Tag: Sales tax

New Zealand Looking to Tax Web Giants Amazon, Google, Facebook

New Zealand Feb. 18 joined the European Union and Australia in seeking to tax Internet behemoths such as Amazon, Google and Facebook on revenue generated within its border.

Prime Minister Jacinda Ardern made the announcement in a post-cabinet press conference.

The proposed 2% to 3% tax would apply to any purchases and services sold by Internet firms regardless of their actual physical presence in the country.

“Some companies can do significant business in New Zealand without being taxed for the income they earn,” Ardern said. “This is not fair, and this is not sustainable.”

Indeed, Google’s subsidiary in New Zealand reportedly paid $393,000 in taxes in 2017 despite generating hundreds of millions in revenue.

The government said the tax could generate upwards of $55 million in additional annual revenue.

“Our current tax system is not fair in the way it treats individual tax payers, and how it treats multinationals,” said Ardern.

The move by New Zealand mirrors efforts in the United States by individual states such as South Dakota, which had its e-commerce tax lawsuit against online furniture retailer Wayfair reached the U.S. Supreme Court.

The high court last summer ruled states could charge taxes on companies doing business in the state without an actual physical presence.

A Georgia lawmaker this month proposed legislation seeking to tax digital entertainment services such as Netflix and Spotify 4% in an effort to compensate for declining pay-TV taxes statewide.

Such a user tax currently exists in Hawaii, Washington and Pennsylvania.

 

E-commerce Takes a Hit as U.S. Supreme Court Rules in Favor of Sales Taxes on Web Merchants

The U.S. Supreme Court June 21 in a 5-4 decision ruled that states can levy a sales tax on products sold by e-commerce merchants regardless of a physical presence in the state. The decision is a multibillion-dollar windfall for states.

The ruling overturned a 1992 decision that held the Constitution barred states from collecting taxes on businesses with no physical presence within their borders.

That ’92 decision helped spawn e-commerce, which, spearheaded by Amazon and others, has hamstrung a brick-and-mortar retail ecosystem that is required to collect sales tax.

But in 2015, Justice Anthony Kennedy questioned the decision involving a North Dakota business. South Dakota responded by imposing a tax on all merchants that had more than $100,000 in annual sales or more than 200 individual transactions in the state.

The state then sued online retailers Wayfair, Overstock.com and Newegg for violating the rule. The case ultimately wound its way to the U.S. Supreme Court.

The decision is seen as major hit to e-commerce behemoth Amazon, which charges sales tax on items it sells directly, but not on those sold by third-party retailers. In 2017, Amazon reportedly generated nearly $32 billion in revenue from third-party sellers — more than it generates from Amazon Web Services.

 

U.S. Supreme Court to Punt E-commerce Sales Tax Case?

The United States Supreme Court reportedly appears unsure how to rule on a case involving sales tax charged on out-of-state e-commerce transactions.

Amazon, among other e-commerce services, has long been able to avoid charging sales tax on out-of-state on purchases — a loophole that rankles in-state brick-and-mortar businesses.

A lawsuit brought in South Dakota challenges a 1992 Supreme Court ruling that states can’t charge sales tax on businesses without a physical presence in the state. A reversal of the law could be worth $18 billion to states and could significantly impact (raise prices) on e-commerce.

A lower court case involving Wayfair, Overstock.com and Newegg ruled in favor of the e-commerce platforms.

Interestingly, in an era of tax avoidance, the justices April 17 heard arguments, with comments against taxes coming from left-wing justices Elena Kagan and Sonia Sotomayor, while conservatives, including President Trump appointee Neil Gorsuch, appeared in favor of taxes, according to Reuters, which is following the case.

“Congress is capable of craftly compromises,” Kagan said without irony. Sotomayer wondered if changing the law would set off an avalanche of new state taxes, hurting Internet start-ups.

In 2015, Justice Anthony Kennedy said the landmark law was outdated and left most of e-commerce tax free.

“Given … changes in technology and consumer sophistication, it is unwise to delay any longer a reconsideration of the court’s holding,” Kennedy said. “The legal system should find an appropriate case for this court to [revisit the original case].”

South Dakota in 2016 passed a law requiring out-of-state businesses collect sales tax if they generate at least $100,000 in revenue or 200 transactions. It is supported by business groups, including the National Retail Federation, whose members ironically feature e-commerce subsidiaries Walmart.com, Target.com and Amazon.

Trump upped the politics of the case when he went after Amazon on Twitter, accusing the company of having an unfair tax advantage. Amazon founder/CEO Jeff Bezos owns The Washington Post, which frequently criticizes Trump.

The Supreme Court is expected to rule on the matter by this summer.