I understand that “sticker” prices in the US do not usually include state sales tax and local sales tax (if any), unlike in Britain where the rough equivalent “VAT” is always included. Apparently most states levy a sales tax somewhere between 5% and 8%, and many municipalities add a small percentage on top of that.
So how does it work if you live in, say, Oregon, which apparently is one of the states that doesn’t have sales tax, and you buy something from someone in California, where sales tax is 8.25%? Or, you live in California and buy something from someone in Oregon? Is sales tax applicable? Do people actually pay it, or is it one of those notional taxes that people routinely find ways to avoid?
No, there’s no way to avoid it if you’re actually at the store. You pay the sales tax of the state (and/or local community) that the store is in, not the state that you live in. However, if you are ordering something to be delivered to you (and this is true whether you order by mail, by phone, or over the Internet), you don’t have to pay the sales tax unless the store chain that you’re ordering from has a location within your state (or local community, if it’s a local tax). This means that if you’re ordering remotely and you want to consider whether it’s cheaper than buying locally, you have to balance off the cost of delivery with the lack of sales tax.
Yeah, there’s no way to avoid paying in the store. It would be incredibly difficult to base sales tax on where the customer lives as opposed to where the store is. The tax is programmed into the cash register so it calculates automatically. It would be really overly complicated to have multiple taxes programmed into the machine for individual people. Not to mention, then people would have to prove where they were from for every purchase, even a seventy-five cent pack of gum. (When I worked retail, we had to check ID for every purchase paid with check of over $10, and people found that irritating enough.) A black market in fake IDs from states without sales tax would emerge.
Technically, the tax is assessed on where you live, but you have to jump through hoops to get it. The store will charge their regular rate and you’d have to write to the tax department to get your refund.
For many years, Schenectady had a 4% sales tax; all other counties in New York had 7% or more. If you had a Schenectady address and you bought a car, you’d be assessed at 4%, no matter where in the state you bought it. It was the same for mail order (I used to be overassessed by some companies who calculated tax based upon my zip code, which was in two counties and had two different sales taxes).
New York still requires you pay the local sales tax on cars; you must prove you’ve paid the tax when you register.
Stores are assessed on the basis of their sales. If you sell $1000 worth of items, you owe the tax on that. The state does not differentiate as to who you sold it to, so no store is going to cut out-of-state customers a deal.
Isn’t there some place on your taxes where you’re supposed to estimate how much stuff you bought online from other states - and thus paid no sales tax on - so that it’s accounted for? Or have I completely misinterpreted/misremembered that?
There has always been a form you were required to fill out to pay what they call the “use” tax (the form was almost never filed). Recently they added that question to the state income tax forms. One way New Jersey was enforcing this was to audit small businesses and look at their expenses and require them to prove they paid the use tax, so if you ordered a printer over the internet without paying the tax, they would catch that.
If you are not using the item as a deduction, it is almost impossible for them to catch it.
People who live near the border between a high-sales-tax state and a low-sales-tax state often drive over the border to buy stuff in the low tax state. So that is a form of tax avoidance.
But as noted above, you’re supposed to voluntarily admit to your home state that you bought it and pay the tax difference to your home state. Do people buy cross-border on untraceable goods like gasoline & refrigerators? Hell yes. And do they declare it in their home state? Hell no.
But on larger purchases like cars & boats, anything really that needs to be registered with the state … Well, the gov’t caught on to that scam decades ago and the states cooperate to ensure the full tax is paid in yuor home state before a registration is issued.
Finally, stores near the border in low tax states which sell the larger durable goods are wise to the situation as well. So they often charge a higher before-tax price than they could get elswhere in their state. They know most of their out-of-state buyers are comparing the after-tax prices, not the before-tax prices. So while the person from the high tax state may save some money, it’s not like they’re keeping all the gain. They’ll be splitting it with the store they bought from.
I was thinking more of online purchases than in-person shopping. When citizens of one US state buy stuff by mail order from another state, do they always/usually/rarely/never pay sales tax on the transaction? When people say that such-and-such a thing costs $199, do they mean $199 including sales tax, or $199 before sales tax, or $199 before sales tax but with the implication that nobody actually pays sales tax? That is my question. It sounds like people do often avoid paying sales tax on online purchases.
As Wendell Wagner explained, If someone buys something from an online store that is physically located in a different state, they’re not charged sales tax, unless that store has some presence in his state. For instance if I order something from Walmart.com, I’ll be charged my state’s sales tax rate because Walmart has stores in my state. It doesn’t matter if the item is actually getting shipped to me from another state.
They pretty much universally mean without sales tax.
New York forces you to either keep receipts for all your online purchases, or to pay a set amount determined by your net income in order to cover the sales tax.
That “presence” thing makes it trickier than you think. I live in a state with a fairly high sales tax (9.5%) that also happens to be the seat of a major online retailer. Very nearly everyone has a presence here. Trying to avoid paying tax is not worth the effort of finding someone who doesn’t have a connection to Washington for most items.
The state of North Carolina has also added a “use” tax in its annual personal income tax form, in theory to cover your “out of state purchases”. You can calculate it yourself, and apparently most people just report that they didn’t make any purchases that applied and thus don’t pay anything. I decided to take the easy way out and pay the alternate “standard rate”, which in my case came to $39. My theory is that North Carolina needed the money more than I did, and maybe they would think of me the next time the roads needed to be plowed.
I believe that, in general, sales tax is automatically calculated by online stores (or mail ordering or phone ordering), just as it is automatically calculated by regular stores. You can’t avoid being charged by the store that you shop at because the sales tax is programmed into their cash registers. Similarly, you can’t (in the appropriate circumstances) avoid being charged by online ordering (or mail ordering or phone ordering) because the sales tax is programmed into the ordering for online stores that have a physical presence in your state. The thing you need to understand is that except in fairly untypical circumstances (for most people), Americans don’t even have to think about sales taxes. It’s just calculated at the register or during the ordering process.
You have to pay sales tax in a bordering state, or if you’re taking delivery of an item in the store. If you live in Nevada, and travel to New York, see an absolutely beautiful necklace that you must have, you can have them ship the necklace back to your home in Nevada and you can avoid paying sales tax. Technically, you’re supposed to pay the tax on some form at the end of the year, but almost no one does (Note: this is often abused, in that people just have the box shipped to their home, and keep the necklace).
You only have to pay tax to any place that ships the item to you if they have a retail facility in that state, so the above wouldn’t work if the jewelery shop had a satellite store in Nevada. Likewise, you always have to pay tax on online orders from Walmart, because they have a retail facility in every state, but never from Amazon, because they have none.
I’m trying to get a grasp on how pricing works in the US. For example, the big announcement recently from Apple – $499 for their latest product. Do average American consumers evaluate the price, like British consumers would, at 499, or do they automatically add ~6% and think “Hmm, $530”? A small difference, but not an insignificant one, I think.
(Of course, this is is a moot point in the case of the iPad, because the usual Apple exchange rate of 1 USD ~= 1 GBP will apply, but work with me here)
I look at everything as real price, and see if I can get by with paying less for it than that, even after I’ve decided I certainly want to purchase an item.
Most people I know think of it as costing $500, and mostly forget about the sales tax. I’m one of the few people I know who tries to calculate it before buying something.
If you’re buying for a tax-exempt group (government agency, non-profit group, religious organization, etc), you’re usually exempt from sales taxes, but you have to provide evidence of tax exemption when you’re at the cash register.