes. If a pro basketball player from Chicago, plays a game in New York City, he pays income taxes on his earnings for that game to New York City (state, county, etc.). The player from New York likewise pays income tax to the city of Chicago when he plays there. And those jurisdictions regularly audit players for compliance. The same goes for entertainers.

Early in my finance career I was a specialist in sales taxes for our company. A friend of mine and I also ran a small business setting up books of account for professionals like doctors, lawyers, dentists, etc. Taxes of every type were always set up on the books so there was no chance of the bookkeeper making a mistake of omission. We also had a CPA as a partner, and he was as thorough an accountant as you could want.

[Oren Grad]

Merged with existing sales-tax-on-Internet thread.

[Corran]

I don’t mind paying the sales taxes I’m obligated to pay... and totally bewildered by the notion that others feel it’s such a travesty to do so as well.

Sales tax, income tax, use tax, property tax, gas tax, sin tax, hotel tax, capital gains tax, payroll tax, gift tax, estate tax...

Hell, I guess we should just give all our money to the gov't! They do a great job anyway ;). Is there an office where I can get some gov't-mandated 4x5 film rations?

[Bob Salomon]

They can post all the signs they like with those statements, but they still collect sales taxes if the jurisdiction requires it. Somewhere in the calculation of the dealer's profit margin, is a line where the seller calculates his profit margin. He may have $1000 on that camera, but he's already figured in the sales tax, table rental, sales overhead, etc. It may not be marked as such on your receipt, but in that $940 (net of $1000 - $60) you paid the sales tax.

Around here, and I'm quite sure it's the same way elsewhere, the appliance and furniture stores are always running sales that state what you cited. However, they're still paying taxes to the state on their gross taxable sales.

The same holds true for pro athletes. If a pro basketball player from Chicago, plays a game in New York City, he pays income taxes on his earnings for that game to New York City (state, county, etc.). The player from New York likewise pays income tax to the city of Chicago when he plays there. And those jurisdictions regularly audit players for compliance. The same goes for entertainers.

Early in my finance career I was a specialist in sales taxes for our company. A friend of mine and I also ran a small business setting up books of account for professionals like doctors, lawyers, dentists, etc. Taxes of every type were always set up on the books so there was no chance of the bookkeeper making a mistake of omission. We also had a CPA as a partner, and he was as thorough an accountant as you could want.

I didn’t say that no tax was paid to the State, City, County, District, etc. I said that the dealer did not charge the buyer tax. He sold product at a sale price and the dealer paid the tax.
This was to let them make the sale and compete with mail order pricing where the mail order sale did not include sales tax on out of state sales where the mail order dealer did not have a physical location or warehouse.

In days gone by it was a fairly common practice with retailers of high end product like camera stores, jewelers (including Tiffany) to deliver product over the counter to customers who lived out of state and ship them an empty box to save the customer sales tax. Eventually NY wised up and there was a major tax suit that the state won.

[Bob Salomon]

I don’t mind paying the sales taxes I’m obligated to pay... and totally bewildered by the notion that others feel it’s such a travesty to do so as well.

Working dealer shows, like the Hunt Show in Boston when Hunt rented out the entire exhibit hall and charged no admission but $1.00 for their “show paper” which was the special sales price each exhibiting company was offering at the show it was common to have consumers come to the booth with the latest edition of Shutterbug Ads magazine (its original name) to compare show prices vs mail order prices. Forgetting that they had driven to and from the show location on the wharf in Boston and paid event prices for parking.
Hunt had all vendors sell their products at dealer cost or with a very small markup.
They did charge sales tax except for special orders that would be dropped shipped by the vendor to out of MA locations. But all sales originally were cash only.

Today their show is totally different then those days.

[pendennis]

I didn’t say that no tax was paid to the State, City, County, District, etc. I said that the dealer did not charge the buyer tax. He sold product at a sale price and the dealer paid the tax.
This was to let them make the sale and compete with mail order pricing where the mail order sale did not include sales tax on out of state sales where the mail order dealer did not have a physical location or warehouse.

In days gone by it was a fairly common practice with retailers of high end product like camera stores, jewelers (including Tiffany) to deliver product over the counter to customers who lived out of state and ship them an empty box to save the customer sales tax. Eventually NY wised up and there was a major tax suit that the state won.

While the dealer may advertise that he eats the sales tax, don't believe that the sales tax wasn't in the calculus of the selling price. Dealers and anyone else in retail should be considering every aspect of cost, from sales tax, to income taxes, to cost of the show. No one stays in business very long with out it. Now, the dealer may think he can eat the tax, but he won't be in business very long if he forgets to add all the cost elements into his selling price.

A dealer may think he can match B&H, Adorama, Hunt, etc., but over time he's playing a fool's game. He'll get killed on the volume margins, and he likely has to mark up something else. Local dealers do this all the time. They count on folks coming in and not demanding the "meet" price.

[Alan Klein]

You can't draw conclusions about a specific tax rate without understanding the overall tax burden as well as the services provided. Those Brits may or may not be paying as much in income and property taxes as we do in the US. And I suspect those Brits aren't complaining about the VAT when they're walking out of the hospital without a bill. (Well, they probably are but shouldn't.)
I'm an American and never walked out of a hospital with a bill other than a small deductible of a few hundred dollars. My employers always paid my health insurance and now being over 65 years old I'm covered by Medicare which I pay around $1400 a year for.

[Alan Klein]

Just get a resale permit. It exempts materials that go into the finished product that is being sold from taxation. This would include things like printing paper and ink, matboard, framing supplies etc, but not film, chemistry, or equipment. In turn, you are expected to collect appropriate taxes from whom you sell your artwork to, and remit these. Of course, specific state laws apply, so sorting this all out going forward might get a little complicated. And Bob, there is really no such thing as "we pay the sales tax". That is just a marketing gimmick by which certain stores temporarily reduce the price of something an equivalent percent, which is generally a lot smaller amount than during a normal sale. The sales tax still has to be factored.

If you sell your final work to an intermediary, they should be able to provide you with their resale certificate so you don;t have to collect sales tax from them as well. I use to do that in the construction field.

[Oren Grad]

From our Guidelines:

Discussions of religion or partisan politics are forbidden everywhere on this Forum. More generally, this Forum is not an appropriate venue for debates over divisive social or political issues.

This Forum is not the place for debates about tax burdens or what governments do with tax dollars.

[Alan Klein]

They can post all the signs they like with those statements, but they still collect sales taxes if the jurisdiction requires it. Somewhere in the calculation of the dealer's profit margin, is a line where the seller calculates his profit margin. He may have $1000 on that camera, but he's already figured in the sales tax, table rental, sales overhead, etc. It may not be marked as such on your receipt, but in that $940 (net of $1000 - $60) you paid the sales tax.

Around here, and I'm quite sure it's the same way elsewhere, the appliance and furniture stores are always running sales that state what you cited. However, they're still paying taxes to the state on their gross taxable sales.

The same holds true for pro athletes. If a pro basketball player from Chicago, plays a game in New York City, he pays income taxes on his earnings for that game to New York City (state, county, etc.). The player from New York likewise pays income tax to the city of Chicago when he plays there. And those jurisdictions regularly audit players for compliance. The same goes for entertainers.

Early in my finance career I was a specialist in sales taxes for our company. A friend of mine and I also ran a small business setting up books of account for professionals like doctors, lawyers, dentists, etc. Taxes of every type were always set up on the books so there was no chance of the bookkeeper making a mistake of omission. We also had a CPA as a partner, and he was as thorough an accountant as you could want.

Of course the seller collects and pays the sales tax. But your amounts aren't correct. It's not $60 tax on $1000 since the $1000 also includes the sales tax despite the seller telling the public there;s no sales tax. You have to work the numbers backwards. If he collects $1000 from his customer and the state sales tax is let's say 6%, the actual product was sold for $943.40 + 6% sales tax ($56.60) = $1000. The seller must send the state $56.60. He's left with $943.40 to cover his costs, overhead and profit. To figure the tax due in situations like this, the formula is to divide the final selling price by 100% + sales tax percent to get the original net selling amount. So in this example of 6% sales tax, $1000/106%= $943.40. Sales tax: $1000-943.40= $56.60.

[pendennis]

Of course the seller collects and pays the sales tax. But your amounts aren't correct. It's not $60 tax on $1000 since the $1000 also includes the sales tax despite the seller telling the public there;s no sales tax. You have to work the numbers backwards. If he collects $1000 from his customer and the state sales tax is let's say 6%, the actual product was sold for $943.40 + 6% sales tax ($56.60) = $1000. The seller must send the state $56.60. He's left with $943.40 to cover his costs, overhead and profit. To figure the tax due in situations like this, the formula is to divide the final selling price by 100% + sales tax percent to get the original net selling amount. So in this example of 6% sales tax, $1000/106%= $943.40. Sales tax: $1000-943.40= $56.60.

Not so. When the tax return is filed with the state by the vendor, the sales tax due is 6% of the gross sales, less any discounts allowed by the state. If the business collects sales tax separately, the gross sale is net of sales tax collected and it goes against the calculated amount on the return. If you don't identify tax on the receipt, you have to calculate your tax due to the state on that total, at whatever the going rate is. The state doesn't give up $3.40 per transaction because the dealer doesn't identify the tax separately.

You might show a gross sale of 943.40 adding 56.40 in sales tax, to come up with $1000, but if you don't break it out on the receipt, you have to remit sales on $1000 to the state.

I've gone through a number of audits with state sales tax auditors, and they never let that one slide.

[Alan Klein]

Not so. When the tax return is filed with the state by the vendor, the sales tax due is 6% of the gross sales, less any discounts allowed by the state. If the business collects sales tax separately, the gross sale is net of sales tax collected and it goes against the calculated amount on the return. If you don't identify tax on the receipt, you have to calculate your tax due to the state on that total, at whatever the going rate is. The state doesn't give up $3.40 per transaction because the dealer doesn't identify the tax separately.

You might show a gross sale of 943.40 adding 56.40 in sales tax, to come up with $1000, but if you don't break it out on the receipt, you have to remit sales on $1000 to the state.

I've gone through a number of audits with state sales tax auditors, and they never let that one slide.

What do you mean by the business collecting sales tax separately? The seller collects sales tax at the time of sales. So whatever he collects includes the sales tax in the total amount. Could you explain this point?

On another point, what if the seller says, "Ok the cost to you is $1060 which includes sales tax. ($60)." And he writes $1060 at the bottom of the receipt. Since a vendor can;t waive collection of sales tax, it has to be assumed the tax is in the total amount collected. The state isn't entitled to 6% of the $1060, only 6% of the $1000. Otherwise they'd be getting 6% of the 6% which is taxing the tax already included. I'm not disputing your experience. But I'm curious if anyone ever tested this in court in Michigan? My experience with NYS Sales Tax people was that when I had an audit, the investigator did not understand all the facets of what she was doing. (I was in construction where there;s a lot of capital improvement where certain aspects are not taxed that she was not clear on). I had to call her supervisor and had her pulled from my case with another agent assigned.

[Alan Klein]

Not so. When the tax return is filed with the state by the vendor, the sales tax due is 6% of the gross sales, less any discounts allowed by the state. If the business collects sales tax separately, the gross sale is net of sales tax collected and it goes against the calculated amount on the return. If you don't identify tax on the receipt, you have to calculate your tax due to the state on that total, at whatever the going rate is. The state doesn't give up $3.40 per transaction because the dealer doesn't identify the tax separately.

You might show a gross sale of 943.40 adding 56.40 in sales tax, to come up with $1000, but if you don't break it out on the receipt, you have to remit sales on $1000 to the state.

I've gone through a number of audits with state sales tax auditors, and they never let that one slide.


I did a little research and found this article that concurs with my theory. Apparently, your Michigan sales tax auditors rips off their taxpayers.
https://www.accountingcoach.com/blog/calculate-sales-tax

[tonyowen]

You can't draw conclusions about a specific tax rate without understanding the overall tax burden as well as the services provided. Those Brits may or may not be paying as much in income and property taxes as we do in the US. And I suspect those Brits aren't complaining about the VAT when they're walking out of the hospital without a bill. (Well, they probably are but shouldn't.)

There is no such thing as free medical care in the UK - it all comes from income tax and other direct and indirect taxes. Also in Canada it would seem that medical care is free at point of service, but (in Ontario) everyone and all businesses have to pay Ontario Heath Insurance Plan (OHIP) fees. Not having lived in any other Provinces I'm not sure about the rest of Canada, but I assume something similar will exist.

VAT is a pain in the tail. It used to be 15% then 17.5% now 20%, but for some things you can arrange to pay cash and then the vat is not added.

I understand that "Value Added Tax" or "Luxury Tax" or whatever name a government uses, is worse in Scandinavia and Europe

regards
Tony

[pendennis]

I did a little research and found this article that concurs with my theory. Apparently, your Michigan sales tax auditors rips off their taxpayers.
https://www.accountingcoach.com/blog/calculate-sales-tax

In Michigan, gross sales are those which don't include sales tax (ditto Kentucky and Indiana). Sales tax owed to the state is calculated on that amount. Now, if you get audited, and everyone does eventually, you must show that you collected sales tax on gross sales separately on the receipt (cash register, written, etc.), or you have to remit 6% of the total gross sales. It doesn't make any difference that you may have collected the tax, but if you don't itemize it, you owe on the gross receipts.

Using your example, if the customer pays $1060, and you don't itemize the $60 as sales tax, you'll owe $63.60 to the state when you file your return.

My point is that taxing authorities demand consistency in your accounting procedures and business practices. If you choose to pay on a calculated basis, then you have to do it each and every time, and the tax auditors must know about this in advance. If you get sloppy, and vary on your receipts, you'll get a detailed examination of your books and practices. It doesn't just apply to sales taxes. If you resort to doing a lot of your flying at night, you'll get a flashlight in very tender places.

PS - I've been involved in sales tax audits in two states, and auditors used virtually the same audit programs in each one. As with any accounting procedure, it's about dotting i's and crossing t's. That's why CPA's are worth their fees, and why you should have a tax attorney on speed dial.

PPS - I read the article you referenced. I understand his procedure, but the auditors for Michigan and Kentucky required details and not calculations. My last sales tax audit from Michigan was in 2012. We have a CPA firm which does our books, and I sat in on the audits as a CFO. In New Jersey, your mileage may vary. See my comments above as to consistency of practices.

[cowanw]

Also in Canada it would seem that medical care is free at point of service, but (in Ontario) everyone and all businesses have to pay Ontario Heath Insurance Plan (OHIP) fees. Not having lived in any other Provinces I'm not sure about the rest of Canada, but I assume something similar will exist.
regards
Tony

For the record, you do not have to pay any Employer Health Tax if your annual payroll does not exceed $450,000. EHT also does not apply to any self-employed individuals. Employees and everybody else pays through the regular income tax calculations and so it is hidden and is subject to the usual jiggery involved in income tax.

[Alan Klein]

In Michigan, gross sales are those which don't include sales tax (ditto Kentucky and Indiana). Sales tax owed to the state is calculated on that amount. Now, if you get audited, and everyone does eventually, you must show that you collected sales tax on gross sales separately on the receipt (cash register, written, etc.), or you have to remit 6% of the total gross sales. It doesn't make any difference that you may have collected the tax, but if you don't itemize it, you owe on the gross receipts.

Using your example, if the customer pays $1060, and you don't itemize the $60 as sales tax, you'll owe $63.60 to the state when you file your return.

My point is that taxing authorities demand consistency in your accounting procedures and business practices. If you choose to pay on a calculated basis, then you have to do it each and every time, and the tax auditors must know about this in advance. If you get sloppy, and vary on your receipts, you'll get a detailed examination of your books and practices. It doesn't just apply to sales taxes. If you resort to doing a lot of your flying at night, you'll get a flashlight in very tender places.

PS - I've been involved in sales tax audits in two states, and auditors used virtually the same audit programs in each one. As with any accounting procedure, it's about dotting i's and crossing t's. That's why CPA's are worth their fees, and why you should have a tax attorney on speed dial.

PPS - I read the article you referenced. I understand his procedure, but the auditors for Michigan and Kentucky required details and not calculations. My last sales tax audit from Michigan was in 2012. We have a CPA firm which does our books, and I sat in on the audits as a CFO. In New Jersey, your mileage may vary. See my comments above as to consistency of practices.

Denis, I defer to your experience. Fortunately, I never did retail with receipts, but construction and service work with major clients, So we always mailed an invoice including sales tax clearly broken out if required. Being in construction doing capital improvement where only certain items had a sales tax, and service where there always was a sales tax, modified by government and charity organizations which paid no sales taxes, as well as private firms that did, our bookkeeping was very complicated. We also used a lot of resale certificates when buying material furnished to vendors and contractors. So material had to be tracked clearly as well as to what project it was used on. We had one sales tax audit in 20 years (NY where we were located). I considered it a success since the audit only came up with around $600 for the three year audit period. Of course, the accountant and in-house bookkeeper costs we calculated at around $8,000. Audits aren't cheap even if there are no discrepancies. What was interesting was the state tax auditor didn't understand the basic premises that make sales tax in the construction industry complicated. I had to ask her supervisor to replace her when she tried to charge sales tax when it wasn't required to be collected.

[pendennis]

Denis, I defer to your experience. Fortunately, I never did retail with receipts, but construction and service work with major clients, So we always mailed an invoice including sales tax clearly broken out if required. Being in construction doing capital improvement where only certain items had a sales tax, and service where there always was a sales tax, modified by government and charity organizations which paid no sales taxes, as well as private firms that did, our bookkeeping was very complicated. We also used a lot of resale certificates when buying material furnished to vendors and contractors. So material had to be tracked clearly as well as to what project it was used on. We had one sales tax audit in 20 years (NY where we were located). I considered it a success since the audit only came up with around $600 for the three year audit period. Of course, the accountant and in-house bookkeeper costs we calculated at around $8,000. Audits aren't cheap even if there are no discrepancies. What was interesting was the state tax auditor didn't understand the basic premises that make sales tax in the construction industry complicated. I had to ask her supervisor to replace her when she tried to charge sales tax when it wasn't required to be collected.

My second job in accounting was with Ford at the Kentucky Truck Plant, which was just being constructed. I worked in property and projects, so I was focused on the construction aspect, contractors, project accounting, etc. We had a direct pay permit, so we could amass taxable purchases and pay once quarterly. However, the contractors, vendors, etc., always had a problem with billing per the contracts. Our accounts payable people would go nuts trying to convince suppliers we were direct pay, even though purchase orders had the appropriate language.

Even worse, were those contractors who ran their businesses out of their hip pockets. They really had a hard time with our concept of 10% contract performance withholdings. Never a dull moment in those days. I'd mark up the invoices for the withholdings, and then I'd get dozens of calls from irate vendors and contractors.

[Jerry Bodine]

From our Guidelines:

Discussions of religion or partisan politics are forbidden everywhere on this Forum. More generally, this Forum is not an appropriate venue for debates over divisive social or political issues.

This Forum is not the place for debates about tax burdens or what governments do with tax dollars.

Has this post not been read and understood?

[BrianShaw]

Has this post not been read and understood?

Shouldn’t that be “... government’s...”?

[BrianShaw]

Shouldn’t that be “... government’s...”?


And what about governments where the dollar does not reign supreme?

[MikeH]

:-) No ... (I think.) "Governments" is being used in the plural. :-)

[Oren Grad]

The back-and-forth about details of sales tax administration unrelated to purchases of photographic equipment on the web arguably doesn't touch the Official Forum Third Rail of politics/religion. But it is way off-topic for us. So let's bring this to a close for now.