Tax on online purchases

Factual Questions
1

Hi,
Some time ago I thought I had figured out that only online purchases made with a retailer in the same state as you would tax you for your purchase (state sales tax).

For the most part I think I’ve enjoyed this information to my advantage.
Then I purchase a digital camera one day from CC and at the last minute I see their pitch on getting your item immediately (in 24 minutes as they put it) from your local store. My local store is just outside my neighborhood so I pass up the “free shipping” offer to go get my camera @ CC locally.

Well, it’s only after I click the pay button that I realize they’ve charged me almost $30 extra in taxes. So I think to myself “nicely played CC, you got me”.
As I’m picking this up from my local store I assume they just steered the state/sales tax my way and that is my penalty for not paying attention.

So FF to the present and I’m again shopping for electronics and I find this item at a good price at CC once again, only this time I opt for the “free shipping” thinking that the wait for my item will be worth it in tax savings- only it’s not… there again at the check-out total is an entry for about $25 in taxes for my purchase.

So bewildered I call-up CC asking why I’m being taxed for an item I’m buying online. The lady replies that all “bricks and mortar” style businesses that have an online presence charge taxes on their items ( I worded that more eloquently than she said it).

Now, I’m not saying I’m right, it’s why I’m here on SDMB asking. I just seem to recall never being charged so much in taxation for any online order I’ve made and most anything that I can buy online I d-o buy online. Chances are pretty high that I’ve bought from several “bricks and mortar” type of companies online and only recall paying shipping and handling charges.

Can anyone explain what’s going on?

2

[QUOTE=Thinktank]
…Well, it’s only after I click the pay button that I realize they’ve charged me almost $30 extra in taxes. So I think to myself “nicely played CC, you got me”…
[/QUOTE]

You do realize they don’t get to keep that money, right?

This are still a little murky. Here’s a good article at Yahoo! (not Yahoo! Answers):

If a big box store like Circuit City (I assume) sets up a separate company like “Circuit City Online Sales, LLC” or something, they can get around that, but what hasn’t been detirmined is how much in-store collaboration can be done and still be non-taxable.

3

In short, how you make a purchase is irrelevant. CC (or any other online merchant) has a physical presence in your state (i.e., th B&M part of her answer), so they are bound to collect sales tax.

4

The whole system is screwed up and nobody knows a good way to fix it. There is a good chance that you actually owe taxes in you own state on most things you buy online. It varies by state but many states have what is called a “Use tax”. A use tax is probably the dumbest and most neglected of all taxes. If you live in a state with use taxes, you are supposed to figure out how much money you spent in other states throughout the year and then pay your own state a tax like you bought everything there. That is slightly simplistic but not far off for some states. Like I said, it is retarded but it is the law.

5

If they have a location in your state, they have to pay sales taxes in your state. Online-only operations like Amazon have a few HQ locations and warehouses, and so they can get away with shipping things tax-free to most states. Circuit City has brick-and-mortar locations all over the place, and so must pay sales taxes in most states.

6

Here is another recent article on point: Amazon Plays Dumb in Internet Sales Tax Debate - The New York Times

7

[QUOTE=Shagnasty]
The whole system is screwed up and nobody knows a good way to fix it. There is a good chance that you actually owe taxes in you own state on most things you buy online. It varies by state but many states have what is called a “Use tax”. A use tax is probably the dumbest and most neglected of all taxes. If you live in a state with use taxes, you are supposed to figure out how much money you spent in other states throughout the year and then pay your own state a tax like you bought everything there. That is slightly simplistic but not far off for some states. Like I said, it is retarded but it is the law.
[/QUOTE]

A friend of mine found to his displeasure that some states don’t ignore it. He went across state lines to purchase a piece of furniture in MT, which didn’t have a sales tax. The next year the state came aknockin wanting their sales tax plus a penalty for not informing the state of the fact you owed sales tax on furniture bought in another state.

How did they get it? Somehow, the state was able to force stores near the border in the other state to disclose this information.

Now, I think the internet has sales tax immunity for now, but they are salivating at the prospect of collecting sales taxes from the net.

8

[QUOTE=Thinktank]
So bewildered I call-up CC asking why I’m being taxed for an item I’m buying online. The lady replies that all “bricks and mortar” style businesses that have an online presence charge taxes on their items ( I worded that more eloquently than she said it).

Now, I’m not saying I’m right, it’s why I’m here on SDMB asking. I just seem to recall never being charged so much in taxation for any online order I’ve made and most anything that I can buy online I d-o buy online. Chances are pretty high that I’ve bought from several “bricks and mortar” type of companies online and only recall paying shipping and handling charges.

Can anyone explain what’s going on?
[/QUOTE]

I think you mis-stated the lady’s response. It’s when an online store has a “b & m” presence in your state that they charge sales tax. If you have a local CC, you would have been charged sales tax on your original purchase, whether shipped or picked up. If you’ve bought online from other “b & m” type stores in the past and weren’t charged sales tax, then they didn’t have a store or office in your state.

9

As mentioned, it’s based on the physical presence of the store. For instance, everyone’s favorite computer parts retailer, New Egg, has a warehouse in New Jersey as well as its headquarters in California, so it charges its New Jersey customers sales tax. Items sent to New York, however, are not charged tax, which can make a sizable difference on the purchase of an entire computer system, say.

10

Hmm, seems pretty low, but it sounds like something CC either didn’t bother to get around or didn’t forsee it hindering their business or didn’t really care one way or the other. But you know I di-d buy from CC’s competitor BB =P lol and I don’t remember huge taxes there either. But I guess enough is said there, “I don’t remember”

It’s the only reason I make a stink about this one, I’m not above paying taxes it just struck me as out of the ordinary and also I don’t appreciate having to read terms and fine print - even if I was a lawyer I wouldn’t want to do this for free regarding my check-out with any given e-commerce purchase. I just want everything disclosed so I don’t have to hunt for the “real price”. Luckily, most have been very good experiences. And that is also why I did not buy from CC this time either.

What I’m hearing/reading above is it doesn’t matter if the item I buy comes from CC’s warehouse in umm say, Ohio- if they still have a physical store in my state(SC) (not even my city, but only my state?) they will charge me tax on my purchase (irregardless of whether the money goes to them or not; It still comes out of my pocket).

Ok, I can accept that, I just needed some kind of explanation- thanks guys.

11

It works in your favor, too, if you live in a state without sales tax. It doesn’t matter whether companies I buy from have a presence in Oregon or not – no tax.

12

[QUOTE=iwakura43]
As mentioned, it’s based on the physical presence of the store. For instance, everyone’s favorite computer parts retailer, New Egg, has a warehouse in New Jersey as well as its headquarters in California, so it charges its New Jersey customers sales tax. Items sent to New York, however, are not charged tax, which can make a sizable difference on the purchase of an entire computer system, say.
[/QUOTE]
This is generally true, but not always.

For example, one of my biggest customers sells all over the country, but their physical presence is in Utah. For years, they had to collect and pay sales tax on Utah sales only.

However, about four years ago, North Carolina made them apply for a sales tax license and collect and pay sales tax on all sales to taxable customers in that state.

Two years ago, Illinois did the same thing.

In both cases, they spent a fair amount of time trying to get ruled as exempt, based on the fact they had no actual presence in that state. In both cases, the state said tough, if you continue to sell here and don’t collect and pay the sales tax, we’ll see you in court.

And as noted above, in most states you are supposed to keep track of those things you buy in other states and didn’t pay sales tax on, and pay the “Use” tax, usually when you file your income tax, IIRC.

As Shagnasty notes, it’s a mess, and probably going to get messier before some kind of nation wide agreement makes it simpler.