Response to Answers: Sales Taxes for Online Purchases

Date:  2021-03-29 22:16:06
5 pages  (1173 words)
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University of California, Santa Barbara
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Critical thinking
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This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

There is only one constant thing in life: change. The advent of technology has transformed different aspects of life key among them being commerce. People can now buy online. States and cities imposing sales taxes must therefore, take online sales into consideration. As noted by Sonnier (2010), failure to do this will result in loss of sales tax revenue. It will not be prudent to continue dealing with physical stores when online businesses are thriving. Varian (2000) noted that people are attracted to internet shopping because there is no sales tax collection with some reporting that they have never paid sales tax on the internet.

Originally, the procedure in collecting sales taxes had the state tasking retailers with the responsibility of collecting the sales tax from the customer before submitting quarterly reports to the state's Department of Revenue and transferring the funds to the state. The system can be audited with ease given that if a retailer has so much in sales, he or she has to collect and pay the state whatever percentage deemed fit for that product category. States have gone to greater lengths to boost their revenues, and Minnesota is a perfect case in point. Here, there is a special legislation that effectively compels out-of-state internet retailers to collect and pay tax. If a business is successful in a particular state, it is only proper that the government reaps similar benefits. Therefore, the Minnesota law is justified in demanding that out-of-state retailer collects sales tax from Minnesota when their receipts to customers in the state surpass $10,000 in the past one year or when they make 100 or more retail sales in Minnesota in the course of the past year.

Furthermore, the action taken by Minnesota is supported by the 16th Amendment of the Constitution which grants Congress the power to lay and collect taxes. The same powers are given to states and localities by their constitutions and statutes. The increasing popularity of Internet commerce has been accompanied by loss of sales tax revenue and according to Varian (2000), state and government officials must look for methods of taxing internet commerce. Till the recent past, it was difficult for states to tax online retailers who lacked a physical presence in the state.The US Supreme Court placed more restriction in 1992during Quill Corp vs. North Dakota, requiring that out-of-state retailers without a physical presence in Minnesota must notcollect taxes on sales to residents of the state

The law was however repealed in 2008 in New York with other states following suit. The move was right and in tandem with rapid changes the world is experiencing today. In this regard, it must not be lost that the financial crisis of 2008 had a negative impact on the budgets of local governments, forcing the governments to devise creative ways of raising more revenue. Therefore, shifting focus on online sales would be an important source of tax revenues for the states. Forty-six states and the District of Columbia impose a sales tax on retail purchases with these revenues forming the bulwark of their expenses. The states are justified to tax online sales.

References

Sonnier, B. (2010). States continue to push tax Internet sales.Wiley Periodicals Inc

Varian, H. (2000). Taxation of electronic commerce - April 2000. Retrieved from

http://people.ischool.berkeley.edu/~hal/Papers/etax.htmlThird Response

Every government depends on revenues to maintain its operations. State and local governments have over the yearsrelied on sales tax as an important source of revenue. However, things have changed with the introduction of the internet which has made state and local governments lose sales tax revenue(ITEP, 2013). This explains why state and local governments have been struggling to maintain their revenue due to the increased volume of American consumers shifting to online buying.People in this era are striving to keep abreast of modern development and this means making online purchases. People may see this as a lazy way of doing things yet according to Uzuner and McKnight (2001), online buying is fast gaining popularity as the easiest and most efficient way of buying. States and local governments receive sales tax any time a consumer goes and purchases items from physical stores. While laws have been passed in some states barring online retailers from paying tax, there are states like New York that understand the level of losses incurred by failing to implement internet taxation. There must be uniform laws from one state to another, allowing internet taxation. The main reason for this is that when a local business owner offers the same product as an online retailer in a different state, the consumer might proceed to purchase that product online to save money on paying sales tax. Many people are attracted to internet shopping because there is no sales tax collection. In a nut shell, given that revenue remains a major pillar of success of any government, internet taxation can help in boosting the amount of revenue collected by governments.

References

Institute of Taxation and Economic Policy {ITEP}. (2013). How can states collect taxes owed on

internet sales? Retrieved from http://www.itep.org/pdf/pb2quill.pdfUzuner, O & McKnight, L. (2001). Sales taxes on the internet: when and how to tax? Retrieved

fromhttp://www.egov.ufsc.br/portal/sites/default/files/anexos/20473-20474-1-PB.pdfResponse

Tax remains a major player in each and every society (Azubuike, 2009). As a matter of fact, it is an opportunity for the governments to collect revenue required to meet their obligations. This is the reason why when people buy an item, it occurs to them naturally that taxes will be levied. However, internet taxation is a different ball game. There are numerous challenges that come with internet taxation. In the same vein, Ryu (2014) noted that the choices people make in life concerning what to buy and what not to buy are depended on a number of factors with tax rate being one of them. Popularity of online commerce is largely attributed to the fact that there is no sales tax collection. Moreover, there are laws barring collection of taxes for on-line purchases if the business is not located in the state. However, it must be considered that customers in a state can buy online from companies outside their state. To this effect, the government has every right to conduct internet taxation. This perhaps explains why some states have passed laws allowing internet taxation of businesses inside and outside the state. The opportunity to generate substantial revenue from this source is indeed important. People no longer depend on physical stores to get what they want. Online buying has become the easiest and most efficient method of buying. Therefore, as the business environment changes with technology, governments must also keep abreast of modern development. This means that growth in e-commerce leaves ample opportunity for state and local governments to begin receiving a much needed revenue stream. Opposing internet taxation will be denying governments their sources of livelihood.

References

Azubuike, J. (2009). Challenges of tax authorities, tax payers in the management of Tax reform

process. Journal of Nigeria accountant, 42 (2), 36-4

Ryu, J. (2014). The public budgeting and finance primer. Armonk, NY: ME Sharpe

 

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