There Should Not Be State Sales Taxes Assessed on Internet Purchases - Research Paper Example

There Should Not Be Sales Taxes Assessed on Internet Purchases Table of Contents Table of Contents 2 Introduction 3 Thesis ment 4 Objective Description of the Issue 4 Opinion Regarding the Issue Supported By Facts and Logic 8 Conclusion 10 Works Cited 11 Introduction Nowadays, consumers are facilitated with the opportunity of purchasing various products through internet which include cars, foods as well as clothes. Purchasing through online sources has become a common phenomenon. Generally, internet is considered as a place of selling goods or items without any sales tax. In this respect, online retailers promote that sales tax free goods or items are available for consumers in order to attract more consumers. However, this aspect of sales tax free goods is not available in many states or countries. It has been observed that in many states of the United States of America (US), the consumers making online purchases are required to pay the requisite sales tax amount in their respective state tax agency. This prospect of providing tax free goods or products has hampered the revenue of the government as well as the brick-and-mortar retail outlets which are providing identical goods and services by minimizing their sales volume and customer base (FindLaw, “Do You Have to Pay Sales Tax on Internet Purchases?”). It has been observed that in the US, law has been formulated as well as implemented with the intention of collecting sales taxes for the shopping which are made online. In this respect, the Marketplace Fairness Act has been formulated with the intention of collecting sales tax in relation to online transactions which are performed within states. Moreover, this Act allows an exemption for online retailing businesses with less than US$1 million domestic sales annually (Yadron, “Lawmakers Reintroduce Online Sales Tax Legislation”). Thesis Statement The paper intends to describe the issue i.e. whether or not sales taxes should be assessed on the purchase of goods through internet. The discussion will identify the major aspects with regard to the issue. Moreover, certain supporting opinions will be provided regarding the issue with facts as well as logic. Objective Description of the Issue The sales taxes on the purchases which are made through online sources are dependent on the location of the consumer. The Supreme Court in the year 1992 made rules that online retailers who have a physical presence in the states are charged with sales taxes on most of the purchase transactions made. In this aspect, online retailers are obliged to charge sales tax for the goods which are sold to home state consumers. In case, when goods are sold to consumers in other states then such consumers can acquire these goods without any sales taxes (FindLaw, “Do You Have to Pay Sales Tax on Internet Purchases?”). It has been observed that there are many large websites which are performing business transactions free of sales taxes by inaugurating subsidiaries with the intention of performing only the online businesses. It is also recognized that they perform online business transactions without physical presence. The above mentioned practice of online businesses is required to be mitigated with the objective of assisting the online businesses with physical presence that are losing sales volume due to online shops which are providing goods at free sales taxes (FindLaw, “Do You Have to Pay Sales Tax on Internet Purchases?”). The consumers purchasing tax free goods from online sources are required to pay sales tax to the agency in a direct manner where sales taxes are charged in their states. In case, where the consumers pay sales tax directly to the sales tax agency are termed as ‘use’ tax. The only difference between sales tax and use tax is regarding the paid tax amount. In terms of sales tax, the tax amount is directly paid by online retailers to the sales tax agency. While, in case of use tax, the tax amount is paid by consumers themselves. Moreover, collecting use tax for small purchases tends to cost more in order to collect these taxes. However, there are many states with limited resource that have enacted laws with the intention of collecting use taxes from respective state residents on the online purchases. In this regard, it is also observed that there are states which face problems in tracking consumers who make minor purchases from internet who are required to pay use tax (FindLaw, “Do You Have to Pay Sales Tax on Internet Purchases?”). The consumers should pay use taxes as the state governments are not able to acquire enough tax revenues for the use taxes which are uncollected. In this respect, the federal government has passed laws with the objective of collecting use taxes in an effective manner (FindLaw, “Do You Have to Pay Sales Tax on Internet Purchases?”). Legal laws such as Marketplace Fairness Act have been formulated with the aim of collecting sales taxes from purchases which are made through internet. Amazon which is the largest merchant in online retailing has agreed with state laws regarding collecting sales taxes. Moreover, states are willing to enact laws for collecting sales taxes with the objective of earning additional revenues from taxes as well as to be facilitated with better balanced budgets. In this regard, it is observed that Amazon has started collecting sales taxes from many states which amounts to around 35 percent of the consumers who are making online purchases in the US (Kaplan, “Internet Sales Tax: States Take the Lead”). The internet retailers are required to pay taxes in an identical manner as paid by retailers who have physical existence in states. There are various reasons for adopting this idea. Firstly, for failure of collecting taxes from internet transactions will treat brick-and-mortar retailers in an unfair manner. In this context, physically present retailers are required to pay sales taxes for the transactions in accordance with the sales tax law. Whereas, online retailers are making business transactions without any sales taxes, which hamper the business of physically present retailers for attracting more customers due to tax free products or goods. Secondly, failure in the collection of sales taxes from internet purchases will adversely affect the taxpayers who pay taxes in compliance with sales tax law. Sales of products or goods are legally enacted with the provision of paying sales taxes for every business transaction. In this regard, customers making purchases from retail outlets which are physically present in states pay more taxes for shopping as compared to online shoppers who in most of cases do not have to pay any sales taxes. Thirdly, failure in collecting sales taxes from internet purchases hampers the revenues of the state governments. In this respect, the states governments are unable to collect sales taxes revenue which leads to loss in revenues (ITEP, “How Can States Collect Taxes Owed on Internet Sales?”). The state governments have formulated the Streamlined Sales Tax Project (SSTP) with the objective of devising plans for simplifying the structures of sales tax. In the year 2002, the state legislature had enacted a legislation named Streamlined Sales and Use Tax Agreement (SSUTA). There are 20 states that are members of this agreement as well as there are four other states as associate members. In accordance with this law or agreement, sales taxes are required to be collected for remote sales. In this respect, the states as well as the Congress have taken steps in formulating as well as in enacting laws with the objective of collecting taxes from the online retailers. These laws have been enacted with the intention of improving the tax revenues of the state governments (ITEP, “How Can States Collect Taxes Owed on Internet Sales?”). There have been certain laws enacted with the motive of enforcing online retailers to pay sales taxes on their business transactions which are performed within states where there is a physical presence of online retail stores. These laws also state that sales taxes are requisite to be collected from transactions performed in-state and are exempted from collecting taxes which are out-of- state. Moreover, the transactions which are made in other states are usually tax free as well as retailers are not obligated with the responsibility of collecting these sales taxes as these may increase complexity. In this regard, online retailers may face problems in collecting the out-of- state sales taxes as different states in the US have different tax systems as well as rules which may complicate the tax collection procedures for the online retailers. Moreover, Kelly Ayotte who is a senator of New Hampshire had enacted the Permanent Internet Tax Freedom Act with the intention of banning the sales taxes of internet purchases. In accordance with this Act, states as well as local government are prohibited from formulating and implementing new tax policies on online retailers. This Act was enacted in the year 1998, with the intention of preventing multiple jurisdictions from imposing taxes on same transactions. Furthermore, this Act has been extended for many times by Congress which may exempt smaller online retailers from collecting sales taxes (Kaplan, “Internet Sales Tax: States Take the Lead”). Opinion Regarding the Issue Supported By Facts and Logic The retailers performing transactions through internet or online should be responsible for collecting sales taxes for the transactions performed within respective states. In this regard, the online retailers having physical presence in any states are required to collect sales taxes for the transactions which are made in such respective states. The taxes should be collected in order to improve the revenues of the state governments. Moreover, the collection of taxes from online transactions will determine fairness for brick-and-mortar retail stores as these retail stores pay sales taxes in an identical manner in comparison to online retailers. The collection of sales taxes will also assist brick-and-mortar retailers in retaining their customer base. There should be an enforceable law for all concerns that sales taxes must be paid on every business transaction which is performed (Foxx-Gonzalez, “Goodbye, Tax-Free Online Shopping”). It has been observed that the state governments have suffered huge losses in revenues for not collecting sales taxes on online transactions. Furthermore, the collection of sales taxes will assist small retailers in performing their business operations in an effective manner through the elimination of tax free online shopping (Foxx-Gonzalez, “Goodbye, Tax-Free Online Shopping”). In this regard, the government as well as the Congress is required to formulate policies and bill for making online retailers responsible for collecting taxes for the transactions which are performed. There are various Acts such as Marketplace Fairness Act among others which have been formulated with the intention of obligating online retailers in collecting sales taxes in a proper manner. Moreover, these Acts are required to be enacted in every state of the US in order to collect sales taxes appropriately (Carlozo, “What the End of Tax-Free Online Shopping Means for Small Businesses”). These Acts have been formulated with the intention of providing an effective taxation system in states of the US for adopting these Acts successfully as well as to collect taxes in a proficient manner. Therefore, it can be advocated that the above mentioned factors should be followed in order to implement policies as well as laws so that online retailers collect sales taxes effectively which in return will assist state governments in improving their revenue generation. Conclusion The continued development of technology has increased online shopping through the use of internet. In majority of instances, in the present day context, the online shopping facilitates customers’ tax free shopping opportunities. Moreover, the online retailers provide this facility as many states in the US do not have proper legislations in place for obligating these retailers to collect sales taxes. The Supreme Court in the US made a provision in the year 1992 that online retailers with physical existence in states are required to pay as well as amass sales taxes from their respective states. In case when the transactions are made in other states, the online retailers are not obligated to collect sales taxes for the transactions which are performed out-of-state. The tax free products as well as goods have hampered the revenues of the state governments by a considerable extent due to the losses suffered because of the failure of collecting adequate amount of taxes from such transactions. Moreover, it is also hampering the brick-and-mortar retailers in losing sales volumes as well as customers to online retailers that are providing these goods at low cost. In this regard, the state governments as well as the Congress have formulated policies and bills such as Marketplace Fairness Act among others with the intention of making online retailers to collect sales taxes for the transactions which are performed in state. In this respect, the states of the US should adopt these policies in order to improve the government revenues and assist brick-and-mortar retailers to perform their business operations in an effective manner along with treating them in a fair manner with regard to the amount of taxes which are paid by them as compared to online retailers. Works Cited Carlozo, Lou. What the End of Tax-Free Online Shopping Means for Small Businesses. Article, 2012. Web. 19 Feb. 2013. FindLaw. Do You Have to Pay Sales Tax on Internet Purchases?, 2013. Web. 19 Feb. 2013. Foxx-Gonzalez, Kellie. Goodbye, Tax-Free Online Shopping. The Mary Sue, 2012. Web. 19 Feb. 2013. ITEP. How Can States Collect Taxes Owed on Internet Sales?, 2011. Web. 19 Feb. 2013. Kaplan, Marcia. Internet Sales Tax: States Take the Lead. Articles, 2013. Web. 19 Feb. 2013. Yadron, Danny. Lawmakers Reintroduce Online Sales Tax Legislation. The Wall Street Journal, 2013. Web. 19 Feb. 2013. Read More