New Sales Tax Rules

[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-tha...e-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!