Newegg charging state tax for MA, even for Economy International Shipping?

[VirtualLarry]

WTF Newegg! So screwed up.

They started charging tax for MA residents, even though MA isn't listed as one of the states that they collect tax in, in their FAQ.

Then, the icing on the cake, I went to order a USB 3.0 hub from a marketplace seller, and it shows $4.99 Economy International Shipping. Newegg is STILL FUCKING CHARGING STATE SALES TAX. FOR AN INTERNATIONAL SHIPMENT.

 

[s0me0nesmind1]

WTF Newegg! So screwed up.

They started charging tax for MA residents, even though MA isn't listed as one of the states that they collect tax in, in their FAQ.

Then, the icing on the cake, I went to order a USB 3.0 hub from a marketplace seller, and it shows $4.99 Economy International Shipping. Newegg is STILL FUCKING CHARGING STATE SALES TAX. FOR AN INTERNATIONAL SHIPMENT.

First some general news - since there was a MAJOR court case decided recently. South Dakota v. Wayfair, Inc.which was recently settled by the US Supreme Court which basically overturned Quill Corp. v. North Dakota.

These are 2 landmark cases that basically defined our sales tax laws. Quill v. North Dakota ruled that essentially one must have a "physical presence" in order to be accountable for collecting sales tax.

South Dakota passed a sales tax law in 2016 that was completely illegal based on Quill - but they did it knowing so just on the hinge that it might be appealed and brought to the Supreme court. As you can tell, they succeeded. The basis of the law was that instead of basing collection of tax on "physical presence" - which has been debated and had legal issues over the last 20+ years - they instead simply stated that if you have a net revenue of $100,000 (or more) in the state OR if you have 200 (or more) transactions in the state then you would be liable to collect sales tax for that area.

Plenty of states quickly followed suite and passed similar laws.

By the way, there is no doubt that this severely fucks over the little guys that sell via e-commerce. They don't have anywhere near enough money to be able to handle the compliance work of reporting to a bunch of new jurisdictions.

Now then - Just getting that out of the way - In general you can expect to see sales tax on eCommerce purchases a lot more often in the next couple of years.


OPs Situation:
As far as if Massachusetts tax should be charged on your order - If indeed the ACTUAL ADDRESS that you told them to deliver to was an international address, I don't see why they should be charging MA sales tax. I would call them up and ask for an explanation.

There are exceptions to this rule - because really what determines the state that sales tax is due is typically determined by where the "title" of the item is "transferred" to the buyer. So for example, if you buy an item and that item gets delivered to a 3rd party delivery service in LA (that you hired) - that is where it's taxed. Even if said 3rd party takes it to FL or something afterwards.

Misunderstood OP - see edit at bottom.

For more knowledge If you care:
https://www.avalara.com/trustfile/en/guides/state/massachusetts/sales-tax.html

What state sourcing rules apply to Massachusetts?


Massachusetts is a destination-based state. Destination-based states are those where the transaction location is defined as the customer delivery location rather than the shipping location of the business. As a seller in Massachusetts, this means you are responsible for applying the sales tax rate determined by the ship-to address on all taxable sales.

Also as far as MA law

In his budget proposal put forward a year ago, Baker laid out a plan to begin by July 1, 2017 to collect sales taxes from online retailers who do not have a physical presence in Massachusetts, but do more than $500,000 in sales in the Bay State annually.

EDIT: I think I misunderstood - OP isn't having this shipped internationally - it's just shipped FROM an international location. In this case, Newegg was likely in the right to collect.

 

[VirtualLarry]

I honestly don't see how this tax is even remotely Constitutional.

Edit: This is going to kill internet-based commerce. Especially, the "little guys" running a small web/e-shop out of their garage.

 

[s0me0nesmind1]

I honestly don't see how this tax is even remotely Constitutional.

Edit: This is going to kill internet-based commerce. Especially, the "little guys" running a small web/e-shop out of their garage.

Sales tax has always (generally) been destination based. Where the product came from has no-bearing on if sales tax should be applied, otherwise nothing would be taxed. All of our food/produce comes from international. All of our clothes come international, etc...

Sales tax can be summarized as "consumption tax" - which translates to taxing based on consumption of the product. You consumed the product in MA, therefore tax is applied in MA.

That and honesty - you really can't complain. You have gotten away with not reporting the Use tax that you legitimately owed for a long time. Just because you made a purchase online and it didn't have tax applied doesn't mean you didn't owe it. The party is over now. Not sure how you can try to translate that to unconstitutional.

 

[ImpulsE69]

The tax system as it is is unconstitutional. Sure, they like to throw in loopholes, but we are double and triple taxed on everything. Problem is no one can fight it. They'd sooner throw out amendments than tax less. It surprises me it took this long honestly. It will be interesting to see how ecommerce does with both taxes added and shipping prices going through the roof (as well as products about to go up in a big way). Trump can tout how amazing his trade bills are, but if the only ones who can afford to buy products are the companies that own them, then your economy is going to take a dive pretty fast.

 

[13Gigatons]

I honestly don't see how this tax is even remotely Constitutional.

Edit: This is going to kill internet-based commerce. Especially, the "little guys" running a small web/e-shop out of their garage.

Truthfully shocked the states have allowed so much business to occur for so long. I can't imagine how many millions have been left uncollected. It has completely killed local stores.

Internet business will continue even with a sales tax since the prices are usually lower then local stores could ever sell the item.

 

[bbhaag]

First some general news - since there was a MAJOR court case decided recently. South Dakota v. Wayfair, Inc.which was recently settled by the US Supreme Court which basically overturned Quill Corp. v. North Dakota.

These are 2 landmark cases that basically defined our sales tax laws. Quill v. North Dakota ruled that essentially one must have a "physical presence" in order to be accountable for collecting sales tax.

South Dakota passed a sales tax law in 2016 that was completely illegal based on Quill - but they did it knowing so just on the hinge that it might be appealed and brought to the Supreme court. As you can tell, they succeeded. The basis of the law was that instead of basing collection of tax on "physical presence" - which has been debated and had legal issues over the last 20+ years - they instead simply stated that if you have a net revenue of $100,000 (or more) in the state OR if you have 200 (or more) transactions in the state then you would be liable to collect sales tax for that area.

Plenty of states quickly followed suite and passed similar laws.

By the way, there is no doubt that this severely fucks over the little guys that sell via e-commerce. They don't have anywhere near enough money to be able to handle the compliance work of reporting to a bunch of new jurisdictions.

Now then - Just getting that out of the way - In general you can expect to see sales tax on eCommerce purchases a lot more often in the next couple of years.


OPs Situation:
As far as if Massachusetts tax should be charged on your order - If indeed the ACTUAL ADDRESS that you told them to deliver to was an international address, I don't see why they should be charging MA sales tax. I would call them up and ask for an explanation.

There are exceptions to this rule - because really what determines the state that sales tax is due is typically determined by where the "title" of the item is "transferred" to the buyer. So for example, if you buy an item and that item gets delivered to a 3rd party delivery service in LA (that you hired) - that is where it's taxed. Even if said 3rd party takes it to FL or something afterwards.

Misunderstood OP - see edit at bottom.

For more knowledge If you care:
https://www.avalara.com/trustfile/en/guides/state/massachusetts/sales-tax.html


Also as far as MA law


EDIT: I think I misunderstood - OP isn't having this shipped internationally - it's just shipped FROM an international location. In this case, Newegg was likely in the right to collect.

Great post it was very informative and spot on. Just to add to it didn't the latest SC ruling state that etailers are responsible for collecting just state level sales tax? They are not responsible for collecting county or city sales tax. So for example here in Illinois if I buy an item from Newegg they only charge me the base 6.5% state sales tax therefore Newegg does not have to collect the county and city sales tax for my municipality correct?

 

[VirtualLarry]

I don't know... it still sounds like states are imposing tariffs on imports from other states, which (I believe) is explicitly prohibited by the Constitution and reserves regulation of inter-state commerce to the Federal Gov't.

 

[bbhaag]

I don't know... it still sounds like states are imposing tariffs on imports from other states, which (I believe) is explicitly prohibited by the Constitution and reserves regulation of inter-state commerce to the Federal Gov't.

Why do you think that? I'm a business owner and we buy products from other states all the time. We don't pay sales tax on those items though because we collect the sales tax from our customers when they buy the product from us.
Why should it be any different for an etailer? If they are selling a product to an end consumer shouldn't they be required to collect the sales tax for that product? I have to so why shouldn't they have to as well? IMO It has been an unfair advantage for to long and I'm glad to see it start coming to an end.

 

[s0me0nesmind1]

Great post it was very informative and spot on. Just to add to it didn't the latest SC ruling state that etailers are responsible for collecting just state level sales tax? They are not responsible for collecting county or city sales tax. So for example here in Illinois if I buy an item from Newegg they only charge me the base 6.5% state sales tax therefore Newegg does not have to collect the county and city sales tax for my municipality correct?

The SCOTUS ruling simply overturned Quill and has stated that South Dakotas model is allowed at this point (to my understanding, IANAL though). And that is one of the major problems, there is no overall guidance on what is an acceptable guidance and what is not. It can generally be inferred that South Dakotas is safe (>200 transactions or > $100,000 in sales) for other states to implement. However, each state must first pass their respective laws.

I don't believe the SCOTUS ruling has any bearing on state vs. local taxes however. Generally for the majority of states the state collects the full sales tax rate (with localities) and then distributes it down to the localities. The exception to this are referred to as Home-Rule States. Generally speaking, in those types of states the state doesn't have the job of collecting on behalf of the localities - but also the localities can make their own rules/laws accordingly. The SCOTUS ruling, ultimately, had no bearing on this since they were already like this.



I think it's pretty obvious by now that I work in this realm heh... And while I do have a some generally deep information, I am by no means someone that can get down to the nitty-gritty of individual states with individual laws. Furthermore, people that are experts on that stuff usually have to specialize down to the state level. So if someone wanted to know about laws in MA they would say "Oh go ask Bob. Bob knows a lot about MA laws".

So instead, I help with installing large software that has all the rules/laws built into it (and updated on a monthly basis). That is what gets me back to one of my original points... Small companies are going to have a very hard time with this. Like I said, they do MULTIPLE updates every month and this is the type of software that interfaces with the ERP system.

However, there is one silver-lining a bit for the really small ones that sell on established websites... Some states are also passing laws in which if you sell on-behalf of someone you must also collect the tax on their behalf. That means if you sell on etsy, amazon, etc.. as a major retailer, the platform you're selling on might be responsible for collecting the tax depending on the state and their laws.

 

[s0me0nesmind1]

Truthfully shocked the states have allowed so much business to occur for so long. I can't imagine how many millions have been left uncollected. It has completely killed local stores.

Internet business will continue even with a sales tax since the prices are usually lower then local stores could ever sell the item.

They haven't been allowing it... Well, they have TRIED to not allow it. There has been a number of laws tried and court cases decided where states have tried to push as hard as they can over the last 20+ years.

While "physical presence" was the determining factor, states tried as hard as they could to try to define what that means... Going as far as to trying to pass laws to state that a website cookie stored on the local person's computer is considered "physical presence"... I know, fucking laughable. Especially because people can simply not store cookies. Plus just because someone ordered something in a state, doesn't mean that is the state where the item is being delivered to... but I digress.

Another big-one was Click-Through Nexus, in which if you receive revenue located in that state from an ad you placed they considered it generating revenue in that state.

Click-through nexus. In some states, contracting with a business or individual to directly or indirectly refer potential clients through links on an in-state website can give you nexus if those ads generate a certain amount of business. States with click-through nexus include, but aren’t limited to, Connecticut, Michigan, and New York.

More on other nexus types that have been tried: https://www.avalara.com/us/en/blog/2018/05/decoding-nexus-.html

 

[dave_the_nerd]

I don't know... it still sounds like states are imposing tariffs on imports from other states, which (I believe) is explicitly prohibited by the Constitution and reserves regulation of inter-state commerce to the Federal Gov't.

No, they're taxing you, the resident of the state.

 

[paperfist]

First some general news - since there was a MAJOR court case decided recently. South Dakota v. Wayfair, Inc.which was recently settled by the US Supreme Court which basically overturned Quill Corp. v. North Dakota.

These are 2 landmark cases that basically defined our sales tax laws. Quill v. North Dakota ruled that essentially one must have a "physical presence" in order to be accountable for collecting sales tax.

South Dakota passed a sales tax law in 2016 that was completely illegal based on Quill - but they did it knowing so just on the hinge that it might be appealed and brought to the Supreme court. As you can tell, they succeeded. The basis of the law was that instead of basing collection of tax on "physical presence" - which has been debated and had legal issues over the last 20+ years - they instead simply stated that if you have a net revenue of $100,000 (or more) in the state OR if you have 200 (or more) transactions in the state then you would be liable to collect sales tax for that area.

Plenty of states quickly followed suite and passed similar laws.

By the way, there is no doubt that this severely fucks over the little guys that sell via e-commerce. They don't have anywhere near enough money to be able to handle the compliance work of reporting to a bunch of new jurisdictions.

Now then - Just getting that out of the way - In general you can expect to see sales tax on eCommerce purchases a lot more often in the next couple of years.


OPs Situation:
As far as if Massachusetts tax should be charged on your order - If indeed the ACTUAL ADDRESS that you told them to deliver to was an international address, I don't see why they should be charging MA sales tax. I would call them up and ask for an explanation.

There are exceptions to this rule - because really what determines the state that sales tax is due is typically determined by where the "title" of the item is "transferred" to the buyer. So for example, if you buy an item and that item gets delivered to a 3rd party delivery service in LA (that you hired) - that is where it's taxed. Even if said 3rd party takes it to FL or something afterwards.

Misunderstood OP - see edit at bottom.

For more knowledge If you care:
https://www.avalara.com/trustfile/en/guides/state/massachusetts/sales-tax.html


Also as far as MA law


EDIT: I think I misunderstood - OP isn't having this shipped internationally - it's just shipped FROM an international location. In this case, Newegg was likely in the right to collect.

Thanks for the explanation. I’ve been wondering why all of the sudden my business is being charged sales tax for using Gmail and taxed by companies with no physical presence .

Though it costs money to collect sales tax? It’s a cluster **** for sure, but for a little company it shouldn’t cost more.

 

[Red Squirrel]

The tax system in general is screwed up. They pick and choose what and when they want to tax us and tax us from way too many directions. We end up getting taxed multiple times on the same money.

As far as sales tax the way it should work is that anything from outside the province/state should get provincial tax, and everything from outside the country should get federal sales tax. Anything local should not be taxed at all. But instead, it's the opposite. You can buy cheap stuff from China and not only is there no tax but there's no shipping cost either. It's like if they purposely put a deterrent to stop people from buying local.

 

[s0me0nesmind1]

Thanks for the explanation. I’ve been wondering why all of the sudden my business is being charged sales tax for using Gmail and taxed by companies with no physical presence .

Though it costs money to collect sales tax? It’s a cluster **** for sure, but for a little company it shouldn’t cost more.

It costs money indirectly because consultants like me are hired with insane billing rates to implement software. These companies can't handle the costs of complying with all these laws, regulations, exceptions, exemptions, rules, rates, etc...

But software can if you set it up correctly. The problem for companies is they aren't experienced with the software, they have no clue how it works, how to implement it, how to integrate it, or how to configure it.

I mean it also costs money as well because every company has a tax department where they collect their data, reconcile it to make sure it matches their General Ledger and they have to fill out and file their returns... for each and every jurisdiction that requires one. So even for the little guys, someone that is paid has to do that stuff.

 

[paperfist]

It costs money indirectly because consultants like me are hired with insane billing rates to implement software. These companies can't handle the costs of complying with all these laws, regulations, exceptions, exemptions, rules, rates, etc...

But software can if you set it up correctly. The problem for companies is they aren't experienced with the software, they have no clue how it works, how to implement it, how to integrate it, or how to configure it.

I mean it also costs money as well because every company has a tax department where they collect their data, reconcile it to make sure it matches their General Ledger and they have to fill out and file their returns... for each and every jurisdiction that requires one. So even for the little guys, someone that is paid has to do that stuff.

I use Quickbooks

I guess I can see after about 10 county/city you have to collect and report on it getting out of hand.

I looked into automated software a few months ago that would take the amounts off each invoice, calculate sales tax due for each county/city and pay them to NYS for you and yeah I thought they were nutters. With all the fees, setup costs, cost per invoice it was thousands of dollars.

 

[Fern]

I don't know... it still sounds like states are imposing tariffs on imports from other states, which (I believe) is explicitly prohibited by the Constitution and reserves regulation of inter-state commerce to the Federal Gov't.

I think you are mostly correct. However, early in this nation (and before while a colony) tariffs were placed on goods from other states that merely passed through the state. E.g., a product from Georgia is sent to purchaser in Virginia. Because it passes through North Carolina while shipped, NC used to place a tariff on it.

The Constitution prohibited that; no more tariffs for merely passing through a state. As the nation grew tariffs for merely passing through states got ridiculous. Purchasers, say in CA, would have to pay tariffs to numerous states as the product was shipped across country making it crazy expensive.

We can now only apply tax to the final state of destination. This is because the product is assumed to be used/consumed in the state of destination. So yes, sales tax is a type of 'use tax'.

Fern

 

[Ns1]

NEXUS HOW DO YOU WORK?!?!

I don't know... it still sounds like states are imposing tariffs on imports from other states, which (I believe) is explicitly prohibited by the Constitution and reserves regulation of inter-state commerce to the Federal Gov't.

interstate commerce clause lost all meaning when it was applied to marijuana prohibition

 

[Pantoot]

However, there is one silver-lining a bit for the really small ones that sell on established websites... Some states are also passing laws in which if you sell on-behalf of someone you must also collect the tax on their behalf. That means if you sell on etsy, amazon, etc.. as a major retailer, the platform you're selling on might be responsible for collecting the tax depending on the state and their laws.

This is a silver lining until the states decide they want more money.
Then all they have to do is go through their sales tax remittance from, say Amazon, and look for sellers that have not registered for a sales tax permit, or paid their franchise tax, or whatever new licensing fee they think up.
I certainly wouldn't put it past them, its basically free money.

 

[paperfist]

This is a silver lining until the states decide they want more money.
Then all they have to do is go through their sales tax remittance from, say Amazon, and look for sellers that have not registered for a sales tax permit, or paid their franchise tax, or whatever new licensing fee they think up.
I certainly wouldn't put it past them, its basically free money.

It'd be nice if they stopped handing this free money away like candy though.