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New tax problem heads our way

Are we about to see the end of Internet commerce as we know it?

Sure the question sounds apocalyptic – it could be.

New York State will begin taxing transactions on the Web at the end of the month. This is in the form of requiring online merchants to collect sales taxes from sales to New York buyers.

How long will it be before other states, starved for tax revenue because of the recession and the real estate bust, implement a similar policy because they view online sales as the only ripe melon left to squeeze?

The Industry Council for Tangible Assets, which has led the fight against state sales taxes on numismatic and bullion coin sales, should once again be commended for the work it has already done and perhaps plan to gear up for yet more undertakings.

Take Wisconsin, my home state, for example. There are no reliable statistics as to how many coins Wisconsin collectors purchase online. The sales tax applies to their purchases.

Currently, the onus is on the individuals themselves to self report on their annual state income tax return in the form of the parallel use tax, which is basically the name given to the sales tax when it is paid by the buyer rather than the retailer doing the selling.

Compliance is not high. What happens when the Internet retailers get a letter telling them to collect the 5.5 percent (state and county) sales tax on future transactions involving Wisconsinites?

There have been silly alarms online for years about taxing e-mails, but this is a very real problem that could be coming at us.

Time to prepare.

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One Response to New tax problem heads our way

  1. Scott Barman says:

    During the initial growth of the commercial Internet in the 1990s, there was a feeling that keeping commerce tax-free would help its growth. The laws passed by congress to support the no-tax stance capitualated to state pressures to allow for the collection of taxes from those doing business in their states–in a similar manner to the laws covering mail order businesses.

    The first concerted effort toward taxing Internet sales came in 2000, just after the post Y2K economic slowdown. Shortly after that, congress reaffirmed the no-tax status for Internet-based commerce.

    Although the drumbeat for Internet taxes became louder in 2002, congress reaffirmed the law again in 2005. But economic times became better and everyone, including state and local governments, were reaping profits.

    Now economic times ae bad. Prices are high, spending is down, houses are not selling, and the taxing authorities are seeing their revenues drop and looking to make up their revenues. With the Internet being the untaxed force, the drumbeats are getting louder to tax Internet-based sales.

    Amongst those challenging the New York law is Amazon.com, the Internet’s largest e-tailer. There are several legal issues that Amazon is using to challenge the law–this is something that David Ganz could write about–but the primary non-legal issue is the damage that it would do to online purchases.

    As a purchaser of all sorts of items from the Internet, including coins, I am against this move by my original home state of New York. At the minimum, I hope that the ICTA is successful in getting broad support for numismatic and bullion purchases.

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