Tuesday, January 05, 2010

What are there so many exceptions? (more)

Part 2 (see part 1)

3. And then, there's, well, politics
. Politicians have to worry about making voters (or contributors) angry. How else to explain why farmers can buy much of their equipment and consumables tax free? It's not like the industries mentioned in part 1, where you need to attract them or they'll go to another state. What's the farmer going to do? Take his land and leave? But almost every state has vast exemptions for agriculture.

Exceptions usually start when the tax is imposed. Then people complain about it, they organize, and then the lawmakers pass an exemption (because they really hate it when you organize). And then other people organize. It's not just farmers. Other politically motivated exemptions, that come to mind, include: non-profit organizations, energy savings and alternative energy equipment, admissions to cultural events, marshmallows, etc. If a politician can keep a voter or contributor happy, then it's fair game for an exemption.

Of course, there are a few loopholes that are driven purely by backscratching, graft, corruption, etc. In every state I look at, there are laws that are clearly written to help out one particular company, or a friend of a friend. Clearly politicians do not always get special rules passed purely for the benefit of the state's citizens. Although they'll claim they did. And if honest politicians and newspaper editors want to clear away some of those, the way is open.

And then there are flags.

4. There are exemptions that are simply forced on the state by the Constitution. The Constitution restricts states in taxing the federal government, interstate commerce, and First Americans. There is not much the states can do about it. It's the Constitution. Tough to change.

But not being able to tax Amazon.com seems to be one of the biggest whines I read about. I just read a few more yesterday (I won't bother you with links - there are far too many and they all say the same thing: "Amazon is a big corporation and therefore bad and they must be taxed." The reason Amazon, and many other small, unincorporated, out-of-state sellers, don't charge tax is because of the Constitution and the commerce clause. But try explaining that to a editorial writers or politicians.

5. Finally, it's just complicated. There are lots of rules and exceptions because business is complicated. Because sales and use taxes are essentially based on transactions, adjustments have to be made for new and creative ways that companies find to do business.

I know people would like it to be simple, but it's not. Which is also good for little old me.

Oh, and two things that I'm sure all of those editorial writers won't complain about when they bring up loopholes: there's usually no sales tax on newspapers or newspaper advertising.
Sounds like a pretty significant loophole to me.

The Sales Tax Guy

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