New laws turn Web retailers into tax tattlers
Summary
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An increasing number of politicians, concerned with shrinking budgets and eyeing continuing growth in e-commerce, want to force out-of-state retailers like Amazon.com, Overstock.com, and Blue Nile to tattle to tax collectors about how much in sales taxes their customers have avoided paying.
At the moment, for instance, Amazon customers in California don't pay sales tax but are supposed to voluntarily write a check for the full amount on tax day--the concept is called a "use tax." Few people do. Tax collectors view it as a loophole that can be closed by requiring Amazon to share customer data with the government.
"This is Big Brother--it's the purchasing police," says Steve DelBianco, executive director of NetChoice, which counts eBay, Overstock.com, and Yahoo as members and says the proposals are probably unconstitutional.
Colorado recently adopted such a measure, which says retailers must divulge the total purchases "made by each Colorado purchaser during the prior calendar year"; they also must forward a more detailed list to every customer accompanied by a warning that paying use taxes is mandatory. A similar proposal in the California legislature will be the subject of a hearing next week, and a Tennessee bill is scheduled for discussion on Thursday.
For more on this article, read New laws turn Web retailers into tax tattlers on CNET News.
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Without taxpayer ID numbers, how is the state ever going to know who is who?
The reason on-line retailers are not required to collect sales tax unless they have a physical presence in the state is a 1967 U.S. Supreme Court ruling that forcing out-of-state sellers to collect sales tax is an undue burden on interstate commerce because there are THOUSANDS of taxing jurisdictions (for sales tax: state, county, city) and it would be ridiculously complicated. (For instance, part of a ZIP code could lie within a city and part in an unincorporated area, and the city has a sales tax. Texas alone has 254 counties!)
Although people might say, "Amazon can handle it," what about "Mary's Confectionary" that fills about 2,000 orders per year to 1,500 different buyers in 40 states?
The same "undue burden" problem would apply to these reports -- and federal law trumps state law.
decade while not providing that many more services and
didn't do it at a higher quality. They simply paid more and
more for services (like road maintenance) and hired lots more
people.
Diet time.
No one questions that contemporary companies like Amazon.com have the technical ability to keep track of many millions of transactions per quarter. With the successes of the internet over the last 25 years, it is time to revisit how difficult it is for remote sellers to manage a mere 10,000+ local jurisdictions.
These are not new taxes. Even if an internet merchant doesn't charge you sales tax, you still likely owe the equivalent use tax in your state - which you are supposed to report to your state on your annual tax returns (and remit payment - although most people regularly do neither).
Colorado's new law allows companies to voluntarily collect sales tax in place of the notification procedure. The state's next step is to set up a system for the companies to do so.
We are working on a product that will provide merchants with the tools to collect these complicated sales taxes at no cost at all to the merchants.
R. David L. Campbell
Chief Executive
The Federal Tax Authority
fed-tax.net
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