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  1. #1
    bcr229's Avatar
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    Speaking of Taxes...

    I don't know if anyone is following the South Dakota v. Wayfair case in the US currently before the Supreme Court. Oral arguments were held last week. Issue on the table: whether online retailers will have to collect and remit sales tax for every customer's state and locality; no more buying online = no sales tax if the seller doesn't have a nexus in your state.

    The cost of compliance for small businesses is huge as the seller is not only responsible for state sales taxes but also for city/locality sales taxes. In my state of WV there are about 40 cities that have their own sales tax.

    Supreme Court Hears Oral Argument in Internet Sales Tax Case
    In South Dakota v. Wayfair, South Dakota is asking the U.S. Supreme Court to overrule precedent and hold that states and local governments may require retailers with no in-state physical presence to collect sales tax.

    NCSL President Senator Deb Peters and NCSL's tax expert Max Behlke interviewed by NCSL Public Affairs Director Mick Bullock following the Supreme Court hearing. NCSL estimated that states lost $23.3 billion in 2012 from being prohibited from collecting sales tax from online and catalog purchases.

    In 1967, in National Bellas Hess v. Department of Revenue of Illinois, the Supreme Court held that under its Commerce Clause jurisprudence, states and local governments cannot require businesses to collect sales tax unless the business has a physical presence in the state.

    Twenty-five years later in Quill v. North Dakota (1992), the Supreme Court reaffirmed the physical presence requirement but admitted that “contemporary Commerce Clause jurisprudence might not dictate the same result” as the court had reached in Bellas Hess.

    Customers buying from remote sellers still owe sales tax but they rarely pay it when the remote seller does not collect it. Congress has the authority to overrule Bellas Hess and Quill but has not done so.

    Even before oral argument, South Dakota could count three votes likely in favor of overturning Bellas Hess and Quill. In March 2015, Justice Anthony Kennedy wrote a concurring opinion stating that the “legal system should find an appropriate case for this Court to reexamine Quill.” While on the 10th U.S. Circuit Court of Appeals, then-Judge Neal Gorsuch wrote an opinion strongly implying that given the opportunity the Supreme Court should overrule Quill. Finally, while Justice Clarence Thomas voted North Dakota in Quill he has since rejected the concept of the dormant Commerce Clause, on which the Quill decisions rests.

    At oral argument Kennedy and Gorsuch asked Wayfair’s attorney different lines of questions both of which indicated they remain anti-Quill. Thomas, as always, was silent.

    The most vocal champion of overturning Quill was Justice Ruth Bader Ginsburg. She said the court needs to take responsibility for overturning precedent it created, which is no longer appropriate in the current economy, instead of relying on Congress to act.

    Justice Stephen Breyer was clearly torn about the case. He said he read both sides’ briefs and concluded both positions were “absolutely right.” He looked to the attorneys arguing for both sides to help sort out issues including exactly how much money is on the table, whether it really is easy and inexpensive to collect sales tax, and whether tax collection should be retroactive.

    Justice Sonia Sotomayor lead the charge defending Quill, asking South Dakota’s attorney about many of the same issues Breyer raised—but taking a more certain approach that the answers were known and point to keeping Quill the law of the land. Justice Elena Kagan asked a number of questions expressing the view that Congress should overturn Quill, if it wants to, given that Congress can craft a more complicated solution than the court can. Justice Samuel Alito also didn’t seem particularly sympathetic to South Dakota’s position, suggesting that if Quill was overturned states would “grab everything they could” rather than exempt small businesses from having to collect.

    Chief Justice John Roberts asked questions of both sides, something he has done more often since Justice Antonin Scalia died. His questions unfavorable to South Dakota focused on, among other things, the burden of requiring small businesses to collect sales tax and honoring Congress’s decision to leave things the way they are.

    The Supreme Court will issue an opinion in this case by the end of June.

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  3. #2
    BPnet Veteran Prognathodon's Avatar
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    Re: Speaking of Taxes...

    I’m not obsessively following it, but I am paying attention.

    Here in Illinois we have 102 counties, each one of them can have county sales tax on top of the state, and then municipality on top of that. Fortunately, Illinois makes it easy to look up the rate for the location for live shows, and I’ve had maybe one in-state Etsy purchase over the years.

    A few years ago Etsy supposedly made it easier to collect sales taxes from multiple jurisdictions - provided you look up the rates and set them all up yourself.

    If we do have to start collecting sales tax on sales to states where we don’t have a physical presence, either the states and sites like Etsy are going to have to give us help, or a *lot* of sellers are likely to just . . . not. And will I have to register with every state and submit a sales tax return in every state? Business/sales tax registration here in Illinois is free, but costs me $10 every year or three in Wisconsin. I can’t see any way having to collect sales tax on all internet sales is going to be anything but painful for small businesses.

    It wouldn’t be as bad if we could collect the tax at the basic state rates and only report/pay for what’s actually collected, without a fee or with an annual fee based on actual sales. Or even better, if we could just collect based on the rate where the seller is, on the theory that it will tend to even out - but I’m NOT holding my breath on that idea!


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  4. #3
    bcr229's Avatar
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    Re: Speaking of Taxes...

    Quote Originally Posted by Prognathodon View Post
    A few years ago Etsy supposedly made it easier to collect sales taxes from multiple jurisdictions - provided you look up the rates and set them all up yourself.
    Once you throw county, city, parish, etc. locality sales taxes into the mix there are over 12,000 tax jurisdictions so it would have to be integrated into shopping cart software to collect it. Remitting it is a whole other issue.

    Also it just affects businesses not hobbyists since they don't deal with sales taxes.

  5. #4
    BPnet Veteran Prognathodon's Avatar
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    Re: Speaking of Taxes...

    Quote Originally Posted by bcr229 View Post
    Also it just affects businesses not hobbyists since they don't deal with sales taxes.
    That may be the case in Louisiana, but not everywhere. Here in Illinois, there is no sales tax exemption for hobbies, and if you sell stuff retail, you have to collect sales tax. Period.

    From the Department of Revenue website:
    http://tax.illinois.gov/Individuals/...ated/fairs.htm
    Do you sell merchandise at fairs, festivals, flea markets, or craft shows?
    If so, you are a retailer and you must collect and pay Illinois sales taxes. Whether this is a full-time business or a hobby, you are subject to the Illinois Retailers' Occupation Tax.
    Must I register with the Department of Revenue if I sell items only at these special events?
    Yes. All Illinois business taxpayers, whether they are Illinois residents or not, must register with us for each tax type that they will collect or for any tax they are required to pay.
    I also have a business license in Wisconsin, and there are only limited exemption for small/occasional sales (which I might meet today, but not in the past). Depending on how many/what quality animals a breeder is producing, it looks like it could be easy to blow through that limit:
    https://www.revenue.wi.gov/DOR%20Publications/pb228.pdf



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  6. #5
    BPnet Veteran Prognathodon's Avatar
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    Re: Speaking of Taxes...

    Quote Originally Posted by Prognathodon View Post
    That may be the case in Louisiana, but not everywhere.
    Oops, I saw “parishes” when you were estimating umpty-thousand tax rate locations and just assumed Louisiana.



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  7. #6
    BPnet Veteran Prognathodon's Avatar
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    Re: Speaking of Taxes...

    Also also...

    I don’t mean to sound like an mind-numbing bureaucratic ghoul, but there are some pernicious myths out there about taxes and businesses, differences across the country can add to confusion, and not everybody checks the actual rules for where they are.
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  8. #7
    bcr229's Avatar
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    For hobbyists I was talking about WV; I didn't realize that IL would tax hobbyists. That's interesting.

    For parish I was talking about Louisiana, each little one seems to have its own tax rate.

  9. #8
    Venom Life Neal's Avatar
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    They just need to let it be and if you buy something online you don't have to pay sales tax if they don't have a physical location in that state. It's worked fine for years.
    -Venomous-

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  11. #9
    bcr229's Avatar
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    Re: Speaking of Taxes...

    Quote Originally Posted by Neal View Post
    They just need to let it be and if you buy something online you don't have to pay sales tax if they don't have a physical location in that state. It's worked fine for years.
    Well five of the nine USSC justices disagree with you:
    https://apnews.com/332abb7455cb4b60b2effc0852ff3c89

    Most reptile businesses and sellers are small enough that compliance won't be an issue; they will fall under the thresholds set by the states (which of course will vary).

    I wouldn't be surprised if frozen feeder sellers and the larger businesses like LLL and Big Apple will likely have to start charging sales tax.

  12. #10
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    Re: Speaking of Taxes...

    Bleaaaahhh. Not enthused. Some noise from Etsy with a link to a petition for sales tax overhaul on (I think) a national basis for “microbusinesses”. Whatever those are defined as. I can’t see any way that this isn’t going to get painful and confusing, at least for the short-medium term.

    Trying to collect and file sales taxes for umpty-zillion different jurisdictions is not the way to encourage businesses to do so. If states want sales tax revenue and compliance, they need to try to make it simple and easy.


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