Hashemian Blog
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Amazon Vs. Internet Sales Tax

by @ 10:05 pm
Filed under: internet,law,money

As an Amazon Associate (you can see the banners even on this page), I have been following the spat between Amazon and the cash-strapped states that are legislating Internet sales taxes.

The states argue that Amazon Associates in their jurisdictions are tantamount to company branches constituting presence and therefore any sales made to their residents are subject to state sales taxes. Amazon counters that associates do not add up to physical presence and therefore it should not be required to collect sales taxes on behalf of those states.

To put its money where its mouth is, Amazon has terminated its relationship with affiliates in North Carolina, Rhode Island, and Hawaii and has vowed to do the same in other states where such laws are passed. California, for example, is one such state that Amazon could axe its associates if the state decides to go through with an online sales tax law.

Admitting bias in this debate, I think Amazon is right and the states are being short-sighted for something that doesn't amount to much money anyways. By pushing Amazon and others into terminating their resident associates, not only would they lose potential sales tax dollars, but they would financially harm their own residents who would most likely spend their earnings in their own states as well as pay income tax on their Amazon earnings.

Online affiliates should be considered nothing more than advertising vehicles. If a company places an advertising in a state's newspaper, that doesn't constitute presence. A Web page is just like any other publication, the only difference being that it's online.

There are other factors that complicate matters even more. What if the Web servers used by an associate are housed in a state different than the associate's residence? Suddenly that state may want a piece of the sales taxes too. What if an associate has a second home in another state where weekends are spent tweaking the Web site?

In the end, if many states succeed in passing Internet sales tax laws, Amazon will most likely pull the plug on its associates program completely. Or it may decide to only work with associates from a handful of states that are too lucrative to walk away from. That may be bad for Amazon, but it's even worse for those states that would in fact cut off their residents from a source of income, possibly forfeiting tax earnings to other states who may be wise enough not to pass such laws and, as the result, harm their residents and ultimately themselves in the process.

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Cell Phone Tax

by @ 9:29 am
Filed under: financial,money

Saw this article the other day that makes one wonder how desperate the government must be. Seems like if you have a company-issued cell phone and you use it for anything personal, the value of that use should be reported as income to be taxed.

So guess if I'm in the office and scribble a personal note on a piece of paper, check email, get water from the cooler or coffee from the pot, or have lunch at my desk while surfing the Web, I should pay taxes on the value of all these.

I wonder if Google employees pay taxes on all the extra benefits they receive from the company, like free food and gym.

Anyways, I don't need to worry about the cell phone tax. I don't have a cell phone nor do I want one.

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The Inverted CD Yields

by @ 11:59 pm
Filed under: financial,money

ING DIRECTI was checking ING DIRECT's CD (Certificates of Deposit) rates today and wondered how long will they continue to be inverted. A 6-month CD currently has an APY of 3.3%, while that of a 4-year CD stands at 2.5%.

What I would really like to see is a normal curve, where the longer the CD term, the higher its yield. Bank yields generally follow the economy and when you see this type of anomaly, one interpretation is that there's more uncertainty with the short-term economic outlook than that of the long-term. Another way to put it, there is more perceived risk in the short-term and hence the investment rewards are higher.

So what is the person with a long-term goal to do? My approach is not lock in my money for such a long time when shorter rates pay nearly a full percentage more. That can amount to quite a bit of interest. Sure, there's always the risk of buyer's remorse if the rates headed lower, but to me eschewing the long-term, low-yield CD is a calculated risk.

I would opt for a short-term, higher-yielding CD and keep rolling it over until the longer-term CD rates become more favorable. In fact, it may make sense to completely bypass CD's for a savings account with a decent rate. ING DIRECT's savings account currently has a 3% APY, and the funds remain completely liquid with no early withdrawal penalties. If and when CD rates become more enticing, one can quickly kick some money from the savings account into a CD.

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Bank Service Agreement

by @ 11:00 pm
Filed under: business,money

Every time I receive a new service agreement from a bank or a credit card company I know they've devised a new way to profit from the consumers.

Remember when many credit card companies shortened the payment cycles (grace periods) from a full month to three weeks or less. That was their ingenious way to snare more consumers into their penalty list, charge them extra interest, and jack up their interest rates.

Or another time when they changed their dispute policies by curtailing consumers' right to lawsuits, replacing it with arbitration. No doubt their hand-picked arbitrators would always side with the banks, forcing consumers into unjust settlements.

Here's another Service Agreement I received recently addressing online payments:

We may delay or cancel a request to transfer or charge money back to the Pay From or other account at our discretion including if the payment:

  • Looks suspicious or fraudulent
  • Appears to have incorrect amount or recipient information
  • Seems to duplicate another payment
  • Of course this is spun to appear as if the bank is attempting to protect its clients against fraud. But what it's really saying is that the bank has given itself arbitrary and broad powers to do as it pleases, including charging fees, if it the transaction doesn't seem right, based on its own vague definition. Look at the verbs used: "Looks", "Appears", "Seems". What kind of rules are these? I mean why even bother with a service agreement? They should just replace all that with a terse statement like: "We will charge you whenever, however, and whatever amount we feel like. Have a nice day."

    ,,,

    Tax Spam Season

    by @ 11:22 pm
    Filed under: financial,money

    You know the income tax filing deadline (April 15th) is nearing when tax-prep companies rev up their spam engines.

    This one from H&R Block is offering half-off their regular prices. Obviously trying to push through a few more sales before the filing season is over and they are back in the lull period. I'm sure I'll get a few more of these unbeatable deals right up to April 15th.

    Thanks, but no thanks guys. This year I used TaxAct and it had a great price right from the start, free.

    *Note: My endorsement of TaxAct is completely unsolicited. I just liked the product and the fact that it cost nothing.

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    Prospectus Paper Waste

    by @ 10:27 pm
    Filed under: email,financial,money

    Like many people I have a 401(k) account through my employer, invested in a few mutual funds. I can appreciate that by law mutual fund companies have to send their clients their prospectuses (prospecti?) whenever there is a change in their investment strategies, but I was getting tired of receiving these booklets in the mail.

    I would just give them a cursory look and then toss them in the trash. I assume many people do the same. I doubt even a small number of people would actually read these from cover to cover and then promptly file them with their important documents.

    So when the retirement management company gave us the option to receive these documents via email, I jumped at the chance. Alas, I'm still getting these tree-killers, like a large one arriving today via mail weighing in at 70 pages. Makes me wonder why I even bothered signing up for the electronic format.

    Now I know these companies are erring on the side of caution. With so much fraud and mismanagement swirling around the financial institutions, they reckon it's better to be safe than sorry. So they just keep mailing the stuff, hoping to avoid a small chance of someone accusing them of hiding material facts.

    That's all fine and good, but in this day and age of green living and electronic transactions, shouldn't they at least try to respect the wishes of those of us who opted in for email and adapt their systems? If they're incapable or unwilling to join the digital revolution, they can hire a bunch of Nigerian spammers to handle the task. The Nigerian scammers figured out years ago how to conduct their businesses via email and apparently they are very successful at it.

    Even the U.S. government, the paragon of technical backwardness, has been going digital with programs such as e-Filing income taxes. It's about time mutual fund companies learned how to save those documents in PDF and attach them to email.

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    TaxAct Bests TurboTax and TaxCut

    by @ 11:06 pm
    Filed under: financial,money

    TaxActEvil or not, paying the IRS (U.S. Internal Revenue Service) is just a part of life. With the April 15th deadline rapidly approaching I decided to file a little earlier and get the drudgery out of the way, especially since there was a refund to be claimed. Why leave that on the table too long? The package I used this year was TaxAct, and I'm confident I'll be using it again next year.

    Years ago when I was single, had no assets, made a paltry salary, and my home state (Connecticut) was income tax-free, paper forms served the IRS filing just fine. I think the whole process took less than an hour for me. Made a photocopy, licked a stamp and off it went. A couple of weeks after came the meager refund and the process was over.

    As life and finances became inevitably more complicated, and tax preparation software packages gained traction, I switched to TurboTax (from Intuit) and was a satisfied customer for a number of years. Then came 2003 and Intuit's spyware fiasco when under the guise of DRM (Digital Rights Management) they bundled an elusive spyware with TurboTax. Thankfully, the spyware was widely reported before I purchased the product, and TurboTax lost my trust forever.

    That year, TaxCut (from H&R Block) probably saw a surge in their market share and I also ended up as one of their happy customer. TaxCut had the same quality as TurboTax. What I also liked about TaxCut was the ability to prepare my entire tax return before I was asked for payment before printing or e-filing. There was also a full rebate to e-file the tax return which made the product even more enticing. But then TaxCut decided to commit the cardinal sin of charging upfront for the product.

    This year when I received my TaxCut CD and popped it into the drive, I was accosted by the payment demand before I could run the program. While considering forking over the money, I saw an online ad for TaxAct touting their free tax product and free IRS e-file to boot. I had seen their ads in the past and had wondered about their quality and their honesty, but having nothing to lose I decided to give TaxAct a try this year. I refuse to do my taxes online, so I opted for the download version and went to work.

    TaxAct surpassed all my expectations for a free product. I dare say it was nearly on par with TurboTax and TaxCut. There was the burden of entering all the personal information (there is no import facility, at least with the free version) and there were a good number of up-selling and cross-selling attempts which could get irritating at times. The help screens were somewhat drab, possibly lifted right out of the IRS publications, and in one instance I had to refer to my last year's TaxCut worksheet to understand a question, but the rest of the process was as smooth as that of the competitive products. The interview questions were relevant and easy to comprehend, there were real-time calculations, error-checking was a breeze and the IRS e-file went without a hitch.

    The only true limitation was the disabled print-to-PDF option (available with the paid versions). But even that wasn't much of a limitation since I already had a PDF printer driver, so I generated PDF copies of my tax return by printing to that device.

    As for filing the state tax return, TaxAct offers a paid upgrade version of their product to handle that. But these days most states have web-filing available, and the process is much simpler than the federal return. For most people their state tax is a figure based on their AGI (Adjusted Gross Income) save a couple of deductions. One hardly needs a tax software product for that.

    If you believe that software should be free, but have had misgivings about free tax preparations products, give TaxAct a try. They made a believer out of me, free and high-quality. And if they had a donation option, I would have definitely kicked a few bucks their way.

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    Discover Card

    by @ 10:05 pm
    Filed under: business,financial,money

    Discover CardMy memory is hazy on this, but I think Discover Card was the first credit card I ever had. What I'm sure of is that Discover Card was the only credit card I carried in my wallet for years. I signed up for mine back in college years when credit card companies were just beginning to realize the untapped potential of revenue in college students.

    The Discover Card was a new arrival but it had an innovative approach. No annual fees and a cashback program and a slick slogan, "It pays to Discover." It instantly won me over and I started using it exclusively. Their plan was certainly paying off with me. As I graduated from college and entered the workforce and ramped up my expenses, Discover Card came along for the ride.

    But it wasn't meant to last. After some 15 years, I finally parted ways with Discover Card over a small dispute with a vendor. This happened a few years ago and the details of the dispute escape me, but what remained was the bitter taste of a credit card company taking the side of the merchant, rather than its long-time customer in good standing. I can understand Discover Card's reasons to go against me. I'm sure the vendor's business was substantially larger than my paltry charge-ups. But from my point of view I was wronged and by then the credit card landscape had caught up with Discover Card's benefits, so there was no reason for me not to jump.

    And jump I did, to a no-fee, cashback MasterCard and never looked back. As Discover Financial Services got its own stock symbol (DFS) today and begun trading on NYSE, I couldn't help reminisce of our long relationship and how it was derailed over a small charge. I wish Discover Card well, but I still don't miss it.

    ,,,

    Energy Policy? Daylight-Saving Time (DST)

    by @ 11:44 pm
    Filed under: business,financial,money,politics

    Here we go again. As if this whole idea of daylight-saving time (DST) wasn't bad enough, this year the US has decided to tweak the time-shift and spring forward 3 weeks in advance. I received an email from one of our vendors a few days ago regarding the change and this was a part of it:

    On August 8, 2005, President George W. Bush signed the Energy Policy Act of 2005. This Act changed the time change dates for Daylight Saving Time in the U.S. Beginning in 2007, DST will begin on the second Sunday in March and end the first Sunday in November. The Secretary of Energy will report the impact of this change to Congress. Congress retains the right to resume the 2005 Daylight Saving Time schedule once the Department of Energy study is complete.

    What kind of moronic "Energy Policy" is that? Someone's ought to tell these people in charge that wasting time with a stupid idea is not a good use of our tax dollars. Those dollars can be used for better ideas than just fiddling with a bad idea.

    I wrote about this 2 years ago and I grumble about it every year. Some may say, why waist time complaining, or just do as you're told like the rest of the people, herd mentality. Here we are, in a democracy, and we're expected to follow a lame idea like sheep in a herd. Only those with narrow intellectual capacities would buy the energy conservation claims. There has been no credible evidence linking energy conservation with DST. Even if there are miniscule savings, they can never outweigh the negative effects, namely the so called mini Y2K issue that many people have been busy averting. The mini Y2K refers to the problem of computers losing and gaining one hour during these time changes. A lot of time and resources have gone into making sure that critical systems are not adversely affected because of this latest change. What a waste.

    In my view, the real answer behind the DST is the same answer behind just about any other question, money. I've always known that the DST had little to do with saving energy and more to do with profits. Maybe kicking people out of bed earlier and having them outside for longer hours translates into more opportunity for spending. It could also mean more hours of work for employees, many of whom will see little compensation for the additional work. Always follow the money, it'll lead to the truth.

    So while you're yawning in your car driving to work on Monday with bloodshot eyes, consider that fact that you (and I) are nothing but sheep in a big herd driven by the big business and their insatiable quench for more money. And the guard dogs? Politicians, of course.
    ,,,,,

    Houses, Roofs, and Snow

    by @ 8:38 pm
    Filed under: financial,money

    There's an old Persian adage that states: "The bigger one's roof, the more one's snow". Living on America's east coast the adage doesn't really apply. The roofs are generally pitched and snow simply thaws and slides off. Back in Iran where most roofs are flat and building structures are of questionable soundness, people are forced to shovel the snow off the tops or else face a collapse or at least water damage, so the phrase fits well. But what the metaphorical phrase tries to convey is that bigger assets bring bigger hassles.

    Ironically this wisdom also fits the recent trend in the US housing market. America is a culture of consumers, the bigger and the more luxurious, the better. Some may argue that it is the consumer that drives the mammoth economy here, but considering the troubles brewing in the subprime mortgage markets, there is also a dark side to out-of-bounds consumerism. For the past few years the housing market has been one of seemingly endless growth. That lulled many to jump into the market without much consideration for a possible downside. Bigger homes (known as McMansions) sprang up everywhere and builders couldn’t keep up. People kept snapping up ever bigger and more expensive homes. The general belief was to hold on to the house for a short period, then sell for a handsome profit, rinse and repeat.

    Now that the housing market has gone limp, it has dragged many into hard times and many may owe more than the current value of their homes, the so called upside-down position. Owning a bigger home is not necessarily an American invention. People do it all over the world, but many fail to consider the real cost of having a bigger home if they are forced into a long-term ownership.

    The general financial approach is a foolishly simple one. You look at the price, then figure out the monthly payments and if it seems to fit one's monthly income, then it's a go. But there is quite a bit more there than meets the eye. Let's take a quick inventory:

  • Initial fees: For that bigger house you will be paying higher fees to the real estate broker, the mortgage banker, the inspector, and the lawyer, just to name a few.
  • Mortgage payments: Unless you're locked in a long-term fixed mortgage (like a 30-year variety), the assumption should be that the variable rate will eventually kick in and in most instances that means higher monthly payments. In some cases the monthly payments could outpace one's income quickly.
  • Taxes: A bigger home means higher taxes. Even if you know what your tax liability is at the time of purchase, there is no chance it'll stay the same for long. There are two forces working against you there. The higher the assessed price of your home goes, the more your town will charge you in property taxes. Also tax rates (known as mill rates around here) never stay in one spot. As the town cost rises, so does the mill rate. It's inevitable.
  • Energy: the bigger the house, the more the cost of heating and cooling it. Unless, of course, you cordon off parts of the house, in which case what's the point of living in a bigger house to begin with?
  • Water and sewer: Many water companies charge homes for water and sewer services based on square footage, not actual usage. In any case, if you are in a bigger home, you will use more water and produce more waste. Just think of watering a larger front lawn as one instance.
  • Repairs: A bigger home simply contains more stuff and therefore more chances for breaks and malfunctions. It's the law of probability. More toilets, more electrical wiring, more piping, more doors and windows, etc. And each one adds an additional risk of needing repair at some point.
  • Maintenance: A bigger property requires more maintenance (think of the snow metaphor.) More gutters to clean, more windows to wipe, more rooms to dust, more lawn to mow, and more driveway to plow. You might need to hire a helping hand or two to cover the maintenance, thus having to part with more money.
  • Furnishings: A roomier house means more volume to fill. That leads to trips to furniture stores to buy more couches, a bigger TV, and more decorative items to hang on the bare walls or fill the corners, or more rugs to throw on the bare floors. Even more closet space means more shopping for clothes and shoes and accessories, and of course more organizers to sort them by color or size. Don't laugh, this is just human nature.
  • I know, I know, enough already. I'm sure this list is not even close to being complete. But there is no escaping the consequences of owning a bigger home. And if more snow won't faze you, the bigger pile of dead leaves in autumn will.
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