June 10, 2013

An Internet Sales Tax - A Good Idea.?. - Terrible Political Execution.!.

This use to be an engineering joke, but fit many of our government bureaucratic proposals - like the Market Place Fairness Act..

I am going to be going off topic for my next 3 blog entries not writing about the standard Local / Printing / Advertising theme (saving the world one community at a time theme).  It's been a couple months since writing my last blog and there is a bunch in my head that needs to come out (a friend asked me recently, "when I shake my head, does it look like a snow globe").  "Internet Sales Tax" is the subject that just jumped out first.

The Internet sales tax - the way it is being proposed by the "Marketplace Fairness Act", is a bad idea and bad for business - all business.  Let it be known that I am not against an Internet Sales Tax, I am just against the way it is being proposed.  What bureaucrat, or lobbyist, could have proposed this method? And the free, easy to use automatic software? None are free - the best I have found has transaction based fees. And automatic (??#>@#) - please...  I was in the automation software business and, unless I am selling it ( :) ), automatic is never free, or easy. 

This is not about the Overstocks", "Amazons", NewEggs or Dells. Its about the 15-100 employee company that is being singled out and burdened.  Remember, I am Pro-Internet sales tax. As I have said before, the states currently do not collect anything (very little from personal use-tax) now in "cross-state-border" commerce. The states are not losing anything (as I also believe they won't be gaining anything from this). I believe that there should be NO MINIMUM (see I am pro) and the making of a federal sales tax form that accounts for interstate sales tax only (of course, only for states where the company does not have an office). A five line form ('Sales' minus 'sales where tax was collected for any municipality' minus 'tax exempt sales' = interstate taxable sales). I don't care where the money goes.... redistribute it back to the states as a windfall (this is not about the 'how' and 'who' of the gift horse - I would rather see our one federal government rather than 20 million businesses have to address this distribution) -or- let the feds keep it (makes more sense to me as as it crosses state lines - Kinda like the FBI). Think about the enforcement !! if it is even possible... Last quarter one of my businesses would have had to report to 17 different local municipalities with an average sales tax collection of $3.25 (if it met the $$ minimum qualifications)... Does anyone see the problem with this? Not the guy that has the "use-based-fees" free automatic software - I hope I am not the only one laughing now....

Very simply, under the new proposed regulations, if a business ships to a different state other than where they are located (or have a location), they will have to do a sales tax return for that state.  Sure, they exclude businesses under a certain size (why, I don't know), but the issue is creating a need to create 46 new returns (at a minimum) for a $1MM business - that's not a big company (10-12 people in most cases).  Oh yea, there is "free" software that handles this "automatically" -

If this is passed, business will ignore it - much as people ignore the current "use tax" which people are supposed to pay when they buy something that is shipped from out-of-state and no tax was collected.  Both of these are ridiculous and unenforceable (Montana is not going to send someone to your business's door in Florida to collect the $10.50 you did not send them).

I also disagree with the other side; E-Bays approach.  They are obviously against an Internet sales tax suggesting at least a raise in the "exempt business size".  In the email they blasted out to their user base (that is just about everyone I think) E-Bay (CEO John Donahoe) stated "Congress can instead support small businesses by making a simple modification to the current bill: exempt small businesses with less than 50 employees or less than $10 million in out-of-state sales".  E-Bay suggests you send this letter to your congressman which they conveniently pre-wrote and provided a link. (Feel free to use and express your opinion).

There are good alternatives as well - like this writer who simply proposes all sales taxes be collected at "point-of-sale" rather than "point-of consumption".  Not my approach, but much better than what is being proposed around congress currently: reason.com/archives/2013/05/01/are-online-sales-taxes-only-fair

Bob