Internet sales tax? yea or nay?

[WorldWatcher]

I'm a little confused,

I'll see if I can help.

I thought the federal government taxed based on Income, not on day to day purchases.

Correct, this is no federal sales tax. That law is about states collecting sales tax they are owed under state law.

I agree this is a ridiculous proposition.

Since your premise was wrong, this sentence isn't valid anymore.

If businesses are selling products they will be taxed already as a business.

In most states (I say most but I'm not familiar with every state, but I'd bet it's every state) businesses **don't** pay sales tax on items they purchase (i.e. inventory) they buy for resale. Businesses only pay sales tax (called a use tax) on items they consume. For example, lets say a business sells computers and they by 200 computers for resale - they pay no sales tax on those computers. Now if that business pulls two computers from inventory and uses the computers for the business - then they owe the state the sales (or use) tax.

If individuals are selling, they have probably already paid tax on the item they are selling, the first time when they purchased it.

If an individual sells an item, they are not a business, they are not subject to this law.


*****************

Hope that was helpful.



>>>>

 

[Dot Com]

The votes are there & the President will sign it. Whats the hold up?

 

[WorldWatcher]

The votes are there & the President will sign it. Whats the hold up?

I know it passed the Cloture vote in the Senate and will probably pass.

However I was understanding the House was not so sure of a vote.



>>>>

 

[shikaki]

I'm a little confused,

I'll see if I can help.

I thought the federal government taxed based on Income, not on day to day purchases.

Correct, this is no federal sales tax. That law is about states collecting sales tax they are owed under state law.



Since your premise was wrong, this sentence isn't valid anymore.

If businesses are selling products they will be taxed already as a business.

In most states (I say most but I'm not familiar with every state, but I'd bet it's every state) businesses **don't** pay sales tax on items they purchase (i.e. inventory) they buy for resale. Businesses only pay sales tax (called a use tax) on items they consume. For example, lets say a business sells computers and they by 200 computers for resale - they pay no sales tax on those computers. Now if that business pulls two computers from inventory and uses the computers for the business - then they owe the state the sales (or use) tax.

If individuals are selling, they have probably already paid tax on the item they are selling, the first time when they purchased it.

If an individual sells an item, they are not a business, they are not subject to this law.


*****************

Hope that was helpful.



>>>>

That was helpful, but the reality is with interstate trade, there is no way for this to become a reality without it becoming a federal tax. The cost to administrate this as a state sales tax would be to much. Even though I agree with much of what you have said, I have been on this world long enough to know however, that not every decision is based on sound knowledge or sound reasoning especially when it comes to the government, so yes my initial reaction was one of skepticism . I still believe that taxing internet sales is ridiculous. This country does not have a deficiency in income, it has a logic deficiency in knowing what to properly do with the income it has,

I'm not sure that small business people would agree, that they aren't already heavily taxed.

The IRS has put EBAY in the middle on the last issue. EBAY is now requesting SSN if you sell over a certain amount in a given year, for tax reasons. Again fuzzy logic, just because someone sells a certain amount in a given year does not mean that they are a business or that they haven't already paid tax on the item before they tried to resell it.

Too much fuzzy logic is what got us where we are today!!

 

[WorldWatcher]

I'm a little confused,

I'll see if I can help.



Correct, this is no federal sales tax. That law is about states collecting sales tax they are owed under state law.



Since your premise was wrong, this sentence isn't valid anymore.



In most states (I say most but I'm not familiar with every state, but I'd bet it's every state) businesses **don't** pay sales tax on items they purchase (i.e. inventory) they buy for resale. Businesses only pay sales tax (called a use tax) on items they consume. For example, lets say a business sells computers and they by 200 computers for resale - they pay no sales tax on those computers. Now if that business pulls two computers from inventory and uses the computers for the business - then they owe the state the sales (or use) tax.

If individuals are selling, they have probably already paid tax on the item they are selling, the first time when they purchased it.

If an individual sells an item, they are not a business, they are not subject to this law.


*****************

Hope that was helpful.



>>>>

That was helpful, but the reality is with interstate trade, there is no way for this to become a reality without it becoming a federal tax. The cost to administrate this as a state sales tax would be to much. Even though I agree with much of what you have said, I have been on this world long enough to know however, that not every decision is based on sound knowledge or sound reasoning especially when it comes to the government, so yes my initial reaction was one of skepticism . I still believe that taxing internet sales is ridiculous. This country does not have a deficiency in income, it has a logic deficiency in knowing what to properly do with the income it has,

I'm not sure that small business people would agree, that they aren't already heavily taxed.

The IRS has put EBAY in the middle on the last issue. EBAY is now requesting SSN if you sell over a certain amount in a given year, for tax reasons. Again fuzzy logic, just because someone sells a certain amount in a given year does not mean that they are a business or that they haven't already paid tax on the item before they tried to resell it.

Too much fuzzy logic is what got us where we are today!!

Just a couple of things...

That was helpful, but the reality is with interstate trade, there is no way for this to become a reality without it becoming a federal tax.

You are free of course to have any opinion you want, but the reality is that this is not a federal tax, it is a collection vehicle for tax by states. Tax laws that are already on the books which people are illegally evading.

The cost to administrate this as a state sales tax would be to much.

We'll see if the legislation passes, but consider. E-commerce sales in 2012 exceeded 220 Billion dollars, at an average 5% tax that is 11 Billion dollars in revenue for the states. Using Virginia as an example that is 285 Million dollars in tax revenue that is currently owed but only a fraction is collected. The cost to administrate this will be through the increased revenue. If Virginia can't administer their tax revenue out of the 285 Million dollar increase then my state has serious problems.

From a business perspective, small mom & pop shops are exempt already. Only business with 1 Million dollars in sales can be required to collect the taxes already due. My neighbor, runs a e-commerce business out of her garage. She sells jewlery/hobbie supplies on the net. She won't be required to change her business practices at all.

Now the reality is there will be some growing pains, but we're talking e-commerce. By it's very nature the business is run through marketing software for the website on the front end which connects to database software for accounting, bookkeeping, inventory, billing, and collections. E-commerce businesses ALREADY are required to collect and remit sales tax when the delivery address is in the same state as the seller. Amazon ALREADY provide a Tax Collections Service for e-commerce providers that provides tax collections across multiple jurisdictions.

What will probably happen is you will see an expansion of such services by major online retailers (like Amazon) for tax collections services. The suppliers of the software used by sellers that drives e-commerce will include the sales/use tax as normal functionality. Then you will see 3rd party providers, Banks, etc. that will collect the tax information from the sellers and will act as a clearing house that will interface with the individual states.

If the USPS, FedEx, UPS, etc. can provide software that calculates various shipping charges for any address in the United States, you can rest assured that programmers will be able to write the software that, based on tables the states will be required to supply for free, that they will be able to calculate the applicable tax based on delivery address.

Even though I agree with much of what you have said, I have been on this world long enough to know however, that not every decision is based on sound knowledge or sound reasoning especially when it comes to the government, so yes my initial reaction was one of skepticism . I still believe that taxing internet sales is ridiculous. This country does not have a deficiency in income, it has a logic deficiency in knowing what to properly do with the income it has,

I don't disagree with the fundamental concept. We do have a spending problem and that does need to be addressed. In the 2012 elections the Democrat position was we don't have a spending problem, they wanted to increase revenue by increasing taxes to fund increased spending. We (I'm a Republican) supported maintaining current tax rates and increasing revenue by closing loopholes and then cutting spending to shrink the deficit. The taxes exist, they are being evaded - this is closing a loophole which increases revenue without increasing rates.

I'm not sure that small business people would agree, that they aren't already heavily taxed.

Small business are exempt.

The IRS has put EBAY in the middle on the last issue. EBAY is now requesting SSN if you sell over a certain amount in a given year, for tax reasons. Again fuzzy logic, just because someone sells a certain amount in a given year does not mean that they are a business or that they haven't already paid tax on the item before they tried to resell it.

Here is an experiment for you. Buy yourself a hot dog cart, buy your products (on which you will pay sales tax) then go to any busy street corner and begin selling hot dogs on buns, sodas, and chips. When the policeman asks to see your business license - tell him you aren't really a business. Sure you are selling hot dogs in a commercial manner, but you aren't a business. Let us know if that works.

Now that's not saying that if you have an XBox that you don't need anymore and you sell it online that you are a business. However if you sell a million dollars in XBox's online (the threshold in this law), then ya - your state of residence will be considering that a business.

Too much fuzzy logic is what got us where we are today!!

What is "fuzzy" about the logic that States have sales/use tax on the books, collection methods in the past have required consumers to be honest and report themselves to the cognizant state and that consumers don't do so and thereby illegal commit tax evasion. Therefore the paradigm is shifting from backend collection after sale to front end collection at the time of sale.

Do you think states should end the practice of charging sales tax at the time of purchase for B&M stores and just require that consumers track their purchases and then send the state a check?

The collection method is being changed so that it is the same for e-commerce and B&M sellers.



>>>>

 

[shikaki]

I think you make good points, but a business should be taxed for being a business. A B&M business requires many fundamental prerequisites that makes it easy to ascertain it is a business. It seems that no matter whether a business is online or B&M it is a business and in order to make money typically they purchase at wholesale, in order to purchase at wholesale they need a Tax ID. Do we really have the need to tax individuals that don't have Tax IDs and that aren't purchasing at wholesale, providing them the opportunity to make a decent margin. All businesses already pay taxes, so I not sure of what problem we are trying to fix. My assumption is that this will only open a door to tax people that really should not be getting taxed, and we all know it is much harder to close the gate once it has been opened.

The EBAY issue I mentioned before was no where close to a million, only like 7M a year.

 

[WorldWatcher]

I think you make good points, but a business should be taxed for being a business.

OK. That's fine. You may want to contact your state legislature and tell them to eliminate sales tax in general and then just come up with a "Business Tax" and suggest what that tax will be based on. I doubt it will succeed, but you can try.

The reality is that 45 of 50 states charge Sales/Use Taxes. The exceptions are Alaska, Montana, Delaware, New Hampshire, and Oregon. IIRC Delaware does exactly what you suggest, then don't charge a sales tax - they charge a business tax. Of course the businesses include this in their pricing calculations, to the effect is the same.

A B&M business requires many fundamental prerequisites that makes it easy to ascertain it is a business. It seems that no matter whether a business is online or B&M it is a business and in order to make money typically they purchase at wholesale, in order to purchase at wholesale they need a Tax ID.

And the businesses conducting e-commerce have business licenses and Tax ID from the State where they are conducting sales. E-commerce businesses have licenses, tax id's, and purchase wholesale.

You seem to be trying to make a point that isn't relative to the situation, this law applies ONLY to businesses with over one million dollars in sale. I don't think anyone would argue that someone with a business license, someone with a tax ID, and with over $1,000,000 in sales isn't a business.

Do we really have the need to tax individuals that don't have Tax IDs and that aren't purchasing at wholesale, providing them the opportunity to make a decent margin.

Individuals are not subject to this law, unless that individual is acting as a business with over $1,000,000 in sales in the previous tax year.

In any state in the union if you are conducting a business with over $1,000,000 in sales and you DON'T get a business license and Tax ID they you will be prosecuted for criminal activity for tax avoidance (at the least).

All businesses already pay taxes, so I not sure of what problem we are trying to fix.

Consumers are not paying legally required taxes on out-of-state purchases when no sales tax at all is charged. The are committing illegal activity though tax evasion by then failing to report such purchases and remitting the tax to the state.

Therefore the paradigm is shifting to the same one used for B&M stores.

My assumption is that this will only open a door to tax people that really should not be getting taxed, and we all know it is much harder to close the gate once it has been opened.

When states have sales taxes, don't all people in the states pay taxes on taxable items at the time of purchase? Is there any states the exempts "groups" (age?, race?, ethincity? Income level?) from sales tax outside of the normal tax exempt ID's supplied to government and non-profit entities?

The EBAY issue I mentioned before was no where close to a million, only like 7M a year.

7 Million a year is no where close to 1 million a year? I agree.

Now you have mentioned Ebay a couple of times. However you have provided no evidence or links to show that what is happening on Ebay has anything to do with Sales/User Tax collections for businesses that operate though Ebay so that a determination can be made regarding the 1 million dollar threshold.

Just off the top of my head I can think of an alternative. Federal law requires banking and other financial institutions to report cash transfers and withdrawls of $10,000 or more to authorities as a means of identifying possible money laundering for terrorist and other criminal activities (such as drug sales). Is it driven by Ebay as a sales entity? Or might it be driven by Credit Card, Banking, and Paypal type entities (who provide the financial payments through Ebay) because of their requirement to report under federal law transactions that exceed certain thresholds which have nothing to do with sales?



>>>>

 

[Dot Com]

The votes are there & the President will sign it. Whats the hold up?

I know it passed the Cloture vote in the Senate and will probably pass.

However I was understanding the House was not so sure of a vote.



>>>>

Thats right. I heard something about that on CSpan news update. Thanks.

 

[shikaki]

>>>>[/QUOTE]

The EBAY issue I mentioned before was no where close to a million, only like 7M a year.

7 Million a year is no where close to 1 million a year? I agree.

7M is 7 thousand in accounting.... I enjoy your thoughts and appreciate your facts!!! You bring some good points!!

 

[nitroz]

Nay.

I'm completely against it.

 

[PaulS1950]

The problem with internet sales tax is this:
I live in washington and they want to charge sales tax of 10% on my internet purchases, ok but when I buy from a dealer in another state, I have to pay their sales tax too. That is paying the same tax on a single item twice. I have no problem with paying taxes on a purchase - just like the fuel tax the truckers pay. They pay the tax at the point of sale. They don't get home and have to pay the taxes again.

That is the bad part of "internet" sales tax. You are paying the tax twice on the same sale to two different states.

 

[WorldWatcher]

The problem with internet sales tax is this:
I live in washington and they want to charge sales tax of 10% on my internet purchases, ok but when I buy from a dealer in another state, I have to pay their sales tax too. That is paying the same tax on a single item twice. I have no problem with paying taxes on a purchase - just like the fuel tax the truckers pay. They pay the tax at the point of sale. They don't get home and have to pay the taxes again.

That is the bad part of "internet" sales tax. You are paying the tax twice on the same sale to two different states.

You pay one sales tax. That of the delivery address.

Right now people are using online purchases to pay no sales/user taxes.


>>>>

 

[FireFly]

I have no problem with paying taxes on a purchase - just like the fuel tax the truckers pay. They pay the tax at the point of sale. They don't get home and have to pay the taxes again.

That is not true. Truckers pay International Fuel Tax Agreement (IFTA).

 

[BillyV]

You pay one sales tax. That of the delivery address.

Right now people are using online purchases to pay no sales/user taxes.


>>>>

I don’t care so much about the tax itself; the consumer should be paying the tax under current law, and while it is an imposition on the business to collect on the states’ behalf at a time when compliance costs are already sky high (and going higher, see “Obamacare”), it is not insurmountable. But no one is looking ahead to the enforcement issues. The problem is with giving 50 new jurisdictions each representing hundreds or thousands of taxing units authority to audit your books and records to a.) see if you have exceeded the $1 million threshold, and b.) force you to prove the sales (or lack thereof) made in their jurisdiction. Anyone who thinks this is a good idea has never run a business or suffered through a state sales tax audit and is unaware of the costs involved. The only ones other than the states who will benefit from this legislation are the accountants and attorneys who will make a cottage industry from this, both on the side of the businesses and on the side of the states. I can see particularly hard hit jurisdictions like California using this new power for sales tax fishing expeditions which will end up costing businesses tens (and hundreds) of thousands of dollars to defend against. Once you are over the $1 million threshold you will be a target for every state and will have to prove to their satisfaction that you have not sold anything to their residents. And the beauty of it from the state’s perspective is that those businesses don’t vote in their state and are not represented, so there will be no incentive not to spread the net as widely as possible. It’s a horrible idea.

As I said, one federal taxing authority (which already has audit authority) to charge a uniform tax for all internet sellers and distribute those funds to the states on the basis of delivery address is workable; anything else will be insanity.

I have no problem with paying taxes on a purchase - just like the fuel tax the truckers pay. They pay the tax at the point of sale. They don't get home and have to pay the taxes again.

That is not true. Truckers pay International Fuel Tax Agreement (IFTA).

I would note that even with the IFTA commercial vehicle fuel tax that they specify that “Audits are conducted only by the base state.”

 

[FA_Q2]

I am late to this thread but I have some points to make here. First, I support a tax on internet sales. I find the idea that internet sales should get a pass where local businesses do not as rather inane. It is the same thing as the state deciding that they want to tax car sales and not clothing sales or jewelry but not pencils. It is favoring one business over another and I am inherently against anything of that nature. I am aware that states do actually do this but that does not mean that I agree with the premise.

Reading through the tread, some disagreed with this based on the fact that brick and mortars should simply adjust to the changing times and that this tax is ‘leveling the playing field’ artificially or that shipping costs adjust for this. All of those points are wrong IMHO. It has nothing to do with ‘leveling the playing field.’ It has everything to do with the fact that one business is being subjected to one law while others are not. I disagree with the government picking winners and losers. That is exactly what selective taxing does. Shipping is meaningless in this context. The only thing that matters in that context is the government selecting who is subject to the law. A law should be uniform to all.

I personally would prefer the abolition of all sales tax anyway and go to a flat tax on income. That is the only thing that makes any sense to me but bearing in mind that is simply not going to happen, this is better than the current system.


As far as the collection and the problems that skull was talking about, that is less clear. I agree with the laws premise and like the idea of the buyer’s location being the determining factor. State taxes are collected to support the state that you live in, not some other random state that has the lowest tax rate and therefore all the ware houses move there. That is not helpful. In that regard, the buyer should be the determining factor. However, his complaint is very real. No business should have to navigate 50 different tax laws. Case in point, if they had a system that actually was simple and did not pick winners and losers like they should the tax law would be irrelevant as anyone would be able to pay out 50 different tax bills easily but I digress. The seller as the point of taxation I don’t really think is workable.

Lastly, those equating this to traveling to another state are not using a logical argument. Such a system STILL exists in that you can simply mail it to another state and pick it up as well. IOW, going to another state and making the purchase there is not the same as doing it at home. It is the same as making that purchase at home and then mailing it to the other state. Essentially, it has nothing to do with the argument at hand.


To sum it up, I back this law because I want to see the B&M stores defeated through healthy competition and NOT through selective laws that have not caught up with the times. The one stipulation that I would have is that the filing MUST be streamlined. I realize that most do not trust that concept and tbh I don’t as well but I really do not see any other options here.

 

[WorldWatcher]

You pay one sales tax. That of the delivery address.

Right now people are using online purchases to pay no sales/user taxes.


>>>>

I don’t care so much about the tax itself; the consumer should be paying the tax under current law, and while it is an imposition on the business to collect on the states’ behalf at a time when compliance costs are already sky high (and going higher, see “Obamacare”), it is not insurmountable. But no one is looking ahead to the enforcement issues. The problem is with giving 50 new jurisdictions each representing hundreds or thousands of taxing units authority to audit your books and records to a.) see if you have exceeded the $1 million threshold, and b.) force you to prove the sales (or lack thereof) made in their jurisdiction. Anyone who thinks this is a good idea has never run a business or suffered through a state sales tax audit and is unaware of the costs involved. The only ones other than the states who will benefit from this legislation are the accountants and attorneys who will make a cottage industry from this, both on the side of the businesses and on the side of the states. I can see particularly hard hit jurisdictions like California using this new power for sales tax fishing expeditions which will end up costing businesses tens (and hundreds) of thousands of dollars to defend against. Once you are over the $1 million threshold you will be a target for every state and will have to prove to their satisfaction that you have not sold anything to their residents. And the beauty of it from the state’s perspective is that those businesses don’t vote in their state and are not represented, so there will be no incentive not to spread the net as widely as possible. It’s a horrible idea.

RE EMPHASIZED: Not an accurate description of the law, 50 (actually 51 counting DC) states will not have the authority to audit anyone's books. The audit responsibility will reset with the state of location of the seller and their compliance with the law will reset with that state.

If an e-commerce provider is located in Florida, audits will continue to be done just as they are now, the Florida Department of Taxation and Revenue will perform the audit of the business. If the e-commerce provider is in Florida, then say Virginia, will have no jurisdiction to audit the books of the Florida seller.

If Florida chooses to participate in the program to receive tax revenues based on the buyers location in that state, then it will be Florida charged with ensuring the businesses in their state comply with Florida law.



>>>>

 

[Dot Com]

latest update I've seen: Recap: Senate takes a key step toward an Internet sales tax - The Washington Post

The days of tax-free online shopping could be numbered. A bill that would give states the authority to collect sales taxes on all Internet purchases passed a major procedural hurdle in the Senate. It would hand local governments as much as $11 billion per year in added revenue that they are legally owed — but that hasn’t been paid to them for years.

$11 billion is the estimate of lost revenue.

 

[BillyV]

You pay one sales tax. That of the delivery address.

Right now people are using online purchases to pay no sales/user taxes.


>>>>

I don’t care so much about the tax itself; the consumer should be paying the tax under current law, and while it is an imposition on the business to collect on the states’ behalf at a time when compliance costs are already sky high (and going higher, see “Obamacare”), it is not insurmountable. But no one is looking ahead to the enforcement issues. The problem is with giving 50 new jurisdictions each representing hundreds or thousands of taxing units authority to audit your books and records to a.) see if you have exceeded the $1 million threshold, and b.) force you to prove the sales (or lack thereof) made in their jurisdiction. Anyone who thinks this is a good idea has never run a business or suffered through a state sales tax audit and is unaware of the costs involved. The only ones other than the states who will benefit from this legislation are the accountants and attorneys who will make a cottage industry from this, both on the side of the businesses and on the side of the states. I can see particularly hard hit jurisdictions like California using this new power for sales tax fishing expeditions which will end up costing businesses tens (and hundreds) of thousands of dollars to defend against. Once you are over the $1 million threshold you will be a target for every state and will have to prove to their satisfaction that you have not sold anything to their residents. And the beauty of it from the state’s perspective is that those businesses don’t vote in their state and are not represented, so there will be no incentive not to spread the net as widely as possible. It’s a horrible idea.

RE EMPHASIZED: Not an accurate description of the law, 50 (actually 51 counting DC) states will not have the authority to audit anyone's books. The audit responsibility will reset with the state of location of the seller and their compliance with the law will reset with that state.

If an e-commerce provider is located in Florida, audits will continue to be done just as they are now, the Florida Department of Taxation and Revenue will perform the audit of the business. If the e-commerce provider is in Florida, then say Virginia, will have no jurisdiction to audit the books of the Florida seller.

If Florida chooses to participate in the program to receive tax revenues based on the buyers location in that state, then it will be Florida charged with ensuring the businesses in their state comply with Florida law.



>>>>

And I will take your word for that as soon as you can point it out in the pending "Marketplace Fairness Act" legislation. Here's a link to that bill for your perusal.

Marketplace Fairness Act (S.336/S.743/H.R.684) Complete Bill Text

The only reference to state audits I can find in that document talks about states that are not members of the Streamlined Sales and Use Tax Agreement ("SSUTA"); it says, in part (Section 2 (b)):

2.implements each of the following minimum simplification requirements: A.Provide* i.a single entity within the State responsible for all State and local sales and use tax administration, return processing, and audits for remote sales sourced to the State.

In other words, the taxing state will have the power to audit the returns of the business from another state.

While I'm certainly no expert on the SSUTA, Section 301 of that agreement indicates that "Each member state shall provide state level administration of sales and use taxes subject to 5 the Agreement....The state level authority shall conduct...all audits of the sellers and purchasers for that state’s tax and the tax 12 of its local jurisdictions."

http://www.streamlinedsalestax.org/uploads/downloads/Archive/SSUTA/SSUTA%20As%20Amended%205-24-12.pdf

So it would appear that each state is only required to have a single state-level entity perform audits on behalf of the state and all of its local jurisdictions, not that the business' home state is required to perform that function.

Please further educate us if the information you have provided above is correct. I will certainly be glad to admit if I'm wrong and happy to find out that there are not 50 state audits in my near future, but I'm just not seeing it.

 

[WorldWatcher]

I don’t care so much about the tax itself; the consumer should be paying the tax under current law, and while it is an imposition on the business to collect on the states’ behalf at a time when compliance costs are already sky high (and going higher, see “Obamacare”), it is not insurmountable. But no one is looking ahead to the enforcement issues. The problem is with giving 50 new jurisdictions each representing hundreds or thousands of taxing units authority to audit your books and records to a.) see if you have exceeded the $1 million threshold, and b.) force you to prove the sales (or lack thereof) made in their jurisdiction. Anyone who thinks this is a good idea has never run a business or suffered through a state sales tax audit and is unaware of the costs involved. The only ones other than the states who will benefit from this legislation are the accountants and attorneys who will make a cottage industry from this, both on the side of the businesses and on the side of the states. I can see particularly hard hit jurisdictions like California using this new power for sales tax fishing expeditions which will end up costing businesses tens (and hundreds) of thousands of dollars to defend against. Once you are over the $1 million threshold you will be a target for every state and will have to prove to their satisfaction that you have not sold anything to their residents. And the beauty of it from the state’s perspective is that those businesses don’t vote in their state and are not represented, so there will be no incentive not to spread the net as widely as possible. It’s a horrible idea.

RE EMPHASIZED: Not an accurate description of the law, 50 (actually 51 counting DC) states will not have the authority to audit anyone's books. The audit responsibility will reset with the state of location of the seller and their compliance with the law will reset with that state.

If an e-commerce provider is located in Florida, audits will continue to be done just as they are now, the Florida Department of Taxation and Revenue will perform the audit of the business. If the e-commerce provider is in Florida, then say Virginia, will have no jurisdiction to audit the books of the Florida seller.

If Florida chooses to participate in the program to receive tax revenues based on the buyers location in that state, then it will be Florida charged with ensuring the businesses in their state comply with Florida law.



>>>>

And I will take your word for that as soon as you can point it out in the pending "Marketplace Fairness Act" legislation. Here's a link to that bill for your perusal.

Marketplace Fairness Act (S.336/S.743/H.R.684) Complete Bill Text

The only reference to state audits I can find in that document talks about states that are not members of the Streamlined Sales and Use Tax Agreement ("SSUTA"); it says, in part (Section 2 (b)):

2.implements each of the following minimum simplification requirements: A.Provide* i.a single entity within the State responsible for all State and local sales and use tax administration, return processing, and audits for remote sales sourced to the State.

Pertaining the the current Congressional legislation, your own quote provides the answer you seek.

In the case where a Virginia resident orders a product via e-commerce from Florida, Florida is the source of the product. As the source, Florida then has responsibility for administration of Florida's sales and use taxes.

In other words, the taxing state will have the power to audit the returns of the business from another state.

False, auditing is conducted under the authority of the State where the seller is located.

While I'm certainly no expert on the SSUTA, Section 301 of that agreement indicates that "Each member state shall provide state level administration of sales and use taxes subject to 5 the Agreement....The state level authority shall conduct...all audits of the sellers and purchasers for that state’s tax and the tax 12 of its local jurisdictions."

http://www.streamlinedsalestax.org/uploads/downloads/Archive/SSUTA/SSUTA%20As%20Amended%205-24-12.pdf

So it would appear that each state is only required to have a single state-level entity perform audits on behalf of the state and all of its local jurisdictions, not that the business' home state is required to perform that function.

Please further educate us if the information you have provided above is correct. I will certainly be glad to admit if I'm wrong and happy to find out that there are not 50 state audits in my near future, but I'm just not seeing it.

If we review Section 301 in it's entirety, it clearly shows that the administration, collection, distribution, and - yes - auditing are done under the authority of the sellers states - not under the authority of the purchasers state. In the Virginia/Florida example, Virginia could not just show up in Florida and demand to audit a businesses records, they have no authority to do so. Florida would have to responsibility and authority to audit Florida businesses.

Section 301: STATE LEVEL ADMINISTRATION

A. Each member state shall provide state level administration of sales and use taxes
subject to the Agreement. The state level administration may be performed by a member state's Tax Commission, Department of Revenue, or any other single entity designated by state law. Sellers and purchasers are only required to register with, file returns with, and remit funds to the state level authority. The state level authority of a member state shall provide for collection of any local taxes and distribution of them to the appropriate taxing jurisdictions. The state level authority shall conduct, or others may be authorized to conduct on its behalf, subject to the provisions of subsection B, all audits of the sellers and purchasers for that state’s tax and the tax of its local jurisdictions. Except as provided herein, local jurisdictions shall not conduct independent sales or use tax audits of sellers and purchasers.​

The inability for out-of-state auditors is also obvious from the next paragraph which is "B". In that paragraph, it clearly points out that when an auditor is authorized by the Sellers State Tax Collection/Administrative authority they CANNOT selectively audit the businesses records. The agreement stipulates (emphasis mine) that the taxing administrator (i.e. the sellers state) or their designated representative when "conducting the audit for all taxes due and not just for taxes due to a specific local taxing jurisdiction,..." When the Florida taxing authority audits Florida businesses they must audit all tax collections of the business, they cannot do it selectively. The state of Virginia cannot compel an audit on an out-of-state business to begin with, but the idea that Virginia will audit taxes for Florida local jurisdictions does not make sense.


>>>>

 

[BillyV]

And I will take your word for that as soon as you can point it out in the pending "Marketplace Fairness Act" legislation. Here's a link to that bill for your perusal.

Marketplace Fairness Act (S.336/S.743/H.R.684) Complete Bill Text

The only reference to state audits I can find in that document talks about states that are not members of the Streamlined Sales and Use Tax Agreement ("SSUTA"); it says, in part (Section 2 (b)):

2.implements each of the following minimum simplification requirements: A.Provide* i.a single entity within the State responsible for all State and local sales and use tax administration, return processing, and audits for remote sales sourced to the State.

Pertaining the the current Congressional legislation, your own quote provides the answer you seek.

In the case where a Virginia resident orders a product via e-commerce from Florida, Florida is the source of the product. As the source, Florida then has responsibility for administration of Florida's sales and use taxes.

In other words, the taxing state will have the power to audit the returns of the business from another state.

False, auditing is conducted under the authority of the State where the seller is located.

While I'm certainly no expert on the SSUTA, Section 301 of that agreement indicates that "Each member state shall provide state level administration of sales and use taxes subject to 5 the Agreement....The state level authority shall conduct...all audits of the sellers and purchasers for that state’s tax and the tax 12 of its local jurisdictions."

http://www.streamlinedsalestax.org/uploads/downloads/Archive/SSUTA/SSUTA%20As%20Amended%205-24-12.pdf

So it would appear that each state is only required to have a single state-level entity perform audits on behalf of the state and all of its local jurisdictions, not that the business' home state is required to perform that function.
Please further educate us if the information you have provided above is correct. I will certainly be glad to admit if I'm wrong and happy to find out that there are not 50 state audits in my near future, but I'm just not seeing it.

If we review Section 301 in it's entirety, it clearly shows that the administration, collection, distribution, and - yes - auditing are done under the authority of the sellers states - not under the authority of the purchasers state. In the Virginia/Florida example, Virginia could not just show up in Florida and demand to audit a businesses records, they have no authority to do so. Florida would have to responsibility and authority to audit Florida businesses.

Section 301: STATE LEVEL ADMINISTRATION

A. Each member state shall provide state level administration of sales and use taxes
subject to the Agreement. The state level administration may be performed by a member state's Tax Commission, Department of Revenue, or any other single entity designated by state law. Sellers and purchasers are only required to register with, file returns with, and remit funds to the state level authority. The state level authority of a member state shall provide for collection of any local taxes and distribution of them to the appropriate taxing jurisdictions. The state level authority shall conduct, or others may be authorized to conduct on its behalf, subject to the provisions of subsection B, all audits of the sellers and purchasers for that state’s tax and the tax of its local jurisdictions. Except as provided herein, local jurisdictions shall not conduct independent sales or use tax audits of sellers and purchasers.​

The inability for out-of-state auditors is also obvious from the next paragraph which is "B". In that paragraph, it clearly points out that when an auditor is authorized by the Sellers State Tax Collection/Administrative authority they CANNOT selectively audit the businesses records. The agreement stipulates (emphasis mine) that the taxing administrator (i.e. the sellers state) or their designated representative when "conducting the audit for all taxes due and not just for taxes due to a specific local taxing jurisdiction,..." When the Florida taxing authority audits Florida businesses they must audit all tax collections of the business, they cannot do it selectively. The state of Virginia cannot compel an audit on an out-of-state business to begin with, but the idea that Virginia will audit taxes for Florida local jurisdictions does not make sense.
>>>>

So much condescension in a post which contains so much misinformation. Let’s take it point by point:

In the case where a Virginia resident orders a product via e-commerce from Florida, Florida is the source of the product. As the source, Florida then has responsibility for administration of Florida's sales and use taxes.

You’ve made a common error in assuming that words used in connection with a tax law have the same meaning as they do in normal speech. In this case the bill defines the word “sourced” in Section 4:
7.SOURCED.-For purposes of a State granted authority under section 2(b), the location to which a remote sale is sourced refers to the location where the item sold is received by the purchaser, based on the location indicated by instructions for delivery that the purchaser furnishes to the seller. When no delivery location is specified, the remote sale is sourced to the customer's address that is either known to the seller or, if not known, obtained by the seller during the consummation of the transaction, including the address of the customer's payment instrument if no other address is available. If an address is unknown and a billing address cannot be obtained, the remote sale is sourced to the address of the seller from which the remote sale was made. A State granted authority under section 2(a) shall comply with the sourcing provisions of the Streamlined Sales and Use Tax Agreement.

So no, sorry, the “source” is not the source of the product, but the jurisdiction where the product is delivered. So your next point, “False, auditing is conducted under the authority of the State where the seller is located” fails on this point as well. If you think about it, why would Florida agree to be involved at all in auditing returns from another state? State audits are not free for the state; Florida is not going to pay to chase its citizens in order to collect money for Virginia.

As far as your analysis of Section 301, you jump to the conclusion that the “state level administration” is referring to the seller’s home state without any support whatsoever. In fact, that section simply requires the state collecting the tax (Virginia in your example) to provide one central authority to administer the tax collection and audits for all of its (Virginia’s) state, city and county taxing units, to avoid having an internet retailer dealing with both the state and each local Virginia taxing jurisdiction (county, city, town). It has nothing to do with the seller’s state. And when it refers to “conducting the audit for all taxes due and not just for taxes due to a specific local taxing jurisdiction”, it is limiting the audit to the one, state level jurisdiction of the collecting state (Virginia), and not one audit for the state and separate audits for, say, the city of Richmond, Va. It isn’t implying that the seller is only subject to one audit for all states by its state of incorporation; you might like to infer that, but it simply isn’t the case.

There isn’t a lot of discussion in news about this bill related to the audit problem; however, an eBay spokesman had this to say:

“We don’t want to make it harder for small businesses to grow,” said Brian Bieron, senior director of federal government relations at eBay.

He’s also concerned with the administrative capability of small businesses to comply with out-of-state tax authorities.

“Now 49 other states could theoretically take you into court or audit you for tax compliance, and that’s a really daunting change. (Small businesses) don’t have an army of tax lawyers and accountants.”
http://www.democratandchronicle.com/article/20130423/BUSINESS/304230059/Online-sales-tax-collection

And then there’s this:

Under the so-called Marketplace Fairness Act, online retailers would become tax collectors for faraway governments thirsty for more revenue. But because complying with America’s 9,646 different taxing jurisdictions is no easy task, the threat of audits would become a stark reality. In an attempt to streamline the inevitable avalanche of audits, the bill sets up:
a single audit of a remote seller for all State and local taxing jurisdictions within that State;

In practical terms, that means online businesses will face the threat of 46* out-of-state audits. And while the bill attempts to limit the liability of inevitable software errors, the risk of a multiple audits cannot be ignored. Even the New York Times’ Andrew Ross Sorkin who favors the bill shudders “about the prospect of an out-of-state tax audit.”
46 Tax Audits from Hell