States Attempting To Tax Internet Sales (Including Tobacco)
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It used to be our state and federal governments convened once a year for a few months. These days they have all year to propose new laws creating new classes of criminals and new taxes. In my state they even routinely propose "emergency legislation" which effectively shuts the people out of the process, no public vote, no debate. I can see where letting some activity left untaxed would required an emergency meeting of the legislature to "fix" it.
Let's be clear on a few things. The laws of most, if not all, states already require people who reside in those states to declare and pay taxes on internet purchases, including tobacco taxes. This is about whether out of state sellers can be forced to collect those taxes on behalf of the states to which they are shipping. Since many folks are not self-declaring their internet purchases, one can understand why the states are so interested in having this collection mechanism.
Surely it is only a matter of time before it happens. We are already witnessing the hollowing out of state taxation bases and the disintegration of B&Ms (of all types - not just in the tobacco industry) as people window shop locally only to ultimately buy their desired product online in order to avoid the taxes. If I was a B&M, I would be pissed about the lack of neutrality this creates. At least if they start forcing collection of taxes then internet sellers and B&Ms will be on a level competitive playing field. All of which is to say, it may not be good for our pocket books but it certainly makes sense froma tax policy perspective.
Surely it is only a matter of time before it happens. We are already witnessing the hollowing out of state taxation bases and the disintegration of B&Ms (of all types - not just in the tobacco industry) as people window shop locally only to ultimately buy their desired product online in order to avoid the taxes. If I was a B&M, I would be pissed about the lack of neutrality this creates. At least if they start forcing collection of taxes then internet sellers and B&Ms will be on a level competitive playing field. All of which is to say, it may not be good for our pocket books but it certainly makes sense froma tax policy perspective.
All I'm saying is this... If someone decides to protest these taxes with a protest al la the Boston Tea Party, I'll be there to grab what they throw over, err I mean help protest!
Several states already try to collect from businesses outside their state. One particular b&m, which I won't mention the name of, tosses these letters in the garbage with great ceremony and pomp. Florida or Utah have no legal grounds to collect a tax from a citizen of another state. But, these states send out letters all the time. Maybe a few cowardly businesses give in, but many just toss the letters. But, this has been going on for a while now. Nothing new.
Maybe, but that's a different issue that goes to the level of overall taxation rather than the neutrality issue. In other words, one can argue that budgets should be slashed and the rate of sales tax in a hypothetical state should be reduced from 7% to 4%, but that is a different policy issue from whether the applicable rate (whatever it may be) should be paid in one type of transaction (a B&M purchase) but not in another type of transaction (an internet purchase).
@Peck: Yes that is true and accurate. But if people were paying much less taxes to begin with, they would have more disposable income and be less inclined to be concerned about a nominal sales tax in the first place.
As far as the specific question of internet taxes is concerned, I think I would be inclined to say that any sales tax collected should go to the state in which the business is located rather than to the buyer's state.
As far as the specific question of internet taxes is concerned, I think I would be inclined to say that any sales tax collected should go to the state in which the business is located rather than to the buyer's state.
We have no sales tax here in Oregon, so collecting a tax like the one we are talking about (hopefully) isn't a threat here. We are sandwiched between two states to the north and south with high sales taxes. We get lots of visitors from those states shopping here.
So if people naturally buy more stuff in states where there are no (or low) taxes you might think that lowering or eliminating taxes would lead to more B&M sales. That is what government would and should do if people were actually concerned about the fate of retailers. (In fact, I've heard that some states have tax free shopping days.) If you want people to buy stuff, don't tax it. That's what tobacco taxes are all about, yes?
So if people naturally buy more stuff in states where there are no (or low) taxes you might think that lowering or eliminating taxes would lead to more B&M sales. That is what government would and should do if people were actually concerned about the fate of retailers. (In fact, I've heard that some states have tax free shopping days.) If you want people to buy stuff, don't tax it. That's what tobacco taxes are all about, yes?
I would also add that I think all sales taxes should be the same rate across the board, regardless of the product. None of these BS "sin taxes" where they collect huge sums on products like alcohol and tobacco as a way of penalizing someone for purchasing a legal product. That is where the real problem lies.
@Tuold: As I was reading your first post on this thread, I was going to ask you if you lived here (Orygun), but your second post confirmed it.
Just because we don't have sales tax at the moment, don't think for a minute our current unelected governor won't push an "emergency" bill through to begin such a thing.
Just because we don't have sales tax at the moment, don't think for a minute our current unelected governor won't push an "emergency" bill through to begin such a thing.
That would of course lead to a race to the bottom, where nothing gets taxed. If you accept that some taxes need to be raised (to pay for schools, roads and other infrastructure) , then the question is how to do that as fairly and as equitably as possible.
Of course the whole idea of a sales tax is to tax consumption, so you need to tax people where the product is used or consumed not where it is sold. I would add that, in theory, states could start intercepting packages and leveling taxes at the state border, as countries do, but I doubt citizens want this. The easiest and most palatable enforcement mechanism is to make the seller collect the taxes. It seems obvious (to me) that this is going to happen at some point, for the reasons already given above.
Ok, but if I physically visit an out-of-state store and purchase an item, the sales tax is going to the state where the business is located, even if I then transport the product home with me and consume it there. So I see no reason why the same rule should not apply to visiting that store's web site and purchasing an item there.
And again I would add, if punitive taxation were prohibited, there really wouldn't be any specific issue here regarding tobacco taxes.
That is true, because the assumption is if you purchase the product in person at the store then you will be consuming it in that state. That is really the only efficient way to levy the tax. It would be unweildy to require retailers to start questioning people who come into a store about where they may be taking the product so legislation needs to make an assumption and impose a standard that can be easily verified and enforced. Most states do have a special export license you can apply for so that if you pick up the product in person in one state you don't have to pay the local tax because you are buying it for export, but absent that, the assumption is you will be consuming the product in the state where it is purchased. Of course, when you bring the product back to your own state you still have to self declare the importation there.
Some very good points here. As a case in point. I live in Pa but if I buy my gas in NJ where the price f a gallon is 35 cents cheaper because of state sales taxes one could argue that I should pay the pa tax to my home state where I do 99% of my driving. The hold true for liquor sales. Delaware prices are cheaper than Pa because there is no sales tax. I know someone who tried to pay the Pa sales tax on bringing liquor into Pa for their own consumption. No one in Harrisburg knew how to make that happen yet it is supposed to be against the law here.
Also, if I buy a souvenir tee shirt in Florida should I be expected to pay the sales tax in my home state because I will wear it here? It gets real messy very quickly.
I just figure that something will happen and I'll have to comply. So be it.
Also, if I buy a souvenir tee shirt in Florida should I be expected to pay the sales tax in my home state because I will wear it here? It gets real messy very quickly.
I just figure that something will happen and I'll have to comply. So be it.
I don't disagree with your thoughts on "sin taxes" but to me that, again, is a separate issue from the neutrality issue -- that is, the separate issue is whether the taxation system should be used to encourage or discourage certain types of behavior. The conservative in me would say that the taxation system should only be used to raise the necessary amount of taxes in the most neutral way possible (ie so that the tax causes the least amount of market distortion). I don't believe the tax system should be used to shape society; indeed, that is precisely why tax systems are as complicated as they are -- because numerous aspects are driven by special interests.
The Marketplace Fairness Act that would allow states to require other states to collect sales taxes received very wide bipartisan support. One might surmise that eventually it will pass.
IF this should come to pass, we will only believe a short step away from having to stop at the border and submit to tax checks to see if we are bringing in items purchased in another state. LOL
Kind of funny that this comes up today; today I made my monthly trip to Iowa to buy my wife's cigarettes for the month. 40 mile round trip saves her $100 dollars on 5 cartons. Since the Minnesota/Iowa border is very rural in my area where would you put a "customs" post....half a section over either way is a township road crossing the border. I agree that this is probably inevitable; guess I'll be getting a post office box in Iowa to purchase my pipe tobacco.
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