The internet sales tax issue is undoubtedly heating up as numerous States meets a devastating $125 billion 2012 budget deficit. This increases the pressure and anxiety as they find ways to increase their revenue however they can. It has been noted that E-commerce increased by 15 percent to $165 billion in 2010, $ 10 billion tax revenue is on the table. As for the retailers, the online market seems to have the competitive advantage over Main Street retailers, especially when it comes to cost of local jobs.
Colorado, Minnesota, Connecticut, and Missouri have just recently joined California along with other dedicated states in the campaign encouraging online sellers to collect sales taxes. Just last month, it was reported that Texas, not exactly a breeding ground of aggressive taxation, charged a $269 million bill to Amazon for uncollected sales taxes.
The result of this legislative battle is quite vague. This concern is no laughing matter for Amazon. Back in 2008, Amazon filed a suit against New York regarding this same issue. They also warned that Amazon will discontinue ties with associated sellers who are situated in states that would try to collect sales taxes. It was reported that they already closed a distribution center in Texas.
If this issue never comes to an end, there is no doubt it will reach the Congress any time soon. They have been avoiding this matter for 20 years already. Anti-Republicans would surely be tied between their governors and local retailers, not to mention the e-tailers as well.
Before going any further, there are three matters that are needed to be clarified. First of all, this issue is not about taxing the Internet. Using the internet is tax-free and nobody’s against it at all, though smart phone contact is as highly taxed as anything in the world.
Second, this does not concern raising taxes. In case you believe sales taxes are too high, then go on and press your case or start a petition to lower them. However, it is not to charge tax differently to a tea kettle bought from one store from the tea kettle bought from the other.
Finally, this matter does not concern whether on-line buyers owe any tax for their online shopping, this is already settled… they do. You are required to pay if you live in a state with sales tax. Provided that the seller does not collect sales tax, the buyer owes what is recognized as use tax. You can see this on your income tax form.
Obviously, almost no one cares to pay, this leads to the unjust upper hand of the online community against the local brick-and-mortar retailers. Some local retailers even face higher taxes when they encounter loss of revenues, while online sellers enjoy more customers since they can offer “discounts”, since they don’t collect sales taxes.
“Nexus” is the legal principle used by out-of-state sellers concerning sales tax collection. Let’s say a business is physically located in a particular state, it is mandatory for them to collect sales tax. The states believe that since Amazon have existing warehouses and associated businesses in their authority; it’s a must that they collect sales tax as well.
The Supreme Court almost begged to put this issue to an end back in 1992, knowing the intricacy of these matters as well as the risk that the contradictory regulations of different states may bring to businesses. During those years, when E-commerce was not yet rampant, the mail-order firms debated that they would have a hard time on keeping track of the different sales tax laws throughout the country hence, the birth of a new commission initiated by the Congress.
Since 1992, technology has rapidly changed. Data miners nowadays are more knowledgeable than before. They can keep track of zip codes with a single click which means the applicable tax law in that area can also be identified in the nick of time. But still, the Internet sales tax war continues. This battle has been being fought by a group of two dozen states for a decade already. It’s about time for the Congress to step in. If you want to calculate how this sales tax could affect you, try the Salary Calculator.