RentMyDVD & Tax (1 Viewer)

[Qui-Gon John]

Looks like RentMyDVD is going the way of Netflix and will soon start charging sales tax. When I switched from netflix I was pleased to see they weren't buying into this. I'm not very happy that they plan to start.

 

[Gavin K]

I didn't think this was legal unless you reside in the same state where the company is headquartered?

 

[AdrianJ]

Where did you see this? Since we are in the same state, Florida, it looks like I could be cancelling my membership also.
I've always thought that this is illegal. My conclusion comes from the fact that there are several bills in front of Congress to legalize it. If they need a new bill to legalize collecting state tax for out of state purchases, then you can only assume that it is currently illegal.
I found this on the RentMyDVD.com site.

Usually, taxes are collected from consumers when providers of goods or services have a physical presence in the state. State officials have ruled that because the discs you rent from Rentmydvd are still owned by us we have a physical presence in your state.

I don't know what kind of bull state officials (and from which state??) are trying to pull. But just because a company has an asset temporarily in a state, does not constitute a physical presense. For example, if an Amazon.com employee goes to a business conference in Florida, does Amazon.com have to charge sales tax in Florida now because they have a physical presense? Come on this is ludicrous. It's about time one of these etailers stood up to the states and take them to court. Just because "state officials" rule on something does not make it the law!
If they actually implement this policy, I will be saying goodbye to RentMyDVD.com the same way I said goodbye to Netflix.
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Adrian Jones
[Edited last by AdrianJ on August 28, 2001 at 04:47 PM]

 

[Qui-Gon John]

I was on the web site. Signed in and went to Order History, then Billings. On that page there is a notice at the top of the screen. Does not seem to be a way to tell whether a particular state will be affected or not.
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Qui-Gon John

 

[Michael Reuben]

Quote:

The occasional and irregular presence of a company asset in the state is one thing. The daily and routine presence of company assets in the state as part of the ordinary course of business is another. The latter more accurately describes the situation with DVD rentals.
I dislike paying taxes as much as the next person, but don't blame the vendors.
M.

 

[AdrianJ]

The occasional and irregular presence of a company asset in the state is one thing. The daily and routine presence of company assets in the state as part of the ordinary course of business is another. The latter more accurately describes the situation with DVD rentals.

Honestly, I don't think it is. I think a physical presense means just that. That there is a location that consumes state provide resources such as electricity, water, land, etc. The passing of a DVD through a state for a couple days or a week doesn't constitute a phsyical presense.
Also, you assertion about Congress not having power in this matter is wrong. Congress has stated that states may not restrict interstate commerce. Levying of sales tax on items sent out of states can be seen as an interstate tarrif and is therefore forbidden by federal law.
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Adrian Jones

 

[Michael Reuben]

Quote:

You haven't trained as a lawyer, I take it? If you had, you'd know that "presence" in a jurisdiction is a much broader and more flexible construct, depending on many different circumstances. If a company regularly and routinely has property (not just land, but any property) in a state -- such as the DVDs that a Netflix or RentMyDVD sends into all the states where they have subscribers -- that is sufficient in most jurisdictions to establish the company's presence. It can be sued in that state; its activity in the state can be taxed.
If you disagree, you're always free to hire a lawyer and try to persuade a court to rule otherwise. Good luck!
M.

 

[AdrianJ]

Since you have attacked my knowledge of the law, I'd like to ask for you to quote a law that states that an asset of a corporation being temporarily in a state constitutes a physical presense of the corporation in the state.
I'm searching through the interstate commerce laws now, which is fairly boring. I'll report later.
But, I think this argument all comes down to what is a physical presense. They seem to only want to apply this to companies that rent dvds, not actually sell them. If RentMyDVD changed to where they SOLD you a disk and then you SOLD it back to them, would this circumvent sales tax laws?
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Adrian Jones

 

[AdrianJ]

Okay. I can't find the Federal law about it, but I finally found the Supreme Court case on business having to collect out -of-state sales tax. It is Bellas Hess Inc VS. Illinois Department of Revenue.

Share, which sells its products primarily through direct mail solicitation out of its principal offices in Fort Worth, Texas, has no offices in Florida and no employees or agents residing in the state. Under these facts, the district court upheld a trial court ruling that Share did not have a sufficient presence in the State of Florida, under controlling United States Supreme Court decisions, to permit the state to require Share to collect and remit Florida taxes on mail order sales to Florida residents

I hope I haven't offended anyone with my opinions. I've found this very informative and fun.
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Adrian Jones

 

[Michael Reuben]

quote: But, I think this argument all comes down to what is a physical presense. [/quote] No, and that's the problem. Jurisdictional presence isn't the same as physical presence, as every first-year law student learns. In some situations (though this isn't one of them), just making phone calls into a state is sufficient to allow the state to exercise jurisdiction over an individual (or a company). You won't find statutes on this subject, but courts rule on it routinely. That's why the American and British systems are known as "common law" -- they rely as much or more on case-by-case rulings than on statutes.
I doubt that anyone will find statutes or regulations specifically addressing what constitutes "presence" for tax purposes. What you're more likely to find are interpretive comments from individual state taxing authorities about what they deem to be "presence" for purposes of this or that particular tax. I've always wanted to see the communications from taxing authorities that prompted Netflix to start charging tax, but such things typically aren't published unless the vendor decides to challenge them in court. AFAIK, Netflix didn't.
Any rational vendor would prefer not to collect sales tax if possible, because it makes their wares more attractive to customers. If a vendor starts charging sales tax, it's presumably because it has been directed to do so by a taxing authority and did not favor its chances on a court challenge. I'll be the first to applaud if you can figure out a way to beat back the state authorities that are requiring the DVD rental companies to collect sales tax. But I don't favor your chances.
quote: If RentMyDVD changed to where they SOLD you a disk and then you SOLD it back to them, would this circumvent sales tax laws?[/quote] Interesting idea. It might even work. But it doesn't sound practical as a business model.
M.
[Edited last by Michael Reuben on August 29, 2001 at 04:19 PM]

 

[AdrianJ]

Actually, Michael, I think you are right about no laws on physical presense, but there are several court decisions that I have noted above. Unfortunately they are still vague. They rely on two terms "slight presense" and "substantial nexus." I don't know how it is determined which is which. I have a feeling DVDs coming into a state for a limited rental term should fall under "slight presense".
It would be nice for Congress to step in and sort this mess out. (They do have the power to regulate commerce between the states as conferred by the US Constitution Article 1, Section 8.) Or for the Supreme Court to make a btter ruling on what a "substantial nexus" is.
In an anidoctal reference, the state of Tennessee has ruled that the trash produced by mail order catalogues represents a "substantial nexus" for those business sending catalogues into the state of Tennessee. It will be interesting to see how the courts rule on that one.
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Adrian Jones

 

[Norm]

AdrianJ, since I also live in FL, I was wondering is the turn around time faster from rentmydvd than Netflix?
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[Qui-Gon John]

I think a bit. I have had them take 4 days, but usually 3 is the most. Of course, when they open their center in Atlanta it should get much better.
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Qui-Gon John

 

[AdrianJ]

Norm, in general yes the turnaround time is much better. Also, they don't play games with releasing your movies like Netflix does. However, I have problems with the PO not delivering discs. They shipped Rocky IV (don't ask!) about 2 weeks ago. It hasn't arrived, but my next movie, Keeping the Faith, arrived 2 days after it shipped. Their customer service is really good and they've already released the next movie in my queue to make up for Rocky IV being late.
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Adrian Jones