I was under the impression that if I bought, say, a sofa from a store in Connecticut, but lived in NY, that there wouldn’t be any sales tax, as the sofa would be delivered to the NY address. Is that not correct? Now, I know that if the store has a presence in NY, then I’d have to pay, but if it’s a sole store, do I? The merchant is telling me yes, but others are telling me no. What’s the deal?
Whether or not you pay sales tax on that item, technically you still owe it (although I believe it is then called a “use” tax.
I think that many states that share borders have reciprocal agreements, especially for big ticket items. I seem to recall that I ran into the same situation (same two states) many years ago.
Without these agreements, people who lived close to the border would go to the other state to buy their furniture, and both states would suffer.
How i works for me in MA being near the NH border is if it is delivered to MA by the furniture company I pay the MA sales tax. NH has no sales tax. I tend to opt out of delivery.
You are supposed to pay the sales tax for the state you live in. Doing otherwise is tax evasion. MA used to really care about this but they gave up trying to enforce it. Prior it wasn’t unusual for MA to pull people over leaving NH to hit them with taxes on newly purchased items.
Different laws do apply to items delivered by mail. Right now e-commerce sales only tend to be taxed if the company is located in the same state as the purchaser. Multiple states are working to change this as it is a major loss of revenue.
This was a contentious issue with the internet sales and mail-order items. Many states have an encouragement to shop in their state - proof the item was purchased out-of-state allows you to recover the sales taxes. (Many foreign countries have this arrangement if you take or ship the item out of the country in a short time). If you pick it up yourself, you pay salesax and submit a claim to recover the tax.
If it is shipped direct, it depends on the state.
For example - http://www.boe.ca.gov/sutax/faqex.htm#3b
This seems to concentrate on vehicles and such:
and
The last bit is the tricky one. You may be exempt from the tax where you bought the item, because it is taken out of state. But the state where you take it to may want you to pay taxes.
I recall reading an article about Amazon or Ebay going to court to stop some states from requesting several years’ back information about sales made to residents of their state. The article mentioned that some states had added a section to the state income tax form making you tally up and pay tax on out-of-state purchases, so if you did not, they could additionally nail you for penalties and tax evasion fines.
This is probably the best answer to your question, listing origin vs. destination states:
Yep. In Illinois, you have to report owed use tax on your income tax forms every year. You owe this tax on anything you pay less than 6.25% in sales tax on that you intend to use in Illinois. So, for example, if I buy my father in Florida a present on Amazon, I do not owe Illinois any use tax. But if I buy myself a physical item (items like Kindle books and Steam games do not incur use tax) on Amazon and I intend to use it here in Chicago, I owe the state 6.25% of the purchase price (including shipping). That’s still less than the sales tax you pay in Cook County, however.
The state tax form gives you “suggested” values to put in based on your income, since most people don’t really keep track of it, I suspect. I assume if you put a big, fat zero on that line, your chance of getting audited skyrockets. Personally, I do keep track of this stuff and thus far, every year I’ve owed more use tax than the suggested value.
Illinois’s website has more info on the state use tax. There’s something similar in most states, although I believe Illinois is one of the few to put it on the income tax forms.
Yeah, you are “supposed” to pay use tax on any taxable item that you didn’t pay on. Most states don’t really enforce it, but California is cracking down. The implication was that many online businesses would incorporate in small states, like Delaware, or ones that didn’t have taxes, so that most of its customers would be tax free. The government wanted to stop them, and Amazon led the fight to limit online sales tax, but are ultimately losing and you might have to pay new taxes.
Dumb question: many people live in Vancouver, WA (no income tax) and might drive the 20 or so minutes to Portland, OR (no sales tax). a) can Washington legally ask for use taxes on that, and b) would they bother? I’m not sure what my gut says, although I believe they might, and I’ve heard of people buying a car in one state, and getting dinged for taxes if they reregister it in the taxed state too soon.
You answered your own question.
(a) yes, and (b) if they are not now, they probably will. (See Illinois example from Borghunter).
As the estimated losses go up, the likelihood goes up.
A Yes ,they can - and it’s not new. A coworker of mine over 20 years ago got dinged on a piano she bought in NJ. She didn’t pay NJ tax on it because it was delivered to NY, the NJ store was not required to collect it, and she didn’t file the proper form and pay the use tax owed to NY. Around the same time, NY put flyers on cars with NY registrations parked in NJ shopping malls informing people that they may owe NY taxes on purchases made in NJ.
B Would they bother? Whether they would bother on individual purchases depends. I don’t really think NY is going to come after me for the difference in tax on a toothbrush I bought in NJ and brought back to NY or for something I bought at a yard sale or on ebay , but they certainly will collect the tax on a car ( even a cheap,used one) I bought in NJ and register in NY. I’m sure there’s a line somewhere, but I wouldn’t even try to guess where. Which is why I use the income based value on my tax return every year- as long as I have no individual purchases over $1000 (which must be calculated separately) I’m safe if I use the table. And I’m sure that if I kept records, I would owe more than the table amount which is around $70-80 for me
In MA you must pay sales tax on based on the blue book value of the vehicle to register it. If you can’t provide proof MA already got it’s 6.25% you’ll have to pay it twice.
Whenever I’ve registered a vehicle, the tax was paid to the DMV/MVA/BMV (Whatever your state calls the “Motor Vehicles Dept/Admin”) at the time of registration, and the tax was based on a bill of sale, book value, or waived/limited in the case of being a gift from family with proper paperwork. the registration would be based on my residence, not the address of the seller.
As far as “use tax” goes, I am aware of how it’s supposed to work, but I doubt I know anyone who pays it. Living most of my life close to the MD/DE border or both states at once, there are many businesses that get a lot of their sales because DE has no sales tax. I doubt people are doing all their back to school shopping and much of their big ticket purchasing in a specific state, only to get a temporary reprieve from paying use taxes to their tax-hungry home state.
Two things. One, the merchant told me today that NY, CT and NY have a tristate agreement where you just pay the tax in the state you shop in and you’re done. I haven’t verified that that is actually the case, but that’s what he said.
As far as CA, yes they are enforcing the Use Tax more and more every year. Once you’re name is on the list you need to pay. They sent letters out to something like 100,000 people about 3 or 4 years ago and have been expanding on that number every year.
How would they crack down on this exactly? How are they going to discover what you bought online?
ETA: Okay never mind, I assume the bank can tell them where a charge originated from, geophysically speaking. (But if that assumption is wrong, then I’m back to not knowing how the state can figure out what I bought online save by looking for the big well known online vendors by name on a statement.)
Washington does ask for use tax - see here. But because we don’t pay a state income tax, it’s probably even harder to collect here than it is in other states.
Instructions on how to pay it are at the same link.
North Carolina gets you for use tax on the income tax form. IIRC, you can either save every single receipt for every penny you spend in a year to document sales and use taxes paid, or just cough up some percentage and it’s applied to your overall tax.
Remember, it’s not what you bought on line. It’s whatever you buy in one state and bring into another without paying the appropriate tax. They don’t have to look at your statements- they can watch out for furniture trucks crossing the border or one of your enemies can snitch you out so they start looking…
I believe someone earlier brought up the New York cigarette tax case - NY got the information about who brought untaxed cigarettes into NY from documents disclosed in a court case (that I don't think NY was even involved in )
I think it's slightly different- I believe the agreement is that sellers in NY can collect and remit taxes to CT and vice-versa. Your're still done, but if you have the merchandise delivered to NY you'll pay the NY rate, not the CT rate.
The big scare for smallish online retailers is that they may be required to collect sales tax for every state that has it rather than just the state they are located in. Filing in just one state every quarter is a pain in the ass (it takes me a couple of hours). Filing in 40 or 50 more states would be impossible without an inhouse accountancy department. Configuring the shopping cart for scores of states and thousands of individual tax districts (contantly changing their sales tax rates) isn’t a task that any but the largest retailers like Amazon could manage.
In Kansas at least, a business conducting an online transaction from another state must collect Kansas sales tax if that business has a “presence” in Kansas. E.g., Amazon operates a distribution center in Coffeyville, therefore all Kansas residents will be charged sales tax on any Amazon purchase. Jung Seed, in Wisconsin, does not have a “presence” in Kansas. Hypothetically speaking, of course, if I made a purchase from them they are not obligated to collect sales tax (although they could choose to), but I am obligated to pay the state of Kansas a “use” tax.
Amazon and other on-line stores have your billing address and shipping address. Not sure how it all works with eBay, whether that info stays private between buyer and seller, but eBay does have a list of what you bid and won, how much, and probably some sort of geographical details.
Of course, Amazon can afford the lawyers to fight 49 or so court cases. Wesellcheese.com probably, as Fadd points out, does not need the headache and does not always have the manpower to sort and calculate state, let alone city or county sales taxes.
then there’s the complication of what’s taxable. The Canadian GST, for example (fed sales tax) does not normally apply to used goods, unless they are being imported(?). Different jurisdictions exempt different things. My brother was advised by the Ottawa furniture sotre he shopped at to pick up his goods across the river in Hull, since Quebec unlike Ontario did not have sales tax on furniture.
Cars are easy to track. You register your car for license plates, they check for sales tax paid.
Then there’s the difficulty of arguing after the fact. The state subpoenas your credit card records. You spent $1000 at Bob’s Furniture Warehouse across state lines. You spent $1500 at Best Buy across the state line. You paid the (much lower) state sales tax there. Not your home state’s problem. You bought it, you imported it, time to pay sales taxes at home. Gotta love computer records. Wait til they come after you for the $50 spent at the Disney Store in Florida for those souvenir sweatshirts…
One way New Jersey did it was to audit small businesses. If you are depreciating a computer and your receipt for that computer does not show that you paid sales tax, then they want that sales tax.