Can Someone Help Seattlest Figure Out This Internet Tax Thing?

We saw the news articles on the internet sales tax stuff that the Governor signed recently. We also saw a few blurbs about it on the TV news, but we still feel like a caveman when we attempt to wrap our mind around what is actually happening here.

From the P-I/AP:

OLYMPIA -- Saying it will level the playing field between in-state and out-of-state businesses, Gov. Chris Gregoire signed a measure Thursday that encourages Internet and catalog companies to collect and send the state sales taxes on purchases made by Washington residents.
"This is absolutely about tax fairness to the businesses of the state of Washington," Gregoire said.

Washington will join 21 other states that have passed legislation to become members of the Streamlined Sales Tax Project.

More than 1,000 companies that sell products in multiple states have voluntarily agreed to begin collecting and distributing sales taxes to any state that agrees to join the project.

What does that mean? Who's paying this tax and who's receiving it? And how voluntary is it, exactly? So far we understand this tax like we understood Communism in our childhood. "Daddy, what's Communism?" "Communism's what's going to drop a bomb on our heads any day now that will wipe us clear off the map, that's what Communism is. Now go play with your GI Joes. 'What's Communism?' he says... What happened to 'Why's the sky blue?' HEY, I don't hear Joe kicking any pinko ass down there!" That is to say, we don't understand it at all, but we've got a vaguely bad feeling about it. The question we really have is "how does an internet sales tax effect Amazon?" (This on top of the Borders thing today.)

Contact the author of this article or email tips@seattlest.com with further questions, comments or tips.

By Dan in News on March 23, 2007 3:00 PM

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Seth (Not Seattlest, Just Seth

I should say up front that I haven't seen the bill in question, but I worked with the Streamlined Sales Tax Initiative about 5 years ago, and the original intent was to simplify definitions for taxable items across jurisdictions. One of my favorite examples was in Kentucky; if you buy one doughnut it is considered a snack and taxed at one rate. However, if you buy a dozen doughnuts it is considered food and taxed at a lower rate. (No wonder my old Kentucky home is always close to the top of the nation’s obesity rate).

So, the Streamlined Sales Tax Project was launched to pore through thousands of definitions in the 44 (?) states that charge a sales tax and standardize the definitions in the law. It also deals with the problem of jurisdiction for taxing matters. For example, If someone in Atlanta orders a book from Amazon (based in Seattle), and that order is shipped from the Amazon warehouse in Kentucky, Who collects the tax? Where the order was placed? Shipped from? Consumed? Here, it lays out that Georgia would collect the tax.

Now further complicating matters, is this is completely voluntary for the companies involved. There is no force of law behind it, and there won’t be unless Congress decides where it wants to go with taxation of the internet (that whole interstate commerce deal). Why would these companies want to do it? Simple, to show Congress that they are regulating themselves, and that they don’t need the feds stepping in.

And my Dad said a poli-sci degree was useless.

bozo

Here's what it means - I think.

As of now when you buy something on the internet from a company that is based in any state other than the one you reside in, you are not charged sales tax. Technically you are supposed to declare that item on your yearly tax return and pay the sales tax to your state. But who does that? Nobody, right.

So because Amazon is based here, they already charge all Washington state residents 8.8% sales tax. Alll other residents of other 49 states pay no sales tax when ordering from Amazon. ( of course when we buy from barnesandnoble.com we are not charges sales tax). When the governor speaks of leveling the playing field, she's referring to us Washington state residents ordering items on the internet from out-of-state companies to avoid sales tax, instead if buying locally.