E-Books Remain Tax Evaders — for Now [ Edited ]

[keriflur]

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doncr wrote:

If that $16.50 came from income earned last year, they would have already paid the state of Colorado about $0.80 in state income tax on that money, so it's a bit closer to what you would pay in WA ($1.44 vs. $1.60).  

However, WA state sales tax is actually only 6.5%.  Colorado has a state sales tax rate of 2.9%, plus the 4.63% income tax.

So if we're just comparing state-to-state and not taking into account any local income/sales taxes, that same $16.50 book would cost $17.78 in CO and $17.57 in WA.

I didn't bother to investigate the local sales taxes of the larger cities of CO and WA like Denver vs. Seattle, but my guess is that the additional sales taxes charged to residents of Seattle would make the final price higher.  I think the sales tax is approaching 10% there.

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Without looking it up, I *believe* King County (where Seattle is) is 9.5%, but it might be that King County is 9% and the city adds another .5%.  I know we have an additional tax (on top of all the others) in the city on served food and drink that pushes a restaurant check to 10% tax.

I pay 9.5% on all ebooks here in Seattle, making my cost of the $16.50 book $18.07.

All that said, the lack of income tax works out better for me, even with the high sales tax, b/c the part of my checks that go to mortgage, car payments, and student loans doesn't get taxed.  IMO every state should do this as it encourages savings and debt reduction.

In the CO case, I alway think it's interesting that on every sale, the state effectively gets paid tax twice - once in sales tax paid by the buyer, and once in income tax paid by the seller.

[doncr]

Denver also has a 3.62% sales tax (plus some other percentage for served food, just like Seattle, but that doesn't matter for book purchases).

So the $16.50 book would cost a Denver resident $18.38, slightly more than your $18.07 in Seattle.

The thing I don't like about income taxes is that they limit the ability to save and invest earned income, which is what I try to do with my money instead of spending it on things I don't need.  Since that income isn't taxed, I have more of it to invest and earn more interest/dividends.

Taxes are a funny beast.  There's been talk in WA about needing a state income tax because with the downturn in the economy, state revenues are lacking since people have curtailed their spending.  

Just south in Oregon where they have an income tax but no sales tax, they are mulling about the idea of some sort of sales tax because too many people are now unemployed and with no paycheck, state revenues are also falling short.  

I don't know which has the better argument, but the state of California has both a income tax and a sales tax and they are in far worse fiscal shape than either WA or OR!  Maybe it isn't the type of tax that's causing the shortfall...

[kamas716]

the thing I don't like about sales taxes are that they disproportionately hit lower income people.  Most places have progressive income taxes, but everyone pays the same amount of sales tax on most purchases (some places have an upper cap on sales tax, which makes it even more disproportionate).  But, yes, I agree that the problem with CA (and many other places) isn't the amount/way taxes are collected, it's the overspending.

[keriflur]

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doncr wrote:

Denver also has a 3.62% sales tax (plus some other percentage for served food, just like Seattle, but that doesn't matter for book purchases).

So the $16.50 book would cost a Denver resident $18.38, slightly more than your $18.07 in Seattle.

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That would make your total tax rate 11.4% - that's with income tax too, right?

I don't even want to know what the combined tax rate for CA would be for that book.  Every time a discussion of CA comes up in my family (my SIL lives there), we always talk about how high the taxes are there.

[keriflur]

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kamas716 wrote:

the thing I don't like about sales taxes are that they disproportionately hit lower income people.  Most places have progressive income taxes, but everyone pays the same amount of sales tax on most purchases (some places have an upper cap on sales tax, which makes it even more disproportionate).  But, yes, I agree that the problem with CA (and many other places) isn't the amount/way taxes are collected, it's the overspending.

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Some states compensate for this by having low or no tax on essentials.  I forget which of the states I lived in did this, but one had no sales tax on groceries.  And NJ had no sales tax on clothing when the total puchase was less than $100 (it was originally no sales tax on clothing at all, but they changed it).

[doncr]

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keriflur wrote:

 That would make your total tax rate 11.4% - that's with income tax too, right?

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Yes, that includes the income tax paid on the $17.30 earned in order to end up with $16.50 in your pocket to buy the book.  

BTW, I didn't take into account the extra money you'd have to make (that would also be subject to the CO state income tax) in order to afford the sales taxes on the book purchase.  I don't know if you can deduct sales tax from state income taxes in CO, so that might be a bit more you'd have to pay.

[DeanGibson Distinguished Bibliophile]

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keriflur wrote:

I don't even want to know what the combined tax rate for CA would be for that book.  Every time a discussion of CA comes up in my family (my SIL lives there), we always talk about how high the taxes are there.

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For years, I had a successful consulting business in California.  However, after it became obvious that CA was looking for money any place they could find it, I left (in 1992) before they found mine.  When I crossed the county line out of Los Angeles County, I pulled over to the side of the freeway, opened the door, and spit on the ground.  I did the same when I crossed the state line out of CA.

So, I would take full responsibility for CA's subsequent financial crisis, except for the fact that I was just following many, many others who believe that we are not subjects of an arbitrary government, but citizens.  When votes of productive people fail to reign in spending, we vote with our feet.

In the current news, Chuckie Schumer is lambasting those who give up US citizenship as traitors.  While I strongly believe that people should pay taxes already owed, we are not hapless subjects of a ravenous government.  While there are reasons I would never consider abandoning my US citizenship, I have no problem with those who do, and treating them as traitors is not only pretty scummy, but somewhat chilling, in my opinion.

[keriflur]

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DeanGibson wrote:

In the current news, Chuckie Schumer is lambasting those who give up US citizenship as traitors.  While I strongly believe that people should pay taxes already owed, we are not hapless subjects of a ravenous government.  While there are reasons I would never consider abandoning my US citizenship, I have no problem with those who do, and treating them as traitors is not only pretty scummy, but somewhat chilling, in my opinion.

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I don't know if I would give up my citizenship, but I would certainly consider living somewhere else.  The US is becoming extremely polarized and I'm worried what that will mean for our government down the line.

[deesy58]

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patgolfneb wrote:
Doncr, any business doing business over the Internet is almost certainly using a reasonably powerful computer. Much like mailing lists or any other database programs containing the needed rates indexed using zip code, area code etc could easily be created. In fact I would expect they already exists. I doubt very much that BN or any business develops this for themselves. A subscription model makes the most sense to me. Given the number of businesses who have a use for this information the expense should be reasonable. I think you are overstating the problem. Accounting and tax software already handle equally or more complex issues.

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In most states, businesses must establish an account with the state in order to collect sales taxes for that state.  The account is identified by a unique number.  Collected taxes must be forwarded to the state revenue department at least every quarter, usually by check.

Imagine the cost to a small Internet business to establish sales tax accounts in each of the fifty states, plus additional city and county taxing districts, of keeping track of collected taxes, and of cutting the necessary checks and paying postage every three months to remit those taxes.  It sounds like a nightmare.

Not to mention that, if you collect sales taxes, you are subject to tax audits.  What fun!

[patgolfneb]

Actually the number is usually your FID number or for self employed individuals, fix it guy for example, a ssn with a suffix attached. I have had to do these type of things. States vary, but most do not require segregated accounts. Most allow or even encourage electronic payment. It is a small part of the tax process. If you do your basic accounting properly your audit risk is almost 0. Audits are almost never done on true small businesses, they cost the government to much and are targeted where the dollars involved make it worth it. If you report say 3 consecutive annual losses on significant revenue for example the computer profiles may kick you out for review. You get a questionnaire and a formal audit can follow. Any business that doesn't generate enough revenue to make basic accounting, bill payment, a part of the operation is a hobby. I use to see this with home day cares. They weren't really businesses they were lifestyles. Buying and selling stuff on eBay is a current equivalent. Real businesses even small ones plan for these things. Again this is really the bogeyman tactic used by political and small business advocacy groups, unfortunately it goes unchallenged . States try to make it as easy as possible. If you want to sell by Internet and your model is multi state this is part of the cost of doing business. My experience has been that groups are quick to criticize what they see as others receiving a free ride, but can always justify their own special benefits.