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House Speaker John Boehner now plans to deliver the bill to the House Judiciary Committee

The Internet sales tax bill passed with flying colors in the Senate, but the House of Representatives may prove to be more of an obstacle.

The Senate voted 69-27 in favor of the Internet sales tax bill (also known as the Marketplace Fairness Act) on Monday. The Marketplace Fairness Act would allow states to force out-of-state retailers to collect sales tax on Internet purchases -- even if the e-tailer has no physical presence in that buyer's state.

The legislation offers an exemption for merchants that generate less than $1 million in annual out-of-state revenue.

However, many e-tailers like eBay and Overstock.com oppose the new bill, saying that it would hurt small businesses. 

Those who are onboard with the legislation include Amazon, which is looking to simplify its U.S. state sales tax payments, and brick-and-mortar stores like Wal-Mart and Best Buy, which have complained about the unfair advantage online retailers have when it comes to the lack of sales tax collection in certain states. 

Also, state government's in need of extra revenue like the idea of the new bill. The California Board of Equalization, for instance, said it made $96.4 million in sales tax on internet commerce from September-December 2012, which is the first full quarter that the state started collecting.

Back in April, the Marketplace Fairness Act scored a big victory in a procedural vote of 74-20 in the Senate. It even won backing from U.S. President Barack Obama. 

While the Marketplace Fairness Act has had an easy time in the Senate, things are expected to change in the House of Representatives. The issue is that Republicans control the House, and they refuse to consider new federal revenue from eliminating tax breaks (which would be part of tax reform). 

House Speaker John Boehner now plans to deliver the bill to the House Judiciary Committee. 

Source: Reuters



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RE: Lies!
By tayb on 5/7/2013 4:51:43 PM , Rating: 3
It will certainly help level the playing field, that is undeniable.

Best Buy is a bad example as they are pathetically overpriced. Fry's is a much better example. Before Amazon started charging tax I would always buy at Amazon. Now? I check Fry's and quite often buy from there because I get instant gratification. Shipping costs are also something I consider at most etailers but at Amazon I have Prime so it doesn't really matter.

The idea that taxation isn't a factor in buying decisions is pure garbage.


RE: Lies!
By Ammohunt on 5/7/2013 5:19:15 PM , Rating: 3
quote:
The idea that taxation isn't a factor in buying decisions is pure garbage.


Never said it wasn't a factor, i implied that it wasn't the primary factor like the above article would lead you to believe. You actually think people wouldn't shop locally more if the price and selection were inline with online stores? For computer components of which i am a large consumer of, i have a single choice 70 miles away that being Microcenter. Who's prices are significantly beyond newgg+shipping prior to taxation; oh and their selection sucks. Large etailers can afford to trim profit margins below what retail can primarily because of the sheer volume of product they move, Its called economy of scale. The main problem with this tax scheme is not so much the added cost of the taxes but the added cost of bureaucracy needed to managed the thousands of different tax codes spread across states and home rule municipalities within those states.


RE: Lies!
By mcnabney on 5/7/2013 10:46:37 PM , Rating: 2
I would totally disagree with you about Microcenter vs Newegg.

I just priced out a new PC build. Microcenter had Newegg beat on every component except the GPU - and that was only $10. So I could save $110 at Microcenter on a $1200 build. However, I am going to have to pay about $90 in sales taxes at Microcenter - making deal much closer in price. Once you factor in gas and drive time - it is about even or maybe a bit in Newegg's favor. Sales tax is clearly punishing Microcenter.


RE: Lies!
By anactoraaron on 5/8/2013 12:26:06 AM , Rating: 2
Not only that but microcenter purposely prices their i3 and i5 unlocked "k" parts well below newegg (even says that on the ads). Price a 3570-k with microcenter vs newegg... then take a look at the motherboard combos at microcenter ($40 off motherboard with cpu purchase that's already $30-$40 cheaper than newegg).

Not that microcenter always beats newegg, but it pays to shop around.


RE: Lies!
By lagomorpha on 5/8/2013 6:14:07 AM , Rating: 2
Microcenter will match newegg prices as well (normal prices not the ones that show up in your email or I think the shellshockers).

You're right about the K series CPUs though, the other week I picked up an i7-3770k at microcenter for what newegg was charging for an i5-3570k.


RE: Lies!
By tastyratz on 5/8/2013 9:49:34 AM , Rating: 2
before online sales we had mail order companies.

The difference here is convenience, that is what we are competing with and that carries a cost advantage no taxation could ever compare to. This might provide some incentive but there will always be a need for both sources. Sometimes you can't wait for shipping and sometimes you cant drive the distance to find a place. non strategically placed establishments are the ones that will continue to suffer in time.


RE: Lies!
By Ammohunt on 5/9/2013 12:08:19 PM , Rating: 2
I sit corrected about microcenter. i am the luck guy today that has a failing hard drive in his laptop i priced SSD's at Microcenter because i need it today and with taxes its still cheaper than newegg. Learn something everyday!


RE: Lies!
By tecknurd on 5/7/2013 6:32:26 PM , Rating: 2
In my area Frys Electronics is far from me and the customer service sucks. Also my Frys Electronics is not in a good neighborhood, so I have to be careful where I park my car. I have not been to Fry Electronics in a long time. By now the customer service should have changed, but I still do not want to go to Frys because it is a long drive. The gas price that I paid for a tank of gas is figure in when I make a trip to Frys Electronics whenever that will be.

Not all products that Best Buy sells are over priced. If you do your homework, Best Buy can be competitive. The in store pickup is nice because I just go pick up the product and get out of there. Luckily for me, Best Buy is a 5 minute drive if stupid traffic lights are not counted for.

I basically count taxes, shipping and handling charges, gas price, and time the product takes to get into my hands.


RE: Lies!
By dgingerich on 5/8/2013 8:37:44 AM , Rating: 3
There's a much bigger impact here than anyone has noted: staffing.

Most internet sales companies can get away with far, far fewer employees because retail stores have to go around picking up after customers. Back when I worked retail, that was all I did most of the time. Sure, I'd stock some things and run a register some times, but most of my job was straightening the aisles after the customers demolished them.

With a company that sells everything online, the only people who touch the stock are the employees. they can keep things neat, and be able to do everything else with less than half the staff of a regular retail company.

Less staff means lower operating costs. lower operating costs means either higher margins or lower prices. This has allowed smaller businesses to grow and survive because they can make enough profit to survive an onslaught of large corporate competition who could offer lower prices because of scale.

On top of that, this will cost every business millions in implementation costs. The software to handle taxing people properly is going to have to be incredibly complex, and constantly updated, with absolutely no advantage to the business. Big businesses will be able to absorb those costs fairly easily, but the one man shops that sell single pieces of software, making a profit of $100k-300k/year, won't be able to stay in business because of the implementation costs. While it may cost a big business 5% of their profit to implement, it will cost a small business 200-300%, or even higher, of their profit.

Don't get it wrong. This is a very big business friendly bill. It will cost thousands of jobs in small businesses. Perhaps they don't mean to, but that's going to be the end effect.

Then there is the effect that it will cost all of us more. Most companies operate on pretty slim margins. investors invest in order to make more money, so the company has to show a certain level of profit and returns or the investors go elsewhere. In order to maintain the level of profit they need to stay operating, these costs, both the taxes themselves and the cost of implementing them, will be passed on to the customers. All prices will rise. This will slow the economy because less money will be spent on actual items and more will be spent on bureaucracy.

Oh, sure, there will be some jobs created, in software development for the new complex tax systems. However, there is a shortage of software developers in this country, so many of those jobs will wind up elsewhere. it won't create a single job here in the US.

I know it's more of a money grab by state governments, but regardless of their intentions, there is the law of unintended consequences to deal with. This bill will shut down thousands of small businesses, cost thousands of jobs, and slow the economy. This is a very, very bad thing, far worse than what people are talking about here.


RE: Lies!
By Rukkian on 5/8/2013 9:45:29 AM , Rating: 2
While I agree with much of what you said, your comments on small businesses are incorrect. The bill clearly states it only applies to business consistently selling over 1mil a year. The small businesses will actually get a boost since they still wont have to worry about tax, and can be more competitive.


RE: Lies!
By dgingerich on 5/8/2013 11:40:22 AM , Rating: 2
I didn't know about the $1mil limitation. That's at least a good thing. However, that's still a pretty big impact. Many small businesses sell a lot, but don't make much profit.

My Mom used to work at a Hallmark store several years ago. They'd sell about $2mil per month, but their profits only allowed for a total of 5 employees, two of which were the owners. The owners also didn't live all that high on the hog, as the old saying goes. Sure, a 6% profit on $2 million is still $120,000 per month, but if you're also paying income taxes (35% federal and 12% state, at current rates in Colorado) on that, payroll taxes on three employees, workers comp and unemployment insurance for three employees, and finally the employees' pay, that $120k in profit comes down to about $5k/month for the owners to live on.

Let's put forward another business model: internet sales. a small internet sales company consisting of the owner and their spouse to handle the management and inventory and one employee to gather the items, pack, and ship. They sell $2 million per year of knickknacks (decorative statues, doilies, decorative pictures, coasters, bookends, etc.) ranging in price from $5 to $100. Knickknacks have a low margin on the internet because there is always someone around the country that can sell them for less. So, they're pulling down $300,000 in margin per year. They also have to pay for IT costs for the web site, employee pay, taxes, and insurance, and business taxes. So, the owners take home, after all taxes, about $100,000 per year. Sounds pretty nice, eh? Not a bad living. Not really rich, but still comfy. They're also working 60 hours a week for it.

All of a sudden, they have to cover an additional $30,000 per year for the software (pretty common cost for business software) to handle the new tax system. In addition, because they now have to charge tax, they lose business. So, now they have to let their employee go, so they're now working 80 hours per week and only taking home $60,000 per year. The owners burn out, the business goes under, and three more people are unemployed and bankrupt.

It's still going to cost many jobs and small businesses.

Prices will rise, because there is going to be additional costs involved. All people, not just the business owners, will have less money to spend. This will cause a slowdown in spending. This will cost more jobs and more small businesses as we spiral down to a lower level of economic growth. (It's not as if we're not hurting already.)


RE: Lies!
By wempa on 5/8/2013 10:56:58 AM , Rating: 1
quote:
On top of that, this will cost every business millions in implementation costs. The software to handle taxing people properly is going to have to be incredibly complex, and constantly updated, with absolutely no advantage to the business.


I don't necessarily agree with this bill, but I disagree that the software will be incredibly complex. How hard is it to have a table of each state and its corresponding tax rate ? Just get the state from the customer's address, look up the tax rate in the table and calculate the tax. If a state changes its rate, just update the table. No code changes necessary. A junior developer could easily do that. Now, if they require merchants to other taxes like city/county taxes, then it could become messy. Retrieving the amount of tax to send each state is a simple database query as well.


RE: Lies!
By dgingerich on 5/8/2013 11:20:39 AM , Rating: 2
It's not that simple. They have to keep track of how to tax by both where the customer is ordering from as well as where the company is shipping from and how they're getting it to the customer.

Many small businesses don't work from stock. They have a middle man who will sometimes ship to the warehouse/business who then ships it as sometimes drop ships directly to the customer.

So, if the small business is based in Montana, who doesn't require collecting tax, and a customer from Colorado orders something from stock and something that has to be drop shipped from California, they don't collect the tax on what was shipped from stock while they have to both collect tax for what is dropped shipped as well as pay tax themselves on what was drop shipped. (Technically, a drop ship is selling from middle man to business and then from business to customer, but only shipped once. So, twice the tax.)

The software will have to handle all that automatically. That's some complex stuff.

In addition, there may be complications of a business of all digital goods that operates from one state and has their servers hosted in another state. There's also a lot of talk by state government about flat taxes rather than % rate taxes on digital downloads. On top of all that, the states all handle their laws individually, and there will be changes from one state or another all the time, so we're talking monthly updates to the program, or perhaps even more often than that.

How do you code web sites around all that? A business owner would have to deal with updates not just in the program on the tax rates, but also the checkout process if some new circumstance comes up.

This whole thing in an unholy mess.


RE: Lies!
By Mint on 5/8/2013 12:03:40 PM , Rating: 2
I don't know why you're making such a big deal out of this. The state that the item is being shipped to gets the tax. It doesn't matter where the warehouse or middlemen are.

Look at the shipping address, charge that state's sales tax, and transfer it to that state.


RE: Lies!
By jwbarker on 5/8/2013 1:30:14 PM , Rating: 2
Not quite correct, you might try reading the actual proposed law:
http://thomas.loc.gov/cgi-bin/query/D?c113:4:./tem...

In the first place, taxes must be charged for localities, not just states. This means the counties/cities/etc where the item is delivered. And, as you may know, the city listed in the mailing address often has little to do with the city the location actually belongs to. This is, indeed, a very complex problem.

On the other hand, each participating state is required to provide, free-of-charge, software which performs all of these calculations. Further, they are required to either provide 90 day notice of any changes to the rules, or forgive any errors for 90 days after the change.

A bigger problem is that these entities often charge different tax levels for different items. For example, here in Ohio, food is not taxed at all. So now, sellers must categorize each item they are selling. This might seem simple at first, but keep in mind the categories must match each and every state's laws, a much more daunting task. (and also difficult to automate.)


RE: Lies!
By wempa on 5/8/2013 2:34:43 PM , Rating: 2
Well, the text is kind of hard to read. However, if they are required to collect local taxes too, then I agree that this law is a big mess. It'd be easier to just have a flat tax on online purchases.


RE: Lies!
By Mint on 5/8/2013 11:20:55 AM , Rating: 2
Your post is a self contradicting mess.

You say internet companies - which benefit greatly from currently not having tax charged on all sales except within their own state - have "far, far fewer employees".

So by taking away part of their advantage, retail stores get more business, right? Retail stores with more employees, according to your own statements. So how does this bill cost jobs?

We also need a bill like this to avoid pointless inefficiency .

If two online companies in NY and CA have the same prices, the current rules make customers in NY buy from CA and customers in CA buy from NY (assuming shipping charges are than the tax), which is ridiculous. We then have all these unnecessary shipping miles, basically shifting would-be sales tax dollars to the shipping companies, all because of this loophole.

You also need to read the article before going on a spiel. Companies with less than $1M/yr in out of state sales are exempted.


RE: Lies!
By dgingerich on 5/8/2013 8:54:45 PM , Rating: 2
The beginning part was expanding on the advantage of online businesses and why they will always have a price advantage and retail stores will never be able to catch up with them. That's all. The rest was about the complexities of this idiotic tax law.

You know what would solve this whole thing without a federal tax law? A simple expansion of the existing local and state sales tax laws with a simple "if it sold here, we tax it here" clause instead of basing it on the location of the buyer. If a company is based out of Anaheim, California, then whoever buys from that company pays Anaheim, California sales taxes. Plain and simple. The feds and the idiots in Congress don't have to get involved at all. Better yet, the business has one straightforward tax law to follow. No complex software would be needed.

There is the side effect of businesses flocking away from California and to tax friendly states like Montana, New Hampshire, or Oregon, and buyers would flock there as well, but I really don't care of California loses a bunch of tax revenue. they deserve to lose it. California has lived high on the hog for far too long. the state is run by a bunch of spoiled, rich idiots that think they own the world, and know what's right and wrong for everyone, just because they happen to have beautiful weather and a bunch of beautiful movie stars.


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