And now for today's News You Can Use:
Ever wondered who pays the sales tax on interstate online sales? I've been wondering because I'm going to sell some paintings online. Here's what I learned from SDDRR, information that loyal readers can apply to their own interstate commerce endeavors:
- If I sell a painting to someone in Pipestone and ship it from Lake Herman, I pay no tax to South Dakota and have no obligation to Minnesota.
- If I sell a painting to someone in Pipestone and drive over there to deliver it myself, I establish a "nexus" (ooo, Star Trek!) in Minnesota. At the point, I pay the sales tax on that delivery and on every future sale I make to anyone in Minnesota, whether I deliver it in person or ship it. (Minnesota buyers, don't expect any personal deliveries.)
Of course, I got to wondering (I'm always wondering): when I ship a painting to Minnesota, does Minnesota just forfeit any tax on that sale? Won't they send a revenue hit squad across the border to shake me down? Are they so rich from income tax they don't need to quibble over interstate sales?
Oh no, my friend at DRR informed me. The Minnesotan who buys my painting has a use-tax obligation to her home state.
But wait a minute, I asked. Does that apply on our side of the border as well?
Yes, DRR told me. When a South Dakotan orders something on Amazon.com, Pierre doesn't expect Amazon to pay. The tax obligation rests on the buyer here in South Dakota.
In other words: when you log on to Amazon.com and order your copy of Jon Lauck's epic campaign tome, you will owe the state of South Dakota 73 cents (4% of today's sale price of $18.21), plus your local sales tax.
Now DRR lacks the resources to send out sales tax cops to everyone's homes to audit your receipts from Amazon.com and other online retailers. No need, since surely you've all been itemizing your online purchases and remitting your sales tax obligations out of the goodness of your South Dakota hearts.
Ahem.
However, for those of you who just moved to the state, send your checks to the Department of Revenue & Regulation, 445 East Capitol Avenue, Pierre, SD 57501.
The complexity and intrusiveness of a multitude of States trying to extract money from "distant" sales has generated a lot of humbug court rulings and regulations to get around the commerce clause of the US Constitution. Check my suggestion to simplify this whole mess at Dakota Today
ReplyDeletehttp://dakotatoday.typepad.com/dakotatoday/2006/12/all_distant_tra.html
The present taxes generate a lot of deserved disrespect for government.
We purchased a Dell Computer on-line and questioned the firm's sales tax charge using South Dakota's sales tax figures. My question was "how do I know that my sales tax money is making it back to my home state?" Dell assured me that it is remitted to South Dakota, but I would like to see verification of which companies DO collect sales tax on out-of-state and internet purchases. Does our Revenue Department monitor those companies or audit them to make sure they aren't just pocketing my 4%-State and 2%-City Sales Tax and adding it to their bottom line? I don't mind paying it, but want to know that it is coming back to SD.
ReplyDeleteI recall your bringing that up earlier, Anon! I thought about that after talking with the DRR rep. How does Dell get by with that? I haven't dug through the rules, but there may be some other programs where the states are trying to collect from out-state vendors. Check out Douglas's post mentioned above, then peruse the DRR website, see what you can make of it all. And if someone can explain the whole mess to me, I'll be very grateful!
ReplyDeleteHmm... maybe we ought to abandon property and sales tax altogether and go for a simple income tax!
No income tax. Just a flat tax. We buy, we pay, simple.
ReplyDeleteIncome tax, sales tax... is there a philosophical/moral difference between paying when you get your money and paying when you use it? Practically, which is harder to hide, income or spending?
ReplyDeleteI'm thinking more and more that income tax and sales tax are both more fair than property tax. Both income and sales tax are based on definite numbers and on the taxpayer's own choices. I can look at my income and spending and know exactly what the tax will be.
Property tax is based on an arbitrary guess by the county assessor, based on assumptions about what other people in the market might pay for properties sort of like mine. To make matters worse, the good debaters and influential folks get a chance to go to the commission and argue their assessment down. Imagine how unfair it would be if people could haggle over sales tax with the grocer: "Come on, Dan, you know me, I should only pay 3%, not 6%."
Taxes need to be fair, consistent, and based on solid numbers, not one official's guess. They also shouldn't take away more utility from the poor man than from the rich man. You show me a tax plan -- income, sales, whatever -- that meets those standards, and I'll back it.