Push to Collect Online Sales/Use Taxes
Remember, if you buy it anywhere in the world, and you’re going to use it in your state, which has a “sales tax”, you are responsible for the tax because it is not just a “sales tax” but in actuality it is a “sales/use tax”. You’re on the hook as the “user” even if the seller has no physical presence or “nexus” in your state and is under no obligation to withhold and pay the tax on your behalf.
From Msnbc.com:
It’s too early to know exactly how much the Nebraska chapter of the March of Dimes raised this week at its annual Signature Chefs Auction in Omaha, but odds are that more than 10 percent of the charity’s proceeds are going straight to the tax man.
That’s because the March of Dimes went online when it bought about 4,000 T-shirts from a Florida vendor to give to donors during its March for Babies Walk last April. The charity often buys supplies and other materials online, and it also raises money online by selling items at auction — racking up a big tax bill in each case.
“We didn’t know that,” said Rosemary Opbroek, director of the Nebraska chapter. “We wish the law was different. It is taking money away from helping … babies.
Specifically, it is taking away about $26,000, the amount the State of Nebraska says the March of Dimes owes for unpaid taxes on the April purchase and other online transactions over the past five years.
Opbroek acknowledged that “we owe the money,” which she said would have to come out of proceeds from this week’s fundraiser. Assuming the final tally is the same as last year’s, about $215,000, the state tax bill will eat up nearly 13 percent of the donations.
The law the March of Dimes stumbled over is similar to statutes in most other states — arcane regulations that mean you are probably a tax scofflaw, along with just about everybody else who has bought something online. That’s roughly 80 percent of all U.S. adults, Nielsen Online calculates.
The reasons are complicated, because they involve variations in tax codes in the 46 states (plus the District of Columbia) that collect sales taxes, not to mention thousands of local tax regulations across the country. That leads to confusion even among advocates for or against enforcing existing tax policies on online purchases, which are often misleadingly characterized as attempts to “create” a new “Internet sales tax.”
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It’s not a new tax
Although some online commerce advocacy groups like to label the Streamlined Sales and Use Tax Agreement (SSTUA) and similar projects as “new Internet taxes,” they’re not. The Internet Tax Freedom Act of 1998 prevents state and local governments from imposing “new or discriminatory taxes” on online transactions. It is scheduled to remain in effect until at least 2014. The SSTUA seeks to simplify and enforce the collection of taxes that are already on the books but haven’t been collected because of complicated distinctions laid down in the Supreme Court’s 1992 decision in Quill v. North Dakota.
• Read the 1992 decision
Sales taxes or similar levies have always been in place on most online purchases in most states. But they are almost never paid. And with their budgets in crisis, states are more determined than ever to get their share.
Do you have a ‘physical nexus’?
The confusion boils down to who does the collecting and when. As with everything involving tax legislation, there are exceptions and other complications from state to state. For example, if you live in Delaware, Montana, New Hampshire or Oregon, which have no sales taxes, none of this applies.
Under a 1992 Supreme Court ruling, businesses are responsible for collecting sales taxes on every sale they make in a state where they have a “physical nexus.” In other words, if the business has a store, an office or even a single sales rep in your state, it’s supposed to tack the state’s sales tax onto your bill.
Online retailers like Amazon.com typically don’t add the tax, except in the states where they’re based or where they have physical facilities like warehouses or distribution centers. Amazon, for example, collects sales taxes only in Washington (its home state), Kansas, Kentucky, North Dakota and New York.
The tax is still supposed to be paid, however. And if the seller’s not responsible, then you, the buyer, are. In general, you’re supposed to voluntarily file your own report and pay the standard tax on your out-of-state online purchases. (The appropriate forms are available on state tax agency websites, revenue officials are happy to remind you.)
But it turns out that the vast majority of Americans are completely unaware of those rules, so the forms don’t get filed and the taxes don’t get paid — to the tune of $8.6 billion in 2010 alone, the National Conference of State Legislatures estimates.
That’s a big problem, because sales taxes (as they’re called when they’re handled by a retailer) and use taxes (as they’re called when the customer handles them after an out-of-state transaction) most often pay for schools and public safety.
Update: Bush Tax Cuts Will Be Extended. High Income Taxpayers May Be Included
Heeding the advice of many economists who see any tax increases in the current economic environment as potentially disastrous, a deal is being cut to extend the Bush tax cuts. The Dems may even be caving on letting the tax cuts expire for individuals with taxable income of over $200,000 and married couples with taxable income of over $250,000. The taxes in dispute are only on amounts over these income levels.
From Politico.com:
Pelosi hedges on tax cuts
House Speaker Nancy Pelosi Thursday renewed her pledge to pass an extension of the Bush tax cuts for the middle class, but now she’s leaving the door open to extending the tax cuts for upper-income Americans.
The California Democrat, speaking in the same room House Minority Leader John Boehner (R-Ohio) appeared in earlier in the day, said that the “only thing I can tell you is the tax cuts for the middle class will be extended this Congress,” leaving open the possibility that cuts for people making more than $250,000 could be extended at some point, too.
“What I believe the American people deserve is a tax cut for the middle class,” Pelosi said. “And without getting into procedure and timing and process, what we’re going to do is to say at the end of the day the extension of the Obama middle-income tax cuts will take place, and that’s what I have to say on the subject.”
Her comments also deepen the confusion about when the cuts might be done — either in the next two weeks or after the November election. The thorny issue of tax cuts has thrown a wrench in an already contentious reelection season for Democrats, exposing a divide within her caucus about raising taxes — even on wealthier Americans — during a soft economy. Republicans have continued to push for an up-or-down vote on tax cuts — they wholeheartedly favor renewing all cuts.
But 31 members the Democratic caucus — many of them facing stiff headwinds in getting reelected to Congress — are too pushing to extend all the tax cuts. Pelosi thinks their logic is flawed.
“The tax cuts at the high end have not produced any jobs; it only increased the deficit,” she said. “We’re still paying the price that they have contributed to the deficit all along. I respect that they have a different view, many of these members are members who are budget hawks, so I think we’ll be able to find some common ground on the subject.”
Pelosi, though, made her view clear: Rich people don’t deserve tax cuts. She said she sees “no justification for going into debt to foreign countries to underwrite and subsidize tax cuts for the wealthiest people of America.”
No matter who gets tax cuts of when, the House will be up for reelection in less than two months, and Pelosi seems to be remaining confident about her party’s chances. She dismissed a question about her place in leadership after the election. When asked about the negative campaign ads being aired across the country that target her, she urged Republicans to keep them coming.
“Spend that money, spend that money, pour it in, spend it all,” she said, before saying that Democrats will be “victorious” on Election Day.
Read more: http://www.politico.com/news/stories/0910/42283.html#ixzz0zkFzagx7
Bad News for Herbie? Government to Offer Direct Deposit Refund Accounts to Low and Moderate Income People Without Bank Accounts
Does this mean the demise of the refund anticipation loan? From the Treasury website:
Treasury Announces New Pilot to Help Deliver Safe, Low-Cost Financial Accounts During Tax Season
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Pilot Delivers Targeted Offers for Individuals to Sign-up for
New Accounts to Receive Their Tax Refunds through Direct Deposit
Tax Season Provides Critical Opportunity to Help
Unbanked and Underbanked
Americans Strengthen Their Financial Futures
WASHINGTON � Today, the U.S. Department of the Treasury announced that it will launch a new pilot program to help capitalize on tax refund season as an opportunity to provide unbanked and underbanked Americans with access to safe, low-cost financial accounts. This pilot will deliver targeted offers to certain low and moderate income individuals to sign up for new accounts with debit card access at tax time in order to receive their refunds through direct deposit. It will also test offering accounts that can be used year-round in the future to deposit other sources of income, store money safely, make purchases, pay bills, withdraw cash, and build savings.
“Far too often, unbanked and underbanked Americans are forced to turn to high-cost alternative financial products � such as check-cashing and other services � that take a big bite out of the savings of those who can least afford it,” said Michael S. Barr, Assistant Treasury Secretary for Financial Institutions. “For many individuals, a tax refund is the single largest payment that they will receive each year. That’s why tax season is a great opportunity to deliver safe, low-cost financial products to the unbanked and underbanked that will help those Americans build stronger foundations for their financial futures.”
The pilot is expected to launch during next year’s tax return filing season. Treasury will reach out to eligible taxpayers in early 2011 through two methods:
- Direct Mail. Treasury will mail information about how to sign up for the new accounts to low and moderate income individuals who have received paper check refunds in prior years or who otherwise have not provided bank account information to Treasury.
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Payroll Outreach. Treasury will partner with the private sector to insert offers to enroll in the pilot into the paychecks and paystubs of select individuals who are not currently using direct deposit to receive their tax refunds.
The offers to enroll in the pilot will include instructions on how to use the account. Treasury will evaluate the results of the pilot to inform future decisions about the viability, structure, and timing of offering similar accounts as an integrated part of the tax filing and refund process.
According to the Federal Deposit Insurance Corporation’s (FDIC) 2009 National Survey of Unbanked and Underbanked Households, there are an estimated 9 million households without bank accounts. Another 21 million households are underbanked, meaning that they have a bank account, but these accounts do not fully meet their needs, and they still rely on high-cost check cashing services or other costly financial service providers.
The use of safe and appropriate financial services and products can help households maintain financial stability. Unbanked and underbanked individuals often face difficulties saving and planning for their financial futures, making them more vulnerable to medical or employment emergencies and threatening their ability to invest in continuing education, purchase a home, or send their children to college. The unbanked are disproportionally low and moderate income. According to the FDIC’s 2009 National Survey, a person making $30,000 or less is more than 7 times as likely to be unbanked as someone making $50,000 or more.
This pilot will build on the Obama Administration’s continuing efforts to assist the unbanked and underbanked as well as empower Americans to make informed financial decisions. Social Security and Supplemental Security Income benefit recipients can currently receive their payments through the Direct Express� Debit MasterCard� card, a program established pursuant to terms approved by Treasury. By 2011, Direct Express is expected to expand to all individual federal benefit programs. Additionally, President Obama has requested $50 million in his FY 2011 Budget for a new “Bank On USA” initiative designed to bolster state and local efforts to help low and moderate income Americans obtain access to safe and appropriate financial services and products.
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