Today, while skimming the news sites, I see California is reconsidering Internet sales taxes and it made me sigh.
For those who don’t know, people don’t pay sales tax for purchases made on line. If something is $19.95 then you pay $19.95 plus shipping and handling. Most companies (amazon.com) will waive the S/H fee if you spend over a certain amount of money. That’s all well and good, since shipping and handling fees are a bitch and a half. Still, since I tend not to spend huge amounts at one time for things that need shipping (I did blow $4000 for a solid wood armoire from Crate & Barrel, but that was a delivery fee and a technicality), I rarely get the waiver and I end up paying the same for something I buy online versus at the store.
So why buy online at all?
This weekend, I’ll be heading to CompUSA to try out keyboards (the cat killed one) and mice (I want a scroll button). I plan on testing them and then ordering them online, so I can find a better deal. I’m pretty sure I know what I want, but keyboards (like clothes) are items that you need to try before you buy. See, that’s the one thing I love about physical stores. I can see something, test it, and know ‘yeah, I want this.’ Also, if I want something NOW (like OS X), I’m going to take thirty minutes out of my day to call CompUSA, put their last copy on hold and then saunter up at 5:30pm and buy it. Well, until the Apple store opens in downtown Chicago. Finally, I have learned to be VERY careful about buying clothes on line. I want to try them on and make sure I look good in them, and while I don’t mind being risky with the GAP, that’s only because there’s a GAP store about four blocks from my home.
Today’s rant is about internet sales tax. Firstly, according to the Supreme Court, a state can not require (nor can they force) a business to collect state sales tax unless the company has a physical presence in that state. Fine, then a lot of internet companies will move to Oregon where there is no sales tax.
This begs the question: What is sales tax?
Sales tax is a statutory tax remitted by the Seller of tangible personal property for items purchased or consumed in the State and or District of their purchase. That is to say, if I buy a candy bar ($.55) in Chicago, I pay Chicago sales tax and it’s now $.56. Where as in Eugene, there is no sales tax and I pay $.55 total.
Now, California’s law books say that their state sales tax is generally imposed on the retailer for the privilege of selling tangible property at retail. So the seller is paying the tax for permission to be able to sell. In turn, the seller charges the buyer the amount of the sales tax, to be able to earn money. The retailer does not have to charge the consumer sales tax, however. If they chose not to, they just cover the sales tax fee from their own pocket.
Okay, so now we’re saying sales tax is what you charge the seller for selling items in your borders.
Where, physically, is the internet? That’s starting to mess with virtual laws. What about when I buy something via the phone? Mail order. That’s, essentially, the same deal. With mail order, you only pay a tax for Maine, Maryland, New Jersey and Virginia (according to L.L. Bean), and the same holds true for online. And they’re taxing you for a delivery, which is basically paying ‘duty’ on items purchased out of state.
While I agree, a state should make money, I’m not certain as to how ethical (or legal) it should be to permit them to charge a duty. If you’ve ever been out of the country, when you fly back in the airline hands out US Customs Forms for you to declare your purchases. Your personal, or duty-free, exemption is the total value of the merchandise you’re allowed to bring back into the country without paying additional duty. Generally, this allowance is $400 and carries limitations on how much alcohol and tobacco products can be included in this total. If you’ve only bought things for yourself and your personal home, you can get an exemption, and there are many other exemptions to be had. Why don’t those apply to online shopping?
Well, remember that a purchase from a duty-free shops is free of duty and taxes only for the country in which that shop is located. So if your purchases exceed your personal exemption, items you bought in a duty-free shop, whether in the United States or abroad, will be subject to duty. That’s tricky to translate into online.
I suspect that before 2010 we’ll have a base internet ‘duty’ tax, and we’ll be coming up with exceptions for home use versus business versus home business. The states need to make money, and the only way to do that is to take more from the consumer. It’s a vicious cycle, and I hope someone smarter than me can see a way out.