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john65pennington's avatar

What's your opinion of the IRS about to tax sales across the internet?

Asked by john65pennington (29253points) March 14th, 2012

The IRS states it has been watching sales on the internet and now has decided to levy a tax on the sales. The cap would be $20,000 dollars and credit card info may be followed. I must ask, I wondered what has taken the IRS so long to grab a hold of a lot of tax money being lost out in cyber space.

Question: What’s your opinion? Do you think the people using the internet as a business, should pay taxes on their sales?

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31 Answers

jca's avatar

Not happy about it but not surprised.

Cruiser's avatar

Yes and it is only fair as brick and mortar stores are taking it on the chin where here in Chicago they charge 10% sales tax and that is some serious coin when you can buy the same item often cheaper on line without having to pay additionally a sales tax.

JLeslie's avatar

Makes sense to do it. The internet is probably not only diminishing sales tax revenue taken in to some extent, but also hurting our brick and mortar stores. There is an unfair tax advantage for online businesses, exceot I guess they charge shipping which many times balances it out a little. The laws have to do with not being able to charge tax in a state you don’t have a store I would assume, so maybe that is the law that really needs to be changed? Not sure what I think is fair or right. I would have to think about it more. What makes it difficult is that sales tax varies around the country.

funkdaddy's avatar

Do you have a link to the information?

The IRS generally doesn’t collect sales tax since that goes to state and local governments. They do of course collect income tax on any income generated online, but that’s already in place.

I think if they’re going to tax online sales, it should be a flat rate for all areas. The differing, overlapping, and changing rules for taxation across the country are nearly impossible to keep straight and then tracking which organization is owed which amount that was collected is also daunting. Enforcement would be an equal nightmare from the other side.

For small retailers, making a payment to a city or county across the country for a single sale from that area is silly, but that’s essentially what would be required as I understand it.

A flat federal tax makes more sense and addresses many of the concerns of brick and mortar retailers, but then what’s the advantage for the groups that normally benefit from sales tax (state, city, local governments)?

I’m sure people more familiar with tax law are working on these problems but I don’t think it’s as simple as just saying “internet sales should be taxed” because there’s no single standard like there are in other countries.

dappled_leaves's avatar

My reaction is that I’m shocked no one has been collecting sales tax on online sales before now. I don’t remember there being a similar “tax-free” period for online sales in Canada.

JLeslie's avatar

@dappled_leaves But, in Canada you have a VAT tax don’t you? A national tax?

john65pennington's avatar

I saw this on CBS News this morning…..source.

dappled_leaves's avatar

We have a national GST (goods and services tax), and in the provinces either a PST (provincial sales tax) or both of these are combined into a HST (harmonized sales tax). However, some items are not taxed at all (most food, books, etc.) in most provinces because they are considered necessities.

But my point is that I wouldn’t expect online sales to be handled any differently than in-store sales in terms of taxation.

john65pennington's avatar

I think the Feds have been monitoring this situation for quite a while. They had to wait until they had all their ducks in a row, before telling the public.

Your tax information would go on a Form 1099.

I was amazed at how much money some people are profiting from cybersales.

jca's avatar

@john65pennington: Each store would provide a 1099 to each customer? That would be a lot of paperwork, yes?

funkdaddy's avatar

I think it’s telling that if you do a search for “internet sales tax” on CBS news, they have articles ranging from 2004 until now (I didn’t find the one from the morning unfortunately), all saying it’s coming and that states want that missed revenue.

“monitoring this situation” – I’m not sure if you think there’s something criminal or wrong about people not paying sales tax online. Receiving a 1099 would be for income, so isn’t related here.

Online companies are already required to charge sales tax for sales in any state they have a physical presence. So as I’m in Texas, any sales I make in Texas would be charged sales tax at the rate for my physical store or headquarters within the state, regardless of the buyer’s local tax rate.

If we did the same at a national level business in high tax rate areas would be at a disadvantage nationally to those who lived in low or no sales tax areas. It would be confusing for everyone involved and that doesn’t even get into places that have multiple physical stores to go with their online business.

JLeslie's avatar

@dappled_leaves As far as I know online is handled the same, if there is a store in your location it is taxed, if not it isn’t. That’s the “problem” with our law I think regarding sales tax. For instance, if I buy a product in Bloomingdale’s in Florida (FL) and have it sent to my house in Tennessee (TN) I pay no tax, because TN does not have a Bloomingdale’s. If I buy it from Macy’s (we have a Macy’s in TN) in Boca Raton, FL, I pay my 9.25% sales tax if it is sent to my home. If I don’t have it sent, and just take it away myself from the store I pay the nornal 6.5% sales tax in Palm Beach County, FL.

I do agree it is odd that in America this has not been addressed sooner. I assume people have talked about it in the government before, but for some reason it has not been much in the media or public discussion.

dappled_leaves's avatar

@JLeslie That’s essentially what we do, too. But from the question, it sounds to me as if there has not been sales tax on online sales until now. I’m re-reading it, and wondering if it doesn’t mean that… then does it mean that businesses have been collecting sales tax from consumers, but not relaying that tax to the IRS? I’m confused. What is the difference between what is being proposed and what was happening before?

jca's avatar

I would prefer to see a link or article before speculating further. The details don’t seem to add up.

wundayatta's avatar

I am opposed to sales taxes. I much prefer income taxes.

JLeslie's avatar

@dappled_leaves If the business has only one location for the sales, if basically everything is online, there would only be a sales tax for customers who live in that particular state where the business resides. Basically 49 states would not pay tax for those online items.

MrItty's avatar

Without a real source – that is, a link to a direct statement by an IRS policy official, this is all BS. No different than the countless other spam messages we all get every day. The Government is not planning on taxing the Internet. There is no little girl dying of cancer to whom Microsoft will donate $1,000,000 if her email gets forwarded 10,000 times. There is no Nigerian Prince who needs your help getting his inheritance across the border. That device they told you about is not going to increase the size of your reproductive organ. Facebook is not going to start charging a monthly fee.

The fact that CBS fell victim to the latest round of nonsense does not make it true. It just makes them foolish, not to mention everyone else who believes them.

MrItty's avatar

Oh, and by the way, the IRS does not have the authority to create new taxes. They Enforce the tax laws, they don’t create them. The Congress creates all federal laws – including those regarding taxes – and the President signs them. The IRS does nothing when it comes to creating new tax law.

JLeslie's avatar

@MrItty Good point about the IRS not creating law. Probablly is SPAM, I would guess right wing, rumor. I only accuse the right wing, because it is hapoening while Obama is President, and they love to freak out about taxes. But, it does seem possible people have bounced around the idea of sales tax laws changing now that more and more is sold on the internet.

john65pennington's avatar

Mritty, my question is not BS. It was on CBS this morning. From my understanding, there is a law change or proposed, that will address this change. There was a tax attorney, name unknown, giving this information in an interview with CBS.

CWOTUS's avatar

You’re nearly always a breath of fresh air in discussions such as this, @MrItty. You saved me a lot of typing. Thanks.

@john65pennington, there’s BS on television every day. Every hour of every day. Just because it has a CBS logo on the screen doesn’t make it ‘not BS’.

JLeslie's avatar

@john65pennington So, did you maybe misspeak when you said the IRS is looking at changing the laws? Or, did the tax attorney actually say it was the IRS?

LuckyGuy's avatar

New York State had been doing this for years. I am surprised other states have not followed suit. I’m even more surprised the Feds haven’t done it already.

funkdaddy's avatar

Amazon is an online retailer that tends to lead the way on sales tax issues both because of their size and because they are usually the first in court to shake down what a new law really means.

As such, their Customer Support Page on Sales Tax is good reading if you want to see how even the few states that do charge sales tax on all sales have complicated things for retailers and consumers alike.

From the section on the Internet Tax Freedom Act

Companies selling over the Internet are subject to the same sales tax collection requirements as any other retailers. Remote sellers (including Internet retailers and catalog companies) are generally required to collect taxes where they have a physical selling presence. If they do not have any such presence, they are not required to collect sales taxes.

The Internet Tax Freedom Act (ITFA) has been renewed through November 1, 2014.

Please note, the ITFA was primarily intended to prevent state and local governments from imposing new or discriminatory taxes on Internet transactions and on Internet access. Despite the name of the Act, ITFA does not preclude state and local governments from imposing existing sales tax collection requirements on companies selling over the Internet.

MrItty's avatar

@john65pennington I’m sorry you were duped, but yes, it is BS. The fact that CBS reported it does not make it not BS.

Brian1946's avatar

66.67% of CBS is BS. ;-)

john65pennington's avatar

Well, in conclusion, when the 1099 Form comes in the mail to internet sellers, I guess the BS will then be a reality.

jaytkay's avatar

I believe this may about the 1099-K form.

It is not a tax. It’s a requirement to report income. Just as wages, dividends, interest, etc have been reported for decades.

Reuters – Feb 15, 2012 – IRS Clarifies 1099-K Reporting for 2011 Taxes

YARNLADY's avatar

The IRS does not set taxes, that is done by Congress, and we can always choose our representatives to Congress by exercising our right to vote.

CWOTUS's avatar

…and live happily ever after.

jca's avatar

@john65pennington: Look at what @MrItty wrote. It makes sense. I think you misunderstood what you watched, or it’s incorrect the way they reported it.

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