MA asserts nexus over internet vendors

Most of the largest mail order retailers pay sales tax now. Amazon stopped dodging sales tax years ago and now has warehouses all over the place, so they have physical nexus in most states. Staples and Walmart and LL Bean have physical stores. The target of this tax is the next tier down.

In case it's unclear, I think the mail order sales tax exemption is a crock, something that happened accidentally and is now considered to be a law of nature, much like the mortgage tax exemption. Having been the mayor of my village, which depends on state sales tax for a large chunk of its budget, I would really prefer that our local stores that hire local staff and pay local property taxes compete on the same terms as anonymous giants with warehouses in Pennsylvania.

R's, John

PS: I'm scratching my head about how MA plans to enforce this. The post office isn't going to give them delivery records, and it's going to be a challenge if they try to send subpoenas demanding records from random out of state businesses.

CA doesn't have "a zillion" different rates. I don't recall the exact number, but it's less than 30.

-- Arthur Rubin, Brea, CA (Tax preparation services are not subject to sales tax in California, or I would probably know the exact number of tax ratea)

Seems like a zillion compared to Massachusetts and Ohio each which has (1) one.

California may only have 30 rates, but the BOE's rate spreadsheet has almost 1800 entries to tell you what rate applies in what city. It's even worse than that because post office names and five digit zip codes don't match city or county boundaries. My rural post office covers parts of three counties so when I'm ordering stuff online, web sites sometimes pop up a window asking which county I'm in.

I think that if you standardize the address and get its nine digit zip code, that's fine enough grain to tell what the rate is, but now you need an address standardization application with access to the USPS address database, and a tax to zip+9 database.

Without a simplified system with one averaged rate per state, you'd have to be pretty big to afford the overhead of all-state tax collection.

R's, John

Are you sure about this assumption? I'm not.

States are, somehow, getting this data for cigarette tax.

/BAH

If someone in one state sends a bomb or poison into another state, and someone is injured, the state where the damage took place surely has jurisdiction over the person who perpetrated it, even if he never stepped foot in that state. It's the same theory. ====I would disagree: Your example would be a federal matter - interstate commerce clause of the U.S. Constitution. However, let's go a step further. Let's say that instead of a bomb, someone shot another person using a firearm across an international border. Where did the crime occur? In the country the shooter was in, not the victim. Now, the country of the victim would have recourse against the shooter's country - prosecute the shooter or it's war.

What it comes down to is jurisdiction. I do not see how a state or country can assert jurisdiction outside of its borders (excluding air/water/space-craft carrying its flag). The authority to tax generally stops where a state's jurisdiction stops. The alien company is outside it's jurisdiction and therefore the authority to tax is lacking. "Alien" can be defined as something outside of the state's jurisdiction, and in this case, that's what it means.

When that's the case, you're right. But when a vendor actively and knowingly solicits business in a state, it can be subject to the laws of that state if it causes damage or injury there. ===By using a web site, I agree that the vendor is soliciting business, but that does not equate to targeting a specific area - i.e. "in state" as opposed to the entire country (or world). There is no overt act by the vendor to solicit solely in the target state. Jurisdiction and authority to tax doesn't exist where the intrusion is merely incidental.

In this situation, the state is free to impose a use tax upon the buyer inside its jurisdiction. However, there simply is no authority to impose sales tax to be collected at a source outside its borders, and furthermore as this is a U.S. state, the U.S. Constitution preempts any such attempt as a violation of the [federal] power to regulate interstate commerce.

I don't really care what Massachusetts THINKS it can do. This action is unconstitutional under the federal scheme, and the Tenth Amendment seals its fate. "[T]he relevant provisions of the U.S. Constitution" forbid states to do what MA is trying - to regulate interstate commerce. MA's analysis is faulty at IV(b)(ii)(B). It tries to argue that Internet communication for a mail order house is somehow fundamentally different (for tax nexus purposes) than a telephone-based order, but it is NOT. To assert jurisdiction, the web site need be hosted in state - just like if a telephone call center of the vendor were in state, to create a tax-assertable physical presence. The entire section of argument footnoted to source 16 is legally wrong in its conclusion, and therefore everything that follows is nonsense.

They gave Congress the power to regulate interstate commerce. They agreed to the converse of "any power given specifically to the federal government or not otherwise [naturally] reserved by it is not a power held by the States or the People" (cf. Tenth Amendment). Therefore, any authority for them to enter into any mutual compact to collect state/use taxes is something they surrendered in 1791.

There's at least two centuries of case law exploring the exceptions to that principle. You might want to review it. There are also lots of interstate agreements on various topics which suggests that things are not as cut and dried as you imagine.

Reread the Quill decision, which had a much more nuanced analysis.

Well, that's one position. We'll surely see how it plays out in court.

R's, John

Laws can change, but, at the moment, Internet sales are _more_ protected from state regulations than telephone sales.