WO2002013106A1

WO2002013106A1 - Obtaining taxes on sales that are made via the internet and/or catalog

Info

Publication number: WO2002013106A1
Application number: PCT/US2001/024814
Authority: WO
Inventors: Frederick W. Ryan, Jr.
Original assignee: Pitney Bowes Inc.
Priority date: 2000-08-08
Filing date: 2001-08-08
Publication date: 2002-02-14
Also published as: AU2001283176A1

Abstract

A method that allows taxing jurisidictions (17b) to collect sales and/or use taxes from sales that are made via the internet and from catalogs. The method also provides sellers (12) and buyers (11) with secure, digitally signed receipts so that they will have evidence of the sales and/or use taxes that they have paid. The foregoing is accomplished by using an agent to perform the sale tax administration functions of a seller and secure coprocessors to generate secure digitally signed receipts.

Description

OBTAINING TAXES ON SALES THAT ARE MADE VIA THE INTERNET AND/OR

CATALOG

Cross Reference to Related Application

Reference is made to commonly assigned copending patent application serial number 09/634,041 filed August 8, 2000 entitled "A Method for Collecting

Sales and/or Use Taxes on Sales That Are Made Via The Internet and/or Catalog" in

the names of Frederick W. Ryan, Jr., Michael W. Wilson, Theresa Biasi, Vadim

Stelman and Ronald P. Sansone.

Field of the Invention This invention pertains to commercial transactions and, more particularly, to

the collection of taxes for the sale and/or use goods and/or services.

Background of the Invention From the dawn of history to the present day, governments have collected

taxes to pay for the government's expenditures. One type of tax levied by governments is on the sale and/or use of goods and/or services. "Sales taxes" are usually imposed at a certain percent of the receipts from every retail sale of tangible personal property made in the taxing jurisdiction. "Use taxes" are usually imposed on the use of tangible personal property or taxable services within the taxing

jurisdiction. Currently, in the United States, some cities, counties, districts, boroughs and

states, collect sales and/or uses taxes on commercial transactions that take place in

their jurisdiction. In fact, there are approximately 6,000 jurisdictions in the United States collecting sales and/or use taxes. The sales and/or use taxes are at many

different rates and apply to different types of goods and/or services. For instance,

the sales tax on clothing may be exempt from taxation in one jurisdiction and subject to taxation in another jurisdiction at a rate of 6% for all clothing sales over $100.00. The sales tax also may be based upon the amount of the substance that is contained in the product, i.e., juices having different amounts of concentrates are taxed at different rates in some jurisdictions. Some entities, like charities, Indian tribes, etc. may be subject to taxation in one jurisdiction and not in another. Generally, a jurisdiction has the right or power to tax a commercial transaction if the commercial transaction takes place within the taxing jurisdiction, i.e., goods subject to a sales tax are sold by a store that is physically located within the taxing jurisdiction. Goods subject to a use tax are goods that are used, consumed or stored in the taxing jurisdiction. The taxing jurisdictions usually have no difficulty collecting sales taxes on sales in their taxing jurisdiction made by merchants physically located in the taxing jurisdiction. However, the taxing jurisdictions usually find it difficult to collect taxes on the sale and/or use of goods and/or services that are made in a different jurisdiction and delivered and/or performed in the taxing jurisdiction. A buyer is responsible for the payment of the tax if the seller does not collect the tax. There has been a tremendous increase in the number of commercial transactions that are or may be subject to a sales and/or use tax that are taking place over the internet or from catalogs. The taxing jurisdictions are having difficulty collecting sales and/or use taxes that are made via the internet and from catalogs.

Currently, sellers of goods and/or services are having difficulty complying with the sales and/or use tax government mandated seller administrative functions. Sales tax administration functions include determination and calculation of the amount of tax due, collection of the tax, remittance of the tax, and filing reports of the tax to the appropriate governmental agency. The seller of the goods/and or services also has to maintain adequate records, since the government may audit the seller. The seller's records may be audited by more than one jurisdiction. For instance, the

United States Internal Revenue Service may audit the seller's sales and/or use tax records, because sales and/or use tax deductions were taken on the seller's Federal

Tax return. Thus, it is important that a seller have a receipt for the sales and/or use taxes paid.

In existing tax collection systems, a representative of a taxing jurisdiction must physically visit a seller in order to audit the seller. As a result, the seller, to some degree, can control the amount of information and content of information to which any given taxing jurisdiction has access. For example, a seller may not show the taxing jurisdiction all of the relevant information, or the taxing jurisdiction may view information that it is not entitled to view. Summary of the Invention

Today, sellers are responsible for calculating taxes due (based upon the location of the buyer), collecting taxes due from the buyer, accounting for taxes collected for the taxing jurisdiction, remitting taxes to the taxing jurisdiction for which they were collected, filing tax returns with each taxing jurisdiction for which taxes have been collected and supporting each taxing jurisdiction's audit of the buyer's records.

This invention overcomes the disadvantages of the prior art by providing a method that allows taxing jurisdictions to collect sales and/or use taxes on sales that are made via remote sales i.e., via the internet and/or from catalogs etc. The invention also makes it easier for sellers to comply with the taxing jurisdiction's mandated seller administrative functions. The invention also gives sellers and buyers a secure receipt for the sales and/or use taxes paid. Thus, the buyers and sellers will have proof of the sales and/or use taxes that have been paid to taxing jurisdictions. The foregoing is accomplished by using an agent to perform the sales tax administration functions of a seller and thereby relieve the seller of as much of the burden of compliance as possible. Buyer and seller privacy are increased by segmenting seller and taxing jurisdiction databases. By implementing a mechanism to provide buyers with a secure receipt of taxes paid, buyers are able to prove the taxes they have paid for the purposes of claiming tax deductions, claiming tax refunds, accounting, etc. Similarly, a mechanism is implemented to provide sellers with secure receipts of taxes collected and remitted. Sellers are provided with a mechanism to inspect the tax records maintained by the agent. The taxing jurisdictions are able to identify potentially fraudulent seller behavior while limiting their access to named seller tax collection records. The invention also has the ability to provide tax remittance financing to sellers.

For accounting and tax purposes, it is important for businesses and individuals to maintain a copy of taxes paid. Most audits (internal and external) require paper receipts as evidence of tax payments. However, a receipt's authenticity is difficult to establish if the receipt was printed by the seller using a standard computer printer. To overcome this problem, this invention provides sellers and buyers with secure, digitally signed receipts.

Brief Description of the Drawings

Fig. 1 is a drawing of a Streamlined Sales and Use Tax System;

Fig. 2 is a drawing showing the transaction flow of the system described in Fig. 1 ; and

Fig. 3 is a drawing of secure receipt 30.

Detailed Description of the Preferred Embodiment

Referring now to the drawings in detail, and more particularly to Fig. 1 , the reference character 1 represents a plurality of buyers who purchase goods and/or services from a plurality of sellers 12. The remote sale may be via the internet and/or by catalog, etc. The information exchanged between buyer 11 and seller 12 and seller 12 and buyer 11 may be: the particulars of the sales order and/or service; the location of the buyer; the cost of the sales order and/or service, including any sales or use tax that may be due; acceptance of the order by seller 12 and confirmation of the order by buyer 11. It will be obvious to one skilled in the art that buyer 11 and seller 12 may transmit other information, i.e., more specific location information, buyer exemption information, buyer identification number, etc. Seller 12 may transmit the location of buyer 11 , the items and/or services to be purchased by buyer 11 , the classification of the items and/or services to be purchased by buyer, and the cost of the items and/or services purchased by buyer 11 to certified automated system (CAS) 13. Seller 12 receives from CAS 13 the amount of taxes due on the sale. CAS 13 has been certified by the taxing jurisdictions and must comply with the taxing jurisdictions' rules and regulations to maintain its certification. CAS 13 maintains a log of all sales and/or use tax transactions. CAS 13 transmits the aggregate tax records, i.e., a log of all sales and/or use tax transactions to certified service provider (CSP) 14. CAS 13 calculates the tax and transmits the amount of taxes that are due to seller 12. CSP 14 has been certified by the taxing jurisdictions and must comply with the taxing jurisdictions rules and regulations to maintain its certification.

Periodically, seller 12 will transmit the monies it receives from buyer 11 to seller bank 15. Bank 15 will periodically send the taxes that are due to CSP 14.

CSP 14 will set up tax record databases 16a, 16b, 16n for each seller 12 in each taxing jurisdiction 17a, 17b, 17n. CSP 14 will aggregate the payments that are due to taxing jurisdictions 17a, 17b, 17n, prepare documentation (tax returns) for taxing jurisdictions 17a, 17b 17n submit documentation to taxing jurisdictions 17a, 17b, 17n, submit tax revenues to jurisdictions 17a, 17b, 17n and support taxing jurisdictions 17a, 17b, 17n when they audit buyer 11. CSP 14 can restrict taxing jurisdictions 17a, 17b, 17n access to data while still enabling complete disclosure of information in the support of tax audits. This is accomplished by separating the data received from the CAS 13 into several separate seller tax record databases 16a, 16b, 16n and restricting access to those seller tax record databases 16a, 16b, 16n. Separate seller tax record databases 16a, 16b 16n exist for each taxing jurisdictions 17a, 17b, 17n.

Taxing jurisdictions 17a, 17b, 17n will receive: all the transactions for which taxes are due to the taxing jurisdictions, all transactions for which taxes would normally be due to the taxing jurisdictions but an exemption has been claimed, all tax returns generated and filed by CSP 14 with taxing jurisdictions 17a,

17b, 17n, and a log of all financial transactions with taxing jurisdictions 17a, 17b, 17n. Taxing jurisdictions 17a, 17b, 17n are restricted from viewing each other's databases. In addition, sellers stored in seller tax record data bases 16a, 16b, 16n may be stored with an alias (e.g., a buyer ID number) which is not normally exposed to Taxing jurisdictions 17a, 17b 17n. Taxing jurisdictions

17a, 17b, 17n could audit seller tax record databases 16a, 16b 16n and tax return information based upon seller ID number. A seller's identity would be disclosed to a taxing jurisdiction 17a, 17b 17n only if there were sufficient suspicion of fraud based upon audit data. The foregoing may also be done for buyers 11.

A seller 12 may view the contents of their seller tax record databases 16a,

16b, 16n. A seller tax record database 16a, 16b, 16n contains: a record of all transactions the seller has conducted, a record of all tax returns filed by CSP 14 on behalf of the seller 12, a record of all financial transactions with the seller 12, and a record of audits performed by taxing jurisdictions 17a, 17b, 17n. CAS 13 may be the sales tax software sold by Taxware International, Inc. of

27 Congress Street, Salem, MA 01970, or the sales tax software sold by Vertex,

Inc., of 1041 Old Cassat Road, Berwyn, Pennsylvania 19312, or other similar software and/or system. CSP 14 is an agent certified by taxing jurisdictions 17a, 17b, 17n. CSP 14: determines the total amount of taxes due to each taxing jurisdiction; pays the taxes to taxing jurisdictions 17a, 17b 17n; and files tax returns with taxing jurisdictions

17a, 17b 17n in cooperation with CAS 13 on behalf of sellers 12. CSP 14 also allows taxing jurisdictions 17a, 17b, 17n to audit sellers 12. CSP 14 may be an automated computer system which performs data processing and financial transactions.

Fig. 2 is a drawing showing the transaction flow of the system described in

Fig. 1. The transaction begins when buyer 11 requests to purchase goods and/or services from seller 12 via A. Then seller 2 collects buyer information, including tax data, i.e., location and exemption status, from buyer 11. Seller 12 sends itemized purchase and buyer tax information to CAS 13 via secure connection B. Now CAS

13 calculates applicable taxes. At this point, CAS 13 sends the result of the tax calculation to buyer 12 via C. If necessary, seller 12 verifies payment availability

(e.g., credit card approval, line of credit check, etc.) from payment mechanism 17 via D. Then Seller 12 presents a finalized statement to buyer 11 and requests confirmation of the sale via E. Then buyer 11 confirms the sale via F. Then seller 12 confirms the sale to CAS 13 via G. CAS 13 records all transactions conducted with seller 12 and stores them as tax data. Seller 12 confirms the sale to payment mechanism 17 (credit card, line of credit, etc.) via H. Then funds for the total amount of the sale are transferred to seller bank 15 via I. CAS 13 periodically will send tax data to CSP 14 via a secure connection J. Based upon the tax data received from CAS 13, CSP 14 aggregates the taxes collected by seller 12 into seller tax record databases 16a, 16b, 16n. CSP 14 periodically initiates a electronic funds transfer transaction to transfer taxes collected by seller 12 from seller account 15 to CSP account 25 based upon data in tax record databases 16a, 16b 16n. CSP 14 sends a statement of the tax collected to seller 12 via L. CSP 14 periodically sends tax returns and other information to taxing jurisdictions 17a, 17b 17n via M and initiates electronic funds transactions transfer of funds from CSP account 25 to taxing jurisdictions 17a, 17b, 17n via M.

CAS 13 contains a secure coprocessor 26 that may be used to generate secure receipt 30 (Fig. 3). Coprocessor 26 may generate secure receipt 30 after coprocessor 26 receives notification of the confirmation of the sale from CAS 13. Coprocessor 26 will then cause CAS 13 to transmit a secure receipt message to seller 12 via N. Then seller 12 will send the secure receipt message to buyer 11 via P. Computer printer 40 will then print secure receipt 30 for buyer 11. Computer printer 41 may print a secure receipt 30 for seller 12.

CSP 14 contains a secure coprocessor 27 that may be used to generate secure receipts 30. Coprocessor 27 may generate secure receipt 30 after coprocessor 27 receives tax data from CSP 14 that was received via J. If the sales and/or use taxes have been paid, secure coprocessor 27 may generate a secure receipt message to seller 12 via L. Computer printer 41 may print a seller secure receipt 30. Alternatively, the secure receipt message may also be sent to buyer 11 via Q, and computer printer 40 may print a secure buyer receipt 30.

Taxing jurisdictions 17a, 17b 17n may be able to audit seller tax record databases 16a, 16b 16n without the seller's prior knowledge or consent. Sellers 12 may be given some control over taxing jurisdictions 17a, 17b, 17n

(unsupervised) access into the seller's records. For instance, taxing jurisdictions 17a, 17b, 17n may only have access to databases 16a, 16b,...16n data only after seller 12 has been able to review the data. Prior to taxing jurisdictions 17a,

17b 17n review of a seller's tax record database 16a, 16b, 16n a message would be sent to seller 12 (e.g. via email, or an email service with receipt confirmation such as Pitney Bowes iSend™ product). After seller 12 either granted permission to a taxing jurisdiction 17a, 17b, 17n or a specified time period passed (e.g., 7 days), a taxing jurisdiction 17a, 17b, 17n would be allowed to view a seller's tax record data bases 16a, 16b, 16n. This would enable a seller

12 to review the seller's tax record databases 16a, 16b, 16n and resolve any issues prior to a taxing jurisdictions 17a, 17b, 17n audit. Alternatively, seller 12 may be informed after a taxing jurisdiction 17a, 17b, 17n reviewed the seller's tax record data base 16a, 16b, 16n.

The invention may also restrict a taxing jurisdiction's 17a, 17b, 17n access to a seller's tax record database 16a, 16b, 16n to a limited number of times over a given period of time (e.g., 3 times every 5 years).

Taxing jurisdictions 17a, 17b, 17n may identify potentially fraudulent behavior by seller 12 by having CSP 14 run various checks of the behavior of seller 12. These checks would be accomplished by processing data in a sellers tax record database 16a, 16b, ....16n received from CAS 14. The aforementioned checks would include: identifying a strange drop-off in the number of seller transactions in a tax record database 16a, 16b, ....16n. For example by looking at a history of seller 12 transactions over a significant period of time to determine seller trends and identify changes in the trends, potentially fraudulent behavior could be identified (e.g., there would be an expected drop in sales in January which would not be considered potentially fraudulent behavior; whereas, a drop in sales in

December may be considered potentially fraudulent behavior). CAS 13 and CSP 14 may provide secure receipts 30 (described in the description of Fig. 3) to buyers 11 and sellers 12. Secure receipts 30 are generated by CAS13 or CSP 14 by creating a receipt data file which contains: the items purchased (or simply the item classification if the detailed description is not available), the date of the transaction, the time of the transaction, the seller 12 ID and the address of purchase (as reported by the buyer 11). The receipt data file would be signed digitally (by using the digital signature algorithm described in FIPS 186, published by the United States Department Of Commerce, National Bureau Of Standards, herein incorporated by reference) by secure coprocessor 26 or secure coprocessor 27. Secure coprocessor 26 is under the control of CAS 13, and secure coprocessor 27 is under the control of CSP 14. The resulting data and signature would be combined with the public key certificate of CAS 13 or CSP 14 and formatted in a barcode (preferably a 2-D barcode 31 shown in Fig. 3). The receipt data file and barcode 31 would be provided to the buyer 11 or seller 12 that requested receipt 30 for printing.

Buyers 11 may request receipts 30 by checking a box at the time of he sale. Seller 12 would recognize that the box had been checked and request a receipt from CAS 13. CAS 13 would generate the signed receipt 30. Receipt 30 could be returned to buyer 11 for printing. However, there is a potential for fraud if receipt 30 is printed and payment is cancelled or never received. A preferred approach is to allow seller 30 to print secure receipt 30 as part of the packing slip; or send receipt 30 to buyer 11 (via email) after payment has been verified; or have buyer 12 verify payment at time of the sale and inform CAS 13 that payment has been rendered, at which point CAS 13 or seller 12 could then provide secure receipt 30 to the buyer 11 for printing. Alternatively, a buyer 11 may register with CAS 13 and/or CSP 14. Buyer 11 would provide a registration number with each purchase (this registration number could also be used automatically to fill in "ship to" information). Buyer 11 then would request a secure receipt 30 from CAS 13 and/or CSP 14 which detailed all transactions over a specified period of time. The foregoing method would be of particular interest to a business which would want to ensure that goods were shipped to a particular location and that employees did not make mistakes or waste time filling in standard company information. This method also has the advantage that a purchaser's tax district can be determined once (correctly) as opposed to each time a purchase is made.

Fig. 3 is a drawing of secure receipt 30. Receipt 30 contains: a title 31 indicating that receipt 30 is a UBIQUITAX ™ payment receipt; a two dimensional bar code 31 ; a order number 33; a merchant or seller identification number 34; a address

36 that indicates the place the sold goods are going to be shipped; a heading 37 that indicates the quantity, name, price, sub total and tax classification of the sold goods; particulars of the sold goods 38 (the particulars are placed under their proper heading 37); the taxable total 39; and the tax total 45. Two dimensional bar code 31 may be derived from one or more of the following: the goods purchased 38, the date of the transaction 46, the time of the transaction 47, the sellers identification number 34 or the address that the goods are going to be shipped. The manner in which 31 is generated is disclosed in "AIM International Technical Specification for "International

Symbology Specification-Data Matrix" published by AIM International, Inc. in 1996, herein incorporated by reference.

The above specification describes a new and improved method for taxing jurisdictions to collect sales and/or use taxes from internet and catalog sales and for buyers and sellers to receive secure receipts for the sales and/or use taxes that they have paid. It is realized that the above description may indicate to those skilled in the art additional ways in which the principals of this invention may be used without departing from the spirit. Therefore, it is intended that this invention be limited only by the scope of the appended claims.

Claims

WHAT IS CLAIMED IS:

1. A method for obtaining secure receipts for sales and/or uses taxes paid on remote sales, said method includes the steps of:

A) collecting information regarding remote sales made by buyers;

B) calculating the correct taxing jurisdictions sales and/or use tax to be paid by buyers for remote sales;

C) collecting by sellers the correct sales and/or use tax;

D) collecting by an agent the correct sales and/or use tax received by sellers; and

E) generating a secure receipt for the sales and/or use tax collected.

2. The method claimed in claim 1 , further including the step of: paying each taxing jurisdiction the taxes that are due.

3. The method claimed in claim 1 , wherein an agent pays a taxing jurisdiction taxes that are due to other taxing jurisdictions.

4. The method claimed in claim 1 , wherein an agent pays each taxing jurisdiction for taxes that are due that taxing jurisdiction.

5. The method claimed in claim 1 , wherein buyers are given a secure receipt for the taxes they have paid.

6. The method claimed in claim 1 , wherein sellers are given a secure receipt for taxes they have paid.

7. The method claimed in claim 1 , wherein the secure receipt is digitally signed.

8. The method claimed in claim 7, wherein the digitally signed receipt is combined with a public key certificate and formatted into a bar code.

9. The method claimed in claim 8, wherein the bar code is a two dimensional bar code.

10. The method claimed in claim 1 , wherein the data that is digitally signed in the secure receipt is one or more of the following: the items purchased, the date of the transaction, the time of the transaction, the seller's identification number or the address where the goods are going to be shipped.

AMENDED CLAIMS

[received by the International Bureau on 11 December 2001 (11.12.01); original claims 1 and 3 amended; new claims 11-18 added; remaining claims unchanged (2 pages)]

I. (Amended) A method for obtaining secure receipts for sales and/or uses taxes paid on remote sales, said method includes the steps of:

A) collecting information regarding remote sales made by buyers;

C) collecting by sellers from buyers the correct sales and/or use tax;

D) collecting by an agent the correct sales and/or use tax received by sellers;

E) segmenting by the agent, the seller's sales and/or use taxes and the information collected by the sellers for particular taxing jurisdictions, into different data bases, wherein the identity of the seller is not revealed to the taxing jurisdiction; and

F) generating a secure receipt for the sales and/or use tax collected.

3. (Amended) The method claimed in claim 1 , wherein an agent pays a taxing jurisdiction taxes that are due.

I I . The method claimed in claim 1 , wherein the seller sales are also segmented for each buyer.

12. The method claimed in claim 1 , further including the step of: filing reports for sellers with the taxing jurisdictions for the taxes that have been collected.

13. The method claimed in claim 1 , further including the step of: filing tax returns for sellers with the taxing jurisdictions for the taxes that have been collected.

14. The method claimed in claim 1 , further including the step of: giving sellers financing to pay the sales and/or use taxes that are due.

15. The method claimed in claim 1 , wherein the buyer information segmented by the agent may be accessed by an identification number.

16. The method claimed in claim 1 , wherein the seller information segmented by the agent may be accessed by an identification number.

17. The method claimed in claim 16, wherein a taxing jurisdiction may access seller information segmented by the agent for that jurisdiction with an identification number.

18. The method claimed in claim 1 , wherein the taxing jurisdictions pay the agent for services rendered by the agent.