Supreme Court rules on internet sales & Sales tax collection

[Grant Wilkinson]

I live in Canada, so my experience is likely different than most of yours. However, when I order anything from the US, I am charged the state tax of the state where the seller is. So, clearly some sellers are able to add tax to the purchase price, even if the buyer is out of state.
In Canada, pretty much every vendor I deal with asks where I live and charges the correct rate of tax for my province, notwithstanding the location of the vendor. This has been the case for as long as I can remember. I'm sure that US vendors will be able to do the same thing. I appreciate that we have only 13 rates of tax and you have 50, but the computer logic is the same.

[Stephen Tashiro]

However, when I order anything from the US, I am charged the state tax of the state where the seller is. So, clearly some sellers are able to add tax to the purchase price, even if the buyer is out of state.

That's the typical experienceo of US citizens who make face-to-face purchases when out of their state. I suppose, in theory, if a citizen of state A buys something in state B and pays sales tax to state B, he could file a tax return in state B and claim a refund. Not many people do that!

Are state sales tax laws generally written so the state where the buyer resides mandates the tax? I wonder if city and county tax laws generally specify that a transaction is taxed because the seller is in the city or county.

Perhaps the requirement to tax internet purchases according to the citizenship of the buyer will lead to the same requirement being enforced on brick-and-mortar stores. It would be an "about face" to the usual complaints that internet sellers have an advantage over brick-and-mortar stores in tax collection. The internet sellers can complain that brick-and-mortar stores aren't required to tax according to the citizenship of the buyer.

[Ken Combs]

My state (OK+) has a state sales tax but addition various cities and counties have local sales taxes. And, the rule defining tax owed is the point where the transaction is completed. So, if I order lumber delivered to my home in the city limits I owe both city and state sales tax. But, if doing work for another outside the city limits, it only requires payment of state tax. What makes it difficult for software is the locations are in the same zip code. Probably the only way to accurately determine it programmatically would be to have a table of GPS coordinates/tax rates. What a nightmare to create and update!

An earlier poster mentioned 50 tax rates, but it is much, much worse than that!

My daughter works in accounting for a company that has presences is several states and has to deal with sales tax. Because they deal with a smaller number of rates they did it manually, and that consumed a lot of time so they had to purchase a software package to help. The worst part is demands for audit info from states who think they are being shortchanged. Even if they are not losing out, the audit consumes a week of an employee's time to prove it. To date there are only a few states that do that, but imagine the impact on small businesses if/when they get hit with 50 such requests.

[Perry Hilbert Jr]

PA's sales tax is a nightmare. No tax on clothes, but a tax on neck ties. A sales tax on dishes and glasses, but not if made of paper. Tax on books, except Bible's. No tax on magazines, if published more than 12 times per year. No tax on Newspapers. No tax on food purchased to prepare at home, but ready to eat food gets taxed. Sales tax on automobiles. But not on tractors, if used to grow food for sale. No tax on candy. The rules have so many stupid exceptions that PA merchants can't get it right, how will a business in Oregon get it straight. And what of foreign sellers? In the past year, I have probably purchased more from ebay businesses overseas than here in the US. Germany, India, Japan and China. Will those purchases still be sales tax exempt? ( I understand that I may owe a PA use tax.) Frankly, some of the hardware items I use are incredibly inexpensive overseas compared to here. For instance brass plated 8mm screw eyes are $1.89 for 300 of them, including shipping. Never found a US supplier for less than 5 times that price.

[Bill Dufour]

In California there is no tax on food. Buy a $5.00 footlong sandwich and pay $5.00. But if they toast it, for free, it costs $5.36 since it is now prepared food and that is taxed.
There used to be road tax on car tires on top of sales tax. Now they only charge the extra tax if the tire weighs over 50 pounds or some thing. Theory being road tax is only for big commercial trucks with big heavy tires.
Some thrift stores charge sales tax, some do not.
No sales tax on real estate due to massive continuous lobbying by realtors.
Bill D

[Rod Sheridan]

As cumbersome as it may be to get implemented, it's good that the taxes are being collected for 2 reasons.

It helps level the playing field between mail order and retail vendors, and it restores the revenue to the state or locality that was lost due to mail order sales.

regards, Rod.

[Jim Becker]

Rod, I believe you are spot on with that. And with the massive shift of commerce to online businesses (some with brick and mortar; some without), there is a need to do this kind of thing. My concern is with the current complexity that having as many as 3000 tax jurisdictions brings, particularly for the small operator. Ultimately, this is going to have to be simplified and standardized so that "the paperwork" doesn't drive small businesses out of business. It may be time to move to a more national approach in that respect if there's an expectation that a small or micro business is going to need to collect "sales tax" regardless of where the buyer resides.

[Keith Downing]

This has to be one of the most complex issues faced in awhile. I can literally argue for both sides. No sales tax was a huge loop hole. Small merchants having to collect from 50 states and their municipalities is beyond unfair.

That tells me there should have (and maybe will be) some legislation enacted to meet in the middle. In my mind, something like this is fair and equitable:

A simple chart of sales taxes to be collected from internet purchases, by state. They could all be the same rate, or differ by state (especially since some states don't collect sales tax). The rate could also be something in the range of 2/3 - 3/4 of the actual sales tax of the states, giving a small break to the consumer, since the goods and services did not require any benefit from the state (such as infrastructure or oversight) to be produced.

Hopefully for once we can use common sense to come to a conclusion that works before all 50 states enact different rules that will have to be rolled back.

[Brett Gregory]

There are a lot of Aussies, including me, that purchase goods from the USA and elsewhere. Sometimes they are sent directly from the retailer, so I imagine that there would be no USA taxes applied, but many of us have a warehouse address in CA or OR where we can accumulate packages and consolidate them into one carton for shipping to Oz.

So my question is: is the State Sales Tax based upon the receiving address or the sending address? (I think the former, but not entirely sure). That is, if I purchase something from a state that has 10% sales tax, but have it posted to Oregon where there is no state tax, will I still pay no state tax? (County and City tax may be another issue).


It's actually going to get worse for Aussies from July 1, 2018. Our govt has decided to impose our Federal Goods & Services Tax of 10% on all packages coming in, where previously only those over AUD1000 (~USD730) were due for it. We don't necessarily mind paying the tax, but the Govt has made it extraordinarily complex, as Govts tend to do.

In fact any overseas retailer or company who sends more than $75k pa to Oz will now have to collect the 10% GST at the transaction point, and forward it to the Aust Govt every quarter. Strange but true. So Lee Valley for example will become a Tax Collector for the Aust Govt from later this week! Amazon have (sensibly) flipped the bird at this preposterous idea, and will geo-block Aussies from all their sites except the fledgling Australian site.

This is a 3 year trial, and many or most of us believe that it will cost more to implement than it will raise in tax. Perhaps it won't even make it to 3 years......

We are expecting chaos and mayhem! Customs warehouses piled high with packages awaiting tax payments. Not enough staff to deal with it all, and so it will go on.

[Yonak Hawkins]

Down-to-earth food for thought, Keith.

[Rod Sheridan]

Rod, I believe you are spot on with that. And with the massive shift of commerce to online businesses (some with brick and mortar; some without), there is a need to do this kind of thing. My concern is with the current complexity that having as many as 3000 tax jurisdictions brings, particularly for the small operator. Ultimately, this is going to have to be simplified and standardized so that "the paperwork" doesn't drive small businesses out of business. It may be time to move to a more national approach in that respect if there's an expectation that a small or micro business is going to need to collect "sales tax" regardless of where the buyer resides.

yes Jim, I can see how much work and confusion all the different tax requirements could cause.

Perhaps it's time for a national "online" sales tax that would be the same in each jurisdiction?

regards, Rod.

[Jim Becker]

Perhaps it's time for a national "online" sales tax that would be the same in each jurisdiction?

Likely necessary long term, but I don't see how it could be for online-only because that puts online at odds with brick-and-mortar with potential disadvantages. And then there is the root of the complexity...the thousands of local/municipal jurisdictions, like Philadelphia, that have their own small sales tax on top of state sales tax. This is complicated because of the way the system currently exists plus states' rights, etc. A major transformation would need to occur and we all know just how likely that would be "effectively" approached at the government level...

So, if it's held that small operators need to collect sales tax based on receiving location, including local type taxes above state sales taxes, it's mostly going to be an opportunity for the accounting service providers and business partners like Amazon Marketplace to deal with the tax stuff behind the scenes on behalf of those small operators. Otherwise, small business will get killed off pretty quick. And that would be sad.

[David Kumm]

As per my earlier post, half the states have all ready singed on to a unified sales tax law to ease reporting. I suspect that this will speed some more to join. Dave

[Carlos Alvarez]

Our state recently changed the structure to a unified reporting system where you pay once and they handle disbursement. Previously we had to file in multiple jurisdictions within the state. I don't know the full details, but our bookkeeper says it's been a huge improvement. As said above, more states will move to it also.

[Van Huskey]

It helps level the playing field between mail order and retail vendors,

regards, Rod.

While both conventional wisdom and logical it may actually have the opposite effect. The final cost of internet supplied goods will likely increase and come closer to brick and mortar prices this will result in an overall spending increase (for partial internet shoppers). When consumer prices go up it causes consumers to be more price sensitive so it may drive the internet shopper to do MORE shopping online to help balance the overall increase on the goods they buy. That along with the convenience and the time/gas/mileage on the car savings they have become accustomed to may produce a counterintuitive deleterious impact on the brick and mortar. The increase in trouble and cost for small businesses selling on the internet might well increase the use of sales platforms like Amazon, giving Amazon more money to revisit the heavy market penetration pricing. Many states and local municipalities may well see a significant increase in tax revenue but the local brick and mortar stores may be hurt even more and the states will have less incentive to save them.