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Ask HN: Congress is Passing an Internet Sales Tax: Why Doesn't HN Care?

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Re: Ask HN: Congress is Passing an Internet Sales Tax: Why Doesn't HN Care?

#81

Post by dragonwriter »

nateabele wrote: post #19
doktrin wrote: post #17

Is the argument that there should be no sales tax, or that online businesses should be exempt from it? Alternatively, is there some specific compliance issue or formulation in the proposed legislation that is poorly thought out? I'm genuinely curious, as (in principle) the fact that online businesses have been exempt from sales tax largely strikes me as an anomaly and not some new standard.

Mail-order catalog businesses, which have existed for decades? You only pay tax in jurisdictions in which you're physically based (for an internet startup, this would be wherever you're incorporated). This axiom has held in US tax policy for about as long as there has been US tax policy. Kinda ties in with that whole 'no taxation without representation' thing. Edit: for clarity .

> You only pay tax in jurisdictions in which you're physically based (for an internet startup, this would be wherever you're incorporated). This axiom has held in US tax policy for about as long as there has been US tax policy.

No, it hasn't. You have to have a business nexus to be subject to taxation, but both physical operations and incorporation (which are often different states) form a nexus, as do certain other activities.

Before, even with mail order, remote operations choosing to actively solicit business in a state without physical presence were never a large volume of retail; with the internet, that's changed, and it makes sales taxes create a perverse incentive to avoid locating in the states where most of the business originates.

Re: Ask HN: Congress is Passing an Internet Sales Tax: Why Doesn't HN Care?

#82

Post by twrkit »

rayiner wrote: post #46
DanielBMarkham wrote: post #12

It's been a very busy news week. Reid picked just the right time to slide this in -- the air has been sucked out of the room by other stories. Congress had a hands-off approach to the internet for some time, and it took off like wildfire because of it. All that's changing now, it seems. I'm disappointed that there's so many avenues of attack for legislators that it's effectively impossible to cover all of our bases.…

> Congress had a hands-off approach to the internet for some time, and it took off like wildfire because of it. All that's changing now, it seems. The internet would've taken off regardless of Congress's level of involvement with it.

I wholeheartedly disagree.

Even if they wanted to regulate it at the time, they would have no idea where to start. The legislative body is, even to this day, not exactly comprised of technologically savvy individuals. Rather, these are people who are very good at acquiring and wielding power, crushing any opposition, and pandering to their core demographics.

So if you told them that, oh, a 'series of electronic tubes' sprang into existence, they would just look at you, scratch their heads, and ask 'but can we tax it?' Oh wait...

In all seriousness, though, the Internet would not be the same if there were meddlesome regulations imposed on it from the very beginning. Openness, freedom and sharing of information, innovation, and experimentation are intricately woven into the DNA of the web; this would simply not be the case with any sort of stifling draconian policies. Entrepreneurs would have little incentive to take the leaps of faith that have since turned the Internet into, at least in Congress' eyes, the economic powerhouse that it is today.

It truly is a wonder that, just now, they are coming around to restricting its freedom (CISPA) and taxing it (the perhaps unintentionally Randian-sounding 'Marketplace Fairness Act'). Not to get all Negative Nancy, but I predict that we are nearing the end of 'The Golden Age of Internet Openness.' Never again will we have this much unfettered and almost-free-as-in-beer access to content and information. Of course I hope this is not the case, but whenever governments get involved and try to 'fix' an industry, it does not bode well for its future.

Re: Ask HN: Congress is Passing an Internet Sales Tax: Why Doesn't HN Care?

#83

Post by bzmwillemsen »

Disclaimer: Canadian, so I don't know all the rules.

I think that a law like this is inevitable and in part fair. States like California have tons of tech companies which are contributing a huge amount of tax dollars to the states coffers. But they are selling goods and services to citizens in other states. Why shouldn't these other states get a grab at the revenue made from the citizens purchasing goods and services while in their state? While the internet is location-independent the purchaser of any item is not.

Re: Ask HN: Congress is Passing an Internet Sales Tax: Why Doesn't HN Care?

#84

Post by adventured »

Avshalom wrote: post #65
DanielBMarkham wrote: post #12

It's been a very busy news week. Reid picked just the right time to slide this in -- the air has been sucked out of the room by other stories. Congress had a hands-off approach to the internet for some time, and it took off like wildfire because of it. All that's changing now, it seems. I'm disappointed that there's so many avenues of attack for legislators that it's effectively impossible to cover all of our bases.…

> I want goods and services delivered to me as efficiently as possible. You know what makes deliveries more efficient? State funded infrastructure. now, how could we finance such a thing...

State funded infrastructure? If only they'd actually spend tax dollars on that instead of lying to get the taxes and then spending the money elsewhere.

They're collecting record taxes at the state level, and our infrastructure is in the worst shape it has been in since pre-interstate highway system days, so now what?

Raise taxes some more, so they can make more empty promises and redirect funds to pet projects instead of infrastructure? How in the world does this band of criminals deserve any trust such that they should get more money to spend, before they prove they can actually work with the $6.x trillion they already get to spend (nearly the size of China's entire economy, and we can't even fix bridges or upgrade our electrical grid).

Re: Ask HN: Congress is Passing an Internet Sales Tax: Why Doesn't HN Care?

#85

Post by saurik »

apawloski wrote: post #42
acjohnson55 wrote: post #40

Earlier quoted context omitted.

Not unless you're getting your products shipped to Delaware

I was thinking of services I use, not necessarily physical products, but you're right. That was just tongue-in-cheek though. I'd still like clarification on the second part.

Services are generally (a hedge I only add as maybe one state out there is doing something insane) not subject to sales tax, only "goods". As an example, it is typically the case that software will transition from an untaxed service to a taxed property when it is no longer "custom", and instead made once and sold to multiple people, or in hilarious cases (California) the second you make the mistake of providing it on physical media.

Re: Ask HN: Congress is Passing an Internet Sales Tax: Why Doesn't HN Care?

#86

Post by tss20147 »

To address a couple of concerns raised here.

There is a Small Seller Exemption. If you have less than $1,000,000 in remote sales during the preceding calendar year you are exempt from collection.

There are six certified service providers, including one free one, which can be used to calculate the required sales tax. The states certify these providers and agree to indemnify users against liability if the case of an error by the service provider.

Before a state can require collection they must change their code to be in compliance with the requirements of the Marketplace Fairness Act. Currently 24 states are compliant and could begin requiring collection if the bill passes.

For more information go to http://www.marketplacefairness.org/

Re: Ask HN: Congress is Passing an Internet Sales Tax: Why Doesn't HN Care?

#87

Post by dragonwriter »

chrismaeda wrote: post #61
weds wrote: post #31

Earlier quoted context omitted.

Sales tax is applied to the buyer, not the seller

Right. Companies with a physical presence in a state are required to collect sales taxes from buyers for all sales in the state. Businesses are not required to collect sales taxes for states where they have no presence (aka nexus); this is based on the Quill v North Dakota interpretation of the Commerce Clause of the US Constitution. The problem with the proposed legislation is that counties, cities, and towns can ea…

> Companies with a physical presence in a state are required to collect sales taxes from buyers for all sales in the state. Businesses are not required to collect sales taxes for states where they have no presence (aka nexus); this is based on the Quill v North Dakota interpretation of the Commerce Clause of the US Constitution.

Specifically, its based on a Dormant Commerce Clause interpretation, to-wit, that States cannot require such taxation of businesses without the kind of nexus specified in Quill without Congress taking specific action to permit the state to do so.

What you see going on right now is Congress taking specific action to permit states, under certain conditions to apply the kind of taxes that they may not be permitted to apply without Congressional permission.

> The problem with the proposed legislation is that counties, cities, and towns can each set their own tax rates. So the compliance costs are high because of the thousands of different rates.

The proposed legislation sets conditions for the states if they want to have access to the privilege Congress is granting with regard to taxation, one of which is that they must provide free-of-cost software for internet retailers to handle the calculations for their states.

> And governments typically levy penalties if you get your sales tax collection wrong. So who is responsible for paying the penalties if the third party tax collection service makes a mistake?

If you are the responsible party for collecting the taxes under the law, you pay the government; if you've paid someone else to do it for you, presumably you've made sure the terms of that contract make them responsible to you for any errors they make, so that they pay both the penalties and any additional costs you face as a result of the error.

> The way this was supposed to go down is that states were supposed to simplify the number of different tax rates before requiring out-of-state businesses to collect their sales taxes.

"Supposed to" based on what? Or are you just puffing up your personal preference for government policy as the way things objectively ought to be?

Re: Ask HN: Congress is Passing an Internet Sales Tax: Why Doesn't HN Care?

#88

Post by freehunter »

joshuahedlund wrote: post #57

Does anyone know if this would apply to SaaS stuff or only to physically shipped products? Also, the $1 million threshold exemption is good, but could it create scenarios where your product/service takes off and then all of a sudden you gotta figure out if you need to start sticking sales tax in there?

I would guess the simplest thing to do would be to build the backend to support sales tax and only implement that piece if necessary.

Re: Ask HN: Congress is Passing an Internet Sales Tax: Why Doesn't HN Care?

#89

Post by mark-r »

The complexities go far beyond just knowing the rates for each jurisdiction and arranging for payment.

Naturally there's going to be a call for some kind of compliance testing. How are you going to catch the cheaters when you don't have access to their financial records, as you would if the business was in your state?

Even just the rates themselves can get complicated. Minnesota for example doesn't tax clothing or food, but the specifics of what's included aren't clear - candy bars for example aren't considered food and are taxed. How is somebody from another state supposed to figure this out even with software help?

Re: Ask HN: Congress is Passing an Internet Sales Tax: Why Doesn't HN Care?

#90

Post by dragonwriter »

nooneelsebut wrote: post #30

Does anyone have any idea how this could affect any startups selling software online? This could have huge ramifications, but as usual it's Congress mucking things up.

> Does anyone have any idea how this could affect any startups selling software online?

Directly, this law would have no effect on anyone except state policymakers if it passes.

What effects particular state policies electing to make use of the authority Congress is allowing states under this law would have depends on the exact policies adopted by individual states (which would affect what goods are covered by the states internet sales tax regime and what variables are needed to calculate the rates, and what, within the requirements of the law, form the free-of-charge tax calculation software supplied by the state takes.)

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