TMs
I have shopped at both Gap.com and Walmart.com. Gap charges sales tax and Walmart doesnt. They both have physical stores in my state (Oklahoma). Are they both supposed to charge sales tax on merchandise purchased? Or are neither of them supposed to? Who is right? Oh, and if I shouldnt have to pay sales to Gap.com, can anything be done about it?
If your state requires that sales tax be charged on mail order merchandise, then it probably requires that internet purchases be charged sales tax as well. In order to find out, you need to research the Oklahoma state laws pertaining to sales tax.
If it shouldn’t have been charged, I know of no way for you to get that back other than contacting Gap.com and explaining the law to them. Even then, you may get it back and you may not. It could have already been paid to the state.
From the Gap website:
They don’t go on to explain why they are required to collect tax, but I assume that it is because they have nexus, or a physical business presence, in each of the states not listed as exceptions. Nexus is tricky to define sometimes because companies will often establish an online company or a catalog company as a seprate business entity from their retail stores.
Again I am assuming here, but I would guess that Wal-Mart has set up its online business as a seprate company from its stores, while The Gap has its online division incorporated as part of its overall business.
Alaska, Delaware, Montana, New Hampshire and Oregon are on the list because they don’t have sales tax.
If all of The Gap’s merchandise is clothing, New Jersey and Idaho exempt clothing from sales tax.
Otherwise, as Bottle of Smoke suggests, it’s a matter of business “nexus”.
I’ve been wondering how long this situation will exist. As online sales increase, more and more sales tax revenue is being “lost”, and various legislatures HAVE to be trying to figure out how to capture it. When it was just mail order, it wasn’t enough volume to be worth the hassle to lawmakers. For now, I will go out of my way to online order something of significant cost across state lines.
I had a customer in today who says he listened to an assistant Department of Revenue person over the weekend in an informal conversation recently.
According to my customer, Ohio has made a descision to chase after taxes which are legally due(USE taxes). He said that the business where he works(a pipe/cigar shop) has more than one customer who has gotten a bill from the state in the last few months for USE taxes owed…one to the tune of $1800. Seems that Ohio has asked 5 or more of the larger out-of-state cigar wholesalers for their list of people in Ohio who have made purchases within the last few years. They then match this up with people who don’t have vendor’s licenses, and, if you don’t have one, bingo!
My customer also said that Ebay has surrendered to the State of Ohio a list of all successful bidders in Ohio. The theory being, that the state will chase down people who have made large numbers of purchases but have no vendor’s license, asking them to pay a USE tax.
Whether the foregoing is accurate, I don’t know. I’m only relating what my customer said. If it isn’t entirely true today, I have no doubt that it will be true soon.
As support for this, the Ohio Income Tax form starting this year, asks you if you have made out-of-state purchases for which you owe a USE tax. It asks how much you bought and how much do you owe. If you say you owe nothing, and sign your form, you could be guilty of felony tax fraud, assuming you owe something.