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May 11, 2011 09:21 PM UTC
80 Comments
I’m going to go through this in great detail because as RedGreen as legitimately pointed out, this has gotten conflated with the software tax and the incompetents running DoR and each issue should be discussed on it’s own merits.
First off, Representative Amy Stephens is 100% right on this issue and major kudos to her (boy did that hurt).
Second, yes Amazon is acting like a complete dick. But that doesn’t mean they are wrong.
The Amazon law has minimal impact on Colorado companies. It’s impact (and its aim) is on out of state companies. But if Colorado is successful, then the other 46 states that collect sales tax can do the same thing and that will have a major impact on Colorado business. It will put a lot of online companies out of business.
First look at the requirements today – a letter has to be mailed yearly to every customer (the fact that it requires snail mail shows the cluelessness of the bill authors). The rule of thumb for mass mailing a letter is $1.00/copy for printing, handling, and postage.
So for a small web store where they may sell something between $9.95 and $99.95/year to each customer in Colorado, making a profit of 10%, they make between $0.99 and $9.99 – and this letter then changes that to a loss of $0.05 to, at best, eating up 10% of their profit. And where would that profit otherwise go for most small companies? Growing and hiring more people.
But the big danger is the precedent this sets. If this law can be enforced, then Colorado can compel action by companies in other states. And at that point it is a much smaller step to then compel collection of sales tax. This is not a slight possibility, this was discussed as the end game when the bill was passed.
What happens if online companies have to collect for local sales tax? There are 89+ taxing districts in Colorado. You can use software programs to determine which district a purchaser is in. But that does not tell you if what you are selling is taxable. For example, which districts exempt jelly beans as food vs tax it as candy? Which districts charge tax on the cost for installing software? Every time a company sells a product into a new district, they need to call that district to find out if that item is taxable.
Companies also need to find out how to remit to each district, what forms must be filled out with the payment, and in many cases purchase a sales tax license. All of this effort takes time which means it costs. And while many revenue departments are certainly well run and able to provide quick and concise answers, there are also way too many like our state department of revenue where answers are both slow and generally end up being “guess.”
The end result of this would be driving online companies that have low margins out of business. And for the ones with the margins (like mine), reducing profits which then reduces our additional hiring.
Unless Pols defines the word “true Colorado business” as “brick and mortar Colorado business” they are full of it. The Amazon tax is deadly to online businesses – both in Colorado and elsewhere. And it is friendly to brick & mortar companies – both in Colorado and elsewhere.
The end
goaleffect of this bill is to decimate online businesses. And that will destroy a lot of jobs.This is just ridiculous. How will remitting sales tax put companies out of business, ESPECIALLY if all the states that charge sales tax start doing so? Wouldn’t that actually even the playing field? Are you admitting that online retailers can’t compete without the sales tax advantage?
Also Dave, do you have any figures for how many Coloradans are employed in “brick and mortar” retail versus online sales? You want to “save” hundreds of jobs at the expense of thousands of jobs. This makes sense, as you are one of the hundreds. But others, including the vastly larger number of “brick and mortar” employees, will tell you to get your head examined.
Everyone talks about having the sales tax added so the prices are equalized. And that is a reasonable request. But no one outside of online discusses the cost of determining and remitting that amount. A brick and mortar store faces minimal overhead collecting. An online store faces gigantic overhead. That overhead needs to also be equal.
And you are correct that today brick and mortar is larger. But is that a reason to drive online out of business? And an equally important question is what is our future if we drive online businesses out?
McDonalds may hire more people than my company – but I think the jobs at my company are the ones we want more of.
all across the country.
If I buy something online from Performance Bikes, I pay sales tax. The local rate, too.
And don’t you think that, if this were required of EVERYONE, then there would be some techy solution? Like maybe a subscription service that actually keeps track of this info for you?
I’ll agree that the process could be made simpler, but this isn’t an effort to amend the law, it’s an effort to kill it.
If you can enter any address in the country and get the 9-digit postal code, what’s stopping enterprising folks from also returning the local sales tax rate for the same address? Yes, some things are taxable at different rates (food, candy, bull semen), but this is not an insurmountable problem, it’s a matter of hooking up some databases. Most Colorado online merchants who sell to Colorado customers already do it, and like ajb says, national retailers do it for states where they have physical presences.
The Amazon law, as written, is difficult (if not impossible) to enforce and does impose a silly burden on out-of-state retailers when it comes to mailing statements. But the solution isn’t to do away with variations in sales tax, it’s to suck it up and start collecting tax for online sales.
Also, David, you might want to check with your accountant (if you have one), but you don’t need to remit taxes to every sewer district and recreation district and library district in the state. That’s not how it works.
But you cannot easily get if something is taxable. And it not only differs between states, it differs within states. When online software was not taxed by the state, it was still taxed by Boulder.
And the reporting to umpteen different districts is more expensive than a store that always reports to the same two.
Can’t you at least admit that Colorado’s gigantic collection of districts, rules, etc. makes for significantly more overhead for an online store that has to deal with all of them?
for all businesses. So the argument that online businesses are entitled to special treatment is specious.
Reform, however, requires either amending the Colorado constitution (to remove the home-rule power to tax) or making state collection such a sweet deal that the home rule cities voluntarily relinquish sales tax collection to the state. Good luck with that.
You keep trying to dance around the fact that, as the courts found, it is an onerous imposition on online businesses.
As to the fact that the Colorado constitution makes fixing this difficult (it doesn’t require an amendment, it just requires the cities to agree, a-la DRCOG), do you use the same argument that we should just live with TABOR?
A court has stayed the law. That is not a finding on the merits.
And, if a court were to find that the law is an undue burden, it will be because it is an undue burden on interstate commerce, not on online businesses.
Pragmatically, do you think Denver, Aurora, and Commerce City are going to easily give up their taxing authority?
They sell one type of product, be it bikes, book, wine, food, whatever. For most, it’s not that hard to figure out whether you’re taxed or not.
cupcakes online. The problem with definitions is key to streamlinedsalestax.org (the every state but Colorado effort):
store locator. They’ve had to set this up for each store and the online can piggy-back on that. Big difference.
It obviously isn’t rocket surgery.
They HAVE to do it, precisely because they have a store in Boulder. That’s why I chose Performance as my example. They not only know the rate for CO, they know the rate for Boulder.
But they do most of their retail online.
in every individual tax district and still make it work? I don’t believe you. Clearly all of their internet customers live next door to the store.
From their online order form
I also went to the store and went through the order system to the final pricing point. Tax for bicycle shorts to a Boulder address (they have a store) – $2.71. Tax if delivered to Aspen (no store) – $1.07.
They’re collecting only for locations where they have a store. So this is 100% piggybacking on their retail locations. They did not have to add anything for the online component.
They’re only collecting the state sales tax, nothing local.
But only for cities they are in. Which they have to do because of their physical presence.
The people advocating for the collection of sales taxes by online businesses believe it will equalize the playing field between online and bricks and mortar businesses who have physical locations in Colorado. It won’t. You can go to Amazon.com buy a book and even if Amazon collected Colorado sales tax on your purchase, the book will cost you up to 40% less at Amazon than if you buy it at Tattered Cover or from the Tattered Cover website.
Whether online businesses should collect sales taxes is a major policy question which implicates U.S. constitutional law but the idea it will equalize the playing field between online and bricks & mortar businesses simply isn’t true.
It may not fully equalize treatment, but it would help.
But the overhead of doing it needs to be roughly equal too. Imposing overhead at a level that drives many online businesses bankrupt is not equalizing.
There is a constitutional guarantee of profitability?
The state absolutely can impose taxes and regulations so onerous that they drive entire industries to bankruptcy. No disagreement there.
I just don’t think it does the state any good to do this. Colorado needs more tax revenue, not less. So driving companies out/away is not a good idea.
I have a question for you. You seem to be totally opposed to the idea of rationalizing the sales tax system so it’s not a substantial burden. Why? There should be no downside to that from the state’s point of view.
You are imputing to me a viewpoint that I do not hold.
I have tried to explain to you how things work, not how they should work in an imaginary universe that you envision.
Why is Colorado the only state not implementing or considering http://www.streamlinedsalestax… I don’t think it’s an imaginary universe for that solution – it’s one the other 49 states are working on or have implemented.
They don’t need an UNFAIR competitive advantage.
Have you ever spoken to an accountant about some of your concerns? Because I don’t believe you have to remit to each district. You have to remit to the state and to the counties. The counties are supposed to distribute to their various special districts. You aren’t required to do that. They are.
I’d really advise you to get some external advice from a professional on this. And if you already are, I’d advise you to find somebody else who actually knows what the fuck they are doing.
You remit to the State and the City. The State collects for the County and pays them. You remit to the City separately.
you don’t submit to a gazillion different districts.
But in defense of David, the Grand Junction city limits change every time some developer wants to hook up to sewer. And they don’t conform to five-digit zip codes, although I’ve never checked if they might conform to 9-digit zip codes.
do not overlap with zip codes because the latter are for the efficiency of the post office, not for tax collection.
However, vendors are held harmless if they use a state-approved database to determine taxability. The real problem is home-rule cities, which can be dealt with only by amending the Colorado constitution.
At least in the home rule cities that say they will accept errors in the software that tries to figure this out (some cities have not passed a hold harmless for this).
The district limits are a minor PITA – not a substantial killer.
Although zip codes are not polygons, they do conform to streets and street address ranges, and street address might (note I said might) be a good first approximation.
A better solution is a geospatial solution, because city limits ARE true polygons.
All that’s required is a geocoded street address and a point-in-polygon algorithm. There are many geocoding services, some free, that are more accurate than the Census Tiger/Line data.
However, a simpler solution might be to find a credit-card processing service that calculates sales tax for you.
…per sale. But each sales is a different second district. A sale to Boulder remits to Boulder & the state. One in Grand Junction remits to Grand Junction & the state.
you must file sales tax returns with the state (which covers state-collected counties and cities, as well as the RTD, football, and museum districts) and any home-rule jurisdiction (of which there are some sixty plus).
A local McDonalds sells 81 big macs and reports to two entities. An online site sells to 81 customers (I think that’s the number of home rule cities) and if it’s one per city, has to report to 82 entities.
Yes fairness requires everyone pay taxes. But it also requires equal overhead and the present system does not provide that.
You are ignoring the nexus requirement, which also applies at the home-rule level.
Also, there are only 66 home rule jurisdictions. But who’s counting?
A simple fact check shows there are 95 home rule cities in Colorado. So I guess I’m counting while you’re making numbers up.
As to nexus, if through this law Colorado can compel out of state companies, then home-rule cities will be able to compel companies in other cities. That’s what makes this law so deadly.
http://www.colorado.gov/cs/Sat…
provides the list of home-rule cities that impose and collect their own tax.
Everyone kept talking home rule cities tax separately and this is the first I heard that some don’t. So sorry – fair point.
Question though, do those cities have their own rules as to what is taxable, or do they follow the state guidelines? In other words is it report to 66 entities but there are 95 different determinations of what is taxable – or is it 66 different determinations?
And even if it’s “just” 66 – that’s still a gigantic burden.
If there is no software out there that takes care of figuring all this out, you can bet someone’s developing it right now. Just purchase that and POOF! Your only burden is buying and implementing it.
someday we’ll have software that can keep track of up to 66 things . . . can flying Barcaloungers be that far off?
Still working out a couple of issues.
On beans and cabbage.
Can you show me in the bill where it deals with local sales taxes at all? The way I read this, it’s only about the statewide 2.9% use tax – NOT all these local districts you’re concern trolling on. Is that right?
http://www.leg.state.co.us/cli…
Am I wrong, or is this ONLY about the statewide 2.9% rate, and all of Dave’s claims are bull-puckey? I’m asking not claiming, I guess I don’t know for sure.
On the other hand, if the Colorado approach is constitutional, presumably home-rule jurisdictions could impose their own versions.
Like everything else you write on this issue (and most of what you write generally), this is utterly moronic and intentionally deceitful.
A physical store has to pay rent, and an online-only store doesn’t have to pay rent. A physical store has to pay clerks to run the cash register. A physical store has heating and air conditioning bills. The two types of stores have completely different overhead. There is absolutely no reason their very different business models should have exactly the same overhead.
You really must think everyone else is an idiot.
Although we’re an online business and last time I checked we do pay rent, have HVAC, and have people to handle purchases. But you are correct that they don’t use a cash register.
Now if your point is that online businesses should have twice the overhead cost of collecting sales tax, I think that’s a sad goal for government, but I will agree it’s defensible.
But what you are looking at here is a system that will make it impossible for many online businesses to be profitable. I don’t see the benefit in imposing a system with costs so harsh that it will drive a significant number of companies out of business.
And to be clear, it’s not the letter required by Amazon (although the requirement of snail mail will make Colorado unprofitable for some online businesses). It’s what will come next if this is found to be legal.
I find this beyond confusing. Appreciate your input.
I get so much “snail mail” from online retailers I’ve ordered from it drives me crazy. The idea that they will go out of business if they have to send me one more piece is possibly the silliest thing I have read today.
And I’ve read some silly shit today.
I get out of print computer books from random used book dealers. I think most of them see a couple of bucks profit from me a year and they never mail me anything.
I do agree that online companies should collect sales tax. We should not get a free ride. But it needs to be done in a manner that will not drive us out of business. So if the state truly wants us to contribute our fair share, and are not just using that as an excuse to drive online companies out of business, rationalize the system.
1. A single state-wide tax rate for online. With a single body it is paid to and that answers questions.
2. A single state-wide standard of what is taxable.
3. A single nation-wide definition of all products. Each state can tax or not tax any give product, but with a standard definition then a company can computerize determining if a product is taxable in a state.
But saying that what worked in 1930 is good enough today – that’s brain dead.
is your inability to deal with a problem by, you know, trying to solve it. You’re full of advice to others (people working shit jobs about to retire, people who get laid off, teachers you don’t like, etc.) telling them to find a solution to some new problem you want to cause, and you always justify it by telling us all about the problems you solve in your business.
Yet here’s a problem that any programmer with a functioning brain could easily solve with a database and a little bit of research, and for you it’s the end of the world. You have been crying about this damn issue in literally hundreds of posts. Why not just fix it yourself and sell the solution?
If you want anyone else to think you’re as smart as you think you are, stop bitching and solve your own problem. Use your brain, it’s not just for complaining.
I even included a link lower down where 49 states are implementing an approach that will be workable. Unfortunately the one state that has no interest in moving out of the 19th century is Colorado.
As to solving the problem with software, software does not solve system problems. All it can do is optimize a system. But if the fundamental system is screwed up, software can’t unscrew it.
ps – I’ve also proposed eliminating sales tax and increasing income tax. That would move the payment from my customers to me. But with the savings in overhead, I’m still ahead of the game.
but isn’t it really a huge thread jack? Obnoxious…
That’s not a thread jack, that’s providing a counter-argument.
Because it looks to me like you’re bringing up your same old arguments about what is taxable and sales tax in the wider sense.
But whatever. Hell, there may be one or two people left who still care. So whine away.
The Amazon tax bill was not meant as an end result. It was meant as a way to establish the precedent that Colorado could compel companies in other states to perform an action re. sales tax. Once that precedent was set, then step two, which would be a much smaller step, would be to compel collecting the taxes.
As to the people that care, if this does happen, then the people who lose jobs when companies shut down will care. It may not matter to most here on Pols, but to those individuals and their families it will matter a lot.
still feels like a huge Dave rant to me. It could be the cute little threat of companies shutting down. Adds that little element. But hey, fuck you for writing it. So there’s that.
…if sales tax collection was required nationwide. So yes, that makes it very personal for me.
that’s on its way up your ass.
See. Now it makes it so. I TOTALLY know it.
If that doesn’t work for Libertad, why would it work for you?
That I don’t like the idea of companies being driven out of business and people losing jobs because we won’t rationalize our sales tax system.
I’m afraid that we’re going to disagree here – I think unnecessarily reducing jobs is not a good idea in this economy.
to make your point, douche.
Even more so that you’re wielding that like a weapon. Vote for this bill, or you’re for pedophiles! So again, fuck off.
I’d be happy to respond.
Come on, Dave the Douchebag. Source it.
Second, there is no way to source what will happen in the future. But if the cost of each sale rises significantly, that will drop the level of profit. Increase it enough and profit turns to a loss. And when a company is losing money, it has to start with layoffs. If the losses continue, eventually they will close their doors.
I have the same question for you I have for OTD – why are you opposed to rationalizing the sales tax system so that the overhead of collecting the tax is moderate? The state would receive the same amount of money and companies would not see a significant hit on their profitability.
I’m opposed to idiots making shit up. How many more times do I need to say it? Just stop, douche. Stop.
What do you care what anyone thinks? You don’t read! Someone answers a rhetorical question and you move on, in many, many threads, like it never happened. Saying the same things over and over and over and over again.
So yeah. DOUCHE.
Why do you love pedophiles? Seriously Dave, fuck off.
streamlinedsalestax.org Colorado of course is the one state showing no interest in this approach.
Give the GOP the repeal of the Amazon tax in exchange for dropping the payday lending amendment from the regulation review bill and a promise not to support that proposal, or anything similar, for the next ten years.
I’m Amazon Tax ambivalent, but I’m sure we shouldn’t negotiate with idiots. Let the GOP be saddled with the cost of a special session. We won’t be in a minority position for very long, no deal needed.
I don’t know what we’re going to do with the Dems…
Democrats should be opposing the amazon tax bill too. Having the Dems as the clear sponsors of bills the high tech community views as our most damaging legislation is not a good thing for the party.
Back when it was proposed the discussion was to raise additional revenue. And yes, the state did (and does) need every penny it can scrape up. But I wonder if part of this was actually rent seeking by the brick & mortar businesses seeing this as a way to drastically reduce the profitability of online businesses.
When you consider that the “business community” (which does not include local online businesses) is adamantly opposed to addressing TABOR or a tax increase request on the ballot, it sure looks like a targeted strike.
I’m not saying everyone involved is coming from this point of view. But it is interesting that the “business community” which opposes all other taxes is in favor of this one.
Maybe? You remember, sales tax. Huge piece of the budget. Fell drastically. You really need an ulterior motive?
Of course the “business community” is just being spiteful. Just because their business model doesn’t get around it, well, that’s not the internet’s problem. Or are it?
No, it’s only the government’s problem that online businesses don’t have a model to make it work. One way street. I got that right, right?
Two douche strikes tonight, Dave (I’m being generous). Going for the third?
The purpose of sales tax is supposed to be to generate revenue for the state, not to impose significant costs on one business segment to give another segment advantage. This is what I find difficult to understand – that people figure it’s fine to impose a tax that has a killer overhead rather than adjusting the system to remove that high overhead.
This is the same reason businesses detest the business personal property tax – because most spend as much calculating it as the amount they end up paying. Democrats would do a lot better to view the tax burden on a business not as what is paid to the state, but the total cost to the business – because that’s how a business views it.
you’re saying I was right in my assessment.
See how I summarized in one little post? It’s not hard.
And I’m not trying to be snarky – I really am trying to have a conversation with you on this.
has taught me that you have trouble with teh reading comprehension.
And you’re not trying to have a conversation with anybody. Don’t lie about it. Anyone who dares to suggest that you’re wrong hates business and is now in a conspiracy? Yeah, good conversation.
Now start at the top, read your way down, think real hard, and fuck off. Mmkay?
Nah- it makes perfect sense.
Taxes are ok, when other people are paying them….and it’s easy….but taxes that are hard to collect and report and that I gotta pay, well those are bad. Puppy killers, if you will
I used to run a small company. we had customers in all 50 states- some of whom spent less than $10/year with us. We got the books, reported as required. In fact, we had employees and contractors all over the place too – some jurisdictions didn’t make the distinction and if we had a contractor in the jurisdiction, we had a “presence” for tax purposes.
In addition to the summary you’ve provided, and my simplification above, David forgets the politics. Income tax increases are hard. Sales taxes are easy. Personally I think sales tax is stoopid – regressive, complicated, and with a whole host of unintended negative consequence.
Think of the kittens!