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Old 08-10-2018, 08:54 AM
BobC BobC is offline
Bob C.
 
Join Date: Apr 2009
Location: Ohio
Posts: 3,275
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Quote:
Originally Posted by insidethewrapper View Post
I can't believe states just don't charge per year for a "sales tax license". In Michigan, the license is free ! Just paperwork for Michigan Sales at the present time. It would be simple to just charge all businesses , for example: $ 100 a year for the license, and high volume stores etc. would need to fill out additional forms.
That sounds great in theory, but wouldn't be realistic in practice. Think about it, if all you had to do was obtain and pay an annual fee of say $100 for having a sales tax license (which is more often called a vendor's license in many states) and that was it, the states would be out so much money it wouldn't be funny. At a 7% sales tax rate a business would only have to have $1,428.57 of taxable sales in an entire year to fully cover the $100 annual license fee you suggested. So under your plan the state loses out on sales tax for any sales over that amount, which would be astronomical. The states couldn't afford to lose that much revenue. So if you decided then to raise the annual fee to generate more revenue, it would end up being a large amount per business. And if you made it a flat fee so everyone seller paid the same, many smaller retailers wouldn't be able to afford it and would argue they're being discriminated against and kept out of starting new businesses or being put out of business because of the ridiculous cost for a license. So if you then try to tie the fee to some measure of the volume of business being done, that is kind of what they are doing now by charging the sales tax, right? So you sort of end up in the same place with additional record keeping and tax filings and payments, just in a different way.

You did mention in your suggestion that larger, high volume stores would have to do additional paperwork, but what exactly does that mean? As I noted above, are you saying that over a certain amount of taxable sales they'd have to start paying in more money towards their sales tax license? If so, how are you going to figure that out and who decides what the threshold is for such additional payments, and on and on? And what you are suggesting is already in practice. For example, in Ohio there is a state sales tax in force that requires seller's to apply for a one-time vendor's license at a cast of just $25. After that they are required to file and remit any sales tax they collect, even if they have $0 to report, until they formally cancel their license with the state. In addition, back in 2005 Ohio enacted something called the Commercial Activity Tax, which sounds a little like what you may be proposing. It requires all businesses that sell to anyone in Ohio to record and report their qualifying Ohio based sales and pay in what is termed a Commercial Activity Tax for sales over certain amounts. Annual Ohio based sales from $0 - $150K per year you, don't have to file or pay anything. Annual Ohio based sales of $150K - $1MM a year, you register and pay $150 with a once a year report you then file. Once your annual Ohio based sales go over $1MM though, you then have to pay in $0.0026 per dollar of sales in excess of $1MM. And this is in addition to Ohio sales tax which can be as high as 8% in some counties. When they enacted this Commercial Activity Tax back in 2005 they did away with a state franchise taxes on businesses and business property taxes on assets and inventory owned by businesses. It was an offset of one new type for for two previous types of taxes.

This type of activity tax as Ohio calls it doesn't get charged directly to the buyers, but you can be sure that prices charged to them got increased to cover the additional Commercial Activity Tax cost increase to the sellers. Oh, and unlike sales taxes which often don't get charged for things like food, the Commercial Activity tax in Ohio does cover food sales as well, so those prices go up for everyone as well. There are so many nuances to these taxes, and what is deemed fair and equitable to everyone, it is not easy to simply replace what we already do with something simple.
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