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Supreme Court: Online shoppers can be forced to pay sales tax

Taxes and regulation

fhs8

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Ya, but that's for over $250K in sales within the state. That applies to very few people. Going for the big boys.

A lot of states passed thresholds higher than 200 sales and 100k because they weren’t sure it would be struck down in the courts. However now that Bellas Hess and Quill has been struck down and 200 transactions has been approved there is no way states are going to set high thresholds going forward.

Even if you do have under 200 transactions in a state it doesn’t mean you won’t be in the clear.

Vermont has a one transaction threshold for use tax notification. So if you sold one item to VT you need to comply with their law.

Reporting Requirements For Noncollecting Vendors | Department of Taxes

The penalty is $5.00 for each customer not notified at checkout if you don’t remit sales tax. Getting an ecommerce site where you can customize your checkout is more important than ever to comply with these requirements. Keep in mind VT doesn’t require that you send first class mail to each customer notifying them of this unlike states such as PA, OK, and WA.

The state of Alabama passed legislation authorizing the department of revenue to require remote sellers follow use tax guidelines that they make.

https://revenue.alabama.gov/wp-content/uploads/2017/07/Act_2017-82_Simplified_Sellers_Use_Tax.pdf

We should see guidelines from AL coming out soon. I can guarantee you it’ll be a lot lower than 250k.

Disclaimer: I am not a legal professional and I do not give professional legal advice.
 
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It's not that big. Plus, what the article doesn't state is there will also be a unit litmus test and that will be a much lower threshold. In South Dakota, it's only 200 units. Almost every single seller that sells on Amazon of of any scale would meet that low bar.

Get ready for 50 states worth of craziness.

Maybe they will come to their senses and make a flat 8% nationwide.
 

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Good luck collecting. The systems and man power are not close to being in place to track and collect on something of this kind of massive scale. If it was they would be sending everyone Use Tax bills.

fhs8 - If people start reading laws on the books you will scare yourself to death with what you will find. But I dont think you are grasping the scale of this. Most states flat out cant afford to pursue this to the letter of the law. It would takes years just to try and get a system in place to make it feasible. You are giving these people far too much credit. Its much easier for them to add a couple cents to the gas tax or many other things that dont require large investment in hiring more people and building more systems.
 

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fhs8

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Good luck collecting. The systems and man power are not close to being in place to track and collect on something of this kind of massive scale. If it was they would be sending everyone Use Tax bills.

The reason why everyone doesn't get use tax bills is because retailers don't report which people owe use tax. With use tax notification law the business sends the state entity responsible for sales tax the full list of customers that owe use tax and the amounts. So now the state will know which people owe use tax.

States do send out use tax demand letters for vehicles and airplanes bought out of state because there's a record of it. They do also do pursue people for relatively small amounts.

fhs8 - If people start reading laws on the books you will scare yourself to death with what you will find. But I dont think you are grasping the scale of this. Most states flat out cant afford to pursue this to the letter of the law. It would takes years just to try and get a system in place to make it feasible. You are giving these people far too much credit. Its much easier for them to add a couple cents to the gas tax or many other things that dont require large investment in hiring more people and building more systems.

I don't know how this will turn out but the problem is that there are multiple states and the amounts remote sellers will owe in interest, penalties, and sales tax won't be a relatively small amount. We aren't talking $20 here. Washington has a $45,000 minimum applied each year when not following their use tax law. I remember reading an article where a state actually hired an independent firm to locate remote sellers not remitting sales tax. Most states can't afford to not pursue remote sellers for money.

Disclaimer: I am not a legal professional and I do not give professional legal advice.
 

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Good luck collecting. The systems and man power are not close to being in place to track and collect on something of this kind of massive scale. If it was they would be sending everyone Use Tax bills.

fhs8 - If people start reading laws on the books you will scare yourself to death with what you will find. But I dont think you are grasping the scale of this. Most states flat out cant afford to pursue this to the letter of the law. It would takes years just to try and get a system in place to make it feasible. You are giving these people far too much credit. Its much easier for them to add a couple cents to the gas tax or many other things that dont require large investment in hiring more people and building more systems.

There's a low chance of getting caught in a lot of illegal activities. That doesn't mean I do them.

If I am required to pay tax under state law and I don't, your post don't help me should I ever need to proffer a defense for breaking the law.

You're advocating people violate the law(s) and your rationale is you personally don't know what tactics will be deployed for collection?
 
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At some point, people who can will just say "F*ck it" and refuse to participate in any commerce. I'm at the point where 100 acres in the middle of no where sounds appealing.
 

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At some point, people who can will just say "f*ck it" and refuse to participate in any commerce. I'm at the point where 100 acres in the middle of no where sounds appealing.

At some point my plan is to be as Off the Grid as possible. I plan to be invisible.
 

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The only way I can see this working long term would be a Nationwide Flat Tax on online sales. I doubt many small businesses would set aside enough tax on each sale for tax payments times 50 states if it were paid lump sum, end of year.

Ideally, if there were an app created whereupon for each sale, the tax would be deducted and sent to each states coffers immediately on collection of payment for goods sold. If that were available, I believe most customers and small businesses would accept and charge the % as part of the purchase.

If not immediately, then no later than months end similar to fees like Paypal, Ebay or Amazon.
I just don't see how it would work any other way...

Otherwise, the hassle of business just ain't worth it
 
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fhs8

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This article and the map included with it doesn't really clear anything up and shows the convoluted mess this all is:

How Will The New Sales Tax Ruling Impact Online Retailers? | Seeking Alpha

That map is outdated since it's from a year ago before Wayfair and doesn't even mention all of the requirements for each nexus.

Here is a an old map for sales tax on software.
Sales tax on software: a visual guide by state - Avalara

I just found out Iowa is going to implement a one transaction "cookie" nexus taking effect Jan 1, 2019. Even if your ecommerce website somehow doesn't put cookies on users they have a ton of other triggering criteria such as 200 transactions, use of a referrer, use of a marketplace facilitator (Amazon), use of an solicitor/affiliate in Iowa, use of a CDN in Iowa, etc ... Every single shopping cart software that I know of requires the use of cookies.

They also tax tangible and intangible property (software).

c. “Marketplace seller” means any of the following:
b. A retailer that makes Iowa sales in two hundred or more separate transactions for an immediately preceding calendar year or a current calendar year.
c. (1) A retailer that owns, licenses, or uses software or data files that are installed or stored on property used in this state. For purposes of this subparagraph, “software or data files” include but are not limited to software that is affirmatively downloaded by a user, software that is downloaded as a result of the use of a website, preloaded software, and cookies.
(2) A retailer that uses in-state software to make Iowa sales. For purposes of this subparagraph, “in-state software” means computer software that is installed or stored on property located in this state or that is distributed within this state for the purpose of facilitating a sale by the retailer.


Iowa Legislature - BillBook
PAGE 93 - 94

Rhode Island and other states have also implemented cookie nexuses. Amazon will now hand over data to help officials identify vendors not collecting sales tax in MA.

Amazon gives in to Massachusetts tax officials and agrees to turn over third-party seller data

It's very clear that if you sell anything on the internet in the US you're no longer safe.

Disclaimer: I am not a legal professional and I do not give professional legal advice.
 
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Vigilante

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working long term would be a Nationwide Flat Tax on online sales.

I doubt Amazon and their corporate lobbyist (the Washington Post) will be onboard with that.
 

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How would a Supreme Court decision get thrown out?

I know of two ways.

The Supreme Court can take another course that deals with the same issue. If the justices of the original court have since died, they'll probably say that the previous decision was wrong and here's the right way to handle it. If the justices of the earlier decision are still alive and on the court, they'll probably just accept one of the other legal theories in the new case. This could be a way to invalidate the earlier precedent, while saving face.

Why would the Supreme Court do this? For one thing, maybe because they just got a new member, and that shifts the balance of power? There's a Supreme Court vacancy right now.

For another, they're supposedly above the whims of popular opinion... but maybe they'll find a way to give the people what they want, with some fancy dancing around the different ways to interpret the law?

Also, Congress can pass a new law that replaces the old one. This means the court case about the old law doesn't matter any more.
 

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I know of two ways.

The Supreme Court can take another course that deals with the same issue. If the justices of the original court have since died, they'll probably say that the previous decision was wrong and here's the right way to handle it. If the justices of the earlier decision are still alive and on the court, they'll probably just accept one of the other legal theories in the new case. This could be a way to invalidate the earlier precedent, while saving face.

Why would the Supreme Court do this? For one thing, maybe because they just got a new member, and that shifts the balance of power? There's a Supreme Court vacancy right now.

For another, they're supposedly above the whims of popular opinion... but maybe they'll find a way to give the people what they want, with some fancy dancing around the different ways to interpret the law?

Also, Congress can pass a new law that replaces the old one. This means the court case about the old law doesn't matter any more.

Congress is the best remedy. Another Court test could take years.
 
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Late Bloomer

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Congress is the best remedy. Another Court test could take years.

I apologize that I've found myself bogged down with this particular thread. Did the Supreme Court say that retailers are obligated to collect and account for taxes for all jurisdictions nationally? Or is this only an assumed obligation, while the actual decision applies only to what the law requires of customers? I'm not clear on whether this ruling means it's time to panic right away, or outsource all tax and billing handling to some nationwide third party. Or is it only a warning sign of potential problems, something to watch but it doesn't require immediate action?
 

fhs8

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Congress is the best remedy. Another Court test could take years.

There's no way the court is going to overturn this. Even the dissenting opinion (Roberts) said that Bellas Hess was wrongly decided. The Supreme Court gets 10,000 court cases a year and only accepts 80 of them. We would be lucky if an issue regarding sales tax makes it in the next 20 years. They didn't even accept Colorado's use tax notification case.

I apologize that I've found myself bogged down with this particular thread. Did the Supreme Court say that retailers are obligated to collect and account for taxes for all jurisdictions nationally? Or is this only an assumed obligation, while the actual decision applies only to what the law requires of customers? I'm not clear on whether this ruling means it's time to panic right away, or outsource all tax and billing handling to some nationwide third party. Or is it only a warning sign of potential problems, something to watch but it doesn't require immediate action?

The Supreme Court threw out Bellas Hess and Quill. Those decisions basically said that physical presence in a state is a requirement for sales tax. The Supreme Court only said that laws where out of state retailers have to pay sales tax are no longer a burden on interstate commerce. So now all states will be able to enforce the laws they have on the books.

It requires immediate action. In fact you should've taken action back months ago. Not only that but a troubling trend is that states are starting to define remote seller sales tax collection as "maintaining a place of business in this state" which means income tax returns, pass through corporation, and registered agent. How does 30+ state income tax filings a year sound along with the cost of a pass through entity (pass-through LLC in CA is a minimum $800 a year)?

Many states already have very broad income nexuses and I would be shocked if they don't include sales tax.

In fact this decision will likely be the end of many tight margin online businesses. You're not going to be able to outsource a lot such as audits, sales tax permit renewals, sales tax fidelity bonds, sales tax permit cost, notices to respond to, state income taxes, pass-through corps, and registered agents.

You should also check the cost of automated sales tax software. In the supreme court the plaintiff said it would cost $19 to comply. When I checked it would be at least $10,000+/yr from the cheapest solution. Some solutions are $50,000/yr.
 

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More hard earned money going to the hands of the asinine beauracts!
 
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It requires immediate action. In fact you should've taken action back months ago

Thank you for the clear summary. I'm not currently selling anything online. So dealing with this is on my to-do list for the time I start to do so in the future.
 

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There's no way the court is going to overturn this. Even the dissenting opinion (Roberts) said that Bellas Hess was wrongly decided. The Supreme Court gets 10,000 court cases a year and only accepts 80 of them. We would be lucky if an issue regarding sales tax makes it in the next 20 years. They didn't even accept Colorado's use tax notification case.



The Supreme Court threw out Bellas Hess and Quill. Those decisions basically said that physical presence in a state is a requirement for sales tax. The Supreme Court only said that laws where out of state retailers have to pay sales tax are no longer a burden on interstate commerce. So now all states will be able to enforce the laws they have on the books.

It requires immediate action. In fact you should've taken action back months ago. Not only that but a troubling trend is that states are starting to define remote seller sales tax collection as "maintaining a place of business in this state" which means income tax returns, pass through corporation, and registered agent. How does 30+ state income tax filings a year sound along with the cost of a pass through entity (pass-through LLC in CA is a minimum $800 a year)?

Many states already have very broad income nexuses and I would be shocked if they don't include sales tax.

In fact this decision will likely be the end of many tight margin online businesses. You're not going to be able to outsource a lot such as audits, sales tax permit renewals, sales tax fidelity bonds, sales tax permit cost, notices to respond to, state income taxes, pass-through corps, and registered agents.

You should also check the cost of automated sales tax software. In the supreme court the plaintiff said it would cost $19 to comply. When I checked it would be at least $10,000+/yr from the cheapest solution. Some solutions are $50,000/yr.

Agree with much of what you said, but it will take some time for most states to get their shit together on this. However, there's also nothing to keep them from going retroactive.
 
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Shades

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There's no way the court is going to overturn this. Even the dissenting opinion (Roberts) said that Bellas Hess was wrongly decided. The Supreme Court gets 10,000 court cases a year and only accepts 80 of them. We would be lucky if an issue regarding sales tax makes it in the next 20 years. They didn't even accept Colorado's use tax notification case.


It requires immediate action. In fact you should've taken action back months ago. Not only that but a troubling trend is that states are starting to define remote seller sales tax collection as "maintaining a place of business in this state" which means income tax returns, pass through corporation, and registered agent. How does 30+ state income tax filings a year sound along with the cost of a pass through entity (pass-through LLC in CA is a minimum $800 a year)?

Many states already have very broad income nexuses and I would be shocked if they don't include sales tax.

In fact this decision will likely be the end of many tight margin online businesses. You're not going to be able to outsource a lot such as audits, sales tax permit renewals, sales tax fidelity bonds, sales tax permit cost, notices to respond to, state income taxes, pass-through corps, and registered agents.


Just listen to yourself. So basically, states will effectively put the majority of businesses out of business so that they can collect less taxes overall in the long term? I mean good lord people. The reaction to this is so over the top apocalyptic. Its a giant nothing until it ever gets implemented in a doable realistic way which will take years, if ever.

You are talking about something that would literally put most american small businesses out of business. Its not going to happen. States realize that by going after businesses in other states... means that other states can just as easily put businesses in their state out of business. Which means WAY less taxes overall for the state. Nobody wins. Not the business owners. Not the states. Not the consumers. Its just another dumb idea thats not thought out.
 

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Just listen to yourself. So basically, states will effectively put the majority of businesses out of business so that they can collect less taxes overall in the long term? I mean good lord people. The reaction to this is so over the top apocalyptic. Its a giant nothing until it ever gets implemented in a doable realistic way which will take years, if ever.

You are talking about something that would literally put most american small businesses out of business. Its not going to happen. States realize that by going after businesses in other states... means that other states can just as easily put businesses in their state out of business. Which means WAY less taxes overall for the state. Nobody wins. Not the business owners. Not the states. Not the consumers. Its just another dumb idea thats not thought out.

So for clarity, the Supreme Court just cleared the way for States to collect sales tax on eCommerce, and your theory is they're just not going to?
 

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So for clarity, the Supreme Court just cleared the way for States to collect sales tax on eCommerce, and your theory is they're just not going to?

Most states do not have the resources or infrastructure to make that happen. We are acting like this is some simple endeavour. And once the smallest amount of thought is put into this by states they will realize they are killing their own tax revenue in the long run by killing the business environment. It makes zero sense.

This is the equivalent to it being illegal to spit in Goodyear, AZ. Theres a ton of moronic laws on the books in this country. Enforcing them is a whole other matter
 
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Most states do not have the resources or infrastructure to make that happen. We are acting like this is some simple endeavour. And once the smallest amount of thought is put into this by states they will realize they are killing their own tax revenue in the long run by killing the business environment. It makes zero sense.

This is the equivalent to it being illegal to spit in Goodyear, AZ. Theres a ton of moronic laws on the books in this country. Enforcing them is a whole other matter

So let's just focus on California. You are talking about this at the 50 thousand foot level and assuming it has to make sense in order to be acted upon. Do you have any indication that the state of California would agree with your assessment?

Amazon has already revealed that they will turn over individual seller statistics to any state that formats their request in the proper manner. California will now know exactly how much you owe and the law is on their side to recover it from you.

It's your position that they will just pass? Even though that wasn't their position before the law sided with them?
 

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Most states do not have the resources or infrastructure to make that happen. We are acting like this is some simple endeavour. And once the smallest amount of thought is put into this by states they will realize they are killing their own tax revenue in the long run by killing the business environment. It makes zero sense.

This is the equivalent to it being illegal to spit in Goodyear, AZ. Theres a ton of moronic laws on the books in this country. Enforcing them is a whole other matter
The IRS is the only federal agency that brings in more money for each person they hire than it costs them to hire that person. I imagine state revenue departments are similar. If I can hire a person at $40k a year who can track down and collect $200k of taxes, I'd hire everyone I could until the numbers didn't make sense anymore.
 

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Just listen to yourself. So basically, states will effectively put the majority of businesses out of business so that they can collect less taxes overall in the long term? I mean good lord people. The reaction to this is so over the top apocalyptic. Its a giant nothing until it ever gets implemented in a doable realistic way which will take years, if ever.

You are talking about something that would literally put most american small businesses out of business. Its not going to happen. States realize that by going after businesses in other states... means that other states can just as easily put businesses in their state out of business. Which means WAY less taxes overall for the state. Nobody wins. Not the business owners. Not the states. Not the consumers. Its just another dumb idea thats not thought out.

Do you know how government works?

They just see money and how they can grab it. They don't give a shit about bankrupting businesses or slowing economic growth.

I wouldn't say it'll put most small businesses out of business either. Maybe just some ecommerce stores, which is a fraction of all the businesses in a state. Joe the Plumber and Craig the CPA will not be impacted.
 
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Do you know how government works?

They just see money and how they can grab it. They don't give a sh*t about bankrupting businesses or slowing economic growth.

I wouldn't say it'll put most small businesses out of business either. Maybe just some ecommerce stores, which is a fraction of all the businesses in a state. Joe the Plumber and Craig the CPA will not be impacted.

PLUS, they are not bankrupting people in their state. By definition, they are trying to grab new revenue from people in OTHER states. Zero shit given. Nobody from California is going to lose any sleep about collection efforts from a company that "owes" sales tax to California from Iowa.
 

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Just listen to yourself. So basically, states will effectively put the majority of businesses out of business so that they can collect less taxes overall in the long term? I mean good lord people. The reaction to this is so over the top apocalyptic. Its a giant nothing until it ever gets implemented in a doable realistic way which will take years, if ever.

You are talking about something that would literally put most american small businesses out of business. Its not going to happen. States realize that by going after businesses in other states... means that other states can just as easily put businesses in their state out of business. Which means WAY less taxes overall for the state. Nobody wins. Not the business owners. Not the states. Not the consumers. Its just another dumb idea thats not thought out.

https://www.supremecourt.gov/DocketPDF/17/17-494/37674/20180305153329994_17-494 Amici Brief States PDFA.pdf

41 states signed in favor of the decision (on page 27-30). Why would so many sign on to it? If it's not going to happen why are legislators everywhere passing bills for remote sellers sales tax?

Most states do not have the resources or infrastructure to make that happen. We are acting like this is some simple endeavour. And once the smallest amount of thought is put into this by states they will realize they are killing their own tax revenue in the long run by killing the business environment. It makes zero sense.

This is the equivalent to it being illegal to spit in Goodyear, AZ. Theres a ton of moronic laws on the books in this country. Enforcing them is a whole other matter

They aren't killing their own tax revenue because the companies they will be after are in other states. It's not a moronic law at all. Most states already enforce sales tax collection on marketplaces and affiliate nexuses. Many companies dropped affiliate programs in the past few years to avoid affiliate nexuses.

The IRS is the only federal agency that brings in more money for each person they hire than it costs them to hire that person. I imagine state revenue departments are similar. If I can hire a person at $40k a year who can track down and collect $200k of taxes, I'd hire everyone I could until the numbers didn't make sense anymore.

https://www.ftb.ca.gov/aboutftb/reports/Supp_Audit_Compliance/2016-17.pdf

For example in CA the FTB gets 16 dollars for every 1 dollar spent on auditing. The cost benefit ratio isn't even close to 1:1. It's far more beneficial for states to hire auditors.
 

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