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US state sales tax being collected from foreign shops if they do enough business


chadbag

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Moderator Note: this discussion on US sales tax was split off from the RG Rokko thread

 

On 10/30/2022 at 12:04 PM, Yavianice said:

Small update is the VAT requirement for the U.S.. RG-R is currently figuring out what the new rules mean to future sales to the U.S.

 

Just a nitpick.  The US does not have a VAT.  Most states, but not all, have a sales tax.  End result is the same but the mechanics and philosophy behind it is different.  It is also a state run thing, not a federal (US) thing.

 

As an aside (and I am not a lawyer):  I'd be very surprised if the states could do anything against out of country vendors who don't want to play along.   Since it is not a federal thing, but a state thing, and there are 50 states, ranging from no sales tax to high sales tax and everything in between, with details different for each, I doubt customs will get involved.  Technically you, the recipient, are supposed to declare this stuff on your state income tax return to calculate "use tax" or a separate use tax return...

 

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I seem to remember states amending sales tax laws internationally by going after any business that may have facilities in the state and why Amazon was the first to get into charging the state sales taxes (they are everywhere now) and big enough to break limits I’m sure everywhere. But you are right states can’t enforce foreign policy things like this. This has all been coming together for a couple of decades now. Would be interesting to know what pressures are making this happen internationally now.

 

jeff

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6 hours ago, cteno4 said:

I seem to remember states amending sales tax laws internationally by going after any business that may have facilities in the state and why Amazon was the first to get into charging the state sales taxes (they are everywhere now) and big enough to break limits I’m sure everywhere. But you are right states can’t enforce foreign policy things like this. This has all been coming together for a couple of decades now. Would be interesting to know what pressures are making this happen internationally now.

 

jeff

 

States couldn't force companies that didn't have a "nexus" or physical presence in the state to collect sales tax on sales in that state.  It went back to a supreme court decision related to mail/phone order long ago.   A recent later case called the Wayfair case was one of Justice Kennedy's last cases and changed this to allow companies to be forced to charge sales tax under certain conditions, which have been written up and are now enforced (which is why most online sales are now taxed in states that the company does not do business in -- small sellers are exempt with each state defining it).

 

I'd be really interested to see how the international sellers are being pressured.  Is one of the states on the list going to sue Ami Ami or whomever in Japanese court?  Or in their local court and get an unenforceable settlement?  And are these foreign companies really even doing enough business in the "chosen" states to qualify?

 

 

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bill937ca

I would think the emergence of eBay and Amazon has lead to these tax measures. They are everywhere and big enough that tax revenues within a state may be declining while the economy on the whole booms. When I order on Amazon.ca  the stuff seems to be coming from everywhere: San Bernardino California, New Jersey, Massachusetts. These companies seem to like to keep a whole line of items in one place.  Now more stuff may be coming ifrom outside countries.

Edited by bill937ca
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At least in Portugal we have to pay VAT over the full value of an international delivery. Shipping and all.

This is usually done on customs, and the VAT can be paid before the item arrives in the country, which makes the whole process painless (unless the courier messes it up).

 

In my case I know that the full price of something I order from outside the EU will be:

For objects without customs tax ->  Full Price = (Value of Receipt + Shipping)x0.23 + Value of Receipt + Shipping + Customs Service Tariff

For objects with customs tax ->  Full Price = ((Value of Individual Items)xCustoms Tax + Value of Receipt + Shipping)x0.23 + Value of Receipt + Shipping + Customs Service Tariff


If the above is lower than buying the same thing anywhere in the EU, with shipping included, I buy from Japan directly.

Now... In Portugal the Azores and Madeira have VAT values that differ from Continental Portugal, which begs the question:
- Do imports to the Azores/Madeira pay for Continental VAT, or their local VAT?

I know that local VAT is the answer, because you have to fill the customs file with your VAT number, which has your residence data attached.

Implementing Customs in the US could solve the issue with sales tax, as the local sales tax would need to be paid when the item arrives and is held at customs. But this would require a whole revamp of the North American tax system, which I can't see ever happening.

After all, we're talking about a country with no such things as ID numbers, Tax numbers, or Health Benefiter numbers, but has Social Security numbers!

Edited by Giugiaro
How many times I need to edit a message to get basic grammar right!?
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18 hours ago, Giugiaro said:

I know that local VAT is the answer, because you have to fill the customs file with your VAT number, which has your residence data attached.

Implementing Customs in the US could solve the issue with sales tax, as the local sales tax would need to be paid when the item arrives and is held at customs. But this would require a whole revamp of the North American tax system, which I can't see ever happening.

After all, we're talking about a country with no such things as ID numbers, Tax numbers, or Health Benefiter numbers, but has Social Security numbers!

 


Customs is a Federal (US) thing.  Sales tax is a state matter.  Customs doesn't care to worry about state matters.

 

I am not sure where "ID numbers, Tax numbers, or Health Benefiter numbers, but has Social Security numbers" comes from.  There most definitely is a "Tax ID" called the ITIN for individuals -- Individual Taxpayer Identification Number".  It happens to be the same as the "Social Security Number", which is just a name for the national ID number for a person.  Not all people can get a social security number, for example, non resident aliens (which is a legal definition), and they can easily apply for an ITIN: https://www.irs.gov/individuals/how-do-i-apply-for-an-itin .  Businesses, and other legal non-person entities can also apply for a "TIN" or taxpayer identification number.  I have 3 for various businesses.

 

The US has all those numbers you say we don't -- in most cases they are identical to the "social security number", which is just the name the US has applied to their national ID number.  Health insurance usually issues their own ID number for your policy or group you fall under.

 

 

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5 hours ago, chadbag said:

Customs is a Federal (US) thing.  Sales tax is a state matter.  Customs doesn't care to worry about state matters.

 

There lies the issue. If Customs, being a Federal thing, isn't collecting sales tax on the state's behalf as the forefront to international trade, then the states are left in a precarious situation when taxing international acquisitions comes into question.

 

The Azores and Madeira are autonomous regions inside Portugal, yet it's the duty of the "Autoridade Tributária e Aduaneira", the national tax and customs authority, to collect the respective VAT values when the importer is from those regions. The central government is expected to take the duty to collect taxes on behalf of those autonomous regions when the seller is from outside the EU (it used to be anywhere outside the country before Portugal joined the EEC).

 

People here tend to buy stuff for cheap on AliExpress expecting to get a huge bargain, only to find out their orders won't be allowed into the country unless the customs duty and VAT is paid. Their bargain quickly turns into a rip-off.

This, however, isn't always the case. Like I said already, there are times when ordering directly from outside the EU is worth it, if you do the math before you place your order.

Edited by Giugiaro
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Ok I dug into this some and the muscle the states are using is the threat of seizing any money a foreign company may have in us banks during credit card transactions. There is usually a buffer period for larger merchant account so if there is a problem there are funds the credit card company can use to compensate the customer. I know this as a travel company once went belly up during a trip and we had to pay again to complete the trip and I was able to get the money back from the credit card company. Cc nicely explained this kept me out of bankruptcy court to try to collect the monies. Also the international sellers don’t want any possible mucking up of their merchant account processing even if they don’t have money in us banks.

 

the other hammer is web service providers that provide retail systems are forcing tax collection so they don’t get a bad name or mucked up, so if your business uses one of these for your web site’s back end you are forced into collecting if you reach thresholds. 
 

of course all the big marketplaces (ebay, aliexpress, amazon, etc) don’t want fights so they just impress the sales tax rule on all sellers as the marketplace could get legally bound up.
 

it’s looking like no one wants to challenge the South Dakota vs wayfair ruling and they are hoping feds step in with saner way to do all this more consistently and equatable. Right now it’s silly as something like a 200 transaction or $100k threshold is not fair as 200 $1 items trips the collection and generates all of like $10 revenue and tons of paperwork, where as one $99k transaction does not trip the threshold when it would bring in like $5000! 
 

jeff

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  • cteno4 changed the title to US state sales tax being collected from foreign shops if they do enough business
16 hours ago, cteno4 said:

Ok I dug into this some and the muscle the states are using is the threat of seizing any money a foreign company may have in us banks during credit card transactions. There is usually a buffer period for larger merchant account so if there is a problem there are funds the credit card company can use to compensate the customer. I know this as a travel company once went belly up during a trip and we had to pay again to complete the trip and I was able to get the money back from the credit card company. Cc nicely explained this kept me out of bankruptcy court to try to collect the monies. Also the international sellers don’t want any possible mucking up of their merchant account processing even if they don’t have money in us banks.

 

the other hammer is web service providers that provide retail systems are forcing tax collection so they don’t get a bad name or mucked up, so if your business uses one of these for your web site’s back end you are forced into collecting if you reach thresholds. 
 

of course all the big marketplaces (ebay, aliexpress, amazon, etc) don’t want fights so they just impress the sales tax rule on all sellers as the marketplace could get legally bound up.
 

it’s looking like no one wants to challenge the South Dakota vs wayfair ruling and they are hoping feds step in with saner way to do all this more consistently and equatable. Right now it’s silly as something like a 200 transaction or $100k threshold is not fair as 200 $1 items trips the collection and generates all of like $10 revenue and tons of paperwork, where as one $99k transaction does not trip the threshold when it would bring in like $5000! 

 

I'd be surprised if Japanese vendors are using US payment portals or payment processors.  Of course, if they sell on eBay they might and places like Amazon probably are easier to threaten.  And as you mention if they are using a US based eCommerce site to host their store...

 

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It sounded like even overseas commerce hosting sites were also driving collection as well from he articles I looked at. The triggers with the transaction number limits is the worst, lots of paperwork for potentially low revenue, but much of this is pushed on the seller. Might have been to get the other selling portals that don’t have physical presence in the us.

 

anyhow it appears to slowly becoming just accepted…

 

jeff

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