DUH, of course we should pay state sales tax on internet purchases

I am 100% opposed to any effort to continue our ridiculous exemption from CA Sales Tax on internet purchases. There, I’ve said it out loud. Our state and local municipalities are on the verge of financial collapse, and nobody seems to be dealing with the impact of sales tax revenue losses on that trend. There are only two solutions: decrease spending or increase revenue. We’ve cut about as much as we can cut. We’re already 47th in the nation in per-student education spending – do we really want to hit bottom?

Am I part of the problem?

You bet. Yes, I buy from Amazon (and others). And yes, I have enjoyed the absurd windfall of an ongoing 8+% discount by doing so. And yes, I have ignored the stern admonishment from my CPA that I am obligated to declare all of those purchases as “Use Tax” on my CA Income Tax return. Here is the link that describes my obligation – what a convoluted piece of crap: http://www.boe.ca.gov/ads/news06.htm

Why do I think I/we should pay?

I shop from my couch – in California. My purchases are delivered to my doorstep – in California. I enjoy the use of most of these items – in California. I don’t know or care where the orders are processed or where the items come from. How are these NOT sales-taxable events? How does this activity differ from driving 1/2-mile to (insert local store name here) and buying something to bring home and use? It doesn’t, and any attempt to differentiate the two is pure rationalization.

Why do I not declare these purchases on my 540?

The legislature should have seen this coming at least a decade ago and gotten on top of it. It’s not my job to help them sort out their lack of vision. If their “solution” is to put the onus on me and the Franchise Tax Board through my 540 return, then I would assert that the merchants in CA should no longer be required to collect sales tax either. We should all be equally bound by the honor system. But since the law requires brick-and-mortar merchants in CA to deal with this collection burden on behalf of the State Board of Equalization, the legislature should require nothing less of the internet merchants who do business in CA. I repeat, not my job.

What about Amazon’s threat to abandon California buyers if we implement an internet sales tax?

Seriously? According to the 2010 census, California represents 12% of the nation’s population. Do you really think that Amazon is going to give up that market? Sure, they’ll lose some of their competitive edge (against local businesses) if they have to collect sales tax. But realistically, all we’re really talking about is a little programmer time to adjust their software and a slight adjustment to the FTE count in their accounting department to file the returns with the FTB. Their threat is as much crap as the current CA sales tax law.

What about the local merchants?

I would hope that a fair sales tax will help local merchants to some extent, as compared to the current ridiculous state of affairs. But to keep my business, the local merchants will still have to stay on their toes to be competitive. I’m unapologetically lazy and unless I have an immediate need, shopping from my couch and having the product show up at my door will usually win.

 Do you really want to avoid Sales Tax?

You can’t have your cake and eat it too. If you don’t want to pay so much sales tax, then you ought to do one of three things:

1. Move to a state that doesn’t have it.

2. Stop complaining about the condition of our infrastructure and educational system.

3. Actively promote legislative alternatives for either increased revenues (which I would argue includes fair sales tax) or reduced expenses.

If you’re not willing to do one of those three things, then you need to SHUT UP about the current internet sales tax proposals and stop harrassing me when I show up at the County Fair or Wal-Mart or wherever you are lobbying that day when your unrealistic and pathetic life happens to converge with mine.

 The Real Scam: Use Tax

Here’s the dirty little secret about Sales Tax – it’s actually called “Sales and Use Tax”. Which, IMHO, is a total load of crap. Here’s how it affects you:

1. If you buy a used washing machine from Craig’s List, you are legally required to pay “Use” tax on that purchase by reporting it on your state Income Tax return. Really? Has anybody ever actually done that? Why not? Because either you don’t even know that you’re supposed to (because it’s so illogical and absurd), or you know in your heart that it’s double taxation and a load of crap. BUT:

2. If you buy a used car, the DMV charges you “Use” tax when you register it. Why? Because they are a government agency and have been empowered and entitled to do so. How many of you have colluded to defraud the state of this bullshit revenue, either as a buyer or a seller, by “agreeing” on a false selling price that you know you can get away with? I know I have, on both sides of that equation. Why is it such a scam? Because it’s so capricious. If I buy a new car and keep it until it dies, I pay the Sales & Use Tax once – through the dealer. But if I sell it after a year and the next buyer does the same (and so on and so on), the state could collect multiple “Use” taxes in that same car’s lifetime. And the only way the state gets away with it is that they have their own agency (the DMV) that is empowered with collecting.

 My Naive Conclusion

If we all paid our fair share of the Sales Tax, regardless of the “source” of our purchases, perhaps we could (a) avoid the financial collapse of our state and our education system and (b) repeal the DMV-enabled scam called “Use” tax on vehicles.

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2 Responses to DUH, of course we should pay state sales tax on internet purchases

  1. KLM says:

    I understand what you’re saying. I don’t believe that Amazon is going to “abandon California buyers”, I believe they said they would “shut down its Amazon Associates Program for California-based participants if the state passes a proposed bill that would impose new taxes on online retail sales.” That means the the local California companies that are associated with the Amazon site would lose business/profit/taxes. Amazon would still allow Californian citizens to purchase goods through Amazon & other associates.

    Another question, if you drove across the California state line to purchase something & use it in your home in California, do you report & pay the CA Sales tax on it? Just asking.

    Anyway, good post… makes you think about the issues.

  2. tajmutthall says:

    What Amazon was doing was shutting down all the thousands–maybe 10s of thousands–of small web sites who use click-through to Amazon to collect tiny amounts of money on things that they mention on their site that people click through to amazon and then buy, for which the site gets a tiny bit of income. As a registered amazon associate, i got all the nastygrams from Amazon. I never actually set mine up, but as one person said a while back, it’s not much, but it pays for some entries to dog agility, and every little bit helps.

    I agree that there’s no good reason for the merchant not collecting sales tax. It’s silly–if the mail-order building is in, say, Tahoe, they have to collect sales tax. If they move down the road to Reno, they don’t. Stupid.

    Of course, businesses may have set up the way/place that they have specifically because of existing tax laws. I’m sure they know that tax laws change all the time.

    My accountant also reminds me every year to save info about what I buy online so I can pay taxes. Well, I inventory everything I buy, but I don’t note how much was sales tax. I gave up saving all my receipts and painstakingly adding every cent at the end of the year when they stopped having a tax reduction for sales tax. And, of course, it was easier because the stores already figured the taxes; I just had to add them up. Now I’m supposed to also figure out whether it’s taxable under the new rules and how much (state tax? local tax? use tax? whaaaaaat?).

    Basically, I agree with you completely.

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