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Supreme Court rules states can force online retailers to collect sales tax
It's about time as states have lost billions because of this online tax dodging and local bricks and mortar stores can't compete. This is the so-called "curve ball" the Supreme Court threw the markets, according to Art Cashin who looked like he was called off the golf course to do his interview on CNBC.
Over the last 10 years or so - Online merchandise has lost quality - got to know what you're are buying. Took a lot of internet business back to brick and mortar stores. People who stand behind their products rather then here today and gone tomorrow.
I'm just sick and tired of Digital This Digital That. Let an item cost same amount of money in the store and online. Then let's see how many people still want to wait for item to arrive in mail vs going to store and buying.
People have forgotten WHAT it is they are buying. I know people who think they understand technology because they buy on Amazon. Then again I also know people who drive past Harvard and then when they are back in Texas they feel more intelligent. Same diff.
Axshully, it's much to do about nothing. Cripes, it's a software issue that has been solved by Amazon and will be solved by everyone else. The folks that will have a tougher time are the small independent vendors selling on Ebay and PayPal will take care of them.
@rono Amazon already charges sales tax in most states but not Wayfair or Overstock and not for independent sellers on Amazon which account for 50% of retail sales on Amazon.
It looks like all the justices agreed that if the tax question were being decided for the first time, physical presence of a vendor wouldn't matter.
The original case in 1967 established the rule that a state could force a vendor to collect taxes only if it had a physical presence in the state. The dissenters in that case, saying that physical presence shouldn't matter, were three of the more liberal justices (Douglas, Fortas, and Black).
Here, the dissent (saying that physical presence still matters) was written by Roberts, joined by three of the more liberal justices. They based their dissent on the fact that stare decisis (precedent) demands a strong argument to overrule. They felt that this threshold had not been met.
With respect to being a burden on vendors, that was a key consideration in all the cases. States can pass laws affecting interstate commerce only if they do not impose an undue burden. The majority felt that the particular SD law in question didn't do so, because it didn't touch the smallest vendors (those doing less than $100K in sales and fewer than 200 separate transactions in the state per year).
However, the Court declined to draw a bright line. So it's possible that we could see 46 more cases (excluding the four no-sales-tax states) examining where each state drew its line between large and small vendors. Or Congress could step in to bring some order to a crazy quilt of tax laws. (Sure, right.)
IMHO it's not the software that's the challenge, but the data entry. One has to keep track of all the idiosyncrasies of all the little tax fiefdoms. I've read that in Illinois, Twix bars are not taxed (they contain a baked cookie) while Three Musketeers bars are. In NY, baking chocolate bars or bags of chocolate chips are not taxed (ingredients for cooking), but Hershey's chocolate bars are taxed (candy). Keeping up with all the tax rates, all the laws and how they apply to millions of different items sold - that's the real difficulty.
As @rono said, it's a solved problem, and one that smaller businesses can contract out.
BDO commercial: "think about all those tax jurisdictions; how are we going to handle this? We aren't."
It's a tax on the purchaser, collected by the vendor. So it's a tax in the state of the purchaser.
It is sort of weird. If you travel to another state to buy an auto, the dealership is required to collect the tax you would have paid in your home state. The dealer then remits that tax to your state. But if you buy anything else of of state, you pay the sales tax of that other state.
@Anna- your question is a little hard to parse as written.
The tax in question is that sales tax which would be levied if the purchase were made in a physical store location within a particular state. Presumably the person making such a physical purchase is your "purchaser or the receiver of the goods". In that sense it could be defined as that tax paid by "the purchaser or the receiver of the goods", and extends the obligation of that "purchaser or the receiver of the goods" to pay the same tax on an internet purchase as on a purchase physically made within the state itself.
(I'm certainly no msf, who I'm sure would be much more clear, so I hope that my attempt at explanation is intelligible.)
Thanks guys. I guess it is the way my thinking works. I immediately formed a picture of asking my brother-in-law in Oregon to manage my large Internet purchases by making an Oregon purchase as a gift to be delivered to me in Washington. Oregon is an income tax only state and Washington is a high sales tax state. He would be the purchaser and I would be the receiver.
What made me think of this was that I have a sister I send gifts to in Tennessee and Amazon used to send me a message that I may owe Tennessee taxes. When I checked with sister's husband he described sort of a transport infrastructure tax based on road and facility use but I chose to ignore the Amazon notice so I never found out if he knew what he was talking about or not. But if I did owe TN tax and WA tax, it would be two states taxing an Internet purchase. I haven't gotten this notice in several years.
- Secondhand marijuana smoke can create range of detectable effects study finds https://hub.jhu.edu/2015/05/15/secondhand-marijuana-smoke-study/ After spending an hour in such conditions, nonsmokers showed "positive drug effects in the first few hours, a mild sense of intoxication, and mild impairment on measures of cognitive performance ...
Ya, too many people blame the secondhand smoke thing, eh? " I was minding my own business, waiting in line; and these folks just kept passing a joint and I was downwind." Back in the day, the name was "contact high". Not that this is not impossible. The test: We'll place four folks in a car, windows closed. The driver is the only non-toker. So, we'll do our "contact high" scientific study after a 20 minute drive, okay? Oh, wait.........we'll have to postpone that study for a bit, as the driver stopped at a convenience store and just returned to the car with a bag of Oreo cookies and a small container of chocolate-mint ice cream. Study report to follow at some unknown date in the future; if anyone remembers same.
NOTE: indicating "use tax" is seldom used by taxpayers, based upon what I've read over the years; and Michigan doesn't have the resources to track who is lying or not.....
Back to the topic. This is what Michigan has used for a number of years for internet taxation when filing an individual return:
--- Use Tax
Every state that has a sales tax has a companion tax for purchases made outside that state by catalog, telephone, or Internet. In Michigan, that companion tax is called "use tax," but might be described more accurately as a remote sales tax because it is a 6 percent tax owed on purchases made outside of Michigan.
Use tax is due on catalog, telephone, or Internet purchases made from out-of-state sellers as well as purchases while traveling in foreign countries when the items are to be brought into Michigan. Use tax must be paid on the total price (including shipping and handling charges).
How to Report Use Tax
Use Worksheet 1 below to calculate your use tax and enter the amount of use tax due on MI-1040, line 23.
Worksheet Calculation
Line 1: For purchases of $0 to $1,000, multiply your total purchases times 6 percent (0.06) and enter the amount on Line 1, or,
If you have incomplete or inaccurate receipts to calculate your purchases, you may use "Table 1 - Use Tax" to estimate your taxes (see the following example).
Line 1 should contain a number unless you made no purchases under $1,000 subject to the use tax. If Treasury later determines that you owe use tax, you may be subject to penalty and interest.
Line 2: In all cases, if a single purchase is $1,000 or more, you must pay 6 percent use tax on those purchases.
Example: Jacob ordered a computer from a catalog retailer in New York for $1,437.50. Jacob also purchased items over the Internet for less than $1,000 during the year, but lost his receipts. He is sure he did not pay Michigan sales tax. Jacob's AGI is $46,500. Jacob would complete Worksheet 1 as follows:
Line1: Jacob selects $36 from the table based on his AGI ...... $36
Line2: Jacob enters $1,437.50 x 6 percent......... $86.25
Line3: Total use tax due .... $122.25
Jacob would enter $122 (no cents) on his 2013 MI-1040, line 23.
Estimating your taxes does not preclude Treasury from auditing your account. If additional tax is due, you may receive an assessment for the amount of the tax owed, plus applicable penalty and interest.
Use Tax on the Difference
If you paid at least 6 percent to another state on your purchase, you do not owe use tax to Michigan. If you paid less than 6 percent, you owe the difference.
Agreed that this ruling does not change the purchaser's liability for the tax. It only changes who collects the tax - the vendor (at time of purchase) or the buyer (at time of income tax/use tax filing).
The official Michigan version of the state's use tax is slightly different from what you quoted from TaxSlayer. The Michigan.gov FAQ says that:
Use tax of 6% must be paid to the State of Michigan on the total price (including shipping and handling charges) of all taxable items brought into Michigan or purchases through the internet, by mail or by phone from out-of-state retailers that do not collect and remit sales or use tax from their customers. Credit is given for tax paid to another state.
So you owe use tax even if you personally buy an item at a physical store out of state. Though you do get to offset the amount owed with the sales tax you paid to the other state.
@msf 'Course, knowing you'll agree..........................isn't all of this so very simple to understand by all involved??? ......insert numerous smiles here.
Add: Michigan 6% sales tax. Who, What, When and Where (link below)
My add: some candy and related products do not have a 6% sales tax, as they somehow are considered a food product, as traditional purchased food products at a grocery store are not sales taxed in Michigan.
Most states don't tax "food", though they have differing interpretations of what constitutes food. (Illinois shamefully imposes a sales tax of 1% on food, drugs, and medical equipment.)
It's a matter of how one classifies things, much as how a fund is rated depends on how it's classified. For example, RPHYX as a junk bond fund perennially gets few stars. There is usually a method to the madness, though it is still madness.
@Catch22: I have blithely skimmed that language in the MI 1040 since it first appeared and wondered how I could honestly comply, having no accounting in April of what we may have bought online for the previous calendar year. Amazon has been collecting 6% for the stuff it sells here for a while now. From what I understand, Amazon merchants will now have to collect. Reminds me that I questioned the state of MI on my refund recently. I suppose I could get “drug” in for an audit. That notice will surely arrive on a day the markets tank again...
Comments
Let them compete at other levels.
Gary
I'm just sick and tired of Digital This Digital That. Let an item cost same amount of money in the store and online. Then let's see how many people still want to wait for item to arrive in mail vs going to store and buying.
People have forgotten WHAT it is they are buying. I know people who think they understand technology because they buy on Amazon. Then again I also know people who drive past Harvard and then when they are back in Texas they feel more intelligent. Same diff.
Axshully, it's much to do about nothing. Cripes, it's a software issue that has been solved by Amazon and will be solved by everyone else. The folks that will have a tougher time are the small independent vendors selling on Ebay and PayPal will take care of them.
and so it goes,
peace,
rono
The original case in 1967 established the rule that a state could force a vendor to collect taxes only if it had a physical presence in the state. The dissenters in that case, saying that physical presence shouldn't matter, were three of the more liberal justices (Douglas, Fortas, and Black).
Here, the dissent (saying that physical presence still matters) was written by Roberts, joined by three of the more liberal justices. They based their dissent on the fact that stare decisis (precedent) demands a strong argument to overrule. They felt that this threshold had not been met.
With respect to being a burden on vendors, that was a key consideration in all the cases. States can pass laws affecting interstate commerce only if they do not impose an undue burden. The majority felt that the particular SD law in question didn't do so, because it didn't touch the smallest vendors (those doing less than $100K in sales and fewer than 200 separate transactions in the state per year).
However, the Court declined to draw a bright line. So it's possible that we could see 46 more cases (excluding the four no-sales-tax states) examining where each state drew its line between large and small vendors. Or Congress could step in to bring some order to a crazy quilt of tax laws. (Sure, right.)
IMHO it's not the software that's the challenge, but the data entry. One has to keep track of all the idiosyncrasies of all the little tax fiefdoms. I've read that in Illinois, Twix bars are not taxed (they contain a baked cookie) while Three Musketeers bars are. In NY, baking chocolate bars or bags of chocolate chips are not taxed (ingredients for cooking), but Hershey's chocolate bars are taxed (candy). Keeping up with all the tax rates, all the laws and how they apply to millions of different items sold - that's the real difficulty.
As @rono said, it's a solved problem, and one that smaller businesses can contract out.
BDO commercial: "think about all those tax jurisdictions; how are we going to handle this? We aren't."
It is sort of weird. If you travel to another state to buy an auto, the dealership is required to collect the tax you would have paid in your home state. The dealer then remits that tax to your state. But if you buy anything else of of state, you pay the sales tax of that other state.
The tax in question is that sales tax which would be levied if the purchase were made in a physical store location within a particular state. Presumably the person making such a physical purchase is your "purchaser or the receiver of the goods". In that sense it could be defined as that tax paid by "the purchaser or the receiver of the goods", and extends the obligation of that "purchaser or the receiver of the goods" to pay the same tax on an internet purchase as on a purchase physically made within the state itself.
(I'm certainly no msf, who I'm sure would be much more clear, so I hope that my attempt at explanation is intelligible.)
What made me think of this was that I have a sister I send gifts to in Tennessee and Amazon used to send me a message that I may owe Tennessee taxes. When I checked with sister's husband he described sort of a transport infrastructure tax based on road and facility use but I chose to ignore the Amazon notice so I never found out if he knew what he was talking about or not. But if I did owe TN tax and WA tax, it would be two states taxing an Internet purchase. I haven't gotten this notice in several years.
- NYC to stop arresting people for smoking marijuana
https://www.highsnobiety.com/p/nyc-stop-arresting-for-smoking-marijuana/
New York City Mayor Bill de Blasio has instructed the New York Police Department to stop arresting New Yorkers smoking weed in public...
- Secondhand marijuana smoke can create range of detectable effects study finds
https://hub.jhu.edu/2015/05/15/secondhand-marijuana-smoke-study/
After spending an hour in such conditions, nonsmokers showed "positive drug effects in the first few hours, a mild sense of intoxication, and mild impairment on measures of cognitive performance ...
Ya, too many people blame the secondhand smoke thing, eh?
" I was minding my own business, waiting in line; and these folks just kept passing a joint and I was downwind." Back in the day, the name was "contact high".
Not that this is not impossible.
The test: We'll place four folks in a car, windows closed. The driver is the only non-toker. So, we'll do our "contact high" scientific study after a 20 minute drive, okay?
Oh, wait.........we'll have to postpone that study for a bit, as the driver stopped at a convenience store and just returned to the car with a bag of Oreo cookies and a small container of chocolate-mint ice cream.
Study report to follow at some unknown date in the future; if anyone remembers same.
--- Apology for "thread divergence"
Back to the topic. This is what Michigan has used for a number of years for internet taxation when filing an individual return:
--- Use Tax
Every state that has a sales tax has a companion tax for purchases made outside that state by catalog, telephone, or Internet. In Michigan, that companion tax is called "use tax," but might be described more accurately as a remote sales tax because it is a 6 percent tax owed on purchases made outside of Michigan.
Use tax is due on catalog, telephone, or Internet purchases made from out-of-state sellers as well as purchases while traveling in foreign countries when the items are to be brought into Michigan. Use tax must be paid on the total price (including shipping and handling charges).
How to Report Use Tax
Use Worksheet 1 below to calculate your use tax and enter the amount of use tax due on MI-1040, line 23.
Worksheet Calculation
Line 1: For purchases of $0 to $1,000, multiply your total purchases times 6 percent (0.06) and enter the amount on Line 1, or,
If you have incomplete or inaccurate receipts to calculate your purchases, you may use "Table 1 - Use Tax" to estimate your taxes (see the following example).
Line 1 should contain a number unless you made no purchases under $1,000 subject to the use tax. If Treasury later determines that you owe use tax, you may be subject to penalty and interest.
Line 2: In all cases, if a single purchase is $1,000 or more, you must pay 6 percent use tax on those purchases.
Example: Jacob ordered a computer from a catalog retailer in New York for $1,437.50. Jacob also purchased items over the Internet for less than $1,000 during the year, but lost his receipts. He is sure he did not pay Michigan sales tax. Jacob's AGI is $46,500. Jacob would complete Worksheet 1 as follows:
Line1: Jacob selects $36 from
the table based on his AGI ...... $36
Line2: Jacob enters
$1,437.50 x 6 percent......... $86.25
Line3: Total use tax due .... $122.25
Jacob would enter $122 (no cents) on his 2013 MI-1040, line 23.
Estimating your taxes does not preclude Treasury from auditing your account. If additional tax is due, you may receive an assessment for the amount of the tax owed, plus applicable penalty and interest.
Use Tax on the Difference
If you paid at least 6 percent to another state on your purchase, you do not owe use tax to Michigan. If you paid less than 6 percent, you owe the difference.
The official Michigan version of the state's use tax is slightly different from what you quoted from TaxSlayer. The Michigan.gov FAQ says that: So you owe use tax even if you personally buy an item at a physical store out of state. Though you do get to offset the amount owed with the sales tax you paid to the other state.
Also, while shipping is taxed in Michigan and many other states, it is tax-free if listed separately (not aggregated with handling) in several other states:
https://www.csmonitor.com/Business/Saving-Money/2015/0811/Are-you-paying-sales-tax-on-online-shipping-fees-Should-you
'Course, knowing you'll agree..........................isn't all of this so very simple to understand by all involved??? ......insert numerous smiles here.
Add: Michigan 6% sales tax. Who, What, When and Where (link below)
My add: some candy and related products do not have a 6% sales tax, as they somehow are considered a food product, as traditional purchased food products at a grocery store are not sales taxed in Michigan.
https://law.stackexchange.com/questions/571/michigan-6-sales-tax-on-food-prepared-in-a-supermarket
It's a matter of how one classifies things, much as how a fund is rated depends on how it's classified. For example, RPHYX as a junk bond fund perennially gets few stars. There is usually a method to the madness, though it is still madness.
(Yes! An actual reference to mutual funds.)