I don’t keep track of the stuff I buy online. I spend a few hundred bucks in tax-free online purchases every year at the most and it never even occurred to me to claim them come tax-time.
Does anyone actually do this? Is not doing this something I could actually get in trouble for? Do online commerce companies report this stuff to the IRS anyway?
I wouldn’t worry about it. I believe that the retailer has to have a physical presence in your state for sales tax to be an issue and even that rule isn’t true in all cases.
Some online retailers have a special note about sales tax for a specific state leading me to believe that if there’s no note about your state - don’t worry about it.
I assume it won’t be long before states, feds, or both figure out a way to squeeze some revenue out of internet sales.
Oh wow, I was so very wrong.
The physical presence thing is a good way for retailers like Amazon.com to justify not applying sales tax to your bill. If they don’t apply sales tax it becomes your responsibility to file the right forms and pay a ‘use’ tax.
Sounds like the economy is prompting states to get serious about enforcing tax code with regard to the internet. I think I’ll carry on ignoring my sales/use tax responsibility but I think the days where we can do that are coming to an end.
Hard to say, but as a general rule of thumb it’s probably not a great idea to make public, permanently archived admissions of tax evasion. Let’s just say I don’t know nuthin’ about no online sales tax. And we never had this conversation.
If a store is physically located in a state without sales tax (which I believe are Alaska, Delaware, Montana, New Hampshire and Oregon) do you have to pay sales tax if you order from them? I don’t, no matter where the online retailer is located, but what about the rest of you? If so, how is it justified by the state that you pay your state a tax on something bought elsewhere?
The whole issue of sales tax is sort of confusing. If I go to Maine and buy a book and some cookie cutters, I need to pay sales tax. But when I bought my car there was no sales tax because I’m an NH resident. Weird.
You could probably get an exemption or rebate for the tax on the book, but it may not be worth the effort. In Washington, Alaska and Oregon shoppers merely had to show their drivers license for “tax free” purchases (This may have been changed since I last worked retail). For a car, it’s worth the effort and the dealer is quite aware of what needs to be done to make it happen.
I do. The state of California requires that you pay use tax on any online purchases that did not charge you California sales tax. Yesterday and today I have been going through my records and putting together my annual use tax calculation that I include with my tax records. It’s looking like I will owe over $150.00 in use tax, which will probably end up doubling my tax owed to the state.
Of course I am an anomaly, and when I tell people about the use tax, they are usually very surprised. I have been paying use tax ever since the specific question was added to the California tax forms and to the electronic software that I use to do my taxes. You can do a search online to find out the requirements in your state.
Meh. It’s for a good cause (stamping out ignorance!). If someone who knows me IRL were to read my posting history, they *might *be able to glean my identity. But a stranger? Nobody would figure out who I am without a government subpoena to the owner of the forum, in which case this post is the least of my worries.
Don’t worry, the states and/or congress are busy working on the problem as we speak.
I do. I use the “safe harbor” amount on my NYS tax return. it’s not that much , and I’m sure I owe at least that amount. And you don’t need to worry about online sales companies reporting to the IRS- its a state or local tax. Some states and localities actually seek out people who cross a border to shop - because use taxes apply to all purchases you didn’t pay state sales tax on , not just on-line purchases.
up to 15,000* 8
$15,001 - $30,000 $19
$30,001 - $50,000 $25
$50,001 - $75,000 $33
$75,001 - $100,000 $46
$100,001 - $150,000 $65
$150,001 - $200,000 $81
$200,001 and greater .041% (.00041) of income, or $225, whichever amount is smaller
That’s a good point. I can’t say I’ve ever heard of someone being prosecuted for state tax evasion… how exactly does that work? If you know?
Thanks for the great information.
It’s not just online purchases. I think if you live in Massachusetts and drive to “tax free” New Hampshire and buy something, you’re supposed to pay MA use tax on it. I’m not sure how much actually gets paid.
I actually have heard of people being prosecuted for sales/use tax evasion. The people involved in Leona Helmsley’s scheme went to prison (she got immunity). A former coworker of mine bought a piano in NJ and had it shipped to her in NY- she got caught because of the shipping records. A cigarette website was sued for a reason unrelated to taxes- but as a result of the lawsuit, their sales records went public and buyers received tax bills from either NYC or state. That could also happen to an online retailer or one in another jurisdiction or for example, NY could find a way to subpoena records from stores in NJ near the border. Me, I’d rather pay a few bucks and not have to worry about getting caught. And it is a few bucks- it’s $81 on a $200,000 income, less on mine.
Gotcha. Those sound like either big-ticket purchases or cases in which sellers were engaging in fraud. I was just wondering if it was something the “little guy” should concern himself with. I don’t yet see any evidence that this is so.
So far in my state it is a self reporting system. They ask every year how much tax you owe for out of state and online purchases on the tax forms. It’s up to the tax payer to keep track of the records and report. I will say that I know a lot of people who do a lot of shopping in OR. I do not know if they are keeping their receipts and reporting that spending come tax time.
Sales tax on cars bought in OR is taken by the dealership or paid when registering the car in your home state. That one is impossible to weasel out of.
Not just on-line purchases, but any out-of-state purchase on which you did not pay sales tax. This includes things ordered online, things ordered by mail, things ordered over the phone, etc. A friend once bought an item while physically present in a store in NC and had them ship it to his house in SC, and as a result didn’t have to pay NC sales tax right then and there. Technically he was supposed to pay SC sales tax at a later time (on his state income tax return), but I doubt he did.
In Michigan and 21 other states, the state treasury relies on self-reporting. Here in MI it’s supposed to be 6% of all of your out-of-state purchases, but if you haven’t kept all of your receipts, they let you calculate your use tax as a (much smaller) percentage of your taxable income.
Does anyone actually do this? Yes. I used to pay the small percentage of my taxable income since I hardly ever kept receipts for out-of-state purchases, but ever since I started operating a small business out of my home several years ago, I have been keeping all my expense receipts for my federal Schedule C, so now I tally up all of those and pay the 6% for the out-of-state purchases.
Is not doing this something you could actually get in trouble for? Yes, it’s called tax evasion. It’s illegal, and there can be harsh penalties for it. I don’t believe businesses in other states report your purchases to your state of residence, but if you get audited by your state treasury, and they can show you made an out-of-state purchase on which you didn’t pay sales tax, you could be in trouble.
Neither big guys nor little guys should lie on their tax returns.
Beat by minutes by the above post.
If you run a business of any sort and deduct the cost of items used in your business, the state has the right to ask to look at the receipt. If that receipt shows that no sales tax was paid, that gets added to your bill, and they may assume that everything you deducted (even things too small to require receipts) were bought without paying the tax. My state (New Jersey) audits a lot of small businesses for precisely that reason.
Yeah - the states do require that you pay - but right now they have very limited means of enforcing it.
We once purchased a piece of furniture from a North Carolina seller, to be shipped to us in VA. Virginia actually did an audit of the shipper’s records and sent us a letter asking us to file for that purchase. Needless to say, we did so.
For the rest - it’s too challenging to keep up with it all. Now, if Amazon, say, had a report we could generate showing untaxed purchases for such-and-such year, it would be a whole lot easier for folks to comply.
I’m actually surprised states aren’t going after the big-time online retailers for just this sort of thing.