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The Amazon Money Grab by North Carolina

Discussion in 'The OT' started by Marlin Guy, Apr 21, 2010.

  1. Stewart Vernon

    Stewart Vernon Roving Reporter Staff Member Super Moderator DBSTalk Club

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    I actually agree in part with you...

    Amazon, and other companies were skirting the issue of "a retail presence within the state" by not technically having a retail outlet, but rather a marketing/shipping "hub" within the state. So they very much were exploiting a loophole in the old tax code that specifically said they had to have a retail presence to be required to collect sales tax.

    NC closed that loophole a year ago by expanding the law to cover non-retail presence like the kind Amazon had... and of course Amazon promptly responded by closing that "hub" and moving operations outside of NC. That still should leave them liable for not collecting tax on any period of time that they remained in the state once the law became effective... and while I don't know what that is, I'm sure it isn't back to 2003.

    So I can't see what point NC would have in asking for the data except to see how much revenue is going towards out-of-state purchases... which wouldn't/shouldn't require names & addresses of NC residents. I expect there would be lots of NC government employees who have made as many or more out-of-state purchases as the average NC resident... and I expect about the same percentage of those employees reported as do the average resident as well.

    Personally I'm tired of all the back-and-forth on this (not this forum discussion, but rather the NC government back-and-forth)...

    States like NC either need to jump on board and get a Federal law on interstate commerce OR quit beating the dead horse.
     
  2. James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Club

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    They MIGHT be pushing to say that the warehouse presence was enough ... but they don't need detailed customer information to back bill for that. All they need is totals. (Unless they are going to try to claim for shipments from the NC center to NC residents only and not for orders sent from other centers.)

    I've dealt with businesses for years that have charged sales taxes in the states where they only had a warehouse. It is likely that even under prior law Amazon should have been collecting the tax. And as long as Amazon continues to market to people within NC moving their distribution center shouldn't change their responsibility to collect taxes (just as out of state companies have to obey the Indiana "Do Not Call" list when they call me - or actually, when they can't call me).

    Here is a write up from 2006 on the issue:
    http://www.wilsonweb.com/ecommerce/salestax-sst.htm
    the US Supreme Court ruled in Quill Corp. v. North Dakota (1992) that mail order businesses don't need to collect sales taxes except in states where they have a physical presence. A company is required to collect sales tax only for its own state (unless the organization has a site, office, or store in another state also).

    However, Streamlined Sales Tax (SST) legislation is gradually being adopted by specific states (www.streamlinedsalestax.org). When this is in place, Congress will probably require companies over a certain revenue threshold to collect other states' sales taxes.​
    That Supreme Court ruling would put the responsibility on Amazon to collect NC taxes before the recent law change. Amazon had a site in NC.

    Click here for a map of participating states. I seem to remember this coming up in online sales before with some sites charging me Indiana tax for my purchases even though they don't have a presence. Amazon has not charged me tax on my purchases through them.
     
  3. wilbur_the_goose

    wilbur_the_goose Hall Of Fame

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    Good map... Makes me happy I live 10 miles north of tax free Delaware!
     
  4. SamC

    SamC Hall Of Fame

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    This was an old way of skirting sales tax.

    It is supposed to work like this:

    The tax is only on the "consumer", so if a business bought something for "resale" then it owed no tax. But if it buys something it consumes, it does. So states issued "Tax IDs" and businesses would not charge sales tax to other businesses. It was supposed to be all reconsiled in the "use tax" return the business filed, but lots of people just bought all of their household purchases that way and it is difficult to enforce.

    The bigger part of the use tax, however, deals with major purchases. I used to work in radio. We needed a new transmitter. Nearly a million dollars. Now there are not even any companies that sell transmitters in this state. So we bought it, technically, in New York, at least that is where the sales office was, Lord knows where the thing was made. Now, we did not owe NY any sales tax, since it was shipped out of state (I actually doubt the thing was every physically in NY). But we owed (and paid) a "use tax" because we "consumed" this item in our business. Right and proper.

    Obviously, a smart company would, in the absence of a "use tax" never buy anything in the state it used the item (it would buy its Kentucky items in Ohio and its Ohio items in Kentucky, etc) and never pay sales tax. This is where the "use tax" came from. To get businesses.

    It technically applies to the "little guy" but it is very rarely enforced. Millions of people buy small items out of state and pay no sales taxes. For example, I buy my groceries in Ohio (no tax on food) and I don't write my state a check for that. Nobody does.

    BTW, the one large purchase you can make out of state is a car, and the states charge car tax in a completly different way to make sure you pay up.
     
  5. Stewart Vernon

    Stewart Vernon Roving Reporter Staff Member Super Moderator DBSTalk Club

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    Once again, I'm inclined to agree with you... but in that situation, it would be Amazon who would be on the hook for having not collected sales tax... and as you noted, NC would not need names just the dollar amounts to collect from Amazon. And Amazon wouldn't be able to back-collect from NC customers... it would just be their loss to have not complied in the first place.
     
  6. Stewart Vernon

    Stewart Vernon Roving Reporter Staff Member Super Moderator DBSTalk Club

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    Agreed... and I remember it well... but at least the business (or in my case sole proprietor) who applies for the Sales Tax ID has to fill out a form, read the regulations, and agree to pay use taxes and collect/pay sales taxes.

    Actually, to be 100% accurate on sales tax anyway... the law doesn't say a company has to collect sales tax at all... just that a company has to pay it! The law also allows companies to collect up to the amount they pay. Some companies (and I know I did this at conventions where I sold things) made it easier on themselves by not actually collecting sales tax as a separate item, but rather build it into the price...

    Ex... Instead of pricing an item at $5 and charing 10% tax to customers and selling that item for $5.50... you can price your item at $4.54 so that the sales tax of 10% is "included" when you charge $5. That way you have easier prices to deal with at the customer level.

    Some of my supplies were actually consumables... Things like tape, pens, bags, etc that are consumed in the course of making the sale are items you don't actually have to pay a "use" tax on because they ultimately are taxed as part of the prices you charge in your business.

    The use tax comes into play for a business, as you noted, with a non-consumable OR something a person decides to keep for personal use.
     
  7. Lee L

    Lee L Hall Of Fame

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    So, now the State of NC DOR is asking internet retailers to agree to voluntarily collect NC sales tax and in exchange they say they will not go after them in court for past taxes. http://www.wral.com/news/state/story/7473826/ . It will be interesting to see if they get any takers or if the web companies stick to the belief that NC cannot do anything to them.
     
  8. djlong

    djlong Hall Of Fame

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    It's probably going to be cases like these that will cause legislators to push for a national sales tax.
     
  9. Stewart Vernon

    Stewart Vernon Roving Reporter Staff Member Super Moderator DBSTalk Club

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    Only problem I see here is... the act of "asking" companies to "voluntarily" collect sales tax pretty much says to companies that it is not required... otherwise why "ask"?

    This could backfire against NC in further court proceedings if companies say that NC told them it was voluntary...
     
  10. James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Club

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    It is an offer. Government sometimes give the choice for industries to regulate themselves instead of having possibly worse rules imposed.

    "Dear Industry, Not collecting sales/use taxes is a problem. Solve this problem or we will."
     
  11. Stewart Vernon

    Stewart Vernon Roving Reporter Staff Member Super Moderator DBSTalk Club

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    Maybe it is semantics... but often law is about semantics.

    Consider:

    1. "We invite you to voluntarily comply with collection of taxes"

    vs

    2. "We invite you to voluntarily collect taxes"

    #1 implies that the tax is required, but they are offering the opportunity to comply voluntarily before they pursue legally...

    #2 implies that the tax collection itself is voluntary.
     

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