Cuz taxes didn't suck enough ...

[Lobo]

Let's see now:

50 states and 3 or 4 territories, plus the District of Columbia. Each is a separate taxing entity.

Each state has counties (usually several dozen each). Each is a separate taxing entity.

Each county has incorporated cities and towns (frequently several each). Each is a separate taxing entity.

Then there are fire protection districts, ambulance & emergency medical districts, library districts, transportation (bus, train, subway) districts, metro districts, municipal utilities, and several other types of taxing entities.

Postal zip codes frequently span multiple taxing entities, so a customer's address is not an accurate means of identifying appropriate taxing entities or tax rates.

How is a small business or mom & pop shop expected to identify each and every one, calculate the taxes for each, maintain accountability for collected tax revenues, file appropriate tax returns (hundreds and hundreds of those every month or quarter), and remit collected taxes to every taxing entity?

If a given taxing entity makes a complaint against a business about taxes collected or remitted that complaint will usually be handled by local authorities. How is Joe Businessman in Maryland supposed to respond and deal with such a complaint in California? Answer: pay an attorney or suffer a default judgement and tax lien.

Without doubt, complying with such laws and regulations would be an extensive and expensive exercise, well beyond the capabilities of most small business operations. The likely result will be the destruction of countless smaller businesses across the country.

Bad ideas make for bad law. Bad law makes for angry and disaffected citizens. Bad law, such as this, may also fuel a vast underground economy that is beyond any possible enforcement effort.

[fredk]

We have basically one tax. Called V.A.T.  - Value Added Tax. Four rates in UK, 20% on nearly everything, 5% on fuels like coal, electricity, 0% on books and such and 'exempt' on things like food and baby clothes. Business' only levies and collects VAT when their turnover is above a certain amount = about £35,000 p/a afair

Big Limited companies pay a Corporation Tax on profits but small business' like your 'mom & pop' shops do not. Brick and mortar business also pay 'rates' a local tax for town/city services

As a small business working from home the only tax I have to pay is on my earned income.

I remember being stuck in an area of New York [called Jamaica !] years ago. I was in-between flights and for reasons I was down to my last $10. I went to a McD for a meal. Most everything was priced at 99c. Great, I thought. So I worked out a meal costing about $6 - as I thought, but it cost me $9.80 or so with all the local, city and state taxes added!

 

[chrisash]

I think the turnover limit is 85,000 not 35000 fred

[fredk]

aye, you could be right. Its still well above what most small business' make though

and I forgot, you lot have local council taxes, which we don't have, 

[CowboyBob]

So meanwhile here in the US they will probably have to hire some more inefficient workers & then have to build larger buildings (gotta spend the $$ you know) to track the non-payers down & I'm sure they will devise some penalty or interest for non-compliers!!

[JLSleather]

Iowa had us charging tax on sales within iowa and any other state where we have a presence, which is currently NONE.  99 counties with their own discretion at local option.  State tax is 6%. ALMOST all the counties add 1% local tax, total of 7%.  Its relatively painless.

As of Feb, Iowans pay sales tax on purchases from other states.  This is IOWA collecting a tax on goods shipped to IA, NOT the state sending the goods collecting tax.  States doing this incl [but no limited to] WA, SD, IA, OK, MN, ... i forget the rest.  So FL, for example, is now required to collect tax on purchases shipped to IA, even though they HAVE NO sales tax in FL   So they collect sales tax on goods shipped to IA, but in IA we do not charge tax on goods sent to FL .

Now - my personal OPINION admittedly not supported by actual knowledge - many people on THIS site will claim the dummy rule, sometimes called "plead ignorance".  On top of the "i didn't know" crowd will be some others -  when ordering materials, many like to say "Im a business" and when tax is due that same person claim "im just a hobby". 

Whatever - Im not the tax enforcement.  But I know for a fact that Cutesy, Ebay, and Amazon are all collecting and remitting sales tax ON BEHALF OF the people who sell on those sites.  I bought something on Ebay recently and the seller was surprised to see I was charged tax.  So I don't think it will take too long before what those sites report and what the individual sellers report clearly don't match... and then it will get far more interesting.

Edited March 6, 2019 by JLSleather

[fredk]

In the UK some business' show the price of goods including tax, and some don't, eg Le Prevo Leather. But in the end everyone pays that same VAT [tax] and no extra. Some business' can reclaim VAT paid on the stuff they bought. An example; one of the business I owned published magazines and booklets. We paid VAT [tax] on film, processing, cameras, computers et cetera, but magazines are 0 rated so I could claim back all the VAT I'd paid out. When I sold the magazines into other European Union countries they did not [with one exception] impose any tax on the magazine even tho they had a tax on mags produced in their country

What I'm reading here is the US States are acting like individual countries, not as members of one great big country, with free-trade between States but imposing 'import & export' tariffs. Whereas the individual countries of Europe are acting like they are part of one country with free flow of trade and recognising that VAT paid in one member country is tax paid

All this must really stifle any growth in any small business. It sounds like the amount of paperwork needed just to sell to someone in another state is a real burden and I guess the IRS is rather unforgiving of mistakes. We joke that our IR&C are hard nosed and bandits but they aren't bad really

[Lobo]

On ‎3‎/‎6‎/‎2019 at 1:57 PM, fredk said:

In the UK some business' show the price of goods including tax, and some don't, eg Le Prevo Leather. But in the end everyone pays that same VAT [tax] and no extra. Some business' can reclaim VAT paid on the stuff they bought. An example; one of the business I owned published magazines and booklets. We paid VAT [tax] on film, processing, cameras, computers et cetera, but magazines are 0 rated so I could claim back all the VAT I'd paid out. When I sold the magazines into other European Union countries they did not [with one exception] impose any tax on the magazine even tho they had a tax on mags produced in their country

What I'm reading here is the US States are acting like individual countries, not as members of one great big country, with free-trade between States but imposing 'import & export' tariffs. Whereas the individual countries of Europe are acting like they are part of one country with free flow of trade and recognising that VAT paid in one member country is tax paid

All this must really stifle any growth in any small business. It sounds like the amount of paperwork needed just to sell to someone in another state is a real burden and I guess the IRS is rather unforgiving of mistakes. We joke that our IR&C are hard nosed and bandits but they aren't bad really

The recent efforts to collect sales taxes (similar to the UK VAT) has become an issue in the United States since the growth of the internet and on-line shopping. Such purchases have undoubtedly reduced sales and tax revenues from traditional brick and mortar stores across the country, and the various states and local authorities are attempting to replace those lost tax revenues by attaching taxes on internet sales.

The United States of America has always been a collection of individual states, each functioning as the primary government within its borders. Originally the national government was charged only with national defense, postal services, foreign affairs, and regulation of interstate commerce. This system of governance was called "federalism".

Starting in the 1930's under the administration of Pres. Franklin D. Roosevelt the national government began usurping state and local powers, centralizing authority at the national level. This was usually accomplished by subsidies and revenue sharing schemes, essentially offering state and local political authorities large pots of federal dollars in exchange for surrendering state and local control. This has been going on for 3 full generations of Americans now and most simply do not recall that we were intended to have far more control over our own affairs than has become the norm under federal control.

Hence, a Department of Education dictating school curricula and enforcing compliance with funding; a Department of Health, Education and Welfare dictating local benefit programs and enforcing compliance with funding; an Environmental Protection Agency with near-dictatorial powers over land use, development, etc, enforcing compliance with funding; and many more centrally-run programs that are used to control local government affairs (and elections) via funding, or threatening to cut off funding. None of these functions or entities are mentioned in or authorized by the US Constitution, and are thus of questionable legality to begin with; however no one seriously challenges such government over-reach because to do so threatens the primary revenue stream of state and local governments.

Here in the US our form and systems of government are fundamentally different than any others. Everything is based upon our Constitution as the bedrock of law, and the Constitution serves primarily to constrain government while guaranteeing the rights of individual citizens and the various states. Perhaps needless to say, many politicians do not like having their powers and authorities limited, and the debate over the constitutionality (legal basis) of laws and programs is never-ending (I am sure confusing, if not comical, to European observers).

So, a bit of an answer to your questions and a long-winded dissertation on American government and polity.

Best regards.

[WTXKid]

Yeah, we have to collect the tax and set it aside for a year. I have a separate google sheets (like excel but free) to keep track of it on top of the quickbooks I use. The state will actually send rep to your place if they realize you might need to pay. At least Texas does as I've learned. So forget making double on your investment. Not with Amazon, ebay, PLUS the taxes from the state and paypal or credit card provider.  I can only add 50% of my cost to the product and then add on the fee for shipping and paypal into the price. People want free shipping now. 

[PigasusStudio]

Late to the tea party, but ... :0)

This sales tax debacle in the USA is part of why I've been dragging my feet on creating items for sale. Between my other person and myself, we're capable of creating jewelry, some light metalsmithing, photography, ceramics, and I'm now dipping into leatherwork. All potentially salable things if someone's willing to buy. For anyone to buy it, we have to provide it for sale. In order for us to provide it for sale we have to be willing to track, collect, and remit sales taxes.

Every revenuer also has different rules on what $ sales threshold is required for filing, or in others the threshold might be a set number of sales, or in others a combination, or in some few no sales tax is to be collected at all, or in still others one must collect from everyone and remit no matter how small a sale or amount of tax collected. This truly places an undue burden on small businesses. We can't possibly be expected to know every rule for every possible tax jurisdiction and be able to calculate this for our customers and be able to remit sales tax collected on all the varying schedules required. 

There are sales tax programs out there, e.g. TaxJar and Avalara, etc. that can help in track what's been collected and what's owed to whom. They, of course, come with their own fees. 

Some sales channels (e.g. Etsy, Amazon) will be the "seller of record" and auto-collect sales taxes for some sales based on some customer locations, and then auto-remit those collected taxes for you to the appropriate revenuer, though for some reason you still have to do the actual filing and say that sales channel x collected and remitted the tax. Yet,  even they don't cover every state / county / municipality / etc. / etc. / etc.. so then you're still left trying to figure out where they've collected and where they've paid and what to charge for everyone else and where you owe and how much. 

It's tempting to just say "sales tax included in price" and then deal with the how much owed to whom later. However, not all sales channels allow for that and just tack on and collect whatever tax they think is needed per their software, so one can't even state that "sales tax included" bit on the product since some customers will still get charged separately (and thus also have paid an increased price, unjustly I think most would say).

There's no easy solution here, and it's very daunting, no doubt.

What are we doing about it? The masses are bending over and ... or, as the OP says of some, ignoring it completely. Us personally, option #1 and not liking it one bit. Once we have enough sales/mo to justify the monthly fee for Tax Jar or Avalara or the like, we'll be using that. Until then there will be hair pulling, throwing things, probably crying, and paper cuts, and ranting.

Oh, and don't get me started on income tax if you're a mobile crafter/seller as I plan to someday be. Ohhh, oooh, ooooh, and that there self-empolyment tax (y'know, that extra FICA and MEDI amount you're supposed to pay on all your earnings that your W2 employer would otherwise pay if you were so employed?).  The combination of the three really makes me question this desire to make and sell.

But if I don't sell, I can't afford to make. 

And I wanna make. 

Edited July 27, 2019 by PigasusStudio