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A few days ago, we published an article about an impending Federal law that would require merchants who have no physical connection to a state, county or city to collect sales taxes for those locations. The good news is that the bill has been held up in Congress. There is still time to contact your Senator and Representative and urge them to vote this bill down.
Here are the issues:
State and local governments think they need money. They see taxing internet sales as a way to generate tax revenue that is not visible to the taxpayer. Since almost no one wants another tax, politicians think they can con the public into believing this is not a "new" tax, .
This is a half-truth. A tax that we, as a non-resident company in your taxing district, don't collect, already exists in your taxing district. You are supposed to report the out-of-state purchase and send the local tax collector the amount of the tax. Some people do. Others do not, for what ever reason. If someone is unwilling to pay the tax directly, why should a company hundreds of miles away be asked to collect it for your local taxing authority? And to do so without compensation for the bookkeeping cost and labor cost of doing it?
Yes. We collect tax for sales of Native American Jewelry to customers in our home state (Florida). And we get a small "commission" for doing so. We do so willingly. After all, we get the benefit of the infrastructure our local taxes support.
By the way, there are thousands of separate taxing district in the country. Thousands of different sales tax rates. How can a small business keep track of all those rates and afford to file returns/reports for all of those taxing districts/rates? Doing so will only raise the cost to you as purchaser not just by the amount of the tax but also by the amount of the overhead for collecting and forwarding those taxes.
Hardly seems fair. And "fairness" is the other rationale proponents submit for creating this new tax collection protocol. They claim it is unfair for corner merchants to have to collect sales tax while internet merchants do not. Is it also unfair that online merchants have to pay (or collect for) shipping? Or that online merchants have to pay to design, maintain and host websites?
In the end, who pays for the government's greed? You do.
Dear Customer:
If you enjoy shopping on line and not having sales tax added to your purchase, trouble is on the horizon.
Congress is considering a new law that will require online sales to be taxed at the rate in the buyers home state, even though the online seller is not located in that state.
On passage, if it comes, the so-called Market Fairness Act, will require an online merchant - such as Native-American-Jewelry.org - located in Florida, to collect the Illinois sales tax from a buyer in Chicago. (what is it now? 10%?) In fact, if different counties and cities in Illinois have different sales tax rates, we will have to figure the sales tax for each town and county. This will be true for every district in every state with a sales tax. These tax rates will have to be added to your purchase price, in addition to the cost of shipping.
To be fair, some merchants complain that online merchants have an unfair advantage because they don't have to collect the tax that the local merchant does.
Actually, the taxing authority requires the buyer to report the sale value and pay the tax directly to the authority. So, online purchases have not been tax-free. The online merchant just has not been required to incur the expese to collect the tax for a state in which it does not have a facility, or a vote and does not use the local infrastructure and services. (We used to call it "taxation without representation").
"Why are there online merchants, anyway", you might ask.
1. Online merchants offer product inventory and selection that buyers can't find locally.
2. Online merchants tend to have lower prices, which benefit buyers.
3. Online merchants are available for buyers to easily compare prices.
4. Online merchants save buyers time, trouble and transport costs of shopping locally.
We have nothing against shopping locally. We do it ourselves.
But the advantages above will be diminished under the new law. And you, as a consumer will be the loser.
Why are some forces pushing for this law?
A. Governments need money and they are looking for ways to get it. Since they feel they can't trust you to pay the tax directly, they are conspiring to force someone else to do the dirty work, with no compensation to the online merchant for their efforts.
B. Large online merchants have facilities in states other than their headquarters. They must collect taxes there anyway. To them this eliminates a benefit a small, specialized online merchant has, and squeezes a small business out. Ultimately, to the inconvenience of the public.
So, what can you do about it? Two things.
1. Let your Congressperson and Senator know you oppose the mis-named Market Fairness Act.
2. Do your online shopping now, before the law can be passed and applied.
You'll save, and support small business in America. Thank you.
According to the media, the State of New York is in the process of requiring Amazon to collect sales tax on all sales sourced from New York residents, and remitting those taxes to the State. If the buyer lives in New York City, City taxes also will be attached to Amazon sales. That would add up to a surcharge of more than 10% on every purchase a NewYorker makes from Amazon.
I'm not a lawyer but I know a little something about WHY you don't pay sales tax when you but from an internet merchant who does not have a "nexus" in your home state. (Nexus is a fancy word for a presence or connection.)
Something called the Interstate Commerce Clause says that individual states can not interfere with trade between the states. In a court case called "Bellas Hess", the Federal courts decided that states could not require catalog merchants who did not have offices in, or a connection to, a State to collect taxes on behalf of that State.
Take our gallery, Aboriginals, and Florida as an example. If you live in Florida and you buy from us, we must, as a Florida company, collect 6% sales tax from you and forward it to the State tax collector. But if you don't live in Florida, we can't be required to charge you the sales tax for the State you live in.
To require us to do so would put your state right between us and you, a violation of the Interstate Commerce clause.
A disinterested party, that is, one who isn't paying the tax, might ask, "why is that so bad?" Well, there are 50 different states. If we, or any other internet merchant, had to calculate, collect and forward different State taxes for all of them, and for every taxing jurisdiction within them, we would not be able to stay in business.
The losers would be our customers, you, and the people who rely on us to pay our tax, based on our income.
What does all this mean to you?
If you live in New York, make sure to check the tax collection status and policy of whoever you are buying from. Make that a consideration about doing business with them. If you decide to buy anyway, order now, before the tax starts being collected.
If you live in any other state, check if the merchant you are dealing with has a "nexus" in your State and what their tax collecting policy is. And lobby your State government not to follow New York's lead.
On the good news side, many legal authorities believe that New York State doesn't have a prayer of winning if this goes to the Supreme Court as a Constitutional challenge.
Stay tuned. You are the one that pays this tax.
