While Texas Politicians Claim $600 Million 'Lost' In Uncollected Online Sales Tax... It Means $600 Million Texans Saved

from the that-money-doesn't-disappear dept

Tue, Feb 15th 2011 6:33am — Mike Masnick

We've already covered the ongoing dispute between Amazon and the state of Texas over uncollected sales tax for residents there. Apparently, a state politician complained about how the state loses $600 million a year because out-of-state online retailers don't have to collect sales tax. However, as Jim Harper correctly points out, shouldn't people be pointing out that this actually means that Texans saved $600 million per year because of the government's inability to tax them on it?

What happens with the $600 million depends on what you mean by "Texas." If you mean the government of the state of Texas in Austin, why, yes, the government appears not to collect that amount, which it wants to. If by "Texas" you mean the people who live, work, and raise their families throughout the state--Texans--they actually save $600 million a year. They get to do what they want with it. After all, it's their money.

The Texas tax collector is complaining because the last thing state taxing agents want to do is collect money on in the form of use taxes, which means something like going door to door to collect money from voters based on what they bought from out-of-state. Revenuers intensely prefer to hide the process, collecting their residents' money from out-of-state companies.

A good thing to remember in these discussions.

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Filed Under: taxes, texas
Companies: amazon

46 Comments

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Anonymous Coward, 15 Feb 2011 @ 6:39am

It isn't 600 million saved, it's 600 million that didn't get another cycle through the economy. It isn't like the 600 million would be collected and disappear (this isn't Italy!). It would be spent by the government on things they need in Texas itself, in effect growing the economy.

Yes, the 600 million saved would be spent in other ways, but there is no way to know if it would stay in Texas. 600 Million of state taxes means 600 million getting spent back in the state, which again would have a sales tax on it, would go in the pockets of Texas companies and Texans themselves, and get spent again in the economy.

It's all about cycling the money.
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Anonymous Coward, 15 Feb 2011 @ 6:42am

Actually, all it does is shift the collection of taxes from the state govt. to the retailer.

The state will get its money, if they have to, they just raise taxes (property or income or additional services tax.)

It isn't that Texas consumers are actually saving anything, because it will just force Texas to raise taxes elsewhere.
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Ima Fish (profile), 15 Feb 2011 @ 6:48am

The solution to this tax "problem" is so simple. As we know, the Constitution bars state importation taxes. They get around that with use taxes, I personally don't see the difference. But the states want the retailers to collect that "use" information and bill the tax payers directly.

The simple solution is this. We should pay taxes from whatever state our purchase is shipped from.

If I leave Michigan and go to California to buy something. I have to pay California's sales tax. I do not have to pay Michigan's use tax.

If I pay my brother to go to California to buy something, it's the same thing. I have to pay California's tax but not Michigan's.

If I pay some dude to do it, it's the same thing.

But for some reason, if I pay UPS or FedEX to ship what I buy from Newegg/Amazon/Etc. suddenly I do not have to pay California's tax and have to pay Michigan's tax. It makes no sense.

Newegg/Amazon/etc. should simple collect taxes and whatever we buy based upon where it is shipped from.

That way Newegg/Amazon/etc. can work out deals with the states or set up in states with low sales taxes. States could compete for the employment and taxes and customers could keep more of their money. It'd be win/win.
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teka (profile), 15 Feb 2011 @ 6:50am

Re:
Its money that got Many more cycles through the economy.

That 4 dollars i saved on a purchase did not magically disappear. It went into food from the locally-texan-owned (and taxed) bakery at the corner. It went into my rent. It went into a any number of things, moving around the state economy and being taxed as appropriate.

I Am cycling the money. If there is a short gap on when Rick Perry and his friends get to play with it, too bad for them.
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John Doe, 15 Feb 2011 @ 6:50am

Who actually pays tax on online purchases?
The state of Virginia asks on your tax return how much online purchases you made without paying sales tax. I guess if you fill in something here, they would make you pay the tax on that amount. Who would report that? Who actually knows how much they spent online that they didn't pay tax on?
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Jako, 15 Feb 2011 @ 6:53am

Amazon Jobs
And then there are the jobs lost as Amazon leaves and the lease, property taxes, utilities. A lot of money and jobs leaving Texas with Amazon.
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John Doe, 15 Feb 2011 @ 6:54am

Re:
I have an idea, why don't the state and federal governments spend their (our) money more wisely and then they wouldn't have to complain about taxes all the time. Every dollar they take in taxes is a dollar I can't spend on other goods and services. The market should be the biggest employer of people, not the government.
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Anonymous Coward, 15 Feb 2011 @ 7:00am

Re: Re:
So true, I don't care if I save a single puny dllr, as long as it's not in their pockets. I will use it to support my fellow people even with something as small as buying a newspaper from the guy in the stoplight. He needs it more than the govt.
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Overcast (profile), 15 Feb 2011 @ 7:01am

Correct: that which is a 'loss' for government is a 'gain' for the people.
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Anonymous Coward, 15 Feb 2011 @ 7:12am

Re: Re:
What if you use that $4 (and a few others) to buy something from another state, or from another country. Did it cycle?
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Overcast (profile), 15 Feb 2011 @ 7:14am

"That way Newegg/Amazon/etc. can work out deals with the states or set up in states with low sales taxes. States could compete for the employment and taxes and customers could keep more of their money. It'd be win/win."

*That* is the problem.

Which state will have most of the retailers then and net all the sales tax?

Will Ohio grease palms or will Utah? What if Iowa has a few retailers and then Illinois pays for the to relocate to Illinois using taxpayer dollars to buy the corporation land, buildings, whatever. It opens up a huge can of worms and makes a very ripe ground for abuse and corruption.

No matter which one gets the most - the other 49 will whine about it and likely sue.
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Michael, 15 Feb 2011 @ 7:25am

Re:
You do not think states and municipalities give tax breaks to companies to entice them to set up shop?
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Pixelation, 15 Feb 2011 @ 7:31am

This also points out the question, what makes the government think they can spend my money more effectively than I can?
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DH's Love Child (profile), 15 Feb 2011 @ 7:35am

Re:
But would this tax be based on where the retailer is located (For Amazon, that would be Washington) or the distribution facility where the product is shipped from (Texas in this example)?

Seems to me that in either case, the smart on-line retailers will relocate those functions to states with no sales tax (Hello Delaware and Oregon) to avoid the hassle altogether.
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Qritiqal (profile), 15 Feb 2011 @ 7:36am

Re: Re: Re:
So, your argument for getting the money as taxing is some low probability of the money going to fund terrorism???
Stretch much?

Most likely, that $600MM will feed back into Texas companies, small and large, thus growing the economy.

Saying that giving $600MM instead to the Texas government will grow the economy more is such a liberal attitude, I don't even want to dignify it with a response.

Of course, I must, so why not give everything we make to the government and let THEM figure out what best to do with it?

Why not just let the government provide us with food, clothing, shelter, vehicles, and such? After all, that would grow the economy more than letting the citizens of Texas decide what to do with their own money, right? They would just use it to buy cheap stuff from other countries.

OH, you're thinking that everything the state of Texas would do would involve products made in Texas! I see how that works, keep ALL the money in-state. Yes, that makes perfect sense. That would DEFINITELY grow the state economy if they went completely isolationist.
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Capitalist Lion Tamer (profile), 15 Feb 2011 @ 7:42am

Saving taxes...
In this political climate, you'd think the Texas government would be proudly touting the fact that they shaved $600 million off their population's tax burden.

Of course, they've kind of got some overdrafts to take care of so it makes sense that they'd blame everyone else for their fiscal problems.
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Ryan, 15 Feb 2011 @ 7:53am

Re:
1) Taxes not imposed by the state are not collected; citizens pay less instead and pocket the difference

2) Not taxing online transactions doesn't force Texas to do a damn thing. If they raise taxes elsewhere, which is completely incidental, then complaining that nothing was saved is like saying a free lunch is worth nothing because you'll just use the money on dinner instead.
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Thwacht, 15 Feb 2011 @ 7:54am

Re:
I'm not sure that would work. Texas has 6.25% state sales tax, and California has 8.25%, but Alaska, Montana, New Hampshire, and Delaware have no state sales tax at all.

Under your plan, Amazon/New Egg/etc could just set up a small "shipping office" in Delaware and charge the local sales tax from there -- which is nothing.

According to the story, that's how much the State of Texas is getting paid already. If this is the problem, I don't think you've solved it.

Texas doesn't get the $600M it thinks it's owed, and Delaware doesn't really gain anything either, except for whatever small, indirect boost there might be from having that single, skeleton-staffed shipping office operate in the state.

As the story points out, no tax can be charged the retailer for moving its own merchandise from state to state, so Amazon/New Egg/etc can claim to ship from anyplace they have a brick-and-mortar office, can't they?
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Anonymous Coward, 15 Feb 2011 @ 8:07am

Re:
"...would go in the pockets of Texas companies and Texans themselves"

My, my, what an active imagination you have TAM!
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Anonymous Coward, 15 Feb 2011 @ 8:13am

Re: Re:
Which is their right to do, and a boon to those states that don't have sales tax. Many states love to make deals to entice large corporations to place headquarters or manufacturing plants there, and the new jobs, property taxes, spending, etc etc that come along with them.
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Thwacht (profile), 15 Feb 2011 @ 8:21am

Re: Who actually pays tax on online purchases?
I do.
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Bt Garner (profile), 15 Feb 2011 @ 8:25am

It goes both ways
How many persons buy TVs from Woot for the tax free, and discounted shipping bargains? I would bet that a lot of the jobs that are created by those "tax free sales" directly add to the tax base of Texas, though income tax, and indirectly through increased spending at local retailers (sales tax, and increased employees causing more income tax...).
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Bengie, 15 Feb 2011 @ 8:34am

Money saved by ordering online is kept in the pockets of the purchaser.

The money spent on the product goes to another state which eventually gets cycled back into Texas. Not only that, the paychecks and money made by the company that sold the item and the company that shipped the item gets a federal tax.

So, the money "lost" by Texas, goes into the rest of the nation. The money saved by the customer in Texas can feed back into the local economy without having to be efficiently wasted by the local government.
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rebrad (profile), 15 Feb 2011 @ 8:35am

Re:
How dare these people want to keep THEIR money and spend it for stupid things like food, clothing, fuel, and housing. Don't they know that the government knows what they need and what the money needs to be spent on better than they do? After all there are poor starving government wards that need food, clothing, fuel and housing more than they do. Without the government insuring social justice what would happen to Texas and the world. /Sarcasm

BTW, why are all the loonies Anonymous Cowards? I guess I would be ashamed to own up to an opinion that the government can spend more efficiently than anyone who has honestly earned a dollar.
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Anonymous Coward, 15 Feb 2011 @ 8:38am

Texas counts on the sales tax to offset the lack of income tax. If the state isn't getting the money on the back end you know damn well they'll begin to consider getting it on the front end. I don't know about you but I'd rather pay sales tax, at least I have something to show for it.
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zegota (profile), 15 Feb 2011 @ 8:54am

As a Texan, let me say that I'm so glad I am able to save a few bucks while the schools here (annual contenders for the worst in the nation) are slashed even further. But that extra couple of hundred bucks is worth some stupid kids!
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Bengie, 15 Feb 2011 @ 9:11am

Re:
A state is like a company. You need to offer a competitive pay or reimburse with benefits.

If Texas wants to tax its people on sales, then it needs to find a way to keep the cost of living down so it can be competitive with sales tax.

If it's cheaper to purchase out of state, then they need to tax more on income, but if they tax on income, they'd better provide benefits that are worth the taxing.
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Thwacht (profile), 15 Feb 2011 @ 9:12am

Indeed there is government waste, but there are also highways and schools and state police and fire departments and garbage collectors.

It costs money to run a government -- even a "government of the people."

If you think your tax money is being poorly spent, the honorable, patriotic option is to vote for the politicians you think will spend it better.

There is nothing noble about not paying the taxes you owe under current laws, just because you can get away with it.
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RobertH (profile), 15 Feb 2011 @ 9:21am

well I'm sure it went into the economy of Texas somewhere. Quit yer bitchin!
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Ryan Diederich, 15 Feb 2011 @ 9:54am

Yes..... but...
Yes but if the taxes actually WERE collected, there is still no guarantee that the money would stay in the state. The government could use that money to pay state workers, who then shop in another state, or for whatever reason.

The point is, money to the people tends to work out better. People bail out companies every day, except only the good ones, the ones that serve them well and operate well.
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Anonymous Coward, 15 Feb 2011 @ 10:03am

Re: Re: Re: Re:
Umm, nobody mentioned terrorists.

The money may feed into Texas companies, and it may not. When the money is collected as taxes, it almost certainly goes back into Texas (and employs Texans, who earn money and pay taxes, and so on).

The rest of your post is an amusing right wing rant that makes O'Reilly look middle of the road.
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Anonymous Coward, 15 Feb 2011 @ 10:04am

Re: Yes..... but...
Not really true.

Remember Voodoo economics? Trickle down economy? The Reagan revolition? What did it lead to? Massive deficits in government, and in the end tax increases by Bush Sr which torpedoed his Presidency.

There is a balance. Just saying "leaving the money in the people's hand is best" is misleading.
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btr1701 (profile), 15 Feb 2011 @ 10:15am

Re: Re: Re: Re: Re:
> When the money is collected as taxes, it
> almost certainly goes back into Texas

Not necessarily. The state contracts with companies for goods and services all over the nation (and even some foreign countries). That $600 million could just as easily be spent on fleet vehicles (from Detroit) as Dell computers (from Austin).
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btr1701 (profile), 15 Feb 2011 @ 10:19am

Re: Re: Who actually pays tax on online purchases?
> > Who actually knows how much they spent
> > online that they didn't pay tax on?

> I do.

So far, a chorus of one.
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ChrisB (profile), 15 Feb 2011 @ 11:08am

Re: Re: Yes..... but...
> Trickle down economy?

No no no! Trickle down was used to justify tax cuts to the rich. The idea is that the rich would spend money and it would trickle down to the poor.
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David (profile), 15 Feb 2011 @ 11:26am

Re: Taxing where it's bought
You're too logical, rational and well reasoned. Based on those facts alone, a government would never accept your ideas.
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Beatrice Vaccaro, 15 Feb 2011 @ 11:56am

Modernize the Tax Laws
Everyone in the United States who is shopping on the Internet right now is already supposed to be paying sales tax, in the form of Use taxes. Unfortunately most people do not know this - and even if they try, they simply (and understandably) cannot be expected to remember every MP3, ringtone, and eBay purchase at the end of the year when they fill out their tax returns. The tax is owed --- the issue is whether the retailer is required to collect the tax, or the consumer is supposed to report and pay it.
When the Supreme Court ruled on this matter in 1967 and 1992 it was too difficult for a remote seller to keep track of the thousands of jurisdictions - which is why they were exempted from the obligation to collect. Moving forward to today, large internet retailers (such as eBay or Amazon) easily manage millions of items for sale at any given moment, and even the smallest internet retailer can calculate accurate shipping rates to every corner of the country in a blink of an eye - it is no longer too difficult to keep track of a few thousand local jurisdictions. There are companies that provide these services - and at least one of those services is completely free to the retailer.
I understand the desire of individuals to avoid paying a tax, but I think it is important to remember that sales and use taxes are voted on by local residents. The intent of these laws is to raise funding for services such as fire protection, police presence, roads, sidewalks, parks etc. Local budgets have plummeted as internet shopping has increased.
To suggest that it is a good thing for Texas that consumers have avoided paying the tax that is already due, and that states should not modernize the law (through Streamlined) to require that out-of-state sellers collect this tax efficiently, is, in my opinion, just plain wrong.
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ANONYMOUS, 15 Feb 2011 @ 12:10pm

Re:
How many miles of road can you pave with your income? How many cops, firemen & EMT's can you hire?

I'm guessing the number is pretty close to zero.

But, by taking a portion of my money & your money, the bad old government provides us with services that we all want.

So - please - quit acting like a spoiled child & start acting like a responsible member of society.
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Anonymous Coward, 15 Feb 2011 @ 1:09pm

Re: Re: Re:
So when the State Government from Texas is buying drugs from China, equipment and raw materials that counts as cycling too?
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Anonymous Coward, 15 Feb 2011 @ 1:19pm

Re: Re: Yes..... but...
May be not the best but sure as hell beats leaving money on the hands of a organization that a) is bankrupted already and can no longer honor it debt promises b) is ineffective in creating the right environment for good things to happen.

Governments don't know how to downsize themeselves, it will be a kicking and screaming proposition for them and in reality nobody really knows if it is necessary to do so, because after all their problems is that they along with companies killed the middle-class, no jobs no cycling anything, less money people make less wealth is created and the f'cking solution from the dimwits is to create a circle of trust with IP so that little group will retain all control over everything supposedly and force the rest of the world to pay money to them. Right that will happen LoL

Without the secondary and tertiary industries there will not be quaternary business and this crap called taxes will be reduced anyways, why don't they tax the 1% of the population that have 80% of the money?

Because that 1% is free to live anywhere in the world they don't need to comply with no stinky rules.

end of rant.
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btr1701 (profile), 15 Feb 2011 @ 4:06pm

Re: Modernize the Tax Laws
> To suggest that states should not modernize
> the law...

It's not up to the states. As you yourself pointed out in your post, the Supreme Court ruled that retailers with no physical presence in a state are not required to collect sales tax in that state.

States can pass all the laws they like but they can't overrule the Supreme Court.
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Anonymous Coward, 16 Feb 2011 @ 7:08am

Like it or not TX is funded in large part by sales tax. When a big % of people buy from Amazon, two things happen. Local businesses lose business to Amazon, and the state loses revenue because Amazon is using tax avoidance (or evasion, depending on who you ask!) strategies to put them at a competitive advantage over traditional brick & mortars.

I'd personally rather have a sales tax than a state income tax.
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Anonymous Coward, 16 Feb 2011 @ 7:11am

Re: Re: Modernize the Tax Laws
Right. Amazon has a large distribution warehouse in Irving TX and also owns Woot which is based in Carrollton TX. Did the Supreme Court also rule that "physical presence" means you have to be able to actually walk into the store to buy something?
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Anonymous Coward, 16 Feb 2011 @ 4:23pm

Re: Re:
We didn't ask the government to provide us with your "services", all of which could be contracted for much less money, and all of which can be primarily underwritten through coop/user-fees instead of taxes.

Spoiled children expect someone else to pay the bill. Responsible members of society hold government accountable for overspending.
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btr1701 (profile), 17 Feb 2011 @ 6:52pm

Re: Re: Re: Modernize the Tax Laws
> Did the Supreme Court also rule that "physical presence"
> means you have to be able to actually walk into the store
> to buy something?

No, but that's apparently what the governor of Texas thinks and since he's in charge of law enforcement...

Besides, Amazon has made it clear that if having a distribution facility counts as a physical presence, then they're going to shut it down and leave. Either way, Amazon won't have to collect Texas state sales tax.
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Idobek (profile), 24 Feb 2011 @ 5:07am

Re: Re:
Under your plan, Amazon/New Egg/etc could just set up a small "shipping office" in Delaware and charge the local sales tax from there -- which is nothing.

Yes, it's is known as tax competition.

According to the story, that's how much the State of Texas is getting paid already. If this is the problem, I don't think you've solved it.

The problem is that the tax code is so complicated that the is a dispute over what is owed by whom.

Texas doesn't get the $600M it thinks it's owed, and Delaware doesn't really gain anything either, except for whatever small, indirect boost there might be from having that single, skeleton-staffed shipping office operate in the state.

Lots of the indirect boosts off lots of shipping offices. Texans get to pay less tax and (shock-horror) spend that money on what they think is important. Delaware gets a lot of shipping offices, lots of tuckers travelling through, more use out of its airfields etc etc. Focusing only on a shipping office is short sighted - those indirect benefits soon add up.
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