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posted by martyb on Friday June 22 2018, @07:51PM   Printer-friendly
from the everybody-self-reports,-right? dept.

https://www.npr.org/2018/06/21/606463186/with-billions-at-stake-supreme-court-rules-states-may-tax-online-retailers

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.


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  • (Score: 2) by Alfred on Friday June 22 2018, @08:39PM (5 children)

    by Alfred (4006) on Friday June 22 2018, @08:39PM (#696948) Journal
    There will be an official .gov site and downloadable text file to be integrated into software. Each local entity needs to submit a form that defines the geographic area, tax rate and address to mail the check to so the .gov site can aggregate it. What could go wrong? (I claim a 0.0001% on all sales in California south of Sacramento)
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  • (Score: 3, Informative) by Anonymous Coward on Friday June 22 2018, @09:14PM (4 children)

    by Anonymous Coward on Friday June 22 2018, @09:14PM (#696970)

    It might be a little bit more complex.

    Different items are taxed differently, so you'll also need to provide the tax rates for each type of product. Some products are exempt from taxation, but that varies by location, so you'll have to track all the products that aren't taxed, too. Perhaps 10,000 different categories might do it. Eh, maybe more.

    Also, some taxes aren't the same all the time. You'll have to include, for each product and each location, an array of dates where the rates may vary, and how much the rate is during that time. Again, some states do things like give a few days of tax-free buying for back-to-school items a bit before school starts, so you'll have to track all that too.

    Some states have inter-state agreements about taxation between neighboring states. So you not only have to track where it's going, but where it's coming from.

    Oh, and any of it can change at any time a legislature or town council decides to change it. So you get to track all that, too.

    As a now retired data analyst, good fucking luck.

    • (Score: 2) by Nerdfest on Friday June 22 2018, @11:01PM

      by Nerdfest (80) on Friday June 22 2018, @11:01PM (#697009)

      I've worked on code to do something very much like this nationally, and it's a fucking nightmare. Doesn't help when it's badly done, and in the wrong language for the job, but even so it's nutty. Last I checked, the rules (in this system) for alcohol and tobacco were especially complex, based around amount, percentage alcohol, litres of pure alcohol, etc, with lots of special cases for extra spaghetti goodness. Expecting small companies to deal with this stuff will end badly. Is this the corporate equivalent of the cycle where poor people get a lot of fines, etc? Seems a bit like it.

    • (Score: 2) by Immerman on Saturday June 23 2018, @03:17AM (2 children)

      by Immerman (3985) on Saturday June 23 2018, @03:17AM (#697106)

      It could be simplified immensely if a definitive federal database was established, with each state responsible for keeping their section up to date. You put in an address, it gives you a tax breakdown for out-of-state sellers. Ideally something easily downloadable and open source, so that instead of notifying the federal government of every transaction, you can download the program, keep the database synced every [legally mandated time interval], and it'll tell you what combined tax to charge any address, and spit out a list of tax totals and recipients for you to pay every sales-tax day.

      Maybe local taxes are included, maybe you have by-product-class taxes, maybe those are details that get compromised away in the name of expediency. This is all firmly in the domain of politicians after all - they all know how the sausage gets made.

      And quite likely, every major sales portal, shopping cart provider, etc. offers to do all the work for you for a modest fee.

      • (Score: 0) by Anonymous Coward on Saturday June 23 2018, @01:11PM (1 child)

        by Anonymous Coward on Saturday June 23 2018, @01:11PM (#697182)

        Likely organized by zip code?

        Each zip code has a certain tax rate associated with it, along with payees?

        This is one of the problems we run into when our government has grown so large as to micromanage everything like this. From what I see, the cost of complying is greater than the tax itself. The net result being just a bunch of busywork. Same problem we have in healthcare/insurance. Its like having highly inefficient power couplings in a system... so much overhead and the thing barely runs - and from what I can tell, it looks like the system is almost ready to stop.

        • (Score: 2) by Immerman on Saturday June 23 2018, @02:49PM

          by Immerman (3985) on Saturday June 23 2018, @02:49PM (#697200)

          Hey, if there's reliably(enough) only one tax jurisdiction per zip code, that sounds like a wonderful idea. As for the cost of compliance - if you sell things you already have to collect and remit taxes, unless you refuse to do business with in-state customers? It costs you what, 2ms to have your online store front look up and apply the appropriate tax rate during the order, and add a bookkeeping entry to remit X taxes to Y? Yes, the storefront software needs some added features, but how many people actually write their own storefront software rather than using a commercial product?

          It's only keeping the database updated that's any sort of issue - and even that's trivial if you avoid local taxes. Or have a centralized database where the information is stored. No micromanaging - just a single location you can go to to get all the data at once, in a standard-format data file that any storefront software can reliably read.

          Personally, I think the ideal solution for "full taxation" would be to set a flat "interstate sales tax" rate, at least for local taxes within a state, and a streamlined way to remit all the taxes at a per-state level (e.g. here's a check for total state and local taxes, and a breakdown of purchase amounts by zip code so that the state can distribute local taxes appropriately) As a seller you already collect all that information anyway.

          If you want to simplify it even further, just leave out local taxes altogether - you just collect and remit taxes for each state at a flat per-state rate - no variation based on product categories,etc. and you only have to keep track of 50 tax rates (plus all the category and local stuff within your own state) Let each state decide for itself if they want to charge a higher interstate rate and distribute some of it to localities according to whatever policy they want.

          The thing to keep in mind is that this isn't establishing new interstate tax policy - it's just opening the door for such a policy to be created. Everyone involved on all sides will be politicians well-versed in compromising to ensure their pockets get lined.