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Ask Slashdot: e-Commerce, Taxes & Private Transactions. 89

thal asks: "With the apparent inevitability of taxes on transactions over the web, what exactly will/should be defined as private transactions that are not to be taxed? Obviously, if you buy a gadget from gadgetseller.com with your credit card, you will be taxed. But what about baseball cards sold on Ebay? What about a garage band who asks you on their website to send in a $5 bill for a copy of their CD? These types of sales between two people have historically been, at the very least in practice, exempt from taxes, but will/should sales on the internet automatically be considered taxable?"
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Ask Slashdot: e-Commerce, Taxes & Private Transactions.

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  • by LL ( 20038 ) on Saturday September 11, 1999 @03:15PM (#1688241)
    thai wrote
    With the apparent inevitability of taxes on transactions over the web, what exactly will/should be defined as private transactions that are not to be taxed

    This is not an easy answer as it squarely hits the contentious questions of sovereignty, juristiction, and individual beliefs of the role of governments. Firstly, some background. As a starting point, I'd recommend people have a gawk at understanding the relationship [polyconomics.com] between taxes and economic activity. Basically as economies become more sophisticated, activities move from private endeavours (e.g. subsidence farming) to measureable activities (ie tracking the cashflow through the national accounting systems) to take advantage of the legal framework (contract law, safety standards, etc). This is one factor in a country's GNP, eliminating the inefficiencies in bartering by moving to a currency based transaction system with improved liquidity and retained value. To see the effect, just look at the economic collapse of Russia which has basically reverted to bartering goods between factories and inviduals. The original US constitution assumed an informed agreement between equal sovereign individuals (private property rights) which have been supplanted and augmented by federal commerce codes which support legal contracts for inter-state and international trade.


    Now with the internet, there are already taxes on the seller (income tax, sales tax, incorporation, etc). What is worrying some groups is that the internet provides an alternative mechanism to minimise a consumer tax collected at point of physical sale. This is a particular concern with new taxes such as the forthcoming GST in Australia which wants to include the sale of secondhand goods within the tax base (previously excluded as it was too difficult to calculate an equivalent value in dollar terms). The issue is rather murky (OK downright opaque) as the internet is a half-way network caught between the concept of private intranets (original federation of AARNET servers) and a regulated public carriageway (telcos, radio, ISPs, etc). Hence there are multiple juristictions (not to mention different global standards) and inappropriate legal precedences with favor one party (usually the incumbents).


    To answer your question, the Internet will be taxed when the overheads of regulation to curb the excesses (e.g. Spam, fraud, trust systems, etc) shifts the Laffer Curve such that there is a net increase in beneficial economic activity. The most appropriate mechanism is still yet to be determined, it may well be the governments insist that the credit card companies collect a compulsary levy which is refunded through a later rebate, it may be that governments insist that all transactions pass through a public key infrastructure which collects a small fee for each access, it may be that they charge the telcos a network volume fee leaving it up to companies to recover (ie pass on the costs) to the actual consumer. You actually might be surprised at how many "invisible" taxes and charges there are. I haven't seen any authoritive studies but some people speculate that 40-50% of the US GDP flows through the public sphere in some form or another (federal, state, municipal taxes/charges).


    Governments naturally want to broaden their tax base to encompass as much economic activity as possible, efffectively to provide "consumer protection" in return for a slice of the action. When this becomes too onerous, you will see the rise of alternative "currencies" for local exchange, use of other intangible non-taxable entiries (frequent flyer points) and the favorite game of controlled multinational corporations for transfer pricing (ie shift high visible costs into tax heavy juristictions while assets are moved into tax havens). The internet has just opened up a huge bottle of worms as now similar practices are available to the individual with some savvy ... can we say offshore gambling joints which have a secondary role as money laundary?.


    In short, you can bet your bottom dollar that international governments will move to protect their interests. Currently there is a hands-off policy as, despite the hype, the internet only accounts for a tiny portion of world economic activity. This will change when it starts being at least 10% of all purchases. The only question is in what form it will take and whether the cost is worth the benefits. It is up to all the public interests groups/institutions to carefully scrutinise any proposals to ensure fairness and that any taxes are spent to support the appropriate activity.


    LL

  • What did the goverment do to earn our Tax dollars? Nothing, it is just a way for them to cheat us out of more money. The Internet funding comes from the users of the service. If you want to know how to stop this kinda stuff goto http://www.lp.org/ and Vote ;)
  • I'm wondering what kind of problems smaller e-commerce sites are going to have in setting up this kind of tax. A lot of small businesses hire contractors (who don't always know what they're doing, and may not always be around in a few months) to implement new taxes into their apps. Are small businesses going to have a grace period in order to bring their sites into compliance with new regulations?
  • Tax based on usage, rather than potential is much fairer. Keep the tax-free status on such things as food and neccesities, perhaps utilities and such would be tax-free for the first $X spent. Of course, it'll never fly...the government would have to lay off so many people!
  • I lived in FL for a good part of my life and often made phone orders to out-of-state companies. Since FL doesn't have a state income tax, they began a very aggressive campaign to obtain sales taxes from companies selling items to FL citizens. I'm no lawyer and don't recall the details, but the state dept of revenue had some sort of leverage over out-of-state companies doing business with FL locals. Apparently, any company doing "mail-order" business must register with the state (it didn't matter how the purchase was placed, only that the goods were delivered via US mail). If these companies didn't pay their share of sales tax, then the state could revoke their right to do business in the state and could confiscate the goods. (I don't know how they extended this to FedEx, UPS, or other package shippers, but since these companies also have to be registered to do business, I'm sure some arm twisting was applied). FL also had a service tax which it decided to enforce. Unfortunately, this plan backfired, and was one of the reasons IBM pulled out of Boca Raton. I'm living in IL now, and read a recent newspaper article about this very thing. The IL state gov estimated that it lost $120 million in sales tax due to internet purchases, but since this only amounted to 2%-3% of their total tax revenue, they were willing to wait-and-see what the other states were going to do to handle the loss. I don't think any state will crack down on the mom 'n pop or garage sale type of purchases. It's just not worth the expense. States will go after Dell, Gateway, Borland, Red Hat, etc. bacause that's where the money is. (Yes, I know I left M$oft off this list. One of the smart things they did was develop a retail outlet marketing plan.) What I'm afraid of is that the US gov will step in with a GST type tax for internet purchases and divide the money up for the states using a quota system. And as far as the comment I read about the US gov not being able to enforce a tax on interstate commerce - have you looked at your phone bill recently? How many FCC fees and charges are you paying?
  • I apologize. I realize his comments were related to taxation, but his statements and implications were much broader than that, and he seemed to be talking about the government's right to regulate interstate commerce in general, not specifically taxation.

    And no, I don't think lower rates are an injustice. Rather, I cite that as a benefit of the regulation of interstate commerce and government "meddling".

    I did, however, forget about the prohibition on taxing exports from states. Thank you for reminding of it, and I apologize for forgetting it.

    Joseph Malicki
  • i dred the day i have to work full time and see half my pay go to fica . i have been working sence i was 14 , and it only looks like it gets worse the more you work *sigh*. i am a student now and hipefuly staying that way for a while .

    "who is fica and why does she get all my money"
  • The federal government cannot regulate interstate commerce???? That power is EXPLICITLY granted to them, in those exact words, in the U.S. Constitution. Perhaps you mean inTRAstate commerce?

    The federal government can be seen regulating interstate commerce every day. For instance, ever notice that long distance calls made to another location WITHIN your home state tend to cost more than those made across state lines? That is federal regulation of interstate commerce in action.

    In fact, the VAST MAJORITY of the federal government "meddling", from gun control and supporting education to the building of the interstate highway system, is legal on the dubious basis of regulating interstate commerce.
  • Personally, I like the idea of a tax-free Internet zone precisely because taxes across International borders gets difficult. For example, the company I work for sells a $39.95 product that we've sold over the net to Europe, Canada, Asia, South America, etc. We simply cannot handle a country-by-country tax problem. It would cost much more than $39.95 to sell a single copy to Venezuela, for example. Direct Internet taxation will stifle lots of business activity.

    I currently live in South America. I buy development software from American companies. I publish shareware over the web and have the fees collected by Kagi [kagi.com]. If a (say) German user pays me US$15, this goes from his bank to the credit card company, to Kagi, to their bank, to my US bank account, and then (possibly) to my local bank account.

    At every step there are federal, state and city governments lurking to get their percentage - not to mention the percentage owned to the middlemen, who at least demonstrably did some usefulwork to help me finally get a certain fraction of the $15. However, in most instances - after considering all direct and indirect fees and taxes - I may get $5 profit, or even less. Under certain circumstances I may even end up in the red on this transaction.

    Unfortunately governments are both slow and relatively powerless to work out an equitable international tax structure suitable for Internet trade. IMHO we're looking forward to a very rocky 40 or 50 years, while mechanisms for handling this will evolve. In the past, geographical isolation and the high costs, long delays and physical barriers to traveling and shipping put all the power in government's hands - but there's no going back. Notice that in my shareware example there's just information transfer involved, up until the point where I physically get cash from my ATM to pay for my groceries - and one of my grocers now lets me pay with my ATM card!

    My point here is that the Internet and cryptography will always allow alternative pathways for information transfer. In the end this means that the current government and tax structure is doomed, they will either fade away to be replaced by a multiple private-enterprise structure or (less probably) evolve to a more adapted form. Metaphorically, governments are like T.Rex - yes, they were big and powerful, but today only their small descendants are around (birds) and better forms (mammals) are dominant.

  • For one, they protect you against fraud if the entity you order from collects your money without shipping the product. Without that, e-commerce would be dead.
  • the internet like some sort of new form of everything. Communication is communication. How is selling your wares over Yahoo any different than putting an ad in the newspaper? Senator Hollings just wants to put a big chunk of change into some pet project he started. Person-to-person transactions should not for any reason be taxed, not only would it be wrong, it would also drive e-commerce under the floorboards.

    Say for instance Joe Ebay is always cruising around auction sites looking for good deals. He spends alot of money on these auctions because it's almost always below retail and tax free. But then comes along a universal net tax, it's a 15% chunk added onto whatever he is going to buy. "Wow" says Joe Ebay, "I think I'll go down to an outlet mall or salvation army instead, since I live in California I only have to pay a 7.75% sales tax." So ends Joe Ebay's auction days.


    Suzy Ecommerce owns her own home business, she is pretty savvy when it comes to computers and she has a few of them. Her little site sells hommade trinkets and assorted cute goodies. She doesn't make a terrible amount of money but it does bring a few extra dollars into the household. She decides she wants to buy a new computer system, hers is really old and she can't find the programs she needs to do the business work she needs. She goes online to gateway.com. There she finds the perfect system for her, it even comes with some small business software. "This is great" thinks Suzy. Oh but wait, besides it's 2000$ price tag it's going to cost her another 300$. That sure is alot of tax but she figures it's worth it, she'll just use the money from her site to pay it off. A few weeks later when she is doing her books, she notices the income of her little site are going down drastically. She thinks for a minute why, it's the extra 15% net tax tacked onto every purchase. Her little trinkets may have been worth a few dollars plus the meager shipping charges, but no one wants to pay an added 15% for small cute trinkets. Suzy soon goes out of business and can't pay for her 2300$ computer.


    These are just a few examples of how a universal net tax would completely ruin e-commerce. The point of e-commerce is that it's quick and easy but beyond that it's cheaper on the average than going down to the mall or store and looking for the stuff yourself and because there's no amazingly high sales tax included. The internet shouldnt be treated any differently than other communication mediums. Whats the REAL difference between conducting a small transaction over the telephone or over e-mail? Is it that hard to see the distinction isn't really that great?

  • if the US Gov't taxes sites,
    can they tax a us citizen buying
    from a german site?
    or a german citizen buying from a us site?
    if not, just route yourself through an
    anonymizer.
    If they can, have EVERYONE in the us, who
    wants to do business, go through an
    (out-of-US) anonymizer. Certainly there
    would be enough users/businesses wanting
    one, you probably setup one, and run in
    on donations only. I say this because
    charge a fee would amount to another form
    of a tax, which is a loophole I want
    to avoid :) Any thoughts?

    -Slackergod

    Is :) a punctuation mark, or does it need a '.'?
  • After ALL taxes (fed, ss, state, local, property, excise, utility, sales, medicare, gas, interest, capital gains, telephone, and the list goes on) we pay between 40% -50% of all our money to the government. That means every day I work until lunch time for the govt against my will. I am literally one half of a slave. And for all that money what we get are crappy schools, traffic clogged highways, a negative rate of return on a govt retirement program (ss), the irs, $500 toilets, and that list goes on. The Internet poses a great opportunity. The Internet cannot and should not be regulated by geographical govt. The Internet cannot and should not be taxed. Don't just say its going to happen, FIGHT it.
  • by XenonOfArcticus ( 53312 ) on Sunday September 12, 1999 @07:47AM (#1688258) Homepage
    The reason this problem is so thorny is that it is extremely complicated. Several previous posters have done an excellent job of explaining how the current tax system (tries to) work, why, and where it doesn't work. Rather than applying more duct-tape and bailing wire to the existing system, maybe we should consider what the perfect system would be. Now, ideally in the perfect system I'd pay no taxes. But I'm enough of a realist to understand that our Local, State and Fed buddies do perform useful (though usually grossly inefficient) services for us that we'd miss if they all went broke. I don't mind the theory of paying taxes. The practise is just a little inefficient and unfair. The challenge is to use whatever means we have available (computer and old-fashioned) to rework the design of the public-service-sector-income system. Not just for the locals, state, or feds, but why not for the whole world?

    Background: The problem facing internet tax collection now is one of severe complexity. The actual amount due is calculated based on a number of factors, some of which could be the location of purchaser and seller, origin of the goods (if they're even material goods), destination of the goods and a host of factors relating to the composition and tax history of the goods themselves. As an internet merchant myself, I realize that just accurately collecting tax on our shipments to the other 49 United States would greatly complicate the infrastructure of our order processing system, not to mention the unavoidable paperwork and bureaucracy involved in dealing with 49 other uniquely different state governments. It's not practical as is. Add into this the complexity of dealing with tax calculation and collection for other countries (something that is now dealt with as goods enter a foreign country, and is usually the responsibility of the recipient) and you can see that the system threatens to fall over and catch fire.

    Review the different types of tax systems:
    Federal Income Tax: In the US, it's very complicated, no one feels it's fair, and regulation/enforcement/evasion/fraud are a constant problem.
    Non-Federal Sales Tax: Simple, and ubiquitous. Some amount of evasion/fraud goes on already, currently deemed inconsequential though a number of state/local entities are cracking down on this. Because it is administrated below the federal level, it leads to a morass of different systems, and interstate transactions can result in confusing or difficult-to-enforce situations.
    Federal GST: Don't know. Never lived anywhere where it was in effect. Some people seem to like it, some don't.

    I would love to see our federal income tax go away, if only because I think our GNP would skyrocket given that the entire country would have the equivalent of one extra month of productivity from the man-hours no longer spent calculating Uncle Sam's take. However, I think a federal GST or uniform sales tax would be as prone to abuse as our current income tax system. Maybe more. It's very easy to do small transactions under the table for cash. It's harder to sweep income transactions under the rug because one side of the deal is almost always a corporation with lots to lose if they get audited.

    The Digital Fractional Flat Tax: Here's a really shocking idea: I think a true digital currency would HELP resolve the tax situation. As Big-Brother as it seems, it might help with our freedom. Basically, all digital bank account transactions could bleed a little bit off the top for their jurisdictions. The actual amount would be determined by the jurisdictions of the origin and destination accounts. Transactions between two of your own accounts would be exempt. Any other transaction, including to/from paper currency would incur the tax. The idea would be to make the actual tax percent quite small, but ubiqitous. Transactions into other currencies would incur the half-taxation rates of both governments. We pay fees like this all the time already to banks. If we streamlined the currency system so we needed banks less, those fees we already pay could take the place of our governmental taxes, and we would have a net win.

    If I (in Colorado) buy something from someone in Texas, both states can skim their bit off the top of the transaction. Maybe the feds get a little bit too. If I live in a state with no taxes, then one less bite gets taken out. If I want to have an offshore bank that doesn't charge taxes (dunno how they'd keep the doors open and the lights on, but..) then I never pay that part of the transaction tax. But even in that situation, if I buy something at a local store, my city, state and maybe the feds, will each collect their fractional-tax. I buy an information-product from an offshore tax-free merchant and pay for it from my offshore tax-haven bank? No jurisdiction. No tax. No problem.

    The advantage? You can see it all going on. It's accountable, visible, summable and provable. You know what you're paying and who's getting the money, and you can choose to do your transactions accordingly. I think it would raise awareness of how much you really pay, and where it goes, which would hopefully lead to some government spending reform. Obviously, some transactions and people/organizations will probably try to become tax-exempt. Dunno if it's really important. Digital money also offers a way to really see the movement of your money. I'd like to see at the end of the year, an accounting of how much of my tax money went where. And maybe the ability to decide how much of my money I _wanted_ to go where. But that's another story entirely.

    So, tell me if you think I'm crazy. Sorry for the length, but I wanted to say it completely and correctly.
  • by RobertGraham ( 28990 ) on Saturday September 11, 1999 @03:22PM (#1688260) Homepage
    I [robertgraham.com]'m surprised that people aren't looking at this from the philosophical side. Nobody has questioned the philosophical basis behind the right of goverment to tax.

    I'm not sure what other people feel is the philosophical basis for taxation. It seems to me perfect taxes are basically usage taxes: what you pay exactly matches the benefit you get. For example, rich people should probably pay for for police protection because they have more to lose in a theft. Another philosophical basis might be to "adjust" society to be more like one would we like to live in (i.e. we don't like others around us to suffer in poverty). Combining those two mean we'd prefer gasoline taxes to toll roads, for example (we don't want usage toll booths every mile, and gasoline taxes approximate the benefit AND encourage lower pollution etc.).

    For example, if I go to the local store and buy something, the local government probably has the right to levy a sales tax. It maintains the roads I use, it provides police protection, etc. However, when I buy from the Internet, the local government is much less involved. Does my city or state government have the right to tax transactions at the same rate as before? (BTW, the federal government is much more involved, i.e. tracking hacking, fraud, and the lot, but they don't see the money).

    Currently, taxes are pretty much a blunt instrument. In the above example, much of what I pay for in the sales tax isn't related to the transaction, but the theory is that it "correlates". Richer people benefit from government services such as fire protection on more expensive homes, and they tend to buy more. Therefore, we think it ok to charge a "fee" for the transaction even though the "benefit" as nothing to do with the transaction.

    From this perspective, the government currently subsidizes Internet transactions. The FBI tracks down credit card fraud, which effectively lowers your credit card fees, but you don't pay for that protection. Likewise, shipping your books from Amazon.com creates wear-and-tear on the roads, but you don't pay for that.

    Personally, I like the idea of a tax-free Internet zone precisely because taxes across International borders gets difficult. For example, the company [networkice.com] I work for sells a $39.95 product [networkice.com] that we've sold over the net to Europe, Canada, Asia, South America, etc. We simply cannot handle a country-by-country tax problem. It would cost much more than $39.95 to sell a single copy to Venezuela, for example. Direct Internet taxation will stifle lots of business activity.

    As a consequence, I'd like to search for other ways to indirectly tax Internet transactions. A fuel tax springs to mind (which I like for other reasons) to tax shipments. A credit-card tax would also be a good thing (since the government is already subsidizing credit card transactions anyway). In other words, rather than stifle all the small businesses which aren't equiped to deal with the taxes, why not shift the burden onto the big companies that can?

    Anyway, those are my thoughts.

  • This is kinda off track but what about offshore companies wishing to host a Website in say the US or Australia. It's a grey area, but
    if transactions are made Online (although monies are only banked offshore), should these companies be liable for any taxes at all? Is it any interest whatsoever of other governments to tax an offshore company because the Website is simply hosted in their jurisdiction?


  • In Oregon we have no sales tax whatsoever, so if I decide to purchase things in Washington or California, I can fill out some forms, flash my drivers license, and recieve an exemption. Usually this is too much of a pain in the butt for small items, but for large purchases it makes a big difference. I've been considering buying a car over the internet, but if I end up having to pay some other state's sales tax I would probably not save any money. Since only OR and NH have no sales tax, I can immagine that our exemptions would be over looked.
  • by Gorimek ( 61128 ) on Saturday September 11, 1999 @03:29PM (#1688264) Homepage
    I buy a lot of stuff over the web, but I've never made a "web transaction". I pay by credit card or money order.

    People are mixing up how buyer and seller contact, and the transaction itself. Two very different things. Taxing the transaction makes sense. Taxing differently depending on the medium of contact does not.

    The absence of a "phone transaction tax" or "fax transaction tax" speaks volumes. *Could* it be that people pushing for this do not have a full grasp of what the internet is??

    I think the real issue here is the somewhat odd US law/custom that transactions where buyer and seller are in different states, are not subject to sales tax. With improving communications, that is bound to give the taxman a bigger headache each year.
  • by craw ( 6958 ) on Saturday September 11, 1999 @03:30PM (#1688265) Homepage
    This is an attempt to answer those of you with comments about international trade. The internet is international with info transmitted thru a dynamic global communication network. Equipment and products cannot fit into a fiber optic cable. If history is any indication of the future, then it will be relatively "simple" to monitor international sales for some things. I'm not saying that is right or wrong, this is just a potential scenario. Impose a tariff that the federal governmnet collects. And if the tariffs maintains job in your congressional district then the pols would say great.

    The in and out of big items into the US is controlled by US Customs. Tariffs restrictions could be imposed. This agency does conduct periodic inspections; this will probably increase in the future. If you screw up then pray that the feds are on their coffee breaks. Screw up then your return address will be toast. If your return address is not in the data base, then you are toast.

    Small items will (may) still get thru. For instance, by regular mail.

    The key is import restrictions, not exports if you operate in the US. Of course if you find a country with no import restrictions, then you flood them with cheap stuff.

    Remember, digital information is information that can be stored and efficiently analyzed. It would be relatively simple to stomp on those ppl that don't abide by the digital rules imposed by the governments around he world.

    No score all the way!

  • I believe that most states that have sales taxes, also have use taxes. Meaning you are supposed to also pay these taxes on all retail items that are brought/shipped into state. It has been basically a voluntary tax, since it has been up to the consumer to report such purchases. For the last 10 years or so, Virginia has been escalating its education(threats) about these taxes in their income tax instruction booklets.
    States such as Virginia have also been attempting to get out-of-state mail order retailers to collect this tax for them. Mail order retailers have not been responsive, since 'no sales tax' is a great sales incentive and since they have no presence in these states, they cannot be held accountable. For the last several years, there has been some sort of attempt at an agreement amongst the states to force mail order retailers to collect sales/use taxes for all out-of-state sales and send that money to the appropriate states. A common TV news story for the last couple of xmas seasons, has been how "this will be the last year you will be able to do sales-tax-free mail order shopping."
  • A National Sales Tax would be quite "regressive", to use the standard definition, since wealthier people spend a lower percentage of their income per year (devoting more to savings and investment). I'm not necessarily a fan of "progressive" taxation, but taxing the poor a higher percentage of income *really* doesn't appeal to me, personally.
  • Umm if you are selling it from an offshore site the government can just charge tarrifs when it enters the US. The reason state to state transactions are special is b/c the constitution specificallys forbids state to state tarrifs.
  • Value added taxes are similar to sales taxes, however with a different twist. Rather than being taxed simply on sales price, they tax based on value added in the manufacturing process. So, for instance, Diamond takes silicon and turns it into a video card, pays a VAT tax on the difference between raw materials and final price. Dell assembles a computer from the video card and other components, and pays a tax on the difference.

    The sale and/or resale of the item, however, is not taxed. I feel that a VAT tax is much more fair than either an income or sales tax because it is simpler as only manufacturers would have to pay the tax and is much less complex than an income tax, and it also subtly encourages the reuse of items, helping the environment and important in a throw-away culture such as the US.
  • will this prove that al gore is the father and inverter of the info super high way?
    i guess this is a point that we will need to address in the future . and now. oh well we will learn. do you think they could tax open sorce? OS's? its going to be intersting.

    *i need to hit a rest stop on the inet turn pike"
  • According to the proposal (link here [fairtax.org] ):
    "...every family would receive a rebate of the sales tax on spending up to the Federal poverty level, to be paid monthly in advance. This would allow a married family of four to spend $22,120 annually without having to pay a single penny in Federal taxes."

    So it seems progressive up to a point.
  • > Umm if you are selling it from an offshore site
    > the government can just charge tarrifs when it
    > enters the US.

    A lot of industries work with middlemen that never ever touch the product. They simply take sales from a targetted group of customers. Like private label brands and such. The transaction could START in one country and END in another one so...tax or tariff? Which is more? That was my point...find a country with a favorable trade laws and import instead of buying local.

    Hell...what could they do if I hosted my entire company off a boat floating in international waters or in waters belonging to a US territory? The fact that these situations even exist should be proof the concept is as impossible as taxing garage sales and out-of-state purchases.

    But more important...a lot of things being sold on the Internet are digital in nature. Like software, MP3, and information in general...what is going to happen to these sites under a new Internet taxation structure?

    I mean...ugh...goods are taxed. Fine. But what happens if you are talking about an MP3 being "produced" on the fly? It's like replicating cars out of thin air... is the government going to get a cut of every car sold?

    WHAT ARE THEY DOING TO EARN THE MONEY? The private sector foots the bill for the entire system and still we are taxed? I don't get it...

    - JoeShmoe

    -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= -=-=-=-=-=-=-=-
  • I recently discovered a new proposal to rid income tax altogether, placing a national sales tax in its place.

    The problem with this is that people who earn a great deal can spend thier money over seas and avoid this tax while poor people are stuck with the same burden as everyone. (rich people make a lot more on thier "savings" than people who dont earn enough to save

    Try thinking about what income tax really is. It is a tax on the transaction between you and your employer. You are giving him/her the service of your employment and he/she pays you for it. So if you removed income tax I think that you would have to include the exchange between employer and employee in the definition of "sale" and tax it as well.
  • by epopt ( 33963 ) on Saturday September 11, 1999 @08:11PM (#1688277) Homepage
    I had to implement a system to handle sales tax on network transactions as part of the late, lamented American Information Exchange system years ago (pre-web, a long story, not relevent here, ask me about it in some other context). As a result I learned more about this subject than anyone should ever care to.

    Basically, how it works in the US is this: sales taxes are charged to the buyer in the state where the buyer is located at the time of the transaction. The seller is expected to act as an agent for the state to collect the tax from the buyer in those cases where the seller has a "business nexus" (I'll get to that shortly) in the buyer's state. In cases where the seller does not have a business nexus in the buyer's state, the buyer is expected to submit the tax to the state directly, though, as a practical matter, this almost never happens.

    The key factor in determining if the seller is expected to collect the tax is, as I said, is this idea of "business nexus". What this means is that the seller has some presence in the state which makes it subject to that state's jurisdiction. Obviously, if you are physically doing business in a state, you have nexus there, but other things can suck you in as well. For example, if I run a mail order business from New York that rents office space in California (say my catalog designer works from there), the State of California can claim I have nexus in California. Similarly with having warehouse facilities in a state, or employees who reside there, or any number of vastly more subtle things. Other than the most straightforward cases (e.g., you live there), the determination of business nexus is litigated on a case by case basis. Some states are more aggressive than others in pursuing this, and some are more creative. Some of them are extremely creative and are constantly trying to push the outside of the envelope. There was a case where a state (I believe it was Wisconsin, but don't quote me on that) attempted to claim that they were owed sales tax on sales of in-flight liquor sold by out-of-state airlines on the basis that the airplanes were overflying their state and thus the airlines had nexus there (they lost, but it illustrates the lengths some states will go to). Some states have tried to claim that use of the mails or the telephone system caused nexus (i.e., "you used phone lines that physically run through our state to communicate with the buyer, thus you were doing business here"), but this has been dispensed with too, though I believe by an act of Congress rather than by litigation. The hit-or-miss nature of this process is the reason why mail-order businesses (and web retailers) will typically have a list of sales tax states that seems entirely random. Basically, those are the states that came after those particular businesses and won.

    The web does not introduce any substantive new principles in all this, but it does create a situation in which large numbers of individuals and very small businesses are now potentially doing business in a zillion different tax jurisdictions, and this is bound to get messy as the tax authorities' greed asserts itself, as it inevitably will.

    --
  • I don't agree with the inevitability of internet taxes per transaction. The government already gets me for a couple bucks a month on the @home charge, income tax on me and the company/person I buy from. It's past time for the government to do some belt tightening and for us to raise hell at the thought of another point of access to our billfolds by uncle fed.
  • I know that any form of freedom is immediately attacked by by collectivists but I think we need to change the debate from what to tax to why tax at all. I mean we are running a surplus now and don't need the revenue. The feds and states combined are already confiscating around 50% of our earnings. Isn't that enough. We need to argue against the tax rather than concede it is a done deal and simply fall back on what to tax. The purpose of taxation is to raise needed revenue not to control commerce. We need to rethink our discussion.
  • As the internet makes government obsolete, taxation will be replaced by militarily-capable reinsurance networks indemnifying against the loss of asset value due to force or fraud. Market competition for such insurance premiums will replace "Constitutional checks and balances". People will "vote with their microcents."

    In the meantime, we're stuck the legacy of history: These gargantuan parasites that don't indemnify people when they fail to deliver on their promises of protection, threaten people with HIV-infected prisoner gang-rape if they don't "pay up" for this pseudo-protection -- and then require people to "vote with their feet" to get any real and timely relief.

    Face it -- politicians and lawyers would have us believe "the process and the law" work when we all know only emigration and technology really change things.

  • I apologize if ambiguous I was in stating the limitations on the Federal Government in regulating interstate commerce. It is true that the right to regulate interstate commerce is reserved for the Federal Government, but limitations to this DO exist. Your example of long distance phone calls is inapplicable to the situation, because it actually involves a form of rate control, NOT taxation. I find it rather amusing that you imply that an injustice occurs every time you pick up the phone and the government makes your call cheaper...

    As a matter of fact, if you would care to read the Constitution, you may find this line from Article I, Section IX amusing and/or enlightening:

    "No tax or duty shall be laid on articles exported from any state."

    Which is why you couldn't find an example that applies to the topic of interstate sales tax.

    I encourage you to carefully consider the context in which comments are made, to avoid jumping on someone for a comment that was correct, so long as you don't attempt to interpret it beyond the bounds of the discussion at hand.

  • Baseball cards or a garage band CD have only been exempt from sales tax in practice. Of course, laws vary by state. In Texas, anyone who sells taxable items more than twice a year needs to collect tax, even if they are just baseball cards (Texas Tax Code 151.008 [state.tx.us]). You may have your own opinion on whether this is a good idea or not, but taxing them on the Internet would not be infringing on some previously exempt category.
  • I doubt that Maine is special, but I've never been there...

    Article I, Section IX:

    5. No tax or duty shall be laid on articles exported from any State.

    That one is pretty straightforward...

    Article I, Section X:

    2. No State shall, without the consent of Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws; and the net produce of all duties and imposts; laid by any state on imports or exports, shall be for the use of the Treasury of the United States; and all such laws shall be subject to the revision and control of the Congress.

    This one is a bit more obscure, but indicates that States don't have the right to tax goods coming from other states, except to fund inspection, and that any amount in excess of that spent inspecting goods must be turned over to the Federal Government. I don't know what your employer is doing, but over here in Michigan, even when purchasing wholesale goods (bike parts, in my case), we don't have to pay sales tax if the company is out of state. So unfortunately, I cannot speak for that specific case, but overall, I believe you may find your case to be an exception.
  • by RaveX ( 30152 ) on Saturday September 11, 1999 @03:42PM (#1688292)
    A number of basic precedents will guide the hand of the government in taxing internet sales...

    1. A number of historic decisions exist that state that the Federal government cannot restrict or otherwise regulate interstate commerce. These decisions actually hampered the passage of antitrust acts around the turn of the century... the origins of this lie in early American history, when state-to-state trade was taxed-- the Antifederalists resisted any movement to give the Feds power to regulate in this manner.

    Because of this, only States have been able to tax sales, and only those within their own state. Thus, it can be expected that internet sales will follow the course of mail-order. You'll only be taxed if you are in the same State as the provider of the goods.

    2. As far as internet auctions, I have no idea. I don't _believe_ (not exactly sure here) that auction items are taxed at physical auctions, so it can be expected that the same laws will apply.

    The easiest way to predict in what way things will be regulated in the future is to look at the past. It is rare for judges to create new precedent, even when dealing with new situations, because they are expected to administer justice on a solid basis. It can be expected that rather than attempt to create a new system, the legislative and judicial bodies of this land will merely apply old law.

    Also, why is everyone under the impression that internet sales are so revolutionary? They are, in effect, only an extremely fancy version of mail (or phone) order, and will likely be treated as such. Granted, the internet and its ramifications are astounding, but in this case, not much has really changed...

  • I live in Texas, and what I say applies to Texas. I'm not a lawyer.

    There is no state income tax in Texas (not yet anyways), but we have a 8.25% (varies slightly from city to city) sales tax on consumer goods (except food which is tax exempt).

    If I, as a retailler, want to sell someone something, I get a tax license, NOT so I can collect and file sales taxes, I can do this without a license. What I need the license for is so I can purchase my inventory tax free. I just need to actually SELL my inventory or pay the taxes on it later.

    If I sell my products to a customer out of state, and ship the product there, I am not obligated to collect sales tax, and I therefore don't need to file any. Any product I purchase from out of state that I purchase for PERSONAL use I am not required to pay taxes on. However, if the product I purchase is for business use then I am required to pay a "use tax" on the product at the same sales tax rate. Its a business product mainly if I deduct it from income tax as a business expense.

    Where things get tricker is where services are involved. Certain services are tax exempt, such as educational services or legal services, but for the most part, a service must be taxed at the same rate as consumer products. If I sell my services to a customer out of state, but I PERFORM the service IN Texas, then I am obligated to file taxes on that service.

    There's no harm done in collecting sales tax from EVERYONE, even if they would otherwise be exempt and filing all of it. Trust me, the state won't care. You can also hike all of your prices to include the tax, and simply file the appropriate percentage, then just not charge any additional tax to anyone.

    -Restil
  • Maybe I'm misssing the big picture, but why do we need taxes for internet purchases? And what is the justification for such a thing? Buying something over the internet is not much different from buying something over the phone or via mail order. Both these methods, to the best of my knowledge, are not currently taxed. So why is the internet so much different?
  • If you would care to move to Sweden youll find a glorious opportunity to try every taxation method imaginable.
    Income tax: 27-35 % depending on where you live
    Sales tax: 25 %
    Capital Gains tax: 30 %

    On top of this there are an seemingly infinite amount of special cases, each with its own tax. Gasoline, Cigarettes, alcohol... etc.

    Last thing I heard a member of our parliament (riksdagen) proposed a special tax on fatty foods as he felt this would help him and others lose weight...

    It's a funny world :)

  • If they just try and tax Internet transactions, then the Internet will just have 99% of the transaction and then the last 1% would be over phone lines. Say go to internet companies site, get the info for the product, realize what options you wanted, then call them and order it. Or on e-bay, you could have the auction, then technically make the verbal agreement for the sale over the phone. It also brings up more issues, like who is going to collect it? Must be federal government (it is interstate transit). To signle out the Internet while leaving all other interstate commerce untaxed would make no sense. But imagine for a moment, the full extent of taxing all interstate commerce. Companies move to Canada, sell the products to US citizens for most products of a decent price (where the increased S&H would be less than the tax). Net effect: loss in American jobs to Canada, buisnesses in U.S. suffer, minimal increase in tax funding. I doubt the republicans would let it go through. (Duties are possible, but that is so isolationalist, it would be as smart as blowing off your dick with a draino bomb).
  • 1) Many people have been complaining that the government shouldn't collect tax b/c they don't use this service or that service or they don't see the philosophical justification for tax. The justification is simple many probelms (such as funding basic research building roads) suffer from a sort of defection problem in which everyone benifits from the result but only one group shells out the money. The government tazes in order to ensure these kind of benifits continue.

    2) Transactions between individuals. Does anyone actually know, have a good cite, whether transactions between private individuals are taxed, i.e. transactions of second hand goods between individuals. Several people have seemed to suggest affirmitively..but several people have also implied that buisness don't have to pay sales tax on their merchandise so perhaps peopls status as paying sales tax on the items originally exempts them.

    3) Privacy. It would appear to raise serious privacy concerns if the government really did assign everyone numbers and track their private trades.

    4) Sales tax seems like a VERY BAD idea. Consider sales tax, as oipposed to income tax, makes the exchange of goods more costly. I have some goods worth X dollars, but, because of sales tax I can only trade them in for goods worth .90*X dollars. From a purely economic point of view it would seem to be a very bad idea as transactions which would benifit everyone are not conducted because of the tax. Income tax on the other hand does not suffer from this problem as only total increase in wealth is taxed, i.e., sales tax seems to artificially slow down the rate at which exchanges are made while income tax does not.
  • Current state sales tax codes will have to be abided by, but no new taxes will be created because the government and companies contracted to do government work DO NOT have to pay sales tax, and internet taxes could compromise that luxury. Especially if anyone wants to be reelected. Just make sure you vote!
  • by LL ( 20038 ) on Saturday September 11, 1999 @09:02PM (#1688303)
    Money__ [slashdot.org] wrote
    Sheeeees LL thanks! . . . da hell is that . . yer thesis?!

    No, just a curious wanderer on the information backlanes (it's rather interesting what you can pick up just rummaging around academic research papers).


    One intriguing point that nobody has picked up is the rather interesting convergence between the Internet, wireless and global positioning system. If you think you can avoid sales tax by accessing an out-of-country server, you can forget about it. The companies are already three steps ahead of any scam any individual can dream up.


    My speculation is that since governments will make GPS compulsary for mobile phones (and thus PDAs) on the pretext of ensuring emergency rescue, they can tax the physical point of purchase (all mobile phone tracking stations can identify the cell of origin) and since all IP addresses can be matched to physical devices, they can thus ultimately match to an identity whether individual or business tax number. It is also not well known but a certain Redmond company has invested heavily in an electronic financial clearing house. Taxes may be onerous but at least they are open to public scrutiny (e.g. the Gore FCC telecom charge to fund internet access for disadvantaged schools). On the other hand, who notices the nickle and dime software "tax" paid on every single transaction? Witness Adobe's bright idea of charging a fee [adobe.com] for every secure PDF file that is copied. Not to mention that your purchasing patterns will be recorded by some computer somewhere for later ... ummm .... analysis :-). As Sun's CEO noted, you can forget about any idea of privacy ... you can't escape little brother unless you shift to a place like Serbia which has been bombed back into the Stone Age.


    The price of a free society may be eternal vigilance but at least the consumers should be informed about any "hidden" costs.


    LL

  • Bill Clinton, speaking at APEC, mentioned (it wasn't anything like the main thrust of his speech) that governments should not put a tax on e-commerce. I quote: There should be "no tolls on the information superhighway".

    You can view a video of the speech from this site [onebusiness.co.nz] (in RealPlayer format), but my rudimentary search didn't show up a transcript.

    --
    Repton.

  • This is my normal late reply but I hope you see this. My guess is that this will not be covered to any internet tax. At least not initially. The sum of money being transfered is too small, and more importantly, this is essentially a "contribution".
  • The US Government can place an import tarrif on german goods. But no, they're not responsible for charging sales tax.

    Can your state require them to collect tax when you purchase from them? No more than they can require another state to do that.

    Can your state require you to pay a "Use Tax" on items which were purchased across the state line on which you paid no other state's taxes? Chances are they already do, and you're already breaking the law.

    The issue of the internet tax moritorium has been interesting. I don't know of a state that doesn't have a "use tax" that doesn't bear striking resemblance to sales tax. In almost all states, when you make any kind of interstate or international purchase that isn't taxed by another state, you are required to pay a "use tax" for no other reason than that they can argue you maybe oughta be taxed.

    So, for all these years when people loved buying from a catalog since there was no sales tax, technicly they were breaking the law when they didn't declare those purchases on their state tax form for the year and poney up the use tax.

    So it's pretty odd that the internet would be treated different.

  • by Anonymous Coward
    Here in the UK, we already have to pay VAT (value added Tax) on Internet purchases.

    This 17.5% tax applies to all transactions where the seller has a turnover of more than £40,000 per year.

    Businesses can claim this tax back where they have purchased products. So the idea is that everyone pays the VAT and then businesses can claim it back passing on the eventual sales tax to the consumer at the final price.

    You can get round this by basing your servers and business offshore. This works well, but it is very hard to get the money back into the country without paying tax on it then.

    What is and is not VATable is a very strange, very complex thing to define. For example, a chocolate chip cookie is NON-vatable as it is considered "food" but a cookie with chocolate coating is considered a "luxury" item and so has the VAT charge on it!!!

    The big worry here is that the government is proposing a bandwidth tax to be levied on Internet Service Providers and mobile phone operators. (costs passed onto the customer!)

    Now that is something to get up in arms about! They might as well tax oxygen, I need them both for survival!!

    You guys thought you had it bad in the USA!
  • Here in Virginia the sales tax is 4.5%, the retailers get a part of that money. I am not sure what the break down is but its probably something 1% for the retailer 3.5% for the state. Basically it is payment for getting the tax.
  • Forget transaction taxes. They're too cumbersome, and it's *way* too difficult for taxpayers to figure out how much of their labor has been confiscated every year. States are going to have to wean themselves off sales taxes, period. Property taxes and income taxes only, and those should be as simple to calculate as possible.

    On the national level, the Flat Income Tax plan proposed by Steve Forbes [forbes2000.com] is the way to go. 17% of income above a five-figure personal deduction ($13K per worker plus $5300 per dependent), no more screwing over renters who lack the mortgage interest deduction, no more loopholes for special interests to buy and corrupt the system. One nice, simple, high-profile bill you can calculate on a postcard. And no government bureaucrats fussing over each and every transaction you've done (and where and with whom). Sure, it'll put hundreds of thousands of accountants, lawyers, and lobbyists out of work, but isn't it worth it?

  • For example, if I go to the local store and buy something, the local government probably has the right to levy a sales tax. It maintains the roads I use, it provides police protection, etc.

    As I pointed out previously [slashdot.org] insurance against force and fraud will replace government protection.

    Intelligent transportation systems [tcore.com] render your "toll avoidance" argument for taxaction obsolete as well. They are being rapidly deployed because they allow governments to get immediate money by basically liquidating public assets. That means money now for the porkbarrels without the political visibility of taxation. This is irresistable to politicians, bureaucrats, lawyers and their porkbarrel constitutents.

    After doing the distributed transaction system for what would become TransCore's initial "drive-though" toll booths, I worked on a system that relied on digital snap-shots of license plates for billing. Since cameras are increasingly ubiquitous anyway, it is only a matter of time before they will become the basis for transportation billing.

    These changes are not isolated to the specific examples you picked. Government assets are being liquidated -- including public trust. It's time to move on to a different paradigm.

  • "With the apparent inevitability of taxes on transactions over the web, what exactly will/should be defined as private transactions that are not to be taxed? "

    Whay are new taxes necessarily inevitatable? Quit voting Libertatian, or Democratic, and vote for tax reform as a Republican. The fact is phone transactions are not taxed, if ordered out of state (in most states). Why should internet transactions, carried out with businesses which are out of your state have a different standard???
    Call or write your Representative and Senator to urge his comittment to no new taxes. If enough folks do that, they listen. Don't roll over and play dead (which is what you do if you give in to it as inevitable).
  • by Riddermark ( 80033 ) on Saturday September 11, 1999 @04:06PM (#1688315) Homepage
    I recently discovered a new proposal to rid income tax altogether, placing a national sales tax [fairtax.org] in its place. Initially I thought the idea seemed a little far fetched, but the more I read the more compelling the case is. It would solve the problem of lost revenue due to internet sales, make it possible to save and make money off your savings without tax, transform the taxing system to a no-loop-holes (fairer) policy that would catch money from the underground market (the bad guys don't report their income, but have to buy goods and services just like the rest of us), and make is obvious just how much we are taxed (ie, you look down at your receipt and see a 23% tax for the fed and think to yourself "Man, This is too much!"). Goods would only be taxed once, meaning used cars, used baseball cards, used houses would not be taxed. Businesses that sell to other businesses would not be taxed. Foreigners would pay right alongside the rest of us when visiting the US. Oh, did I mention it would solve the e-commerce question? ;)

    Any thoughts?

  • yes most every thing is supost to be taxed , i am sick off it , as a poor lonly goverment number i am tire of taxes , every where i look there is a tax on some thing. just a while ago NC had a small fall out with a 1 cent tax extra on grocherys. namly paying 7 cents on the dollor, this made me sick, then my gas now has about 65cents worth of tax as well, and every time i go out to eat , there is an extra cent on all my meals beoucse of a propaganda deal with a base ball park they wish to build. i am here confused at my EZ forms each year. and i dont have much to write up realy . being a student realy i kinda suck at it. i feel like a leach is on me. but this also got me thinking about the MS press release a while back about leasing software out , i am wondering if there is a tax on such things , how about share ware. it odd that i will have to pay fica for using my computer even more. i wish we could stop the taxes as is and "cut the fat" out of our system. congressmen are getting better but they are still drawing more money then they would doing any thing else , i remeber back to high school and remeber how my teacher made us read up on the bills being passed and to pick them apart and see what was attached , and alot of them where infact a rase in congress mens pay. i am scraping by and i will stay that way but i wish things would liten up a little do we realy need all these taxes . if there is a reason why we need them then i am happy to pay , but the waste is going to hurt ppl alot more then help and i have to say unless i pay some one i cant figure out all the tax loop holes that apply to me a lonly little student. i am paying for school myself. and i didnt get anythign great.

    "hostes- churchill are you drunk?, churchill- yes mama i am drunk , and you are ugly but tomarrow i will be sober!"
  • shipping your books from Amazon.com creates wear-and-tear on the roads, but you don't pay for that

    Sure you are. Isn't that what you pay shipping and handling for? The company that is used to ship your purchase charges a fee that will cover the costs of shipping it - fuel for the vehicle to ship it, labor for the vehicle operator, tolls that the vehicle will be assessed...

    I'd like to search for other ways to indirectly tax Internet transactions. A fuel tax springs to mind

    what about your company's product? how would a fuel tax apply to something that your customers are downloading?

  • Why would local authorities agreee to this ? Essentially they are taking the right for them to collect sales tax. This would upset the balance of power between the local authorities and the federal government pretty badly.
  • They're the only ones capable of prosecuting it after the fact. Once the company has been paid by the credit card company, the credit card company can do nothing.
  • Like I said, I'm not necessarily a fan of "progressive" taxation. (I hate the double meanings in these labels...)

    Per capita taxation isn't necessarily fair, though... People who have more assets have more to lose, and therefore more to protect. Thus, the government does more for them, than it does for someone who has less.

  • What's to stop me from selling insurance internationally?
    -russ
  • I'm surprised that people aren't looking at this from the philosophical side. Nobody has questioned the philosophical basis behind the right of goverment to tax.

    They did, in 1776. In 1789 they had to reformulate government :-).

    I'm not sure what other people feel is the philosophical basis for taxation. It seems to me perfect taxes are basically usage taxes: what you pay exactly matches the benefit you get. For example, rich people should probably pay for for police protection because they have more to lose in a theft.

    ... but poor people are stolen from more often. For every Old Master stolen, a lot of pension checks go missing...

    However, when I buy from the Internet, the local government is much less involved. Does my city or state government have the right to tax transactions at the same rate as before?

    If you're buying from an in-state firm, yes. most of the cost of government is administration of the law and maintenance of the infrastructure, not cops and robbers. The laws that keep the firm from running off with your money shouting "caveat emptor" and the ones that make sure you pay apply, but so do rules for merchantability, property transfer, your right to sue.... and if the firm is out-of-state (I assume we're talking USA here) then your locality can't tax the transaction as it falls under the jurisdiction of the federal government (over interstate commerce). That was one of the reasons for that 1789 convention, because different rates and philosophies of taxation were making trouble for interstate commerce.

    The FBI tracks down credit card fraud, which effectively lowers your credit card fees, but you don't pay for that protection. Likewise, shipping your books from Amazon.com creates wear-and-tear on the roads, but you don't pay for that.

    Sure you do. (firstly, it's mostly the banks tracking down the fraud, and you pay them every month) You payed the government for it when you earned the money. The freight company bought a special license for heavy vehicles (the fee is shared amongst the states the truck operates in) and you payed for shipping. The company you purchased from pays tax on its income (your purchase price) and property tax.... the government has a lot of ways to get your money.

    But none of these are user fees, exactly (and it's arguable that they shouldn't be, as sharing the burden levels the playing feild). The truck you were following yesterday, with the bumper sticker saying it payed $80,000 in taxes last year? It probably did $250,000 in damage to the roads (our interstates would last essentially forever if only passenger cars used them -- almost every maintenance crew you pass is there because of truck traffic). Most of the US federal government's money comes from income tax. Most state revenue comes from propery, sales and income tax.

    A fuel tax springs to mind (which I like for other reasons) to tax shipments.

    Ok, you're thinking, but you've missed all the virtual traffic. By the way, we already have fuel taxes in most states, and a federal tax on fuel IIRC...

    In other words, rather than stifle all the small businesses which aren't equiped to deal with the taxes, why not shift the burden onto the big companies that can?

    Hm... so a big company operates on a larger margin than a small one? Sales taxes don't work that way, and small business still spring up... Small businesses selling restored Rolls Royces might pay more than big ones selling $3.00 MP3 files, but so what? I'm all for a sales tax administered fairly if the cost of administration is low enough that the tax can be small (otherwise you'll revert to internet advertising, but sending in your order on paper).

    There's no reason to treat internet sales as different from regular sales. If you want to create a Federal sales tax, or a state sales tax for in-state purchasing, fine. But you'd better work out the policy for foreign buyers, foreign sellers and be prepared to kill businesses that deliver virtual products in your country (or watch them flee).

    General Internet taxation (taxing the consumers) is liable to destroy freedoms and hurt the online economy (likely both) in the country that adopts it first. Free stuff will dry up first, but the additional marginal cost will make the internet a lot less popular as a forum for expression and a place to do business.

  • Bah. Percentage, who cares? The ultimate in fairness would be an even number of dollars per capita. Working twice as hard (or twice as long) shouldn't be punished by having to pay twice as much tax. (Actually, it's more than twice as much, thanks to the ridiculous concept of "tax brackets".)


    ---
    Have a Sloppy day!
  • I used to run a consulting firm based in West Chester, PA. We had to pay (and thus charge for) sales tax for all work we did in PA. If we did work in Delaware (where there is no sales tax) we did not have to pay sales tax. QVC, also based in West Chester, PA, sells over the phone and on-line. They charge tax based on where the product is being shipped (which is not necessarily where it is being purchased, like when gifts are purchased). There are already laws for governing how taxes are changed for sales over the internet, I do not see the need for any more. If you selling something and you are not part of a business, then you should not pay taxes, ragardless of the medium used for selling. In the case of a business, you pay taxes based on where the service is done. When you are selling something, the location is where the object is being sent.
    I can't see the need for new taxes. In a surplus year with the highest taxes ever I think that taxes should be left alone. I don't think they shuld be lowered, just stay the same. We should start paying of the Natational Dept. Lowering those interest payments could really help things and lead to a safe lowering of taxes.
    If there is a new Internet Tax, I just hope that we know what it is being used for. I can't stand money being put into a big pile for all the little groups to fight over. How come my social security donations go to people collecting now? When my parents, the baby boomers, start cashing in like crazy, things will get really rough. Especially, if this surplus year is the exception that proves the rule. I want to know where my money goes. Taxes should be for specific things, government should be held as accountable with hwo they deal with their money as companies are. We the people are the stock holders of the United States of America and should demand an Annual Financial Report. If RedHat has to make one, so should the USA!
  • So is the advent of web-based taxation going to mean that there will also be tax havens for Internet hosting of virual (not brick-and-mortar) companies? IE...run those fat fiber pipes to some island in the South Pacific and then run the tax-free company from there...?

    What about the possibilty of escrow services where a larger for-profit company acts as the buying agent for a customer in a transaction? I believe eBay has something like this that allows any JoeShmoe seller to take credit card payments to make sure they don't get ripped off and to make the buyer feel safer. This is basically a person-to-person transaction, but because it is being conducted over a company website am I out the tax now in addition to the eBay fees?

    Here's the biggest big question tho...what the hell does the goverment do that actually deserves my tax dollars? I mean...I pay taxes at my real-world company to help pay for the roads that bring me my customers, for the police that protect my property and so on. Before the government gets too tax happy...let's ask WHAT costs we are actually defraying?

    If anything...my ISP is doing all the work and I'm probably already paying "taxes" to them for the bandwidth I chew. Larger pipes are run by backbone providers which are also privately owned. I don't think the government has spent one thin time on the Internet in the last seven or so years...

    The government can pretend they are losing money thanks to web-based commerce but that is a crock of steaming manure. The increase in e-commerce has produced a ten-fold growth in ISPs, web hosts, backbone providers, hardware companies like Cisco and 3Com...all of which is taxed, taxed, taxed. So I don't buy the idea that the Internet is going to make the government broke.

    - JoeShmoe

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  • by MikeFM ( 12491 )
    Rather than try to tax the net the government needs to improve the postal service to make shipping USPS a desirable thing for online companies and their customers. They could take their profit off the shipping that way by actually offering a service which IMO is much better than taxes. Is also a lot easier than wasting half your money trying to track down people or sites who don't pay their taxes.

    Slightly off topic but I think the government should also give tax breaks to open source companies to help fuel their R&D. It doesn't cost the government anything to let them keep their own money and it is cheaper for the government to have free software than paying Bill Gates for it.

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