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The U.S. Supreme Court ruled Thursday that states can require retailers to collect and remit sales taxes on out-of-state purchases. The 5-to-4 decision reversed decades-old decisions that protected out-of-state vendors from sales tax obligations unless the vendor had a physical presence in the state.
Those earlier decisions, one half a century ago, the other a quarter-century ago, date back to a time when mail-order sales were relatively small and online sales were all but nonexistent. As the justices acknowledged Thursday, however, the court back then "could not have envisioned" a world in which e-commerce sales have revolutionized the dynamics of the national economy.
Writing for the five-justice majority, Justice Anthony Kennedy said that the previous decisions "were flawed," and in the modern economy, they "create, rather than resolve market distortions." In today's context, he said, the physical presence rule is "an extraordinary imposition by the judiciary on the states' authority to collect taxes and perform critical public functions."
Furthermore, Kennedy said, the previous decisions effectively functioned as a "judicially-created tax shelter" for out-of-state retailers, and put local businesses at a "competitive disadvantage."
The problems with these earlier decisions, Kennedy said, were made "all the more egregious" by technological innovation. "The Internet's prevalence and power have changed the dynamics of the national economy," he wrote in the majority opinion.
[...] The decision was a victory for South Dakota, which, like some other states, has no income tax and relies on sales taxes to fund most of the state's services. Because of dramatic fall-offs in state sales taxes, the state in 2016 enacted a law to test the physical presence rule. Three large online vendors, Wayfair, Newegg, and Overstock, challenged the law in court, and lost on Thursday.
[...] "The chessboard just looks a lot different now," said Stephanie Martz, general counsel for the National Retail Federation, which includes 18,000 businesses large and small. "Now our members are going to be able to figure out how to construct their businesses without worrying about whether putting a distribution center on this side of a state line or that side of the state line will result in a different tax implication."
While the court made clear that the states do not have unlimited power to require sales tax collection, "The court blessed South Dakota's law," said Carl Davis, research director for the Institute of Taxation and Economic policy.
The law specifically protects small businesses from collecting sales taxes if they have less than $100,000 in sales or fewer than 200 transactions in the state. The state also provides sales tax collection software for free for any business that wants it, and using that software immunizes the business from audit liability. Perhaps most importantly, the state law does not permit sales tax collection for past purchases, meaning that businesses don't have to worry about a huge tax bill that they never anticipated.
(Score: 5, Interesting) by VLM on Friday June 22 2018, @08:33PM (7 children)
I do consulting some of which can be sales taxed and in the state I live in, thankfully the state collects all the tax and documents the hell out of it, but you almost need a lawyer to go over the rate info as it is NOT 1:1 with counties, postal addresses, or zip codes.
Over my lifetime the total amount of fines I've accumulated from the DoR is $20 so I guess I'm doing well?
Also you forgot another category of taxation which is "F the tourists" where the tax rate varies by season in some locales.
Amazon collects a big slice of the take, but they do make all your problems go away, and they have AmazonServices and I've considered billing thru them for all sales taxable transactions, although I've never gone to the effort of serious research.
Adding to the fun, some software and IT type stuff is taxable; some is not. Depending how the contract is written up, regardless of the actual work I do, I might owe big brother a couple percent or not. This is also hilarious. If I "service your prewritten software" by rewriting it because its a piece of shit, then I owe sales tax, but if I "write custom software" then its tax free. The language on the contract determines the tax not the physical work done. Also if I provide you a printed tangible copy of the source code that skirts mighty close to tax evasion... here's an attachment to an email is definitely tax free. If you've ever seen contractor-types doing really weird shit like refusing to submit paper documents of their work, well, now you know why.
This may be overly doxy because all states have weird tax laws, but I shit you not, if I do something on spec and try to sell it to someone I didn't know before I wrote it, its sales taxable, but if we have any sort of agreement even as minor as a documented business meeting (like a business lunch with IRS approved dated restaurant receipt?) then custom programming work done for a specific customer is non-taxable.
Its to the point where I have to check state law every time I do something. If I install some back end support stuff that I didn't write to help a customer out, I donno, Putty for SSH, thats taxable, even if everything else I do WRT my personally written software is not taxable. So if you ever wondered why a contractor is like "You install MySQL for me, then I'll touch your server" its all to avoid a tax audit. I'd literally rather help you install some pre-written software for free off the books than have to deal with the tax and audit bullshit if 99.9999% of my work is my own software.
(Score: 2, Insightful) by Anonymous Coward on Friday June 22 2018, @09:30PM (6 children)
Why do we put up with this obvious crap?
The amount of lost productivity due to such poorly defined bureaucratic red-tape is unthinkable. The other AC's comment resonates with me: Maybe taxation is a bad way to organize society.
(Score: 4, Interesting) by VLM on Friday June 22 2018, @09:47PM
Well, the state I live in pulled in about $3K per head per year, about $1500 from income tax and $1500 from sales tax.
The sheer quantity of frictional bullshit in my opinion is about 10x greater for sales than income tax, so theoretically the highest quality of life would come from slashing sales tax (which is usually regressive to the poor) and boosting income tax (which is usually progressive to the poor). It seems like a no brainer, don't really know why its not done.
Several options have been tried.
Financing via printing money works until it doesn't then you get hyperinflation and 1920s Germany leading to 1930s Germany etc etc. In theory the government would be voted out and .. handled by the populace, but in practice the economic collapse is far too fast for voters to influence so it always ends in disaster, even though "in theory" if we limited govt spending to a long term average of long term average economic growth it would be stable. In practice its not dynamically stable at all.
We could chop the size of .gov in half, but a lot of people exist merely to provide votes for government types to provide services to... this option would be chill in the 'burbs, not so much in the blue hell cities. Essentially we would have to send the national guard to occupy the cities for awhile, its not gonna be free. Low tax rates are a white privilege.
There's not many other options if you're gonna run a welfare state. Improve the demographics of the population? Well, we're working hard as possible in the opposite direction, so thats a non-starter.
It might be a shitty way to organize society but it seems to be the least shitty of the alternatives.
(Score: 3, Informative) by Grishnakh on Saturday June 23 2018, @01:36AM (4 children)
No, it's not. Taxation is absolutely necessary to fund government.
What *is* a bad idea is having ridiculously complicated tax schemes that cause a huge amount of overhead in being compliant. Taxes should be simple. Just look at the IRS forms needed for various Americans, especially regular W-2 wage- earners, and then compare to the utterly simple 1-page pre-filled-out forms that typical western European wage-earners get from their governments each year. This crap, while making TurboTax and H&R Block rich, imposes a huge cost on society at large.
Same goes for this sales tax crap. There should not be 10,000 different jurisdictions in the US for sellers to keep up with and remit to, all with different rules on what can and can't be taxed, and how much. It's too fucking complicated. Worse, sales tax is a regressive tax, hurting the lower classes the most.
Here's a few proposals (some are mutually exclusive):
1. Eliminate sales tax except on luxury purchases, and only have income taxes. For states like South Dakota, that means they can go bankrupt if they're too fucking stupid to just implement an income tax like other states.
2. Forbid localities from implementing sales taxes, so sellers only need to remit to 51 or so entities (do territories have sales taxes?), not 9000-something.
3. Enact a federal law that sales tax is collected based on the location of the *seller*, not the buyer, and remitted to the jurisdiction the seller is located in, since the seller is the one using government services for their business and warehouse.
4. Enact a federal law homogenizing the sales tax laws across states, so it's easy for sellers to figure out, and they only need to figure different tax rates.
(Score: 1, Touché) by Anonymous Coward on Saturday June 23 2018, @05:11AM (1 child)
Just sayin'.
(Score: 1) by anubi on Saturday June 23 2018, @12:36PM
Unfortunately, no matter how we organize ourselves... its gonna be a guv'mint.
"Prove all things; hold fast that which is good." [KJV: I Thessalonians 5:21]
(Score: 2, Interesting) by Anonymous Coward on Saturday June 23 2018, @12:39PM
I would go the other way around: forbid the federal and state governments from taxing individuals. Make all of that done by the locality, and have federal funds collected from states which collect them from counties, which collect from cities/towns/individuals. Go a little bit further, and make nearly EVERYTHING local, down to all laws beyond the constitution. Makes things harder for businesses, but not radically, and it would simplify things quite a bit while weakening the bureaucratic expansion of the federal government and other malignant entities.
(Score: 0) by Anonymous Coward on Saturday June 23 2018, @05:46PM
of course this dumb bitch was going to come shilling for government.