Why The Angst Over Internet Sales Tax?

The subject of sales tax on internet sales is something to which I haven’t paid much attention. From time to time some of the conservative blogs I follow have written on the subject and invariably they are dead set against the idea. Frankly, I have been left scratching my head as to why. So, I am hoping that you, dear readers, can help educate me on this. I have some questions.

Why is “state” sales tax an issue for the federal government?

From Fox Business_

For the record, you’re supposed to pay sales tax for online  purchases  (assuming you live in one of the 45 states with a sales/use tax) when you file  your state tax return, but most people don’t. Well, soon you may not have a  choice in the matter.

The House Judiciary Committee recently held hearings on the Marketplace  Equity Act of 2011 (H.R. 3179) – in fact, there are actually three federal bills  relating to internet sales taxes floating around Washington, D.C. At the same  time, Amazon seems to have dropped their vehement opposition to online sales  taxes.

So, my confusion begins. There are three bills floating around Congress and I don’t understand what the federal government has to do with sales taxes that are applied in various states.In the first paragraph of the above quote, it says that if you live in one of the forty-five states that have a sales tax, you are already, in theory, supposed to be paying your states sales tax on all internet purchases. WHAT? This then leads me to my second question.

Why is sales tax on internet purchases an issue at all?

Apparently, states are claiming that if their resident make an internet purchase from any other state, the purchaser must pay sales tax to their state of residence. THIS IS INSANE! Why would they believe that?

The issue of sales tax on internet sales seems very clear to the simple mind of this humble observer. States that have sales taxes apply the tax to every  retail outlet in their state. If I am a resident of Missouri and I am in Minneapolis, Minnesota for some and make a purchase there, I would expect to pay what ever state and city sales taxes that they have. Upon returning to Missouri, I sure as hell would not send a copy of my receipt to the state of Missouri along with a check for Missouri sales taxes. That would be nonsense. No retail transaction took place in Missouri. So, it seems to me that when an internet purchaser buys something that is shipped from another state, the internet retailer should collect the sales tax for his/her state just like any other retailer in that state. Large internet retailers like Amazon, I would assume, have warehouses in different strategic states with each warehouse making deliveries to certain states. It seems to me that it would not be that difficult for Amazon to have software embedded on their web page that asks the purchaser to enter the name of the state to which the purchase is to be delivered. The software would recognize which of their warehouses services that state and would calculate for the customer the sales tax that applies. If states like California think their residents should pay California sales taxes on purchases made in one of the other 49 states ( or is that  other 56 states?), that is totally illogical, in my opinion.

So, dear readers, what am I missing? Why do states think they have a right to collect sales tax on purchases made in other states? And, for the love of God, what possible involvement is there for the federal government in this issue? I am confused. Am I over simplifying the problem? Honestly I don’t see why there is even a question of whether there should be a sales tax on internet purchases or a question about which state should collect the tax. To me the  tax applies at the point of the retail sale.

Well, that is what I’m thinking. What are your thoughts?

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22 thoughts on “Why The Angst Over Internet Sales Tax?

  1. “Why do states think they have a right to collect sales tax on purchases made in other states?”

    Simple. Citizens exist for the sake of the State. The State does not exist for the people. Or something like that.

    Never doubt any government’s persistence in getting their mitts on any form of revenue.

  2. Some web sites that I order from already tack on my state’s sales tax, so I’m sure that the software is available.

    However, some people don’t pay sales tax (certain licensed businesses), and, of course, there is no sales tax on certain products in certain states (certain medical supplies for example).

    Furthermore, food is taxed at a different rate from other purchasers in some states.

    Amazon sells all sorts of products — including some foods.

    Damn, the tax codes are complex!

  3. Jim,

    We simply can’t afford any more taxes. Today I posted a 50 state chart on tax rates. In Idaho, we pay 51%. That does not include property tax, sales tax, auto registration, or my 80 dollar a month water and sewer tax that never goes down.

    So yea, we’re taxed to death. So who are the thieves….a government stealing over 1/2 of your work product or people finding ways to defeat paying taxes?

  4. No end to the grabbing from any and all sources by the Federal government….or any other government in our day and time. Here’s the deal in N.C. If I sell something from my internet site to someone in N.C., I am expected to report that and pay the State of N.C. sales taxes on the transaction. If I sell to someone in Montana, I don’t have to charge sales taxes on that transaction. The Feds are saying…”whoa, Nellie.” “There is a chunk of money we can get our hands on…..a “national internet sales tax.” Zippidy doo dah!! The other thing this internet sales tax does in further blur the lines between the States and the Feds. No more States rights. Bad enough already, this just solidifies that even more.

    It also opens the door to the VAT – consumption taxes on anything and everything. After all…why just pick on internet sales? Why not create a Fed tax on everything. Europe here we come!! Right down the same rabbit hole.

    The original reasoning behind sales taxes was to prop up local government services facilitating retail, such as the roads, sidewalks, infrastructure, et al. Property taxes should have paid for that already, but someone somewhere decided to tax each purchase on top of the property taxes. Let’s face it….they will never get enough. The beast won’t be starved to death…

  5. Cheryl may have the answer to the Federal Government’s interest in internet taxes. Some people believe that the internet is a government thing, but it it totally funded by private corporations and individuals. The Feds did a lot of research and invented the DARPA Net, but the internet is very little like the Fed funded research project. The Feds had nothing to do with the idea of the world wide web.

    Then, we have state taxes. Legally an morally, we should pay our state’s sales tax whenever we buy something on the internet. Amazon is being sued by several states of which North Carolina is one. I can buy something on Amazon, and never pay any taxes.

    Long ago, when I sold something to an end user in another state, I would have to look up the state, county, and city taxes and add them to the invoice. Now, the software is trivially available even for the most simple internet store. Charging end user taxes is really simple, now.

    The states will win their battle against internet retailers, many of whom charge local taxes, now. Amazon has already indicated that they will be on board with the program.

    The thing to fight is a federal internet sales tax. That is an abomination of the Obama nation.

  6. Several thoughts…
    Living in one state and paying a sales tax in another pretty much guarantees you won’t ever get a deduction for it.

    Compared property taxes where you always know to the penny what you pay in taxes, a sales tax is insidious. You never really know how much you pay and its is much easier for governments to foist increases its citizens.

    If a person (like me) is in a state with no sales tax, why should I pay a tax for the convenience of an online purchase when I wouldn’t if I ordered over the phone as an out-of-state customer?

    1. Living in one state and paying a sales tax in another pretty much guarantees you won’t ever get a deduction for it.

      Have things changed that much sence I left the country? I never got any tax deductions for sales taxes. paid

  7. Speaking from a purely New Hampshire perspective I can tell you why our state opposes it. Massachusetts has something called a “usage” tax and the tax requires residents of Massachusetts to claim anything bought out of state on their state tax. Many Mass residents come to New Hampshire to buy large items and needless to say they do not report it on their taxes. Because this tax in unenforceable Massachusetts tried to force New Hampshire stores to collect this tax at the time of purchase, just think of what would happen if all people had to show IDs at every store to prove where they lived! We call our sales tax free state the “New Hampshire advantage” because it entices people to do business here. New Hampshire eventually passed a law which said none of our stores could be used as tax collectors for any other state simply because that state couldn’t enforce its own laws. New Hampshire sees this as yet another attempt at making stores the tax collectors for other states and sees it as a threat to the “New Hampshire advantage.”

    1. Unbelievable what and California are trying to so. It is not like people from other states don’t spend money and pay sales taxes in Massachusetts and Clifornia. Tomorrow I’m doing a post on taxes that I think you will find interesting.

  8. My Dad used to own a semi-tractor that was driven by my brother. The taxes they had to pay worked on the same kind of logic that you are failing to understand. We didn’t understand it then and it still escapes me, years later. Here is how the taxes were calculated.

    My brother had to keep track of the miles he drove in each state. He also had to keep track of where he purchased fuel and how much was purchased in each state. Obviously, he was paying fuel taxes when he purchased the fuel. The kicker was that if he drove through a particular state, say Arizona, and made no fuel purchases in that state, he still had to pay taxes in that state. Those taxes were calculated by determining how many miles he drove in the state and how much fuel he “should” have used while doing so.

    I’ve never seen my Dad so frustrated in trying to keep up with that fiasco.

  9. governments (State and federal) are plucking us like chickens.

    Infidel said it best:

    Citizens exist for the sake of the State. The State does not exist for the people. Or something like that.

    It’s bass-ackwards

  10. Squeeze the life out of Americans whatever way the government can find. How about all of the gas taxes we pay? Will we have to pay it twice if we buy it from another state? Oh I remember. The new tax will be per mile with a gadget on our cars to monitor our driving. Thats right, we already have the black boxes now.

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