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Democrats Turn to Online Sales Tax for New Revenues

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Democrats Turn to Online Sales Tax for New Revenues

Old 08-03-11, 07:01 PM
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Democrats Turn to Online Sales Tax for New Revenues

Democrats Turn to Online Sales Tax for New Revenues


While the nation was captivated by the debt crisis – and whether tax increases would be part of any deal to reduce federal deficits – a group of Democratic senators and congressmen have rolled out legislation that would raise new revenues by targeting online sales from retailers like Wal-Mart and Best Buy.

These lawmakers say that states are losing billions in uncollected state and local sales tax on Internet sales and are touting the support of online retailers like Amazon who say they’re fine with an across-the-board system that would make tax collections simple.


The bill introduced by Sen. Dick Durbin, D-Ill., last week called the Main Street Fairness Act, has drawn support from several Democrats, including Sens. Tim Johnson of South Dakota, Jack Reed of Rhode Island, Reps. John Conyers of Michigan, Peter Welch of Vermont and Heath Shuler of North Carolina

“This bill will level the playing field for local businesses, by ensuring that online retailers collect the same sales taxes that brick-and-mortar retailers already do,” Conyers said. “This will help our state and local governments avoid devastating layoffs and cuts to essential services vital to the well-being of our local communities.”

But several tech groups strongly oppose the bill.

“Congress often says that small businesses are the backbone of the economic recovery, but these new collection costs will break the backs of many small online businesses,” said Steve, DelBianco, executive director of NetChoice, a tech trade group.

“It’s a cruel irony to call this job-killing bill the ‘Main Street Fairness Act,’” DelBianco added. “Online sales are about the only way small retailers can survive being steamrolled by the big-box chains who are behind this bill.”
Old 08-04-11, 12:09 AM
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Re: Democrats Turn to Online Sales Tax for New Revenues

Why am I not surprised Durbin is behind this? Earlier this year the State of Illinois tried to bully its citizens into paying online taxes that weren't actually owed. Seriously, the state admonished taxpayers and tried to demand that we total up our online purchases and then send the state a check in the amount of the tax.

My issue with it is this -- and please correct me if I am wrong -- sales tax is a point of sale tax collected by the seller, not a use tax on the purchaser. (Yes, I realize the user ultimately pays the tax). If the point of sale does not occur in the state, then the state has no right to collect tax. (Yes, I realize there is some debate as to where the point of sale occurs.)

If I travel to New Hampshire (who does not have a sales tax) and buy an action figure, I am not obligated to pay tax to the state of Illinois. Why should I be obligated to pay tax for a purchase that is processed in another state just because I use a computer in Illinois (or any other state)? Currently taxes are collected where the retailer is, will we now have to pay double taxes - one for our state and one for the state where the sale occurs?

And one more random thought -- of course Best Buy and Walmart are supporting this. Retailers get to keep a (small) portion of the taxes they collect. For a mega-company, this is worthwhile because it not only hurts the competing small retailer, but could add up to a significant new source of revenue.
Old 08-23-11, 02:26 PM
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Re: Democrats Turn to Online Sales Tax for New Revenues

Originally Posted by Abob Teff
If I travel to New Hampshire (who does not have a sales tax) and buy an action figure, I am not obligated to pay tax to the state of Illinois. Why should I be obligated to pay tax for a purchase that is processed in another state just because I use a computer in Illinois (or any other state)? Currently taxes are collected where the retailer is, will we now have to pay double taxes - one for our state and one for the state where the sale occurs?
Technically, this is not true. On anything you purchase from outside of the state of Illinois (for use in IL) for which the retailer does not collect sales tax greater than or equal to Illinois' 6.25% sales tax, you are technically required to pay the difference to the state of Illinois.

So, if you buy in NH, you owe IL 6.25% of the purchase price. If you buy something in Indiana, where the sales tax is 7%, for use in IL, you owe Illinois nothing, because Indiana has already collected tax in excess of the tax that IL would have collected and IL is not looking to "double tax" you.

See here.
Old 08-23-11, 02:32 PM
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Re: Democrats Turn to Online Sales Tax for New Revenues

Originally Posted by Abob Teff
And one more random thought -- of course Best Buy and Walmart are supporting this. Retailers get to keep a (small) portion of the taxes they collect. For a mega-company, this is worthwhile because it not only hurts the competing small retailer, but could add up to a significant new source of revenue.
Also, this strikes me as a bit of a mischaracterization. Best Buy and Walmart would support this because it would require Amazon, etc to collect the same taxes that they are required to collect when they sell online. Currently, because Best Buy and Walmart have a physical presence in each state, they are already required to collect sales tax for any state to which they ship.

Amazon is only required to collect sales tax in those states where is has a physical location (and, they would claim, is "doing business"). As such, right now Amazon has an advantage in that consumers believe (wrongly) that they are not required to pay taxes on Amazon purchases and that makes them even cheaper.

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