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  1. #1
    OPM and Moderator Chuck Hamrick's Avatar
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    Shopping Tax Free on the Web Nears End
    Last edited by Chuck Hamrick; April 26th, 2013 at 02:10 PM.

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  3. #2
    ...and a Pirate's heart. Convergence's Avatar
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    Guess no one checks facts anymore - must have outsourced the writers...

    The legislation would effectively replace a 1992 Supreme Court decision, made in the early days of the commercial Internet, that held that a state couldn't force a retailer to collect sales tax unless the retailer had a physical presence in the state, such as a store or a warehouse.
    Had nothing to do with the internet...
    Last edited by Convergence; April 26th, 2013 at 02:27 PM.
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  4. #3
    OPM and Moderator Chuck Hamrick's Avatar
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    Seems like it could easily be overturned by the Supreme Court too.

  5. #4
    ...and a Pirate's heart. Convergence's Avatar
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    Quote Originally Posted by Chuck Hamrick View Post
    Seems like it could easily be overturned by the Supreme Court too.
    How's that?
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  6. #5
    OPM and Moderator Chuck Hamrick's Avatar
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    The bill, called the Marketplace Fairness Act, would allow states to require online sellers around the country to collect sales tax for them on purchases made by their residents.
    Perhaps AffiliateHound who's a lawyer can clarify but I don't believe a bill can over turn a Supreme Court ruling. The bill proposes to allow states to collect taxes on out of state purchases for their residents. Can an out of state merchant not fall back on the 1992 Supreme Court decision and refuse to collect? Playing devils advocate here as I am for this bill to clear up the tax issue and encourage states like New York to allow affiliates there back into their affiliate programs.

  7. #6
    ...and a Pirate's heart. Convergence's Avatar
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    Quote Originally Posted by Chuck Hamrick View Post
    I don't believe a bill can over turn a Supreme Court ruling.
    It can't. But Congress can amend things to satisfy the Supreme Court, such as relieving the undo burden on retailers in respect to having the where-with-all / means to collect sales tax.

    Quote Originally Posted by Chuck Hamrick View Post
    Can an out of state merchant not fall back on the 1992 Supreme Court decision and refuse to collect?
    Don't see why not. But what stops a State from dragging the merchant into court?

    Question is - who is going to appeal and get this before the Supreme Court?
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  8. #7
    ...and a Pirate's heart. Convergence's Avatar
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    From Wikipedia:

    In Quill Corp. v. North Dakota, the Supreme Court ruled that a business must have a physical presence in a state for that state to require it to collect sales taxes. However, the court explicitly stated that Congress can overrule the decision through legislation.
    For what it's worth...
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  9. #8
    Super Dawg Member Phil Kaufman aka AffiliateHound's Avatar
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    Well, as to what Congress can do in response to a US Supreme Court decision depends on the basis of the decision and the specific language of the Court's opinion. The decision that has been the basis for litigation on nexus laws around the country is Quill v North Dakota, that used prior case law to formulate the current "Nexus" rule. It is this rule that the Marketplace Fairness Act seeks to modify. That Congress has the power to do this is specifically stated in the Quill decision, as the Court was cognizant of the needs and responsibilities of both businesses engaged in interstate commerce and states who may be entitled to revenue derived from such commerce. Though the Court did set a hard-line rule based on its interpretation of the Commerce Clause and on case precedent, they saw that there was wiggle room in the Constitution and specifically in the Commerce Clause, where laws could be formulated to entitle states to broader rights to tax interstate commerce. Thus, the Court in Quill wrote:

    "This aspect of our decision is made easier by the fact that the underlying issue is not only one that Congress may be better qualified to resolve, but also one that Congress has the ultimate power to resolve. No matter how we evaluate the burdens that use taxes impose on interstate commerce, Congress remains free to disagree with our conclusions. See Prudential Insurance Co. v. Benjamin, 328 U.S. 408 (1946). Indeed, in recent years Congress has considered legislation that would "overrule" the Bellas Hess rule. Its decision not to take action in this direction may, of course, have been dictated by respect for our holding in Bellas Hess that the Due Process Clause prohibits States from imposing such taxes, but today we have put that problem to rest. Accordingly, Congress is now free to decide whether, when, and to what extent the States may burden interstate mail order concerns with a duty to collect use taxes**."
    (Note: Bellas Hess was one of the older cases on which the Quill decision was based.) *And by implication, burden internet concerns as well.

    Congress has failed to act on this issue for two decades, but now, with the Marketplace Fairness Act, it may finally do so.

    The Marketplace Fairness Act provides states with 1) the CHOICE of imposing a state sales/use tax on internet purchases made by that states' residents, and 2) the right to do so without the need of creating the legal fiction of a nexus between merchants and affiliates. Under the Act, if out-of-state merchants meet certain thresholds (I believe there is a $1 M threshold in gross sales to a state's residents) then their sales can be subject to that state's tax requirements.
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  10. #9
    ABW Ambassador CCBerries's Avatar
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    It's more than just a flat sales tax
    Take a look at this simplified tax table http://http://en.wikipedia.org/wiki/...#Summary_table. Now think of the exemptions they left out.

    In my world in some states flowers would be at one rate, edibles at another, but the definition of edibles varies by state, is it food, candy or a bakery item?, each of those could have a different rate Shipping is also taxable or exempt depending on what is being shipped. (so the shipping on a mixed shipment of flowers and chocolate strawberries could be partially taxable).

    If someone placed an order for a tempering machine (a durable good) with cookies, strawberries and roses that could be at 4 different rates with some of the shipping being taxable and some not.. all depending on where it went.

    Looking through the reference section on that Wiki article makes it even worse, in some states food shipped to a business is taxable, in others there are exempt venues (stadiums).

    If you look back at that table it shows that in some cases clothing is only taxed when it is above a certain amount, (and just in certain states), those and other exemptions open up a can or worms that's just ugly.

    For the big guys: throwing a bunch of programmers at the problem is an easy fix, but for the mid-sized merchants that's pretty ugly.

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  12. #10
    Super Dawg Member Phil Kaufman aka AffiliateHound's Avatar
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    A couple of years back, I had done some research and found that even then there was software available that not only computed the correct tax for every US jurisdiction, but that could prepare state sales tax returns as well.

    (note - the above link is not working)
    Since June 10, 2012 a vegan aarf but still writing the Hound Dawg Sports Blog
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  13. #11
    ...and a Pirate's heart. Convergence's Avatar
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    Yep, software exists for most carts even today - the trick will be how the States simply reporting and remittance of collected sales tax - there lies the rub...
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  15. #12
    ABW Ambassador CCBerries's Avatar
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    too late to edit.. here is the link again.. Sales taxes in the United States - Wikipedia, the free encyclopedia

    so the merchant just needs to be on a cart/platform that the software is not available for.. time to find an old HP3000 with Speedware..

    And with 40+ states that tax that's 40+ pieces of software setup/maintenance to deal with.
    Last edited by CCBerries; April 27th, 2013 at 02:11 PM. Reason: my brain is mush

  16. #13
    Super Dawg Member Phil Kaufman aka AffiliateHound's Avatar
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    CCBerries - the alternative could be the end of affiliate marketing. If enough states were to independently pass nexus tax laws, and merchants continued to terminate affiliates throughout the county, then it is over. Since the CA nexus tax went into effect last September, my gross is down c. 50%. I have not found converting merchants for many of my previously successful product lines, and many that I have found are paying commissions at rates 1/2 or so of what I used to receive. Merchants can deal with computing and collecting sales taxes. Would you rather be in our shoes?
    Since June 10, 2012 a vegan aarf but still writing the Hound Dawg Sports Blog
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  17. #14
    ABW Ambassador CCBerries's Avatar
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    Would you rather be in our shoes?
    For the big merchants a half dozen programmers and data entry people can do the job..

    Do the math, lets say the merchant has 600 SKUs, depending on the product it may be taxable at one of several rates for each state (food, candy, bakery, flowers.. can all be different).. multiply that out by the number of taxable states.. that is a huge amount of entries. Even shipping is taxable sometimes and not in others, depending on what is being sent and where it is going.

    A flat tax by state can be done easily, if the same rules apply to all products and shipping/handling but this legislation has holes:

    1) States provide the cost of the software, do they also provide for the annual upgrades, the installation, the configuration, if the version for the next upgrade of the cart is not available is the merchant then stuck on the old cart?, if their PCI compliance requires the cart upgrade what happens then?

    2) "Simplified" has no meaning, what can be said in a sentence can be simple, coding it is something else. (food at one number, bakery at another, candy at another.., when food is sent to a business it's taxable..).. Flat with no exceptions is simple... anything else when multiplied by 45 taxing authorities is nasty.

    3) If a merchant manages to get on a platform where the software is not available they don't have to collect. Think about that, think about how many ways there are to prevent a generic piece of software from running on a platform (strange database, different OS, even a different character set can break things.., the version of PHP - my cart can't run with the newest version of PHP because some of the source is encoded with some software that is no longer supported on those versions..). If a merchant hops on a platform with a unique setup they don't have to collect, and some will go in that direction.

    4) $1 Million exemption (if that stays in place), opens up the door on split stores just to stay under the cap. A sporting goods store may create split companies/web sites to put all the baseball equipment in one legal entity and football equipment in another, with carts like Magento it's possible and some of the big companies are already doing it (same core/DB but the headers and templates change depending on the URL..)

    This will change things for a lot of mid sized merchants, for the biggies it's minor.

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