Sunday, December 4, 2022
Hawai'i Free Press

Current Articles | Archives

Sunday, February 14, 2016
Solving the Online Tax Dodge with Cookies?
By Tom Yamachika @ 4:01 AM :: 4339 Views :: Small Business, Taxes

Solving the Online Tax Dodge with Cookies?

by Tom Yamachika, President, Tax Foundation Hawaii

Every year, lawmakers seeking to fund their favorite programs or services inevitably ask themselves whether there might be a way to squeeze more money out of the tax system without adding more burdens to those of us who already pay taxes. Are there folks out there who should be paying taxes but aren’t?

For years, lots of attention was focused around online businesses and e‑commerce. Online travel companies recently concluded a long and bitter fight with the State over how much in GET and transient accommodations tax they owed, with the State recovering $75 million or so in the process.

Online retail continues to be a sore spot, because current interpretations of the U.S. Constitution say that unless the Congress says otherwise, online retailers aren’t required to pay local taxes unless they have some type of local presence. So retailers with brick-and-mortar stores have to pay taxes like our GET, and they chafe because their online competitors don’t. To put it another way, retailers who collect taxes on sales to support government and public works, and who keep local residents employed, are losing ground to online retailers who do neither. A January 2016 study by Civic Economics and the American Booksellers Association, titled “Amazon and Empty Storefronts,” looked at the impact of just one online retailer, and estimated that for Hawaii, in 2014 it sold $201.9 million worth of retail goods statewide, avoiding $8.8 million in GET and causing a net loss of 1,236 retail jobs in Hawaii.

The Legislature has explored ways to get online retailers to collect taxes on sales to Hawaii residents. In 2013, New York’s highest court ruled that the State could define an online retailer’s "physical presence" to include affiliates who direct sales to the online retailer in exchange for a commission; the U.S. Supreme Court later let this ruling stand. Our legislature passed a bill to adopt that technique in 2009, but when the online retailers threatened to cut off all of their local affiliates if it became law, Gov. Lingle vetoed it.

Recently, the State of Ohio tried a more interesting argument, focusing on cookies. Cookies are little files left on your Internet browser when you visit online sites that save information between pages that you view. Online sellers need these to conduct e-commerce. The latest U.S. Supreme Court case on “substantial nexus,” which is what is needed before a State can force an online seller to pay local taxes, held that some kind of physical presence within the State is necessary, and “a few floppy disks” aren’t enough. Ohio, however, argued that the cookies left by an online retailer’s system should be enough physical presence. If you conduct hundreds of millions of dollars in local sales, your system must have left LOTS of cookies on local computers. No word yet on whether the Ohio courts have bought in to the argument, but it’s certainly an interesting point to ponder.

Even so, the writing is on the wall. Amazon already collects sales taxes in 28 states, with 84% of the U.S. population. Congress could settle the skirmishes now being fought state by state and bring some certainty to retailers, wherever located, by giving states the authority to require online retailers to collect taxes on purchases. The U.S. Senate approved a bill to do this, but the bill stalled in the House of Representatives. Given dim prospects for Congressional action in Washington, D.C., what can the State of Hawaii do to level the playing field, give our local retailers a chance to compete, and support our local economy?



TEXT "follow HawaiiFreePress" to 40404

Register to Vote


808 Silent Majority

ACA Signups Hawaii

Alliance Defending Freedom

Aloha Pregnancy Care Center

American Council of Trustees and Alumni


Antonio Gramsci Reading List

A Place for Women in Waipio

Astronomy Hawaii

Back da Blue Hawaii

Ballotpedia Hawaii

Better Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii


Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together



Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

July 4 in Hawaii

Kakaako Cares

Keep Hawaii's Heroes

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

National Christian Foundation Hawaii

National Parents Org Hawaii

NFIB Hawaii News

No GMO Means No Aloha

Not Dead Yet, Hawaii

NRA-ILA Hawaii

Oahu Alternative Transport


OHA Lies

Opt Out Today

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons

Pro-GMO Hawaii


Rental by Owner Awareness Assn

ReRoute the Rail

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Save Dillingham Airfield

School Choice in Hawaii

Sink the Jones Act

Statehood for Guam

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii