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Online Sales Taxes on eBay and Etsy

by John | Nov 17, 2019 | Economic Outlook, Tax Strategies

Within the past month or so online marketplace sites like eBay and Etsy started collecting sales taxes. This phenomena was a result of a flurry of states passing legislation targeting these types of sites. More states will inevitably follow.

Source: https://www.etsy.com/seller-handbook/article/marketplace-sales-tax-where-etsy/321914904041

I started noticing back in 2017 that more and more of my Amazon.com purchases have required the payment of sales taxes as well.

Source: https://en.wikipedia.org/wiki/Amazon_tax

But this recent scourge of legislation is tied to a 21 June 2018 supreme court case: South Dakota v. Wayfair, Inc. in which the court changed their mind about state’s ability to collect sales taxes on purchases from other states.

Online Sales Taxes are Bad for Consumers

These online sales taxes are just in time for the busy Christmas shopping season. Among the many benefits of online shopping was that it was normally sales-tax free. Tax savings are partially offset by having to pay for shipping. But in many cases, depending on the price, size and weight of the item being purchased, this was less than the taxes would have been.

There are fewer and fewer ways to shop online without paying sales taxes.

Online sales taxes are a regressive tax hike on the lower and middle classes who spend a higher percentage of their income on goods and services.

Sales Taxes Saps the Motivation of Producers

Never mind that the company making the sale pays taxes on their profits. Forget the buyer paying for the item is doing so with money on which they paid income taxes. These taxes aren’t enough for states that want to charge sales taxes as well.

There really is no limit to how big a slice of cake the government thinks they should get.

“Online sales taxes are a regressive tax hike on the lower and middle classes who spend a higher percentage of their income on goods and services.“

A person buying ingredients and spending time baking a cake ought to get the most benefit from that labor. At its most extreme, not being able to benefit from the fruits of one’s labor is slavery.

Most people enjoy having goods and services so it makes sense to live in a society that motivates and incentives people who produce to goods and services.

Societies that punish producers of goods and services tend not to have a lot of goods or services.

At a certain point people start to feel that the government is getting too much of the cake. A baker might decide they aren’t benefiting enough from their labor and they stop making cakes.

Bad for Small Business

One of the biggest burdens besides the consumer is the small seller. Companies like Amazon.com have entire legal and accounting teams that can navigate the myriad of state, federal, and local taxes.

Big conglomerates can afford systems that track how much is due based on the location of buyer and seller. Smaller players are less able to manage the complexity the number of tax jurisdictions an online seller would need to be responsible for.

All in all online sales taxes benefit the government and to some extent large businesses. Online sales taxes hurt smaller competitors who are less able to deal with managing tax collection on behalf of the government. It’s bad for consumers and small businesses.

Just One More Problem in the Economy

There were already numerous economic headwinds facing the United States and this is one more. While many States are essentially insolvent, Illinois being one of the worst offenders, it makes sense that they are desperate to increase money flowing into their coffers to offset the unsustainable promises they are obligated to pay out.

However, until there is real reform of government spending, increasing taxes will ultimately hurt the lower and middle class and shrink the economic pie being divided up, resulting in everyone being poorer.

Worth a Look: 15 November 2017 Edition

by John | Nov 15, 2017 | Worth a Look

Today’s edition of Worth a Look covers Taxes in the United States, a Socialist Country in default, the United States Air Force seeking to weaponize space and gold.

Articles:

GOP Tax Plan Increases the Most Insidious Tax – by Ron Paul

The Strange Behavior of Gold Investors from Monday to Thursday – by Dimitri Speck

Venezuela Officially Declared In Default – This is what happens to Socialist Countries – from ZeroHedge

‘Increasing lethality in all areas’: US Air Force declares space a new ‘warfighting domain’ – from RT

Because Theft Avoidance is a Bad Thing – from LewRockwell.com – by Karen De Coster

I Hate Tax Refunds

by John | Feb 19, 2017 | Tax Strategies, Wealth Protection

I hate tax refunds. Some people think, “I can’t wait for my tax refund so I can do X.” If you really don’t want to wait for your tax refund, take steps so you don’t get one.

See, a tax refund is just that, a refund. It’s not a bonus, new money, or an extra paycheck. An income tax refund is money you could have had earlier in the year, that you overpaid to the government, which is now being returned to you, without any interest.

The United States Tax System

First, a bit of a background on the tax system in the United States.

HowIGrowMyWealth.com has a global audience. I focus on the US with respect to taxes because I am subject to income taxes in the United States and have no experience with taxes outside the US.

While I’m not tax attorney, accountant, CPA or guru, I have been in charge of my own income tax returns since college and I have over 10 years experience doing my own taxes.

There are a myriad of tax situations. I’m just writing about my own experience through 2016 as a W2 income earner.

Income taxes in the United States are imposed at various levels. There are Federal Taxes, State Income Taxes (in most states but not all), and in some cases income taxes on an even more local level.

The US has a pay-as-you-go tax system. That means one is taxed throughout the year at a rate that assumes you’ll make the same amount each pay period.

So if one were to make $4,000 in January, the United States Internal Revenue Service (IRS) assumes you’ll make $48,000 ($4,000 x 12) and taxes will be withheld by one’s employer from each paycheck as if you were going to make $48,000.

But the US tax code is hopelessly complex (you can ask 3 different accountants a tax question and get three different answers all of which could be correct) and tax withholding doesn’t take into account changes in income, deductions, credits, allowances, or capital gains/losses.

As a result one could end up owing more or less in tax at the end of the year, once the myriad of factors that factor into an income tax return are known.

Why I Hate Tax Refunds

Imagine you go to a store and buy a shirt and you pay $100 for it. But the shirt really only cost $50. An honest storekeeper would give you $50 change at the point of sale.

But this store owner holds onto your $100 for over a year and then finally tells you that you overpaid and gives you $50 back.

If you didn’t realize you overpaid you might be glad, “Hey, I’ve got an extra fifty smackers!” But what if you needed that $50 a year ago to pay rent, or buy food, or to buy a pair of pants to go with your shirt, or better yet, save that money and earn interest on it. You’ve lost out on all kinds of opportunities for those funds.

Try to Be Rational

Now I get it, just like if you were to find a $20 bill in your couch that you thought you had lost, there is a certain emotional thrill of getting money back.

I also get that as humans, myself included, we’re very emotional creatures.

Sure, humans have the capacity for reason, but unfortunately and all to often emotion rules the day.

I quote my favorite playwright, Oscar Wilde:

Lord Caversham: No woman, plain or pretty, has any common sense at all, sir. Common sense is the privilege of our sex.
Lord Goring: Quite so. And we men are so self-sacrificing that we never use it, do we, father?

An Ideal Husband, Oscar Wilde

In the witty quote above, I think Oscar Wilde is basically saying that too few of us (men and women) use common sense or reason as often as would be ideal.

Rationally it doesn’t make sense to get a tax refund. A tax refund is money that has been overpaid that is being returned much later with no interest.

I strive to be a rational person. Not in the sense of being a robot, but rather having rational thoughts in the driver seat and emotions serving more of a supporting role, rather than using reason to justify my emotions.

It’s much more reasonable to avoid a tax return and be happy that one has the money throughout the year, rather than get the money in April.

My next article will provide ways in which I’ve avoided getting a tax refund in the past, so that I had more money throughout the year and I didn’t give the government an interest free loan.