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  1. #1
    What's the word? Rhia7's Avatar
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    Talking US House seeks alternatives to Internet sales tax bill (Article)
    Apparently the Marketplace Fairness Act has not made Internet taxation laws less convoluted
    This article analyzes some Internet taxation difficulties and addresses various business issues.

    US House seeks alternatives to Internet sales tax bill | PCWorld

    James Sutton, a tax attorney with Moffa, Gainor & Sutton, called for Congress to require remote resellers to track their remote sales and report customer names to their home states. The process would be much simpler for Internet sellers than collecting sales taxes and would allow sellers to avoid costly audits and enforcement action, he said.
    Source=http://www.pcworld.com/article/2107520/us-house-considers-alternatives-to-internet-sales-tax-bill.html
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  3. #2
    Affiliate Network Rep JCrooks - AffiliateWindow's Avatar
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    Sutton's idea isn't new and has been dismissed in many states because of the privacy law complications. That's not going to work either. The argument went along the lines of "Do you want your name reported to the state because you bought Depends online?" Think of other online purchases you don't want anyone else to know about, much less the state!

    Very complicated situation for sure. I know many Illinois consumers who figured out which websites didn't charge IL sales tax when the law was in effect there. They just adjusted their shopping habits around it, which of course hurt IL affiliates.
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  5. #3
    What's the word? Rhia7's Avatar
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    " 'The bill required states to provide free [tax collection] software, but did not address integration costs,' which could cost businesses tens of thousands of dollars, he said." -- Apparently there are burdensome costs to installing proposed "free [tax collection] software" -- purchases and the collection of taxes get more convoluted

    Source: US House seeks alternatives to Internet sales tax bill | PCWorld
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  6. #4
    OPM and Moderator Chuck Hamrick's Avatar
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    I still think that merchants should collect sales tax on all sales and pay to their local tax bodies. Then other states would have to sue in Federal court and we would get some action on this.

  7. #5
    Affiliate Network Rep JCrooks - AffiliateWindow's Avatar
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    I watched the committee discussion on this prior to the original vote in the US Senate. Very thoughtful and brought up a lot of excellent points. I know the Federal solution would be easiest, but each of the states have such varied laws, tax rates, etc., that there is not an easy solution for this one.
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  8. #6
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  9. #7
    OPM and Moderator Chuck Hamrick's Avatar
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    VAT Tax, ugh! I am for a flat income tax.

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  11. #8
    ...and a Pirate's heart. Convergence's Avatar
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    Quote Originally Posted by carpeperdiem View Post
    23%? Are they daft?
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  13. #9
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    Quote Originally Posted by Convergence View Post
    23%? Are they daft?
    Actually, it's 30% (effective 23%). But that is in-lieu of all income and property taxes.

    What makes this work (read the FAQ) is the guy buying a Ferrari will pay tax on it. And that guy pays more tax than the guy who rides the subway.

    Tax accountants would be out of business. No IRS. No income tax.

    Too many smart economists all say this is a good thing. Please read the FAQ and look at the numbers. Our current tax system is regressive and does not tax the wealthy -- it taxes high wage earners. It assumes you "earn" money. But many wealthy get their money in unearned form -- and they are minimally taxed. But the wealthy spend lots of money. The argument is tax what you consume. And do not tax income. And the economists are saying this will bring in far more than income tax. With a fraction of the infrastructure to collect and shelter income.

    read the FAQ. :-)

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  15. #10
    OPM and Moderator Chuck Hamrick's Avatar
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    I would rather have a flat tax of 10% on everything with no income tax. Then the IRS could chase those not paying the fed share.

  16. #11
    Beachy Bill's Avatar
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    It makes a lot of sense when you look at all the parameters. No more income tax, no more property tax, etc.

    Cynical part here: However, it will never happen - because it would put myriad attorneys out of work - and most congresscritters are or were attorneys.
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  18. #12
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    Quote Originally Posted by Bill View Post
    Cynical part here: However, it will never happen - because it would put myriad attorneys out of work - and most congresscritters are or were attorneys.
    Of course.

    These are the same "leaders" who pass laws preventing a manufacturer from opening their own stores to sell their goods (if the goods are automobiles in New York or New Jersey).

    The problem is that these same people will never understand the idea of equitable taxation. As long as the income tax is the basis of the tax system, the system is fixed against the wage earner. Raising cap gains taxes is not the solution.

    Taxing things that wealthy people consume (Yachts, vacation homes @ Deer Valley, etc...) is far more equitable than going after 10% of the guy working his ass off for $50k. If EVERYONE has to pay a consumption tax with no loopholes, the system becomes balanced and those who consume the most are paying more. If the economists are right about this, we (taxpayers) should be begging our "leaders" to get their heads out of their collective lawyer asses and do something intelligent. For a change.

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  20. #13
    OPM and Moderator Chuck Hamrick's Avatar
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    The fallacy of a flat tax is that it would apply to everything and would have to be divided up to replace the existing sales tax, federal and state income tax system. So if 50% went to the feds and 25% went to the states then the city/county would be reduced. What about phone service there are half a dozen taxes there.

    I could deal with 10% but would be a hard pill to swallow for an automobile or home purchase. I couldn't see politicians who create the laws and taxes ever agree on this.

    Watch House of Cards if you want to see how decisions are made in Washington.

  21. #14
    Affiliate Network Rep JCrooks - AffiliateWindow's Avatar
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    I learned a lot about how bills were passed and deals were made while fighting the affiliate tax in Colorado. NOTHING like what we learned in Civics class!
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  23. #15
    ...and a Pirate's heart. Convergence's Avatar
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    Any FEDERAL sales tax would be just that - FEDERAL. States with their state tax and local taxes would still collect, that includes any sales tax, income tax, and property tax. States are NOT going to give that up. And here in Colorado, all taxes have to be approved by the voters - so the government overrides that by creating "fees" which do not require voter approval.

    Tons of "fees" in the federal system as well, 911 surcharges, rural this and that, airline "fees", etc. We're actually "taxed/fee'd" to the hilt..
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  24. #16
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    Sales Tax Reporting with Privacy
    Hi guys, I hope you don't mind me chiming in on this conversation. I'm the person that was quoted originally in this thread - James Sutton. I'm an attorney whose almost entire practice is devoted to sales and use tax controversy in Florida. I see every day how hard it is for honest business owners to defend themselves against the aggressive tactics of state tax departments. That is why I decided to speak out against the marketplace fairness act (MFA). As drafted, remote sellers would become just as liable for the sales tax as the customer. Every mistake the business makes in collecting sales tax becomes sales tax the business owes. This may seem trivial - but businesses end up paying hundreds of millions of dollars a year to the states for these mistakes - just for in-state sales under the current law.

    Yes - there is an inequity for state tax revenue and brick/mortar companies as the law stands now. We do need to do something, but asking the remote vendors to collect makes them jointly liable for that tax, which they are not currently liable for.

    The solution I suggested was suggested in the 1990s, but discarded for privacy reasons. The old suggested reporting method would have remote vendors report every single sale to the states with copies of the sales invoices. Even I cringe at the thought of the state seeing everything I buy online. So I examined the old idea and realized that the same software suggested for the MFA could be used to merely report the amount of taxable purchase without any details of what was actually bought. But the state getting the details of millions of actual purchases - even if only reflecting a dollar amount - would still be unworkable. So I came up with the idea of accumulating the information by person, by state for a whole year in a database (without any details of what was purchased), into a database. From this database, the purchaser and state would receive something like a 1099 with one dollar amount reflecting total remote taxable purchases in a year. The individual could them file a use tax return at the same time they file their federal income tax returns. Use tax reporting would become commonplace.

    Amazingly, under the MFA - your state would have the right to audit every detail of your purchase from the remote vendor. Huge privacy concerns. However, under my suggestion (Consumer Private Reporting. CPR), the state never sees the details of what is purchased.

    The pro-MFA guys have done a very good job of miss-describing the CPR system as some giant privacy concern. But the MFA has much bigger privacy issues in my humble opinion.

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  26. #17
    ABW Ambassador isellstuff's Avatar
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    James, how do you address the fact that different categories of items have different tax levels in different jurisdictions? You have to get pretty specific about what is being purchased in order to fulfill these categorization requirements. Also, as we are all very aware, categorization varies drastically from merchant to merchant.

    What we all want is to stop being used as "Nexus Pawns" by the state government. I would like to have the freedom to move to any state in the United States and still run my online marketing business. As it stands now, I have a long list of forbidden states who have either passed an affiliate nexus law or are considering one.

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  28. #18
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    isellstuff - You just managed to pinpoint one of the very few issues with the CPR system. The CPR system solves the glaring problem within the MFA dealing with different parts of the state having different rates. However, I don't have firm answer on how to address the issue of items being taxed at different rates in the same location. My best answer for you at the moment is that the few states that have different tax rates for different goods would have separate categories for taxable purchases reported on the 1099 style report. The software MFA supports using would categorize and tax these differently, which is likely the same type of software that would be used under a CPR system. So the information tracking ability is already there. That is my best guess at the moment.
    Last edited by JamesSutton; March 15th, 2014 at 03:25 PM.

  29. #19
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    Quote Originally Posted by isellstuff View Post
    What we all want is to stop being used as "Nexus Pawns" by the state government.
    Merchants don't have it any easier...

    Some states are promulgating (unconstitutional) laws that require we collect sales tax from a customer if our fulfillment vendor moves the item through a fulfillment center in the customer's state.

    For example, PA. We have zero nexus in PA -- but if our fulfillment vendor (a 3rd party) moves my inventory (without my knowledge or consent) from our main facility in KY to PA, I now have (according to PA) nexus in PA and must pay PA. I don't have to collect it, but I have to pay it. HOW am I supposed to know or control which warehouse my fulfillment vendor ships from? I don't care where they ship from. It's fulfillment vendor's business (expertise) to move my inventory to the warehouse that optimizes the customer experience (fast delivery). We can't possibly think of going back to a customer post-sale, "um, because you live in PA and our shipping vendor has a warehouse close to where you live, you get to pay state sales tax now". Customer would then say, "so ship it from NY".

    My lawyer says PA law is unconstitutional, but it would cost me $millions to fight it. He told me to let Amazon fight this one -- but Amazon's interest does not align with mine.

    If customers simply declared their out of state purchases, fake nexus laws would no longer be an issue.

    NY has a box on the personal tax return to have NY "estimate" your sales tax - and it's binding, unless you are hiding large purchases.

    Look how much energy we are wasting even thinking about nexus.

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  31. #20
    What's the word? Rhia7's Avatar
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    I'd like to thank Mr. Sutton for becoming a member of this forum in order to respond to this article. Thank you, Mr. Sutton, for joining this conversation.
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  32. #21
    What's the word? Rhia7's Avatar
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    I'm sorry that Abestweb's Admin, Chuck Hamrick, is not here to engage in lively conversation about Internet taxation.

    It's a real treat when someone cited in an article (I introduce) appears at ABW.
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  33. #22
    ...and a Pirate's heart. Convergence's Avatar
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    Quote Originally Posted by Rhia7 View Post
    I'm sorry that Abestweb's Admin, Chuck Hamrick, is not here to engage in lively conversation about Internet taxation.
    Huh?
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  34. #23
    OPM and Moderator Chuck Hamrick's Avatar
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    Ya did I miss something specific? Office was closed today and just reading this now. Rhia7 are you asking my opinion here?

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  36. #24
    What's the word? Rhia7's Avatar
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    Quote Originally Posted by Convergence View Post
    Huh?
    Yes, I was sorry that more people were not present when Mr. Sutton was here earlier. It's not every day that ABW is visited by a taxation attorney who understands affiliate and/or Internet taxation issues. If more people had been logged into ABW the conversation might have been better.

    When James Sutton registered and entered the conversation there were no moderators around and Chuck wasn't around. I really appreciate Chuck's posts and I am sure he would have engaged James Sutton in conversation.

    Other than finding the article and placing it into the forum in hope that it might start a conversation, I didn't have much to say. I think James Sutton might have made further posts had interesting responders been around.
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  37. #25
    What's the word? Rhia7's Avatar
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    Quote Originally Posted by Chuck Hamrick View Post
    Ya did I miss something specific? Office was closed today and just reading this now. Rhia7 are you asking my opinion here?
    I thought it would have been nice if you had been here during the conversation with James Sutton. James Sutton registered in ABW to respond to an article I had posted. I thought that was really nice of him and if more people had been around while he was on this board/logged into it I think an interesting conversation would have developed. He got responses from isellstuff and carpeperdiam but I felt that he was bored from the lack of any other responses.

    I find your take/opinions interesting, Chuck, and the conversation could have been more interesting while James Sutton was here if you had been here at the same time. I'm not asking for your opinion now unless you feel like writing something.

    Chuck, you didn't miss anything planned. I just happened to log into ABW when James Sutton (a taxation attorney cited in an article I had submitted here) actually registered to make comments. I thought that was really nice of him so I thanked him for registering to make his above comments. It was a coincidence that I happened to be on the board.
    Last edited by Rhia7; March 16th, 2014 at 12:43 AM.
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