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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: 0) by Anonymous Coward on Saturday June 23 2018, @05:50PM

    by Anonymous Coward on Saturday June 23 2018, @05:50PM (#697271)

    IT IS VERY SIMPLE to do. I set up and maintained a system for home service company.

    SALES TAX is consumer CONSUMPTION Based. Where is it consumed for food, light bulbs, whatever.
    Consumption with low traffic volumes is ASSUMED to be at the point of change of ownership (the place you bought it).
    It is FOB is used in business. It is saying owner ship changed on sell loading docks. So, the buyer has to get it from there to their location so shipping and the like are the buyers problem.

    SALES is hard to manually do, since if you ship with in a state and rate is different every where then a SMALL would have to know every rate with-in the state. In California r around Houston TX. that is bitch.

    Trucking industry is "ownership" of the goods in the truck is ASSUMED to be driver's. If it catches on fire, is harzardous, or what not, it is the drivers fault.

    SALES TAX varies based on address location. So Federal land in State cannot be taxed, State land in County can not be taxed, County Land in a City cannot be taxed. Then toss in MTA and other local taxing authoruty... you get the picture.

    ADDRESS are OWNED by the Post Office. They know what is right and what is invalid. They know the correct zip and zip+4.

    So the fix is cheap (mostly) and easy (mostly)...
    1) Change laws so ownership changes as each person/carrier takes procession. (normalizes trucking assumption)
    2) Sales Tax Rate will be part of Address validation by the Post Office. It would take about 1 month and 3 people to do it. Post Office already knows the type of land and it actual location. It is setting up the filling system by State, COunty, City, MTA, ... to define the geo-coded tax information. Also processing laws. But there are databases out there that do it today. Those table are sold by subscription from large accounting firms. Make it part of the Postal System.
    3) since the item changes hands at the front door of buyer. Then the last mile delivery service (they have physical presences, would "collect" the tax and would be audited on the collections.

    So how would this work?
    Buyer buys and item. During check out the delivery address is checked and validated. That is done to determine the cost of shipping by FedEX, UPS, USPS ... That check will also return the tax rate for that location. Hence two charges, shipping and sales tax. Both of these funds are turned over to shipping company. Now every website can "collect" sales tax without knowing a damn thing about it.

    If I walk in to FedEx or UPS, or USPS, ... I want to ship a goods, I declare value, type and source (used vs new (retailer shipment)), they would determing shipping and tax at the delivery point. They would collect that tax there. You as business can fill for return of taxes paid, since it changed ownership.

    IF you go to USPS site to validate an address, the tax rate would would be returned with the zip+4 and other information. So you can charge the correct amount to consumer and get it shipped at the post office.

    Other things to do...
    1) LAW the tax rate suplied by the USPS is "the valid rate". Even if it is wrong, it is right of legal reasons. So everyone that follows the correct method, validate address get a rate back is protected.
    2) LAW USPS can subcontract / assign others to also provide the service, FED or UPS for example. Allows for more equipment to handle the work load. Also sinceFedEx and UPS will be collecting taxes too, they would be good partners in the process.
    3) LAW Sales Tax what it applies to is normalized items. So if a state allows sales tax on Items: Food, Labor, Alcohol, ... then each of those taxes are returned as separate lines.

    Hard part of TAXES in general is intent. Worked with international restaurants years ago. In one city, they implemented a tax on beverages. The issue was the intend consumption of beverage. A glass of milk, to drink in resturant area was 15%, in the bar area 3ft away 25%, but you pour either place over your food is was 10%. This why normalization is important.