The Free Ride is Coming to an End

The Free Ride is Coming to and End! What does this mean? It means that the free ride on no sales taxes on internet purchases is coming to an end.

The Federal Moritorium on Internet Sales Taxes expired in 2003. With the current political party in power, the current political mindset and the ballooning national deficit, renewal of the the moritorium on internet sales taxes is highly unlikely. Further, I expect that there will eventually be a Federal Sales tax or a VAT tax levied on internet sales which will be collected to help pay off the Federal Budget Deficit. (Just like the European Union does now and we know how that is working out!)

In 2002, state governments organized to fight back. Under a state-led initiative known as the Streamlined Sales & Use Tax Agreement (SSUTA), 40 states and the District of Columbia banded together to simplify their sales tax codes in order to make sales tax collection easier. Under SSUTA, the collection of sales tax still remains voluntary. However, if ten states representing 20% of the U.S. population vote for the rules, the organization will pressure Washington D.C. for federal legislation. The SSUTA has gained traction recently http://smallbusiness.findlaw.com/business-operations/internet/internet-taxes(1).html by Bryan E. Kuhn Counselor at Law P.C.

This means states will be scrambling to pass or enforce sales tax or use tax laws on internet sales to balance budgets. It means online retailers will have to start collecting and remitting sales taxes to many more states than they do now.

Colorado recently passed HB1193 otherwise known as the “Amazon Ad Tax” among affiliate marketers to force Amazon to collect sales taxes on sales in Colorado if they have Colorado Affiliates. When other states such as New York and North Carolina have passed similar laws, the affiliate management companies have simply dumped the affiliates in those states effectively putting them out of business.

Almost all states have use tax or use fee laws on the books which require buyers of goods on which sales taxes have not been paid to remit the equivalent of sales taxes to the states. In the past these laws have mainly been applied to large ticket items such as boats and cars purchased in states with low or no sales taxes. These items have to be licensed and so the collection of the use tax could be controlled.

Other items such as appliances purchased out of state, downloadable software, ebooks, ecourses, membership sites are much harder to track. But in typical government fashion Colorado is working on a database of online retailers that market such items. As the data base grows, you can bet that online retailers will be forced to collect sales taxes.

The retailers that start gearing up now will be ahead of the curve. Those that don’t will be left scrambling to get sales tax licenses and systems in place to track and remit sales taxes. And you can bet that tracking consumers will be coming too. The laws may be changed to force disclosure of sales by state by buyer for an online retailer. Then the state will contact the buyer for the use tax.

The internet is one of the remaining engines keeping a bad economic situation from getting worse. And in typical Government fashion, government is going to screw it up for all of us.

This post is a personal opinion of the Editor and does not reflect the Company Policies of Fly Fishing Colroado.