Comments on: The (North Carolina) Government Wants to Know What You Bought

By: Bruce

Bruce — Wed, 19 May 2010 16:32:40 +0000

Tyler, Do the authorities in Broken Arrow try to collect a use tax when Broken Arrow residents buy stuff in Tulsa? I could imagine deciding that states should collect taxes on interstate shipments without extending the principle to municipalities and counties. Quite an extensive discussion over at the Volokh Conspiracy.

By: Harry Lewis

Harry Lewis — Thu, 22 Apr 2010 15:01:17 +0000

There has been some confusion about whether NC really wanted item level data, or just the category data ("book," for example) that would enable it to assess the proper tax. The answer is they want item level data. This is from Amazon's complaint. By letter hand delivered on March 19, 2010, to Amazon in Seattle, Washington (the “March Information Request”), the DOR stated that Amazon’s initial response to Question 16 of the December Information Request omitted the “Bill to Name; Bill to Address (Street, City, State, and Zip); Ship to Name; Ship to Address (Street); Product/item code or description” (the “Customer Data”).

By: Harry Lewis

Harry Lewis — Thu, 22 Apr 2010 13:20:36 +0000

By: Tyler Moore

Tyler Moore — Wed, 21 Apr 2010 21:46:19 +0000

While I agree that automatically tracking different sales tax rates is more feasible than was the case previously, it’s a bit more complicated than having a 50-entry database that gets looked up. Cities and counties can levy their own sales taxes in some states. In Broken Arrow, Oklahoma, for instance (my hometown), sales tax used to be 7.917% when I was growing up. This was a combination of state sales tax (around 5% I believe), plus county and city taxes. There are 77 counties in Oklahoma, each charging different tax rates, and then each city sets its own rates. To top it off, referendums are frequently proposed at the county and city level to fund public works projects. For instance, Tulsa County passed a 20-year 1% sales tax to build an arena, boosting sales tax to 8.9% through 2025. Broken Arrow spans Tulsa and Wagoner counties, and around the same time passed a city-wide temporary boost in the sales tax of .5% to fund the construction of a public university located in the town. So now in Tulsa you pay 8.9% sales tax, in adjacent Broken Arrow you pay 9.4% sales tax in part of the city, and 8.4% in the other part of town. How convoluted is that?!

And this ignores the fact that some states (but not Oklahoma) don’t tax clothing or food (or both!).

Given how cash-strapped state and local governments are, it would make sense for states to set up a website where merchants can find out the tax rate (and which governments to pay) by inputing an address. This could simplify the collection of taxes from a merchant perspective while putting the onus of sorting through the bureaucratic mess on the bureaucrats themselves.

By: Harry Lewis

Harry Lewis — Wed, 21 Apr 2010 14:16:58 +0000

Mark Rasch explained a little more about the background here. Historically, states haven’t collected sales taxes of other states on purchases sent to those other states, because it was too complicated for one state to know what’s taxable at what rate everywhere else in the US. The Supreme Court ruled years ago that collecting such taxes and transferring them to the other states would be too much to ask. Of course, that was then. Today some enterprising soul just has to code up the sales tax codes of the 50 states (fewer, actually, they don’t all have sales taxes) on the various categories of merchandise. With the aid of this software and data base, the out of state sales tax could be collected at the point of sale (at least by large stores) and transferred directly to the other states, without the other state ever knowing exactly what items had been purchased.

By: M

Wed, 21 Apr 2010 00:04:50 +0000

I think a smarter, more effective law would be to require all companies who sell via the Internet to your state to issue a receipt to their customers at the end of the year, showing all purchases those customers had made during the year.

For example, end of the year, you receive an automated email from Amazon.com with the following:

“Dear Mr. Lewis:

In compliance with Massachusetts law [cite], we are sending you the following information to aid you in filing your tax returns. According to our records you purchased the following items from us this year.

Order # 1831-2, October 2, 2009:
Stainless Steel Wok – $49.99
Dreaming of Science – $19.99

Order # 1964-7, December 14, 2009:
Kindle e-Book Reader – $399.99
Chocolates – $18.63

The total value of purchased items this year was: $488.60.

If you did not make any of these purchases, please notify us so we can update our records.

– Amazon.com
”

Then, you simply tally all of those up. You are responsible for separating out items by their tax type/bracket. And then paying your taxes as appropriate. In event of audit, you can show the collective end-of-year receipt as your evidence.

This simultaneously protects privacy while furthering the states goals. The draw back is that it places a burden on companies to track the information and report it at the end of the year. However, this could be viewed as the cost of doing business and is something they probably already do – at least to some extent – in their overall accounting system. This feature could be fully automated in order to comply with the law. Companies that do not want to participate could notify their users, “We do not participate in MA’s draconian tax reporting laws. You are required to track all of your purchases independently using the receipts we give you at the time of purchase.”

-M