I just went to buy some books on Amazon and found they were planning on charging me sales tax. They weren’t going out of their way to point this out but I always check my order. When I saw this I started looking and found that New York state passed a law that requires online venders to collect sales tax to any orders from New York.
Now New York passed a law about three years ago requiring all tax payers to submit an estimated payment for the uncollected sales taxes on their online purchases along with their income tax return.
In a fair world, I’d assume that with this new law in place to collect actual taxes for online sales that the old estimated tax for online sales would no longer exist. But sadly, over the years I’ve learned that life is not always fair.
So would I be correct in guessing that New York now plans on collecting sales tax twice for anything I buy online? Once when I buy it and a second time when I file my income tax return?
New York is one of 19 states that have made agreements with many of the large internet retailers to collect sales tax, my state is also one of the 19. In the past the collection of tax was based on a retailer having a “presence” in the state, usually a brick and mortar retail store. This presence was expanded to include wholesale and other properties owned by the online retailers. To me this is the start of the slippery slope, soon states will require any and all internet sales to include sales tax.
I suspect that the reason for the internet tax is that there are so many law breakers; i.e. people who have not been paying use taxes. The “use tax” laws have been on the books forever in most states, although mostly ignored by common folk. Internet purchases almost certainly would have fallen under use tax laws, but still were not being paid. This will probably spread to all 58 states.
My point is that New York has been collecting a tax on the assumption that people weren’t paying online sales tax. Are they still going to collect that tax now that people are paying them?
No, it will still be once. You subtract off the taxes you already paid from your use tax calculation which is easy to do because you calculate use taxes yourself.
Amazon is not one of those retailers. Amazon has sued to enjoin New York from requiring it to collect sales tax on sales to New York. However they will collect the tax in the meantime in case they lose the suit.
But I do believe that part of the impetus for an Internet tax is to snag some of the unpaid use taxes. (Well, that and the fact that politicians like taxes, and this is something new to tax.)
Not exactly. The change was that you were permitted to pay an estimated amount for sales and use tax for individual purchases under some set amount. Before that change , you were supposed to pay that sales and use tax, but it had to be calculated and on a separate form. You can still calculate and report the actual tax you owe- even if it’s $0.
You wouldn’t be correct. The instruction for the 2007 income tax return clearly says that you must pay the sales and use tax for online, catalog, mail-order, etc purchases delivered to you in NY, for which you have not already paid NY sales tax. Plenty of online vendors have always collected NY sales tax- Borders and Barnes and Noble, for example.
So when I’m doing my returns for 2008, I can figure out what my estimated use tax payment would be and then subtract any sales tax I’ve actually paid for online purchases? Am I supposed to document this? All I’ll have is a digital copy of my Amazon order.
Both have actual stores in New York as well as online sales.
Nope. You can either use the income-based estimate or calculate the actual tax you owe on all of the online and other non-taxed purchases you made. If you do the actual calculation, you would of course not include those purchases you already paid tax on.
How am I supposed to document what sales taxes I paid online? For that matter, how would I document it if I were a luddite who didn’t buy anything online?
Around here, you keep receipts if you want to prove exactly how much you spent on things subject to the use tax. If you didn’t buy anything subject to the use tax, you put a big fat “$0.00” in that line and move on with your life. Then it’s their responsibility to prove you did.
I don’t know anything about how they handle it in New York though. On the advice of an accountant, I put in zero dollars and they’ve never called me on it, but again I’m not filing a New York tax return.
I expect most states are far more interested in devoting their energy toward making large online retailers collect sales taxes for them, than tracking down individual tax payers who underreported what would have been $25 in use tax.
“Use tax” is a sales tax on out of state purchases. But wait, sales tax on out of state purchases is unconstitutional - however if you call it a “use” tax, SCOTUS says it is constitutional. I love how the judicial system protects us.
You document it the same way as anything else- you keep your invoice or receipt. How do you document that you don’t owe any tax? You won’t have to- the state will have to prove you really do owe it. Will they be able to prove it? Maybe. About 20 years ago, a coworker of mine got dinged by NYS for the sales tax on a piano she bought in NJ and had shipped to NY. Leona Helmsley got into trouble for having empty boxes shipped to an out-of-state address to avoid NYS sales tax on the jewelry that didn’t leave NY, and sometime in the past few years, New Yorkers got tax bills for cigarettes bought from an out-of state website. It may be difficult, but it’s not impossible for them to prove it (at least in some cases)
BTW, its not just internet purchases - it’s pretty much anything a NYS resident brings into NY without having paid NYS sales tax on. Internet purchases, phone or mail order, and purchases in another state or on an Indian reservation. It’s also not just the state portion of the sales tax- you have to pay the local portion as well, and if you paid a lower rate in another state, you might get a credit (or you might not- depends on the state).
And the fact that the local store competing with the online retailer DOES have to charge you sales tax, and they also pay property taxes in the state, pay assessments when the street is repaved, provide local jobs, deposit their funds in a local bank, probably support local charities, may sponsor a local kids team, etc.
There are many reasons for politicians to want people to support local businesses, and when local businesses complain about the unfairness of people having to pay sales taxes in their stores, but not paying the tax if they buy over the internet, politicians are likely to listen to them.
Use taxes are actually intended for items you “use”. For example, I own a computer shop and buy things from wholesalers on a tax exempt basis. If I sell a part to a customer, I collect sales taxes. If I use the item myself to fix or upgrade a shop machine I pay a use tax. The only nice thing is, the use tax is at wholesale price not retail.