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  1. #1
    OPM and Moderator Chuck Hamrick's Avatar
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    Panel Urged to Close Online Sales Tax Loophole
    Latest on the federal effort:
    Tax experts urged a Senate panel on Wednesday to close a loophole that allows some online retailers to avoid collecting sales taxes, saying Congress needs to step in to ensure that states can collect all the taxes they are owed.
    States have been asking Congress for years to close a loophole created by a 1992 Supreme Court decision that found states can’t require retailers to collect sales taxes from customers in states where the stores have no physical presence. The Senate Finance Committee examined the issue as part of a broader hearing focused on federal tax proposals that affect the states.
    “As more sales get done on the Internet … I think state and local governments are going to be at a disadvantage, and so congressional action to help coordinate this seems like a no-brainer,” Kim Rueben, a senior fellow at the Tax Policy Center, told the committee.

    Sanford Zinman, a New York accountant who testified for the National Conference of CPA Practitioners, agreed. “There is a strong need for federal oversight of state sales and use taxes to ensure all states are able to collect proper tax revenue,” he said.

    Many brick-and-mortar retailers complain that they are losing business to Internet retailers who can offer their products at a discount because, in many cases, they don't have to collect sales taxes. States note they are losing billions of dollars a year in uncollected taxes from Internet sales, a problem they say will get worse with the growth of e-commerce.

    A handful of bills have been introduced in Congress to close the loophole, including a Senate measure offered by Sens. Michael Enzi, and Dick Durbin, D-Ill., that would authorize states that meet certain criteria to require online retailers to collect sales taxes from out-of-state customers.

    The issue has divided tech firms. After opposing efforts by some states to try to close the loophole on their own, Amazon last fall endorsed the Enzi-Durbin bill, while eBay and Overstock.com are among the leading opponents.

    Sen. Ben Cardin, D-Md., a cosponsor of the Enzi-Durbin bill, chided critics who say the bill would burden online firms by requiring them to comply with the thousands of different tax rates and policies across the country. Cardin noted that under the Enzi-Durbin bill, states would have to provide online retailers with free software to help them comply with differing state tax rates.
    “This is being used as an excuse for inaction,” he said. “It’s not a problem that can’t be overcome.”
    Tax Foundation Vice President Joseph Henchman argued that Congress must do more to push states to simplify their tax rates. He said that even an organization such as his own that is focused on tax issues has a difficult time tracking state tax changes. “It’s not an excuse for inaction,” he said. “It’s excuse for the right kind of action.”

    Meanwhile, Sens. John Thune, R-S.D. and Ron Wyden, D-Ore., made a plug for their bill that would set rules for which states are allowed to tax digital goods such as music downloads or mobile applications.

    Wyden also urged action on his wireless tax legislation, which would impose a five-year moratorium on new state or local taxes on wireless services unless those taxes are also imposed on other goods and services. He noted that mobile-phone services are taxed at much higher rates in many states than other goods and services.

    “We have smartphones and dumb tax policies,” Wyden said.

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  3. #2
    ...and a Pirate's heart. Convergence's Avatar
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    LOL:

    under the Enzi-Durbin bill, states would have to provide online retailers with free software to help them comply with differing state tax rates.
    That should slow things down.

    “We have smartphones and dumb tax policies,” Wyden said.
    Just like that line...
    Salty kisses, Sandy toes, and a Pirate's heart...

  4. #3
    Affiliate Manager AffiliateWarrior's Avatar
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    How about instead of having all these ridiculously varying tax rates, they just set a default online tax, then send the money collected to the appropriate state and let their legislature figure out the divying up piece. K.I.S.S.
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  6. #4
    ...and a Pirate's heart. Convergence's Avatar
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    Quote Originally Posted by AffiliateWarrior View Post
    How about instead of having all these ridiculously varying tax rates, they just set a default online tax, then send the money collected to the appropriate state and let their legislature figure out the divying up piece. K.I.S.S.
    Would be simple but it goes back to "unfair" If the tax rate is 7% and a State only has a 5% State tax, online merchants yell foul. If the tax rate is 5% and the State has a 7% tax rate, the B&Ms yell foul. Sooner or later all the local tax authorities will cry foul.

    Don't know all the individual tax rates for States, I do know in the early and mid-2000's was involved in two start-ups that drop-shipped restaurant equipment - we only collected Colorado STATE sales tax (think it was 4.1% back then). For orders shipped outside of cities the company was located in. So if a someone placed an order in Aspen they would only remit the STATE tax rate and were responsible for SELF-PAY of any local taxes (county, city, and any other special taxes applicable to Aspen).

    Then there are States that charge sales tax on everything. By everything I mean the product and shipping charges. Some States only charge on the product.

    Now with today's technology this could create / expand upon an entirely new industry - software and tax databases. Not all bad. Merchants collecting sales tax is EASY. It's the reporting and remittance that will cause problems. Suspect a good number of States won't have the technology, staffing, or wherewithal to process remitted Sales tax from THOUSANDS and THOUSANDS of out-of-State merchants. Their staffing just to verify and/or make inquiries to a merchant would probably exceed their additional tax revenue (based on typical government inefficiencies).

    The States all want the revenue - but in reality they wouldn't know how to process any of it...
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  7. #5
    Affiliate Manager Bradley.Senkovich's Avatar
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    Quote Originally Posted by Convergence View Post
    The States all want the revenue - but in reality they wouldn't know how to process any of it...
    there are 3,033 different counties (or some similar gov. entity). Also, Vermont doesn't charge tax on clothing and Florida does. Tax Categories can be complex. Complex as it may be, it should still be possible to work out. It would be convenient if we had a single Federal Government Organization that could coordinate payments to each state (I wonder if the IRS is available).Thus removing the burden to the merchant of coordinating the 3,033 tax codes.

    I do see one more possible thing to fight over. Who gets the tax, the state where the customer resides or the state the Merchant resides...

    (compromise is when all parties are agreed to something but still pissed of right?)
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  8. #6
    ...and a Pirate's heart. Convergence's Avatar
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    Quote Originally Posted by Bradley.Senkovich View Post
    I do see one more possible thing to fight over. Who gets the tax, the state where the customer resides or the state the Merchant resides...
    I don't see THAT as any hurdle.

    I do, however, see a burden on merchants for States that have exemptions on sales tax, ie: in the case of non-profit organizations, for resale, or government entities. Now merchants have to record and report that as well to those States that have such tax rules in place. Typically it requires a signed document/proof of sales tax exemption...
    Salty kisses, Sandy toes, and a Pirate's heart...

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