Thread: California to target Web retailers for sales taxes

California to target Web retailers for sales taxes - Los Angeles Times

Anybody following this? Something really stinks (as in fishy) about this, especially the Federal involvement (Streamlined Sales and Use Tax Agreement). Although this has apparently been going on for some time, it's new to me. What I couldn't find is how will this law be enforced?

The term "board of equalization" for a tax department has a Randian quality to it.

I don't know how California will be able to enforce this. I'm not sure what the legality is regarding interstate commerce.
Will they be sending bills to foreign companies that do retail via the internet?

There is nothing new here. CPA's and Certified return preparers have been mandated to ask as per line 95 when the return is prepared. Enforcement is a bit trickier, but if one answers "no" and later the BoE (no Randian overtones) finds otherwise, you can be hit with a hefty penalty. You might have to sell your razor collection to cover the fee!

Originally Posted by LeBois

There is nothing new here. CPA's and Certified return preparers have been mandated to ask as per line 95 when the return is prepared. Enforcement is a bit trickier, but if one answers "no" and later the BoE (no Randian overtones) finds otherwise, you can be hit with a hefty penalty. You might have to sell your razor collection to cover the fee!

I'm assuming you are refering to a declaration of use tax (don't know what "line 95" refers to). But how does one state control the sales practices of an out-of-state, on-line retailer?

I can see how the state might crack down more on under reporting of use tax within the state. But control ouside of the state?

Originally Posted by honedright

I'm assuming you are refering to a declaration of use tax (don't know what "line 95" refers to). But how does one state control the sales practices of an out-of-state, on-line retailer?

NY did it with amazon.com few years ago, they just passed a law redefining 'affiliate' and under the new law amazon was required to collect taxes for NY. You ask what happens if a retailer refuses to comply with the law and I suspect that (apart from challenging it in court, as amazon.com did) as long as they are big enough to matter NY has figured out ways to make their life so miserable that the cost/benefit is in favor to just comply. There is a current lawsuit by another company.

From my understanding the problem with cross-state internet sales is that it's not clear which state should collect tax because both can claim participation in the transaction, so they just went with not collecting, after all internet commerce was all new thing, insignificant revenue, not worth pursuing. I think (at least in NY) consumers are still required to pay the tax to the state, but that's hard to enforce (however I've personally seen friends change their attitude and start paying those taxes when their income multiplied and the stakes got much higher).
But now that the internet commerce market is enormous and the revenue is significant the states want to get those money and the only feasible way to enforce it is by going after the vendors (for them the stakes are much higher than for the customers).

You are right, they can't really go after every single small merchant, but I suspect that in the future this will change. One way I see this happening is by mutual agreement and each state policing their own merchants that they collect the taxes not just for that state, but for all other states as well.

Interesting. I wonder what effect this might have on those states without a sales tax (Alaska, Delaware, Montana, New Hampshire and Oregon)?

What it looks like we're headed for is a Value Added Tax (VAT) similar to the UK. The vendors collect it from every one. Feds will unforced it, states get a share.
Anyone for a Carbon Tax?

Originally Posted by honedright

Interesting. I wonder what effect this might have on those states without a sales tax (Alaska, Delaware, Montana, New Hampshire and Oregon)?

I wonder about that to. My guess is the Gov't will pass a tax for every state in the country to try and enforce it. I wonder how many companies will pack up and head over seas and than ship their products into the US if this happens.

Enforcement is the big problem. Just remember however, whether one likes, agrees with, or not, when s/he signs the 540 in California, it's under penalty of perjury if willingly includes misleading information. In addition, some out of state purchases are taxed if the company has a physical presence within California i.e., Orvis, Bass Pro, etc.

Originally Posted by InHonorOfRay

I wonder about that to. My guess is the Gov't will pass a tax for every state in the country to try and enforce it. I wonder how many companies will pack up and head over seas and than ship their products into the US if this happens.

My guess is about zero. Plenty of countries and us states with a sales tax, and companies don't leave over that. Shipping is expensive and slow, especially international shipping. But most importantly shipping from another country does not evade the tax - it just gets collected by customs (just ask our canadians and the european members).

But as far as US go, it's not happening anytime soon, the politicians who brought that up during the republican primaries lost. And there was more talk about it in the 2010 election, but then it predictably died as soon as the election was over.