Supreme Court Takes Up Internet Sales Tax Conundrum
I work as a sales tax auditor and I am always amused by these lawyers that love to talk in the courts.<p>These guys aren&#x27;t even aware of how badly the current nexus statues are being abused. The current trend I&#x27;ve seen is companies move abroad (usually to south america or the Caribbean) and then ship goods into the USA to all 50 states. All sales are routed through this entity and thus since it is a foreign entity they are not required to collect any sales tax at all. This actual entity is most likely just a letter box company as well.<p>For the actual shipment of goods they have another company that acts as a drop shipper. Most states have exemption rules that make drop shipment transactions exempt from sales tax collection which gets abused since the duty to collect falls to the foreign entity but the foreign entity has no duty to collect either. Also due to these exemption rules, this structure is 100% defensible in court as well!<p>If they need sales agents in the state then they use a network of &quot;authorized distributors&quot; to do the soliciting. If you audit one of these authorized distributors then all of them have the same defense: we do not own or ship the goods being sold. We simply act as a sales agent (and only collect a commission). If you want to do the audit you need to go to the company that owns the products which of course is the foreign entity which does not have nexus.<p>See how elaborate this stuff gets? To make matters worse, the use tax is rarely paid by small consumers since it is way too complex to comply with and to be frank the odds of you getting personally audited for sales tax are pretty much 0% unless you are a high net worth person. It is no surprise that the companies that setup these elaborate schemes often sell the majority of their goods to small individual consumers rather than big companies. They know that consumers will &quot;shop the sales tax&quot; and look for sellers who don&#x27;t charge it and thus the sales tax dodgers end up getting rewarded with more sales.<p>Also for everyone else, you might not see this as an issue but what often happens is when revenue start to decline then the politicians either have to cut services or more likely what they do is raise rates for other taxes. The only people who benefit are those who buy from the companies and don&#x27;t pay use tax.