Senate to Vote on Internet Sales Tax

Tuesday, April 23, 2013

When you make a purchase online, you probably are not paying state taxes. Whether you know it or not, you have a legal obligation to claim any out-of-state purchases made online on your state tax return.

Except that no one pays these taxes. A bill being voted on today would change that, and make it so that all online purchases are subject to state and local taxes.

The bill, called the Marketplace Fairness Act, has friends and enemies on both sides of the aisle in the Senate.

Takeaway Washington correspondent Todd Zwillich discusses the political process behind the bill.

Curtis Dubay, a Senior Tax Policy Analyst at the Heritage Institute, explains why he opposes the bill.

While anti-tax organizations oppose the leveraging of state and local taxes on internet purchases, many large online vendors, like Amazon, are voicing their support for it. But it’s not just large companies and the administration that support the bill. States and municipalities, even those headed by Republicans, strongly support the bill, too. It could bring in as much as 11 billion dollars for localities across the country-- tax revenue that, not only they are legally entitled to, but that they desperately need.

Mick Cornett, mayor of Oklahoma City, explains how the bill would help his city.

Guests:

Mayor Mick Cornett, Curtis Dubay and Todd Zwillich

Produced by:

Tyler Adams

Comments [15]

Biff from Seattle

The eBay seller interviewed in the story made several comments based her apparent belief that her business should not be involved with tax collection outside of where the business had a presence because it does not benefit from the services provided by those taxes. However, her business is not paying the taxes, its customers are.

What the business would be paying is additional costs associated with collecting those taxes. How is this different from other costs of doing business, like credit card processing fees and business license fees. In the case of costs associated with collecting local tax, the benefit that her business gets is access to a larger pool of customers and more opportunity for business. I don't see the problem with her business having to pay additional costs associated with that access and opportunity.

My suspicion is that she is more concerned about losing the "tax free" advantage when doing business with out-of-state customers.

One more point - if she has an eBay business that is doing a million dollars in business per year, she probably afford better software that can deal with multi-state sales tax collection.

Apr. 24 2013 07:26 PM
Bryan from Michigan

First -- read the bill -- http://www.govtrack.us/congress/bills/113/s743/text

You (the seller) must have gross receipts (sales) over $1,000,000 before this has any effect on you.

It imposes no new taxes. If there are no sales taxes where you (the buyer) are, this bill has no effect on you.

No state is obligated to do anything. The bill authorizes a state to require collection, but the state can choose not to. If a state does nothing, nothing happens.

The state is required to provide free of charge software to compute the tax due at the time of the transaction.

The state is required to provide free of charge software to file the tax returns.

Now -- after understanding all this -- what is the objection to the bill?

I support the notion that local, job-creating retailers should not have a tax burden that is not equally applied to remote retailers who put local jobs at risk.

The cost of doing business in 50+ tax jurisdictions is more than offset by the value gained by doing business in 50+ tax jurisdictions. If that is too complicated for you (the seller), then sell locally, or only to states that have no tax requirements -- and accept the loss of sales in other states. It's a business choice. Make a business decision.

Apr. 24 2013 12:50 PM
Alfred Jeffries from RI

The discussion with Oklahoma City's mayor it was pointed out the sales tax revenue could hire additional police and fire people............will someone remember to hire more public school teachers?

Apr. 24 2013 08:30 AM
Barbara Gordon from Philomath, Oregon

This whole issue of paying sales tax on internet purchases was, I once thought, resolved many years ago.
In 1986, before the advent of internet sales, I went to work as a Buyer for a public high school district in southern California. One of my first surprises was that a public school district, spending taxpayer funds, paid sales tax. The second, bigger surprise was that the district paid sales tax on ALL purchases, whether the vendor collected the tax for California and for San Diego County, or not. When I expressed my astonishment at this requirement I was informed that legally, as a private citizen, I was also supposed to be paying sales tax on all catalog and phone purchases, even from out-of-state vendors who did not collect California or San Diego County sales taxes.
I worked there from 1986 until 2000 and on every purchase made, the school district paid a sales tax of 7.75% (sometimes as high as 8.25%) on
ALL purchases. The sales tax was either collected by the vendor or the district paid it directly on, I believe, a quarterly basis, to the State.
I understand that the expense to any state, county or municipality with a sales tax of actually collecting the tax on phone, catalog or internet purchases probably outweighs the amount that will be collected, but understand that legally, we all should be paying sales taxes on all our purchases. (Except, of course, those of us who now live in one of the states that have no sales tax. I now live in Oregon.)

Apr. 23 2013 05:01 PM
Richard

Why should I have to pay sales and my neighbor not have to. Supporting our local businesses creates jobs near home. Many more local jobs will be available if all businesses collect sales, not just some.
Our biggest State competiors are other states not other countries!

Apr. 23 2013 04:32 PM
Dorothy from Manhattan

Hey Genius! I buy a lot of stuff from Amazon and I PAY SALES TAX on it. Amazon collects it and I assume Amazon passes it along to NYS.

It's a non-issue.

Apr. 23 2013 03:32 PM
Jon Leszczynski from Warren, MI

It continues to gall me that folks make the statement that their is a legal obligation to pay these taxes. IF Congress makes a law to do so, THEN it will be legal but that is not how it stands currently.

The US constitution expressly forbids a tax being placed on an item exported from another state. (Article 1, Section 9, Paragraph 5 "No Tax or Duty shall be laid on Articles exported from any State." Article 1, Section 10, Paragraph 2 "No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.") And it should be noted that the SCOTUS has directly said that the ONLY way such a tax could be collected is if CONGRESS authorizes it. SCOTUS has used the commerce clause and the due process clause as reasons to turn down use taxes, time and time again.

Apr. 23 2013 01:28 PM

The whole concept is suspect. I live in Florida. If I purchase something from and online company in Georgia, how is Florida entitled to any money? Maybe Georgia is but there is no impact on Florida in any way. Why should they get paid a tax? If I purchased from an online company in Florida and live in Florida, that's a different thing and I do pay tax on Florida purchases. That makes sense.

Apr. 23 2013 12:40 PM
Larry Fisher from Brooklyn, N.Y.

Enforcing the sales tax on Vendors might be like trying to get waiters to claim their actual tip money. The State will get something, but never all of it. eBay doesn't want to be the IRS, they just want to remain the Maitre D.

Apr. 23 2013 12:34 PM
Guyla from Oklahoma

Some people DO pay taxes on online purchases! My husband and I do. It's not hard and it benefits our community. We pay it when we file our state taxes.

Apr. 23 2013 12:32 PM
Steve Sacco from Orlando, FL

So, here's a question I've never heard posed: What gives a state the right to force someone outside of their jurisdiction to perform uncompensated services? That would be the tax collection and remitting, in this case.

Apr. 23 2013 12:21 PM
Linda from massachusetts

Can you imagine a business selling $10,000 worth of goods on line finding software to sort,charge and pay sales tax to nearly 50 states

Apr. 23 2013 11:34 AM
listener

Is this what they meant by tax the rich?

Apr. 23 2013 09:44 AM
Mike Monahan from West Palm Beach Fl

The constitution forbids one state from "interfering" in interstate commerce. This new law is unconstitutional.

Apr. 23 2013 09:37 AM
Peg

Yes I think we should pay internet sales tax. Virtual businesses should not have an UNFAIR advantage on "over the counter" sales. Having to pay a tax would not influence my buying decisions - no matter where I decided to make a purchase.

Apr. 23 2013 09:29 AM

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