Power Sellers Unite

elgato · Joined: 24 Feb 2005 Posts: 17235 Location: Texas

Legislation that would ease the way for implementation of the 4 percent general excise tax on all Internet purchases made from Hawaii is on its way to the governor.

Currently, companies that sell merchandise over the Internet do not have to collect state sales or excise taxes on purchases if they do not have a physical presence in the buyer's state.

The legislation would standardize parts of Hawaii's tax code so it can join a national effort to simplify tax rates.

More than 1,100 retailers have joined the effort and are voluntarily collecting sales taxes on items shipped to the 22 participating states.

However, Internet tax collection won't be mandatory unless Congress passes a law requiring it.

more.. link to news article

DaLizardsLair · Joined: 15 Feb 2009 Posts: 4780

The implementation of a general excise tax on internet sales to residents of Hawaii, sounds similarto the 6% Use Tax charged residents of Michigan.

It would be the state's responsibility to collect that money from its residents, and not the responsibility of the companies doing business with them.

greggrss10 · Joined: 13 Apr 2009 Posts: 40

that is interesting. i think all this, with so many states going this route, will pave the way for a nation-wide tax scheme.

RecycleBin · Joined: 15 Jul 2007 Posts: 152

DaLizardsLair wrote (View Post): › docWrite("quote")The implementation of a general excise tax on internet sales to residents of Hawaii, sounds similarto the 6% Use Tax charged residents of Michigan.

It would be the state's responsibility to collect that money from its residents, and not the responsibility of the companies doing business with them.

You have changed one word in the legislation which significantly changes who will collect the 4% tax.

"Legislation that would ease the way for implementation of the 4 percent general excise tax on all Internet purchases made from Hawaii is on its way to the governor."

The Sellers, who reside in Hawaii, will collect sales tax from all buyers, on the Internet, regardless of which state the buyer lives in. The Seller will turn over the collected taxes to the State of Hawaii, either anually or quarterly, depending upon the amount collected.

purple_reading_giraffe · Joined: 04 Feb 2008 Posts: 5485 Location: Indiana, USA

Is the next step that the participating states then divvy up the proceeds and send the amounts due to each state - IN which a buyer resides and who has purchase goods - TO that state? So, in effect, every seller IN Hawaii is responsible (if that seller joins the voluntary effort) for collecting the sales tax at the rate set by each respective state that seller sells the item TO?

So, if a Hawaii seller sells an item to a buyer in Michigan, that seller would collect sales tax of 6%, then give it to the State of Hawaii, and Hawaii would forward it to Michigan? And a seller in Michigan, selling to a buyer in Hawaii, would collect 4%, give it to Michigan, and Michigan would forward it to Hawaii?

Have I understood the plan correctly?

I also note that this system is voluntary for both the states participating and the sellers involved.

purple_reading_giraffe · Joined: 04 Feb 2008 Posts: 5485 Location: Indiana, USA

So... the net effect is that each participating state agrees to deputize sellers in other states, through the other states' taxation agencies, to act on behalf of the participating state for use tax enforcement. Interesting.

greggrss10 · Joined: 13 Apr 2009 Posts: 40

purple_reading_giraffe wrote (View Post): › docWrite("quote")
Is the next step that the participating states then divvy up the proceeds and send the amounts due to each state - IN which a buyer resides and who has purchase goods - TO that state? So, in effect, every seller IN Hawaii is responsible (if that seller joins the voluntary effort) for collecting the sales tax at the rate set by each respective state that seller sells the item TO?

So, if a Hawaii seller sells an item to a buyer in Michigan, that seller would collect sales tax of 6%, then give it to the State of Hawaii, and Hawaii would forward it to Michigan? And a seller in Michigan, selling to a buyer in Hawaii, would collect 4%, give it to Michigan, and Michigan would forward it to Hawaii?

Have I understood the plan correctly?

I also note that this system is voluntary for both the states participating and the sellers involved.

i believe they call it job creation at the state level.

RecycleBin · Joined: 15 Jul 2007 Posts: 152

purple_reading_giraffe wrote (View Post): › docWrite("quote")Is the next step that the participating states then divvy up the proceeds and send the amounts due to each state - IN which a buyer resides and who has purchase goods - TO that state? So, in effect, every seller IN Hawaii is responsible (if that seller joins the voluntary effort) for collecting the sales tax at the rate set by each respective state that seller sells the item TO?

So, if a Hawaii seller sells an item to a buyer in Michigan, that seller would collect sales tax of 6%, then give it to the State of Hawaii, and Hawaii would forward it to Michigan? And a seller in Michigan, selling to a buyer in Hawaii, would collect 4%, give it to Michigan, and Michigan would forward it to Hawaii?
Have I understood the plan correctly?
I also note that this system is voluntary for both the states participating and the sellers involved.

Oh geez, now I have to use my brain! :P No! Let's think about how sales taxes are collected now. Each state requires sellers to file with the Franchise Tax Board of that State. (Supposedly they also have a business lincense to do business in their town....but most casual on-line sellers do not). When a seller makes a sale and the buyer is located in his state, he must charge the sales tax that applies to his county in that state. Annually, or quarterly, he must send the sales taxes collected to his Franchise Tax Board. ( What I don't understand is that many of the larger businesses do collect sales taxes when a buyer is not located in their state now. I have no idea how they manage to get the funds to the appropriate states or if they are even required to.)

If the Hawaii legislation goes through, sellers will collect 4% sales tax from Internet buyers who are located out of Hawaii. Hawaii gets the money, not the other states. IMO, this is what is going to occur in the future and all states will require a tax of some amount on Internet sales.......which they will keep. Again....the Sellers collect the taxes and turn them into their states. The 4% tax will apply universally to the Internet and I assume the rate will ultimately be the same for all states. It's actually the only way they can do it so that sellers aren't collecting 52 different percentages, from 52 different states.

The collection of sales tax is not voluntary, nor will it be if this becomes law. Now, I'm not positive about this, but anyone who sells over a certain amount annually must have both a business license in their county and a Tax ID number with the Franchise Tax Board. They must also report their earnings as earned income on the Federal Tax Returns. I do have a license and have always collected sales taxes for sales in my state. This is the law. However, again, most casual sellers do not follow the letter of the law. I'm not sure how much one is allowed to take in in sales before a license is required.

If a universal internet sales tax does go into effect, I wouldn't chance selling without following the laws and collecting sales tax because the records of every sale will be public knowledge. I'm guessing that all selling sites (auctions included) will require the collection of the universal internet tax, leaving the seller as the responsible party to turn it over to their state.

I hope I'm explaining this correctly so that it's understandable. If I've stated something that's incorrect, I hope someone more knowledgeable than I will jump in and set me straight!

RecycleBin · Joined: 15 Jul 2007 Posts: 152

purple_reading_giraffe wrote (View Post): › docWrite("quote")So... the net effect is that each participating state agrees to deputize sellers in other states, through the other states' taxation agencies, to act on behalf of the participating state for use tax enforcement. Interesting.

No! IMO, all states will be required to participate in the near future. Each state will collect the Universal Sales Tax (4%....yet to be determined), from THE SELLERS IN THAT STATE. The Sellers will collect this tax on all Internet sales, regardless of where the buyer resides.

Try to think of it in these terms:
The more internet sellers a state has, the happier they will be! Did you know that a state's operating funds are derived from taxes..........and that the bulk of those funds come from personal income and sales taxes?

purple_reading_giraffe · Joined: 04 Feb 2008 Posts: 5485 Location: Indiana, USA

http://74.125.155.132/search?q=cache:7fecAGagndwJ:www.cyberlaw.pro/docs/taxingtheinternet.pdf

http://www.streamlinedsalestax.org/oprules.html

BigfootDepot · Joined: 27 Apr 2005 Posts: 916 Location: Northwest Ohio

Now I'm not a lawyer, but I was reading this rather old document called the

United States CONSTITUTION

and under Section 9 - Limits on Congress, it says:

"No Tax or Duty shall be laid on Articles exported from any State."

This, to me, says there can be no tax on interstate items.
Am I wrong?

purple_reading_giraffe · Joined: 04 Feb 2008 Posts: 5485 Location: Indiana, USA

That's one of the major obstacles they are facing. However USE taxes are "OK". The taxing the internet pdf (first link above - in google cached html format) is an interesting review of the issues by a lawyer. Page 8 is where he talks about the Streamlined Sales Tax folks (the second link above) who have been working on this "problem" since 2000 or so - that's the plan the "other states" have signed on to. They hope that if they significantly reduce the paperwork burden and have thresholds for compliance that Congress will pass a law to make their plan mandatory instead of voluntary (as it is now).

The SST folks do not make anything very clear, but I gathered that the seller would still file taxes with every state it sells a sufficient volume to, and there is NOT any plan to use ones own state to "streamline" the process.

diesel_parts · Joined: 23 Jul 2006 Posts: 723

Any tax or duty on interstate commerce is illegal according to the constitution. Greedy politicians would like to burn the constitution and write one more favorable to the present greedofobia that prevails in Washington and state governments.

The supreme court has kicked interstate tax out before and if they do their job will do it again.

It is not necessary that every facet of out lives be taxed.

RecycleBin · Joined: 15 Jul 2007 Posts: 152

purple_reading_giraffe wrote (View Post): › docWrite("quote")http://74.125.155.132/search?q=cache:7fecAGagndwJ:www.cyberlaw.pro/docs/taxingtheinternet.pdf

http://www.streamlinedsalestax.org/oprules.html

Thanks for the link Purple. Now I understand it a bit better. I never did understand the "use tax" (which is largely ignored by most). The article was published in 2007, and if Hawaii is now attempting to set forth legislation to collect internet sales tax, there must have been some issues worked out between Congress and the states which opened the door to Hawaii to go forth. This issue is far to complicated for my pea brain! :wink:

RecycleBin · Joined: 15 Jul 2007 Posts: 152

BigfootDepot wrote (View Post): › docWrite("quote")Now I'm not a lawyer, but I was reading this rather old document called the

United States CONSTITUTION

and under Section 9 - Limits on Congress, it says:

"No Tax or Duty shall be laid on Articles exported from any State."

This, to me, says there can be no tax on interstate items.
Am I wrong?

This is beyond me, but if that were the case, the major companies would not be charging sales taxes on all sales, regardless of what state is involved. I'm wondering if there is a difference regarding the manufacturing of articles (exporting) and the selling of articles? When I sold wholesale (a product I manufactured), I collected no sales taxes from my clients, but when selling retail, I collected sales taxes.