Speaking of sales taxes …

North Carolina’s sales tax just dropped 1% because the legislature allowed a 1% temporary surcharge to expire as of this morning. The tax rate in Forsyth County, where we live, and most of North Carolina’s other 99 counties dropped from 7.75% to 6.75%. I just updated my PayPal profile to reflect that change. People who order our chemistry kits for delivery to North Carolina addresses now pay about $1.50 less in sales tax.

I got to wondering why we have a sales tax at all, and, if we must, why that sales tax is considered to be due from the buyer rather than the seller. (As a business, we’re responsible for collecting the sales tax and forwarding it to the state, but it’s the buyer who’s considered to be paying the tax.)

As things stand, if someone from North Carolina orders one of our kits for $150, we have to collect that $150 plus 6.75% sales tax, for a total of $160.13. Of that total, we send North Carolina the $10.13 sales tax. Nor are we paid for collecting and forwarding that sales tax, which seems inequitable.

I have a brilliantly simple revenue-neutral proposal that would address the problem states have with collecting sales tax from out-of-state vendors on sales to state residents, and would not fall afoul of Constitutional interstate commerce provisions. Abolish the sales tax and the use tax entirely. Replace them with a simple tax on gross revenue on any business within the state.

As things stand now, if someone orders one of our chemistry kits for delivery to an address outside North Carolina, we collect $150, North Carolina collects nothing, and the state where the kit is delivered (probably) collects nothing. If someone orders a kit for delivery to a North Carolina address, we collect $160.13, and North Carolina collects $10.13.

Under my proposal, anyone who ordered one of our kits would pay $160.13 and the state of North Carolina would collect a revenue tax at about 6.32% of $10.13 on every kit we sold, regardless of delivery address. Conversely, when a North Carolina resident ordered something from an out-of-state vendor, North Carolina would collect nothing, nor would they be entitled to do so.

If every state implemented such a tax, which they soon would, it would be each state’s businesses that were paying rather than each state’s consumers. When anyone from any state ordered product from us, they’d be supporting North Carolina government services, just as when I ordered anything from any of the other 49 states, I’d be supporting that state’s government services. Everyone would pay the same regardless of where they lived or where the company they ordered from happened to be.

Tax collection would be dramatically simplified, both for retailers and the government. And there would be no Constitutional complications, because each state would simply be taxing the gross revenues of businesses that operated within that state. States would be motivated to keep that revenue tax rate as low as possible, to keep businesses in their states competitive with those in other states, and would also be motivated to make their states as business-friendly as possible to encourage the growth of businesses that would get them “free money” from customers in other states.

 

The Amazon Tax

The US Constitution clearly prohibits states from taxing interstate commerce, as SCOTUS confirmed in the Quill decision. Unless a business has a physical presence in a state, that state cannot tax transactions between that business and a resident of the state.

Cash-strapped state governments and brick-and-mortar retailers wish desperately that were not true, the states because they want more money and the retailers because they want to force sales to their local stores. Several states, North Carolina among them and most recently California, have passed laws on the dubious theory that affiliates constitute a legal nexus for taxation.

But, no matter how dubious that theory, at least it’s used to enforce sales tax collection, which is Constitutional. What seems to skate beneath notice are use taxes, which are not. All states that have a sales tax also have a use tax. A resident from one of those states who purchases something from a vendor in another state is legally obligated to pay the use tax, which is invariably calculated at the same rate as the sales tax, and is simply a transparent attempt to violate the Constitutional prohibition on taxing interstate commerce.

North Carolina goes further than most states. Every year, when I do our state income tax return, I have to fill out a section on use tax. North Carolina offers residents a choice. Other than for major purchases, which always require paying use tax on the actual purchase price, we can either pay use tax on actual purchases or on estimated purchases as a percentage of adjusted gross income. That percentage is small enough and we buy enough on-line that it always makes sense for us to use the estimated method. In effect, we usually end up paying something like 1% or 2% use tax rather than the nominal 7.75%. Still, it’s perfectly legal for us to choose the estimate method.

It’s also perfectly unconstitutional for North Carolina to impose that tax, intended as it is to get around the Constitutional prohibition on taxing interstate commerce. The problem, you see, is that North Carolina charges use tax only for purchases that did not incur sales tax.

For example, if I buy a $100 widget in a local store, I’m charged $7.75 sales tax. If I buy that $100 widget on-line from an out-of-state vendor, I am (at least in theory) required to pay a $7.75 use tax. So far, so good. The problem is, when I buy that widget at the local store, I’m charged only the $7.75 sales tax, rather than the $7.75 sales tax PLUS the $7.75 use tax. Because the use tax is not charged on in-state sales, it is discriminatory and a violation of our Constitutional right not to be taxed on interstate commerce.

I keep hoping that someone will pursue a case against a state government and take it all the way to SCOTUS, because use taxes as currently implemented are prima facie not Constitutional.

Writers despair

Kristine Kathryn Rusch has an excellent post up about the despair prevalent among traditionally-published novelists. Even recently bestselling authors are being dropped by their publishers and those who are “lucky” enough to continue being published are being paid peanuts. Publishers are unilaterally changing contracts terms, grabbing e-publishing rights they aren’t entitled to and haven’t paid for, grossly underreporting sales numbers, and otherwise ripping off their authors. Nor are agents any friends of writers, if they ever were. Most literary agents are no better than publishers, and many are worse.

All of this was predictable and predicted, a result of the ebook tsunami that has destroyed traditional publishers’ and agents’ business models. Traditional fiction publishers and agents are at panic stations, and the authors are the first ones to be tossed out of the lifeboats. Print fiction publishing is in a death spiral, and it’s every man for himself.

If you think I’m exaggerating the death-spiral thing, see the sales numbers for mass-market paperbacks. From April 2010 to April 2011, MMP sales fell 50%. If anything, I’m being generous. A 50% decline in one year isn’t a death spiral; it’s a crash-and-burn. And, if anything, we’re likely to see a greater decline over the coming year. MMP is toast, and hardback is already on life support. Traditional fiction publishing is dead. Unfortunately, most traditionally-published authors haven’t heard the wake-up call.

Barbara came across a new-to-her author yesterday, and asked me to check availability of her titles for Kindle. The good news is that most or all of them are available for Kindle; the bad news is that all of them are more expensive than the MMP versions, and most are priced at hardback levels. NFW will we buy those books at those prices. Nor will many others, which leaves that author and others like her hung out to dry.

When one of the parties to a contract substantially violates the terms of that contract, as traditional publishers have done and continue to do, that contract is void and the injured party is entitled to damages. It’s unlikely that many authors have the resources to sue their publishers successfully, but that doesn’t mean those authors have no recourse.

If I were Kate Atkinson or another traditionally-published author, I’d treat my publisher to some of its own medicine. I would immediately send my publisher a legal notice that they are in violation of the terms of our contracts, that those contracts are now void, and that I was hereby demanding full and immediate reversion of rights on all of my titles with them. I would then self-publish all of my own titles on Amazon and B&N, pricing them at $0.99 for backlist titles and $2.99 for frontlist titles. Let the publisher try to sell ebooks of those same titles at $15.99 when I’m selling them for $2.99.

Rinderpest is no more

The New York Times reports that, for only the second time in history, humans have eradicated a disease in the wild. The first one, of course, was smallpox, which now exists only in a few government laboratories. This one is rinderpest, a plague that affected cattle and related animals, sometimes with 95% or higher mortality rates.

Like smallpox, I’m sure government labs have kept rinderpest specimens, both as a potential bioweapon and as a counter to its use as a bioweapon. And, of course, “extinct” is a matter of opinion. Many species thought to be extinct have since been rediscovered in the wild, and scientists have sometimes been surprised by how good some viruses are at finding new vectors. Let’s hope there’s no reservoir of this virus remaining in the wild.

More chemistry kits

The chemistry kits are selling well enough that it’s almost time to order more components. I really don’t want to have to backorder the kits, particularly between now and September.

I dithered about how many kits’ worth to order, and settled on 56.  If that number sounds odd, I chose it because the chemical labels are printed 28 per sheet. Also, that’s a convenient number for kit assembly. We can make up all 56 chemical blocks and small-parts bags in one pass, and do final assembly of the kits in four batches of 14 each. Finally, 56 boxed kits occupy more than two cubic yards, which is about all the space I want to devote to storing finished goods inventory.

Netflix outage

Ironically, just as we changed our Netflix service from 3-discs-at-a-time to 1-at-a-time, intending to watch more Netflix streaming, the Netflix streaming service collapsed. We’re able to see our instant queue on the Roku box, but pressing the button to start a video running does nothing.

The service has been down a couple of days now, with no word on when it will be back. I called Netflix tech support Monday evening, thinking perhaps the problem was on our end but their automated attendant announced that they were experiencing streaming problems and working to fix them. I’ve no idea how widespread the problem is.

I like that Netflix keeps the cost of their streaming service low, but I think they’re keeping it too low. Hastings says that Netflix isn’t in competition with cable TV, which is a battle he knows he can’t win, at least for now. But people commonly pay $75/month or more for cable TV service, and Netflix charges only $8/month for streaming. I think they could bump that to $20/month or even $30/month without scaring the cable TV companies too badly, and without losing many subscribers. In fact, they’d probably gain subscribers, because that extra revenue would allow them to buy rights to a lot more streaming content.

With about 30 million subscribers, I suspect that at $30/month Netflix could buy streaming rights to nearly everything they now carry on DVD, with the possible exception of current seasons of a few popular TV shows. At close to a billion dollars a month in revenue, Netflix would become an 80o-pound gorilla. They’d have the clout to negotiate streaming rights for just about any content. Just as important, they’d have the clout to buy enough legislators and judges to prevent broadband companies from throttling their customers.

Eventually, Netflix could introduce tiers. For another $30/month, for example, Netflix could offer several channels of live sports, which is the Holy Grail for a streaming service. They’re also in an ideal position to offer pay-per-view events and first-run movies, and they could introduce a purchase option as well. I suspect all of this is on Hastings’ to-do list, and I suspect we’ll see the first signs of these new Netflix offerings by 2012.

I have no doubt that Hastings’ real goal is to become the content provider of choice, turning the cable companies into providers of dumb pipes. Hastings denies this, of course, because he’s still vulnerable to cable companies. But the cable companies are fully aware of the threat, and doing everything they can to nip it in the bud. I’m betting on Hastings.

 

Unscientificacy

One frequently sees newspaper articles and news reports deploring the high rate of illiteracy in the United States, the wealthiest country in the world. Certainly, literacy is fundamental; if one cannot read or write, one’s ability to learn is crippled. Compounding the problem are the aliterates, those who can read but don’t read, which leaves them no better off than those who can’t read at all.

Less frequently, one sees articles about innumeracy, the inability to deal with even simple mathematics. Innumerates cannot calculate the correct tip in a restaurant, balance their checkbooks, or calculate the proper change when they buy something. One suspects that more than a few sales clerks would be lost if their cash registers didn’t calculate the correct change for them.

As devastating as ignorance of basic reading and math is, there is another class of ignorance that is nearly as important and almost never mentioned. For lack of a word, I’ll call it unscientificacy, or the inability to understand or deal with even simple science concepts. Because they lack the ability to reason critically, unscientificates are easy prey for anyone who tells a good story.

Vaccines cause autism? That may sound reasonable to someone with no understanding of science, but to anyone who has even a modicum of scientific knowledge it’s obvious from a brief glance at the facts that there’s no correlation. Chelation therapy, homeopathy, astrology, chiropractic, aroma therapy, magic wristbands, snake-oil nutrition supplements–the list of pseudosciencey crap goes on and on. All attract large followings among the ignorant, and not a one of them is evidence-based. To the extent that any make falsifiable predictions, those predictions have been tested and found to fail.

To me, the truly frightening thing is that these credulous True Believers are allowed to vote on issues that affect all of us. Now, I realize that the universal franchise is held sacred by most people, but when I visualize a new-agey know-nothing space cadet entering a voting booth, I think the “you’re too ignorant about everything that matters to be be allowed to vote” argument should be reasonable grounds for disqualification.

Literacy tests were formerly used to restrict voting, but came into disrepute because they were perceived to be racist. Be that as it it may, it seems reasonable to me to set a bar on voting by requiring some minimum level of knowledge among voters. The ability to read and explain a paragraph of plain English text would be a good start, as would demonstrating some basic facility with mathematics and science. I’m not suggesting that we require competence in, say, differential equations or orbital mechanics to qualify someone to vote, but it would be nice to require, say, the ability to answer correctly such simple science-related questions as the orbital period of Earth or the freezing point of water. Anyone who cannot answer such simple questions can safely be assumed to be incapable of reasoning out which candidate he should vote for. Allowing such people to vote dooms us to suffer politicians elected by the stupid and the ignorant.

While we’re at it, it wouldn’t hurt to require a basic knowledge of history, at least US history. I was stunned the other day when I read a link on Jerry Pournelle’s site about a guest lecturer asking a class of graduate students in history to raise their hands if they knew who George Marshall was. Not a single hand was raised. In a class of history students in graduate school.

Hello? George C. Marshall? A five-star general and the Army Chief of Staff during WWII. The author of the Marshall Plan. Geez.

Well, perhaps I’m being too harsh. These were, after all, only graduate history students. One can’t expect them to know much about recent US history. And, even in their abysmal ignorance, they probably still know more about history than most US high school students, the majority of whom probably can’t name four of the major combatants in WWII, nor even give the dates of that war within a decade.

 

Ereaders blowing away tablets

A couple of months ago, I commented in passing that dedicated ereaders like the Kindle and Nook were outselling tablet computers like the iPad. Several readers called me on that, but they were using old figures. And, when it comes to ereaders and the ebook phenomenon, “old” may mean months or even just weeks.

I just saw an article on CNN that makes clear the explosive growth in dedicated ereaders. Last winter, about 7% of US adults owned an iPad or other tablet computer, while only 6% owned a Kindle or other dedicated ereader. By May, those number had changed dramatically. Tablet ownership had increased from 7% to only 8%, while dedicated ereader ownership had doubled, from 6% to 12%. Apple has sold a total of about 25 million iPads since their introduction; it’s likely that 25 million dedicated ereaders will be purchased in 2011 alone.

And we’re still on the steep part of the curve. It’s entirely possible that twice that many ereaders will be purchased this year, depending on how Amazon and B&N price their ereaders for the Christmas season. Rumor has it that Amazon will begin giving away Kindles, possibly in time for Christmas, but more likely in early 2012.

The sea change foretold by this flood of ereaders is confirmed by book sales figures. Publishers’ Weekly, a bastion of traditional publishing, does everything possible to minimize the importance of ebooks, which are a deadly threat to their core audience. And yet, even PW has had to acknowledge the reality of ebook sales matching and now exceeding print book sales. In a recent article on J. K. Rowling going indie, PW as usual tried to trivialize the importance of this critical change, but even they were forced to admit that ebooks accounted for 50% of frontlist fiction sales. The reality is that if PW admits to 50%, the real figure is almost certainly much higher.

As dedicated ereaders continue to sell in huge numbers, book sales will inevitably continue their shift from print books to ebooks. What’s a traditional publisher to do? I am reminded of Goldfinger: “No, Mr. Bond, I expect you to die.

 

Figures lie and liars figure

Most of us frequently read mainstream media “science news” articles that make startling assertions about this or that. And, with very few exceptions, the assertions made in those articles are not supported by data included in the article, nor even by a link to the original paper.

For example, I read an article the other day that claimed that sitting for 6 hours or more per day greatly increased the likelihood that one would die young. Furthermore, said the article, exercising regularly did not offset the harmful effect of sitting for 6 hours or more per day. Presumably, one could run 10 miles before work and 10 miles after work, but that six hours of sitting in the middle renders all of that exercise worthless.

And the figures were pretty startling. Men who sat for 6 hours per day or more experienced 20% higher mortality over the course of the study than men who were less chair-bound. For women, it was even worse, with 40% increased mortality.

The obvious lesson here is that everyone who wants to live to a ripe old age should flee screaming from their chairs. Offices should scrap their desks wholesale and replace them with standing desks. Everyone should get rid of the sofas and easy chairs in their dens and watch TV standing up. Restaurants should get rid of their tables and booths and replace them with bars where one stands to dine. Sporting stadiums should rip out those rows of benches and chairs and require sports fans to stand while they watch a game. Schools and universities should remodel their classrooms to require students to stand during lectures.

I haven’t even looked at the original paper, but I still call bullshit. In the first place, this study, like all such studies, depends on self-reported behavior, which is notoriously unreliable. In the second place, although I might believe that it’s harmful to sit for 6 hours straight every day, week after week, year after year, not many people actually do that. Even the most chairborne office worker takes bathroom breaks, lunch breaks, smoke breaks, and so on.

I’m probably pretty typical in that respect. Even when I’m writing heads-down, I seldom sit still for more than an hour, and usually much less. I get up to use the bathroom. I get up to walk into the kitchen for more Coke or a snack. I take the dog for a short walk. (Right now, with a four-month-old puppy, that happens literally 20 times a day or more.) I get up when the mail arrives or the UPS guy delivers a package. Do I sit 6 hours during the course of a day? Sure, every day. I sit at my desk during the day, and on the sofa in the evenings. But I think the last time I sat for 6 hours straight was … never.