South Dakota v. Wayfair Supreme Court ruling on interstate sales tax seems to be based on wishful thinking

In the recent case of South Dakota v. Wayfair, et al, the Commerce Clause of the US Constitution has been redefined by the Supreme to remove prohibitions on states to collect sales tax on interstate transactions where the buyer is within their state. I am thoroughly suprized by this ruling, as it overturns long held understanding of Commerce Clause. As best as I can tell from reading the ruling, it's based on the same touchy-feelingly arguments that have been pervasive among the states about "losing money" and "the Internet changes everything". The decision takes for granted that money must be owed just because their is a transaction and the state has a sales tax. The ruling dismisses the very real challenge for small business who now have to deal with the burden of over 5000 tax jurisdictions. The ruling simply lemented an edge-case consequence of the previous ruling rather than allowing Congress to address the edge-case through legislation.

In an effort to level the playing field, Supreme Court created a whole new unlevel field on a much larger scale. The ruling also goes into a state's sovereign power, but it ignores the fact that this ruling is at the expense of every states' sovereign power being eroded, as now one state can tax another state's business directly. Since a sale tax is a tax, does this now mean one state can tax the income of a business in other state for the money earned on the transactions within their borders?  This would seem to further level the playing flat so that businesses in other states experience the same double taxation that businesses within the state experience already. [sarc]

This ruling also fully legitimizes Use Taxes, where the individual person must pay the sales tax directly to the state (rather than the business doing the collection), even though the transaction occurs in other state, like when you drive across state lines to buy something, then bring it back home.

Based on this ruling, states should not only have a right to tax transactions that occur outside of their state, but they should be able to tax transactions that occur in foreign countries now too. Additionally, since the Indian Tribes are specifically mentioned in the Commerce Clause, do they now have the right to tax businesses in the same new manner as now granted to the states, taxing businesses anywhere in the country (or the world)? This is going to be an annoying twenty or so years while the lower courts sort out this mess unless we can get Congress to enact something that addresses everyone's concerns. Since this is specifically an interstate commerce issue, Congress does have the right to set up a system that solves these problems and addresses states', comsumers' and business' needs.

For me the SCOTUS arguments are not convincing, based on wishing to make things fair by legislating from the bench without working through the consequences. I find myself agreeing with Justice Roberts' dissenting view. There were issues with the previous rules, but we've thrown out the baby with the bathwater (my words).

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Ruling text, with pro and con arguments by SCOTUS: https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf

Amazon.com's double-whammy for Massachusetts comes in one more day (Nov 1)

Whammy #1

Despite the illegality of applying a state tax (of any kind) to an interstate purchase (in direct violation of U.S. Constitution's Commerce Clause found at Article 1, Section 8, Clause 3), Amazon.com has capitulated to Massachusetts' harassment.  As of November 1, 2013, Amazon.com will begin collecting the state's sales tax on purchases sold by Amazon.com.  This does not include third party vendors which sell their product through Amazon.com's website, who are responsible to handle their own taxation (if any).

The problem I have with this is that is really is illegal.  Until such a time that Congress actually passes a law granting states the authority to apply their intrastate taxes to interstate sales, these states are in willful violation of our Constitution.  There are exceptions this that have been allowed by Federal Courts, but Amazon.com (nor most online retailers) does not have a business that operates in such as way as to fall under these exceptions.  Besides that, there are ambiguities that Congress needs to resolve.  Allowing taxation of purchases that do not originate within the state may be an open door for states to outright tax purchases that have no origin or destination within their own territory, but are rather just passing through.

There are a lot of nonsensical justifications for taxation of interstate sales, and there are a lot of good reasons to not allow such taxation.   I would go into detail here as to why, but I've actually covered this pretty well in a previous article about California's similar attempts to harass Amazon.com and other online retailers.

Whammy #2

Not quit as annoying, but still bothersome is that last week Amazon.com raised their minimum purchase for free shipping.  Instead of the $25 threshold, the minimum purchase for free shipping is now $35.  What does this mean for most casual shoppers who don't buy into the Amazon Prime plan?  There may be some short term gain in sales from customers who are not aware of the change and planned on making immediate purchase.  But over the long run, my guess is that many will wait longer between purchases rather that purchase more each time.

New England Condo Expo

I am on the Board of Trustees for the condo association that governs the community in which I own my home.

Today, I attended the New England Condo Expo at the Seaport World Trade Center in Boston, MA.  The convention was surprizingly crowded with a lot of vendors, including condo management, painting, gardening, insurance, pavers and high-end locksmiths to name just a few.  The swag was great, including some high-end items like cooler bags, water bottles, tons of pens and various tools; not to avoid mentioning the motherload of candy and baked goods.

I attended a very informative seminar about the "Good, Bad and the Ugly" of condo association challenges.  A panel of three lawyers discussed various issues, such as the recent legalization of medicinal marijuana and how that might affect communities, handling discord on a Board of Trustees, current legislation being proposed this year and how that might impact condo contracts, addressing rules for attending board meetings from a remote location via online, and recent changes in law that prevent local governments from banning specific breeds of dogs.  The information was valuable, but of course, if any of these situations arise, legal council would still be preferred in many cases.  Even still, this seminar made was worth the trip into the heart of Boston.

Is state sales tax on interstate commerce allowed?

Did you know that individual States cannot tax interstate commerce, as a general rule? There are some very specific exceptions, and California (and other States) have been trying to exploit extremely loose interpretations of those exceptions. Interstate commerce is any transaction, transit or business that is conducted across State borders. This includes mail order, Internet, and physically going to another State to purchase an item to bring back to your home State. Many States have taxes on their books that attempt to circumvent this law. Recently, States have been trying to exploit what they think is a loophole in the Quill Corp. v. North Dakota (91-0194), 504 U.S. 298 (1992) (backup link) Supreme Court ruling that solidified the limitations on taxation by States. In this ruling, the Supreme Court declares that States may only attempt to levy an interstate commerce tax against businesses that have a presence within their State, known as a substantial nexus. Leave it to judges to come up with a term like that. It basically means a business must have a physical presence within the State in order for its transactions to be taxed by that State. California is now ready to pass a law that will try to specifically impose the collection of taxes from consumers on sales by online retailers, even when the retailer has no physical presence within the State. They are trying to expand on a similar law passed by New York recently. The idea behind the bill is that marketing itself counts as some sort of physical presence. If that doesn’t scare everyone, I don’t know what will. It basically means that anyone with a website that is accessible within California’s territory (i.e., any website on the Internet) is subject to California taxes and law, even if they’ve never set foot in the State. This substantially contradicts the body of Quill v ND, but hey, it’s a taxation party right now! Now, the common mistake is to assume “oh, the States are just strapped for cash and are trying to find ways to soak us dry.” That might be true if politicians actual wrote the bills that become laws. As a general rule, they do not (backup link). You know who does, as a general rule? Corporate lawyers of companies that lobby our legislative bodies. Hmmm, what corporate lawyers would be in favor of raising taxes on businesses? The corporate lawyers that work for companies who would not be substantially hurt by those taxes, but whose competitors would be. Let this excerpt from a recent letter from Amazon.com tell the story.

For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers – including but not limited to those referred by California-based marketing affiliates like you – even if those retailers have no physical presence in the state. We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue.

Big-box retailers are companies like Target and Walmart. According to Amazon.com, companies like these seek to protect their businesses by fooling State governments into thinking the State will increase revenue with expanded scope on their sales taxes. Instead, this new tax (like any other tax) has a negative impact on the economy. I’m not against all taxation, but I am against any laws (taxes or otherwise) where one industry attempts to screw over another without providing any new benefit to the consumer. My website is just like any other. It does generate an extremely small amount of income from referrals (upon which I already pay income tax) via affiliate links with Amazon (please see the FTC 16 CRF Part 255 notice in the right column). Now, this law wouldn’t require me to pay any more taxes direclty, but as a customer of Amazon and other online sites, I would be forced to pay sales tax from a law that is probably unconstitutional. Laws that see to “tax the Internet” erode everyone’s rights, and threaten to hold anyone with a website accountable to the individual laws of over six thousand different taxing jurisdictions in America, according the Quill v ND ruling (linked above). Oddly enough, I no longer live in California. But, how long will it be before more States try to pass similar laws? Congress needs to act on this issue soon to prevent this economic nighmare from growing any further. I’m not making this a call to action because each person much act on their own. As such, I am going to be contacting my *new* Congress representitives about this issue very shortly. For additional reading, please see The Problems of State Taxation of Interstate Commerce and Why Congress Should Act (backup link)

Free Right Turn rule in California

There are a lot of areas of confusion about some California driving laws. This was discussed in article that is part of an on-going series in the San Jose Mercury News that covers readers' questions about driving. The article supposedly provides some final answers about some very common driving questions. Since the article doesn't site many of its sources, it's tough to trust it 100%. The article does make some interesting statements.

One of the biggest questions in California is about something called free right turn. Many larger intersections have right turn lanes that are separated (channelized) from the intersection by a traffic island. These lanes rarely have signals or signs directly associated with cars in the lane. The confusion comes from how to use the lane when there is a red light in that direction. In most cases, a right turn is allowed on a red light only after a full and complete stop. However, when there is a separated lane, the car may treat it as a yield. In other words, it's OK to precede on a right turn as a yield on a red light (if safe) for separated right turn lanes.

Here's the funny part. There is no law on the books in California that actually make this declaration, as far as I know. The free right turn rules seems to come out of the same absence of law regarding the requirement for a stop on red for those lanes. It's important to note that this rule only applies if the traffic signal is after the segregation of the right turn lane (which does make sense).

Grieving family faces more trama

A recent story in the news has caught my attention. There is this family whose daughter died in a traffic accident a couple years ago here in California. As standard practice, the CHP had photographed the accident, including a shot of the young woman's nearly decapitated body. Unfortunately for that woman's family, the CHP officers leaked the gruesome photo some days later, and they ended up all over the internet. As reported, "Even Nikki's grieving father couldn't avoid the pictures. Days after the crash, the real estate developer opened an e-mail he believed was a property listing and found instead a grisly photo of his daughter's body." Ever since, the family has been fighting to get the photos removed, first by going after hosting sites, then by going after the CHP itself. All attempts have failed, thankfully.

Now, I do sympathize with the family for their lose. However, the photographs taken by the CHP are a matter of public record. The CHP actually doesn't have any right to hide those photos from any citizen who requests them. Nor can the law prevent their unlimited disclosure. We live in a free society where the government cannot be allowed to keep information from the public (except for matters of National Security). There are pluses and minus to this, but if we wish to keep our society free, we must prevent the government from hiding any information.

Additionally, this is not a matter of privacy at all. The woman died in an auto accident, which is a public incident. Privacy does not hold any priority in public events. First, I (and every citizen) have the right to photograph anything I wish in public (again, except or matters of National Security). The CHP actually had a responsibility to photograph the accident scene. They actually would've been negligent in their jobs had they not.

So, although privacy is an important right, it is a right that is limited to private acts. With the exception of creative works (protected by copyright), any public incident is a matter that is in the realm of public domain. Side note, in the course of an investigation, any record of evidence collected (photographs of the scene, written reports, etc) by the CHP or any public service is public record.

Patent exhaustion rule upheld

Yet another blow for customers' rights last week via the Supreme Court which just handed down a ruling that upholds Patent Exhaustion regardless of a patent holder's notices or attempts to put limitions on the purchaser. I recommend this more detailed article found at Electronic Frontier Foundation. It provides many links on the topic along with a detailed description.