Illinois enacts Internet sales tax law

[Balta1701]

Or they realize that the cost of shutting them down, and finding someone else to do them in the next state over is cheaper than paying the local tax rate. Either way, it is a jobs consideration to some extent. It is no different than Wal-Mart opening up across the street from the Chicago city limits to save the four percentage points of sales tax, knowing that it will draw more customers, or operating in the next town over because they get a better incentive package from them. Tourism isn't the best thing for Michigan City, but it is something better than 20% unemployment.

 

In the big picture this really isn't any different. if you aren't competitive, you lose. That is exactly what is happening to these states right now.

No, what's happening is that a large company which has worldwide business and facilities in only a few locations has managed to do business with a lot of small operators, and in exchange that large company has in effect demanded huge state-level subsidies to keep the small operators in business.

[southsider2k5]

Oh they hesitated - but its simple math. They can lose a bunch of affiliates - most of whom direct very small amounts of business to them - or they can lose a heck of a lot of customers among the entire state population because they are now being taxed. They chose the lesser evil. Still not what they want (they'd rather the law just not change at all), but its better than the alternative. I don't blame them for making that choice at all.

 

I will say though, there's a good chance that lots of states will enact similar laws in the next few years. So eventually, this will be a non-issue. Sure there will be a few states that consistently avoid it, but if a majority of states (particulary if they are key, large population states) do this, then it will in essence level the playing field. So I don't necessarily blame Illinois either.

 

But here is what I'd love to see happen (I know it won't)... have the US government enact a national sales tax, solely on non-essential goods (excludes store-bought food, clothing for example)... lower the federal income tax by that amount for all brackets, but specifically targeting the lower ones more significantly... and then allow the states to decide whether or not to increase their state income taxes to fill that gap. What this does essentially is, without adding any more net tax dollars, shift the national nature of shopping online to the federal level where it is more effective, and give the states back the revenue via a transfer of burden.

 

The lower two quintiles of American taxpayers have a negative tax rate. Plus sales taxes are horribly regressive in their nature.

[Balta1701]

The lower two quintiles of American taxpayers have a negative tax rate.

No they don't. They do on "the Federal Income tax". They don't if you count Social Security taxes, Medicare taxes, State taxes, and local taxes.

[southsider2k5]

No, what's happening is that a large company which has worldwide business and facilities in only a few locations has managed to do business with a lot of small operators, and in exchange that large company has in effect demanded huge state-level subsidies to keep the small operators in business.

 

Which is exactly what happens every day in towns all over the US, except replace state with local. It is all the same pursuit for jobs and spenders. If your policies are more anti-business, your community (or state) loses. In the cases, the State of Illinois decided that taxes are more important than jobs. The other side of the coin is that governments do this all of the time with other regulations as well. Things that make it more expensive to do business somewhere, drive away businesses. In Economics 101, we call this the Law of Supply.

[southsider2k5]

No they don't. They do on "the Federal Income tax". They don't if you count Social Security taxes, Medicare taxes, State taxes, and local taxes.

 

He isn't talking about those taxes, as was outlined in his post. There was a specific reference to federal income taxes, so I really didn't feel I needed to repeat federal income taxes to make it obvious that I was talking about federal income taxes.

[Balta1701]

He isn't talking about those taxes, as was outlined in his post. There was a specific reference to federal income taxes, so I really didn't feel I needed to repeat federal income taxes to make it obvious that I was talking about federal income taxes.

Then your point isn't an objection, because if they already have a negative income tax rate in this particular tax, what does it matter if the negative tax rate is made more sharply negative while being offset with a consumption tax?

[southsider2k5]

Then your point isn't an objection, because if they already have a negative income tax rate in this particular tax, what does it matter if the negative tax rate is made more sharply negative while being offset with a consumption tax?

 

It isn't a tax reduction at that point. It is a subsidy or social entitlement, depending on how you package it. It also means that for 364 days a year the taxpayer is paying a regressive tax and losing income, which is made up for on the one day a year when they get their tax refund. It is a terrible idea that hurts poor people's spending power for pretty much the entire year. Sales taxes are incredibly regressive, and shouldn't be used if at all possible. Same with any other sort of usage tax or fee.

[NorthSideSox72]

He isn't talking about those taxes, as was outlined in his post. There was a specific reference to federal income taxes, so I really didn't feel I needed to repeat federal income taxes to make it obvious that I was talking about federal income taxes.

That's why it should be low and limited away from essentials. And because you still have income taxes, you can essentially get rid of the regressive nature of it.

 

Now, if I had advocated REPLACING the income tax with sales tax across the board, I'd agree, there would be no way that taxation wouldn't be highly and unfairly regressive.

 

[Balta1701]

It isn't a tax reduction at that point. It is a subsidy or social entitlement, depending on how you package it. It also means that for 364 days a year the taxpayer is paying a regressive tax and losing income, which is made up for on the one day a year when they get their tax refund. It is a terrible idea that hurts poor people's spending power for pretty much the entire year. Sales taxes are incredibly regressive, and shouldn't be used if at all possible. Same with any other sort of usage tax or fee.

Why do you think he was calling for a tax cut?

[southsider2k5]

Why do you think he was calling for a tax cut?

 

I got that part. I also got the part where it only helps one day a year.

[Texsox]

I agree with SS that tax incentives are tax incentives and those incentives and other regulatory issues need to be weighed against job creation. What makes this kind of different is in theory sales taxes are a pass through for the business. Yes, there is some expense in tracking and sending payments, but it isn't exactly like property taxes that they would need to pay regardless of sales volume. Also, near as I can tell the bulk of these affiliates are about the same as eBay sellers and really not contributing to their state's revenue. I wonder if Amazon announced they were ending their affiliate program if states would line up to offer Amazon an incentive to keep the program in place.

 

I would have an easier time justifying a state offering Internet businesses who locate in their state being allowed to continue to ship tax free inside the state. Currently two Illinois based business, each shipping to customers within the state, could either have to charge sales tax or not if they were shipping through Amazon or someone else. That doesn't seem right.

 

But that is really a side issue to solving the real problem of a significant percentage of consumer spending that was generating revenue for states and local communities that are going away. My daughter buys almost all her non perishable items from Amazon and receives free delivery to her apartment. No lugging cases of water up two flights of stairs.

[Y2HH]

I agree with SS that tax incentives are tax incentives and those incentives and other regulatory issues need to be weighed against job creation. What makes this kind of different is in theory sales taxes are a pass through for the business. Yes, there is some expense in tracking and sending payments, but it isn't exactly like property taxes that they would need to pay regardless of sales volume. Also, near as I can tell the bulk of these affiliates are about the same as eBay sellers and really not contributing to their state's revenue. I wonder if Amazon announced they were ending their affiliate program if states would line up to offer Amazon an incentive to keep the program in place.

 

I would have an easier time justifying a state offering Internet businesses who locate in their state being allowed to continue to ship tax free inside the state. Currently two Illinois based business, each shipping to customers within the state, could either have to charge sales tax or not if they were shipping through Amazon or someone else. That doesn't seem right.

 

But that is really a side issue to solving the real problem of a significant percentage of consumer spending that was generating revenue for states and local communities that are going away. My daughter buys almost all her non perishable items from Amazon and receives free delivery to her apartment. No lugging cases of water up two flights of stairs.

 

Why do people buy cases of water...when you can buy a cheap water filter and save all the plastic.

[Texsox]

Why do people buy cases of water...when you can buy a cheap water filter and save all the plastic.

 

 

I blame it on her mother (my ex-wife)

I've been after her to stop doing that. Lazy on her part. I've even bought her filters and water bottles. For a while she was at least buying gallon size spring water and piouring it into reusable bottles.

[Balta1701]

Why do people buy cases of water...when you can buy a cheap water filter and save all the plastic.

If I could drive everyone in the country past the "Crystal Geyser" bottling plant, the bottled water industry would end. Forever.

[Y2HH]

If I could drive everyone in the country past the "Crystal Geyser" bottling plant, the bottled water industry would end. Forever.

 

You mean where they fill the bottles out of a unfiltered garden hose?

[Balta1701]

You mean where they fill the bottles out of a unfiltered garden hose?

No, where the plant happens to be sitting right next to a place that's ~ worse than a superfund site

[jasonxctf]

Gov. Pat Quinn signs bill into law, prompting Amazon.com and Overstock.com to say they will sever all ties with affiliates in state to avoid incurring such taxes.

 

Great idea, Quinn, you f***ing tax happy jackass...all the businesses that relied on Amazon.com and Overstock.com just got f***ed over by a bill you signed, and will produce almost nothing now.

 

back to the subject at hand. I would argue, that Gov Quinn did a good job looking out for the interests of the Illinois small business community. These small businesses who are retail fronts, (brick and mortar) were getting killed by online giants such as Amazon and Overstock who were getting away with not charging sales tax.

 

A laptop computer that was priced at $899 pre-tax at both online and retail stores, ended up costing Illinois consumers $65 extra dollars if they chose to shop locally rather than with a national online re-seller.

 

Take it out a few steps, this hurts the local re-seller who employs local workers. It effects his ability to pay his landlord and effects the local commercial real estate market too. Not to mention the local re-seller's employees and their impact on the economy.

[RockRaines]

Why do people buy cases of water...when you can buy a cheap water filter and save all the plastic.

Have you lived anywhere outside of Chicago? There are truly places in this country where filters wont do anything to make the water taste better. We are truly spoiled here.

[RockRaines]

back to the subject at hand. I would argue, that Gov Quinn did a good job looking out for the interests of the Illinois small business community. These small businesses who are retail fronts, (brick and mortar) were getting killed by online giants such as Amazon and Overstock who were getting away with not charging sales tax.

 

A laptop computer that was priced at $899 pre-tax at both online and retail stores, ended up costing Illinois consumers $65 extra dollars if they chose to shop locally rather than with a national online re-seller.

 

Take it out a few steps, this hurts the local re-seller who employs local workers. It effects his ability to pay his landlord and effects the local commercial real estate market too. Not to mention the local re-seller's employees and their impact on the economy.

How many small business are truly competing with big box online retailers?

[Jenksismyhero]

How many small business are truly competing with big box online retailers?

 

and how many small mom and pop stores are really going to be saved here? They're on equal footing with big box stores anyway (in terms of people having to pay sales tax) so it's not like a new stream of clientele is going to be coming through the door.

 

If anything, this law screws the small mom and pop internet stores out there that may or may not have a presence in Illinois. Now their one perk for consumers is gone.

Edited March 24, 2011 by Jenksismybitch

[Texsox]

and how many small mom and pop stores are really going to be saved here? They're on equal footing with big box stores anyway (in terms of people having to pay sales tax) so it's not like a new stream of clientele is going to be coming through the door.

 

If anything, this law screws the small mom and pop internet stores out there that may or may not have a presence in Illinois. Now their one perk for consumers is gone.

 

One of us is misreading the law. Illinois tried to prove that Amazon had a presence in Illinois with their affiliates. No presence, no sales tax collected for sales in Illinois. The perk hasn't changed, any sales where the buyer and seller are in the same state the sales tax must collected and paid by the seller. Sales where the buyer and seller are in different states, the buyer is responsible to report the sale and send in the sales tax. (which does not happen).

 

 

 

 

 

 

 

 

 

 

[StrangeSox]

Have you lived anywhere outside of Chicago? There are truly places in this country where filters wont do anything to make the water taste better. We are truly spoiled here.

 

Buying bottled tap water that may be subject to even less regulations than municipal water is still a dumb idea.

 

But I really do shake my head at people who buy case after case of bottled water even though they get Lake Michigan water at home.

[Texsox]

Buying bottled tap water that may be subject to even less regulations than municipal water is still a dumb idea.

 

But I really do shake my head at people who buy case after case of bottled water even though they get Lake Michigan water at home.

 

 

When I first moved to McAllen the water was outside of EPA guidelines and tasted funny. Buying 5 gallon water bottles sucked, but we drank more water.

[StrangeSox]

Yeah that's a different case. Still, bottling water can lead to ecological disasters.

[Iwritecode]

Buying bottled tap water that may be subject to even less regulations than municipal water is still a dumb idea.

 

But I really do shake my head at people who buy case after case of bottled water even though they get Lake Michigan water at home.

 

The water from the fountains at my work tastes really odd to me. I don't know if it's because I didn't grow up with it or what.

 

At home we use a Brita water pitcher.