By Lance Eliot, the AI Trends Insider
Taxes seem to be the bane of our existence.
Whenever a new technology or innovation appears, one of the questions that inevitably gets raised is whether or not to tax it (the answer usually is yes) and how to do so.
Consider for example the advent of online retailing, which has increasingly become a favored way for people to shop and seems to inexorably be undercutting storefront retailers.
On the taxes side of things, a now famous U.S. Supreme Court case seemed to settle a thorny question about taxes as it relates to online retailers (a case pitting South Dakota versus Wayfair Inc.).
The United States Supreme Court ruled that online retailers would henceforth be required to collect sales taxes in states for which those online firms have no actual physical presence, assuming that the respective state wants those retailers to collect such taxes (yes, most states if not all will – it is essentially “free” revenue for the state).
Brick-and-mortar firms cheered feverishly and popped champagne when they heard the ruling.
Online retailers cursed out loud and were dreading this possible decision.
Significance Of The Online Retailer Taxes Case
Let’s unpack the case and then recast it toward another newly emerging innovation, namely the advent of AI self-driving driverless autonomous cars.
At the start of the 1990’s, the Supreme Court had ruled in the Quill Corporation versus North Dakota case that online retailers could not be forced to pay sales taxes in states for which they did not have a substantial connection in. Pretty much if the online retailer had no physical offices or warehouses in a state, it was nearly impossible for the state to try and hit them with sales taxes.
For online retailers, this was a godsend.
First, it meant that their goods could be sold without having to include the added cost of sales tax in the state for which an item was ordered by a customer. Physical stores were maddened at this decision since it meant that they were inherently more expensive than if you bought something online. You might counter-argue that the online retailer has to charge you shipping, while the local store does not, but the cost of shipping has come down dramatically, plus many consumers don’t think about the true cost of ordering online (they often neglect to add the shipping cost when they compare in-store prices versus online prices).
Second, online retailers, while laughing all the way to the bank, claimed that it was just too byzantine to try and collect the sales tax for every state. They argued that the effort to calculate the sales tax for this state and for that state, would be an undue burden. It would jack up their costs unfairly. A physical store in state X only has to collect sales tax for items sold as based on the sales tax of state X. Meanwhile, the online retailer would have to figure out the sales tax for state A, B, C, D, and so on. It would be a nightmare.
Online retailers have had a free ride, one might say, since the early 1990’s.
The ride is over. Now, they will need to collect the sales tax for any item they sell that is purchased by a customer in whatever state the customer is in. Will this be horribly complex?
Most would say that with the advent of modern day computers, trying to calculate the sales tax is no longer a manual or laborious burden and it doesn’t really matter how many states you are selling into. It’s a few lines of extra code in a program. So, that prior argument about added complexity is now out the window.
Will states decide they want to hit online retailers with a sales tax. Of course, since it is “free” money. Imagine how much additional revenue a state can take in. It’s a windfall. Plus, the brick-and-mortar firms in a state will argue, as they have all along, the states “must” charge the online retailers with a sales tax as a matter of fairness and logic. The logic part is that why would a physical store want to be in a given state if the state is going to let the online retailers get away without paying sales tax. It puts the physical store at a disadvantage. Meanwhile, the physical store likely is helping the state economy in many other ways, including hiring people in that state, perhaps making use of local vendors in that state, and otherwise helping that state to be vibrant.
Justice Anthony Kennedy indicated in the written opinion by the majority in the 5-to-4 ruling that states have been losing out on about $33 billion in annual sales tax revenue. Ouch! States are now already starting to figure out how they will divvy up all that sales tax revenue that will be pouring in. A lot of special interests in each state will want to grab a piece of that pie.
One important aspect that with hindsight we can perhaps concede is that the lack of a state-by-state sales tax might have aided the advent of the online retailers. Perhaps, if there had been a sales tax imposed, there might not be as many online retailers today, or the big ones might not be as big. As a society, by allowing online retailers to be unburdened by the sales tax, we might have allowed the innovation of online retailing to grab hold. It is like a new plant that we carefully protected from the other fauna, so that it could take root. Now, the new plant is presumably established enough that it can exist without special exemptions. That’s the hope or thought about why we did not force the online retailers into collecting state sales taxes for their online sales.
Do you think that online retailers will now be curbed or substantially harmed because of the Supreme Court ruling?
It’s admittedly hard to see that it would.
The trend towards online purchasing has hammered the brick-and-mortar world. Physical stores and malls have been devastated. It would appear to be an unstoppable trend. Seems unlikely that just because the online retailers now will be charging you sales tax that you’ll say to yourself, darn it, I’ll go over to my local mall and buy that item there instead.
AI Autonomous Cars And Emerging New Tax
What does this have to do with AI self-driving driverless autonomous cars?
At the Cybernetic AI Self-Driving Car Institute, we are developing AI systems for self-driving cars, and also identifying key trends of where self-driving cars and AI is headed. It seems likely that we’ll soon enough see states opting to impose so-called Zombie-cars usage taxes.
Yes, some like to refer to self-driving cars as zombie-cars.
Kind of cute, I suppose.
For those of you AI developers that are pouring your hearts into making true Level 5 self-driving cars, which are self-driving cars that can drive without any human intervention and are supposed to be able to drive as a human could, it would seem somewhat disheartening to think that some would call your creation a zombie. Zombies are brain dead. At least call the self-driving car a Frankenstein, which though considered a monster, it did have something of a brain.
See my article about Frankenstein and AI self-driving cars: https://aitrends.com/selfdrivingcars/frankenstein-and-ai-self-driving-cars/
See my article about why these cars should be referred to as self-driving cars: https://aitrends.com/selfdrivingcars/ai-reasons-call-self-driving-cars/
Zombie-cars usage taxes?
Yes, there will likely be usage taxes imposed onto zombie-cars. Well, another way to phrase things is that there are going to be “self-driving car” usage taxes, which if OK with you is how I will refer to it henceforth herein. Just don’t like the connotations about those zombies.
Let’s consider what will happen once AI self-driving cars become prevalent.
Most are predicting that self-driving cars will be working non-stop.
You have a built-in chauffeur that never sleeps and is always available to drive the car. When you are at work, no sense in having your AI self-driving car sitting out in the parking lot. Put it to use! Especially if you can make money by doing so. The odds are that most people that own a self-driving car are going to turn it into a ridesharing revenue source. Running it essentially 24×7, you can recoup the costs of the self-driving car (hopefully) and maybe make a profit besides.
See my article about non-stop use of AI self-driving cars: https://aitrends.com/selfdrivingcars/non-stop-ai-self-driving-cars-truths-and-consequences/
Where is your non-stop AI self-driving car going to go?
If you live in city Y, you’ll most likely want to keep your self-driving car relatively close in case you need it, so you’ll rideshare it for people in city Y that need to get a lift. Suppose that there are hundreds, maybe thousands of these AI self-driving cars, all cruising around your city. It would be akin to an Uber driver that is cruising around, waiting for a request for a pick-up. You probably won’t have the self-driving car be parked, and instead keep it moving. You’ll likely even be using some kind of Big Data analytics system that will help predict where your self-driving car should be. If it’s nearing 2 a.m. and the bars are closing, seems like that’s the part of town where your ridesharing AI self-driving car ought to be.
Anyway, imagine these self-driving cars crisscrossing city Y.
Seems like it will impact the roads there in city Y. Today, during late hours, those roads are hardly used. In the future, there might be roads that are getting non-stop usage. Non-stop usage of the roads means they’ll wear out more. Roads that wear out more need greater amount of upkeep and repairs. Greater upkeep and repairs costs money. Where will the money come from for those rising costs? Answer: AI self-driving cars.
You can expect that local cities, the states, and the federal government will all wake-up and realize that the popularity of AI self-driving cars has caused a tremendous strain on the roadway infrastructure.
If the cause of the problem is due to AI autonomous cars, perhaps one could suggest that the “cause” also should be the solution. Impose a usage fee on AI self-driving cars. The money raised would presumably go towards the infrastructure that supports those roving beasts.
Of course, there are some governmental entities that might opt to use the money for some other purpose entirely.
They might decide that spending the money on homelessness or other local societal aspects is preferred over spending it on infrastructure. The infrastructure angle is usually the way to get society to buy into the usage fee, since it suggests a tit-for-tat. If the AI self-driving cars caused added costs for infrastructure, they should pay for it. That would seem fair to most, though maybe not necessarily to the owners of the AI self-driving cars. On the other hand, once a government finds a spigot that pours out money, they’ll likely spend it as they wish.
This brings up an important point that ties back to the online retailers and the sales taxes by state.
Remember that it was viewed as a crucial breathing space for online retailers to grow and prosper by not having had a sales tax burden to meet. Would the imposition of a usage fee possibly curb or disrupt the advent of AI self-driving cars? If so, do we want to cause an innovation that appears to have great societal payoffs get “harmed” by having to deal with usage fees? This is going to likely require a significant amount of open public debate.
For more about regulations and AI self-driving cars, see my article: https://aitrends.com/selfdrivingcars/assessing-federal-regulations-self-driving-cars-house-bill-passed/
You might wonder how the owners of AI self-driving cars could possibly complain about a usage fee, since if indeed their vehicles are impacting the roadways it seems befitting that they pay for it, somehow.
Their counter-argument would be that the AI self-driving car is providing other societal good. For example, by providing a ready mode of transportation, these cruising non-stop self-driving cars are offering a form of “public transportation” and that perhaps a municipality is able to cut-back on their costs for buses and other forms of mass transit. It would be unfair to hit the AI self-driving cars with usage fees and neglect the fact that these vehicles are already doing so much for the city or locale.
How To Determine The Taxes Owed On Zombie-Cars
The debate about the appropriateness of a usage fee is going to likely bounce back-and-forth. Meanwhile, let’s consider how usage fees would even be ascertained. The usage fee should presumably be based on one or more usage factors.
Here’s some of the most likely usage factors:
- Per occupant
- Per delivery
- Per miles driven
- Per time driven
- Per trip
One means would be to require the AI self-driving car to self-report the number of occupants in the car, for any trip that takes place. There could be a usage fee charged per occupant. The owner of the AI self-driving car would need to decide whether to pass along the cost to the occupants, or absorb the usage fee otherwise into the cost of doing business.
This approach though seems perhaps intrusive in that it requires counting people.
Furthermore, if you have one person that goes one hundred miles, while there are five people that go two miles, it doesn’t seem sensible that if the cost is a fixed fee per occupant that the shorter trip has the higher usage fee.
There’s another drawback of using occupants as a factor, namely that if the AI self-driving car is used to delivery pizza, and there’s not a human occupant needed, the AI self-driving car would travel around the city without having to pay any usage fee.
Thus, another factor would be to impose a per delivery fee. This would be eagerly done by many cities that want to catch revenue for Amazon deliveries, and for the food GrubHub deliveries, and the like.
We can combine these factors.
Perhaps there is one level of a usage fee for the occupant’s model, and a different level of a usage fee for the delivery model.
Another approach says that rather than caring about what the AI self-driving car is doing, charge a usage fee for the number of miles driven.
This would be handy too since the occupant or delivery models assume that the self-driving car is being used for a particular purpose. If the AI self-driving car is cruising around, and there’s no occupants and no delivery underway, perhaps because it is staying in motion to most likely be near to wherever it is needed when so needed, the miles driven approach would make sure that the usage fee applies.
You can argue that the miles driven metric has its own advantages and disadvantages, and so you could possibly end-up suggesting that maybe the better approach is based on time.
Time takes distance out of the equation. If the AI self-driving car is on the roadways, and moving at one mile per hour for five hours, maybe that’s more important than if it was being driven for 80 miles per hour for thirty minutes. You could also try to argue in favor of using the number of trips as the usage metric, but that’s squishy since who’s to say exactly what constitutes a trip.
We can mix-and-match these metrics. We can also add various conditions. Maybe the usage fee is based on the metric of time during the morning hours, and then it shifts into the metric of the number of miles driven, doing so for the afternoons and evenings. You might at first complain that having varied limitations and metrics is going to be onerous to calculate, but that’s kind of the same argument used in the early days of the online retailers. With today’s vastly superior computing power, I don’t think you can make much of a case about things being labor intensive to calculate.
Zombie Self-Reporting To Aid The Calculating Of The Taxes
Notice that I mentioned that the AI self-driving car would self-report its usage.
How would it do this?
It could keep track of the miles driven, or the time underway, or the number of occupants, and so on. This tracking could then be communicated to a municipality via OTA (Over The Air) updating capability that AI self-driving cars are going to have. It would seem relatively straightforward that the AI self-driving car would be required to report its numbers say each day, or each week, and the government would then receive those numbers and charge the usage fee.
You could even consider using blockchain to have the AI self-driving cars record their usage, and then have the government tap into the blockchain to impose the usage fees.
See my article about OTA for self-driving cars: https://aitrends.com/selfdrivingcars/air-ota-updating-ai-self-driving-cars/
See my article about blockchain for AI self-driving cars: https://aitrends.com/ai-insider/blockchain-self-driving-cars-using-p2p-distributed-ledgers-bitcoin/
I’m sure there will be cheaters.
There are bound to be AI self-driving car owners that will try and find a means to avoid the usage fees. Since the numbers are presumably self-reported by the AI self-driving car, there could be a method to hack your AI self-driving car so it under-reports the numbers. It is likely the government would need to try and audit the AI self-driving cars and determine if there is anything funny going on about the reporting aspects.
The government could also potentially use other means to try and verify the self-reported numbers. With the advent of V2I (vehicle to infrastructure) communications, the roadway infrastructure is going to be able to track our cars in ways not as feasible today. It is conceivable that the infrastructure will know exactly where your self-driving car has been the entire day and can calculate the usage fee without even asking your AI self-driving car for the numbers.
All this potential collecting of data about the AI self-driving car raises potential privacy issues. We’ll have to see how that plays out in the usage fee debates.
See my article about privacy and AI self-driving cars: https://aitrends.com/selfdrivingcars/privacy-ai-self-driving-cars/
One final point to consider.
We had the tension between the brick-and-mortar stores and online retailers.
The emergence of AI self-driving cars as ridesharing vehicles is certainly going to create tension with human-based ridesharing services.
This includes taxis and shuttles, but also includes those everyday folks that are trying to make some money by being a rideshare driver. What will happen to them?
Maybe the usage fee of AI self-driving cars will help save them, since it might make the costs of using an AI self-driving car higher than choosing the human-driven approach. Or, maybe to be “fair” we’ll have usage fees on any ridesharing service, regardless of AI based or human-based.
As you can see, there are lots of public related considerations that go into all of this.
The revenue though of Zombie-cars is just going to be so tempting that no one will be able to overlook it. You can bet that there will be many start and stop attempts to come up with usage fees on those Zombies. The zombie apocalypse will need to pay for itself.
Copyright 2019 Dr. Lance Eliot
This content is originally posted on AI Trends.