Sales Tax for Online Purchases?

[Stormtrooper1320]

Must have to do with the state you live in I guess. Sounds like I'm gonna be paying sales tax now.

It does seem to vary by state.

I recently purchased a few items and wasn't charged sales tax, but that seems to be outside the norm these days.

 

[Taxinator]

Must have to do with the state you live in I guess. Sounds like I'm gonna be paying sales tax now.

That is correct. The seller must have triggered or now believes they must collect sales tax from buyers in your state.

 

[BULL]

Of my own curiosity...

As in individual, for states (such as my own, Colorado), if I'm expected to pay taxes for online purchases, I then have to be educated (informed?) about what items are taxable, and which are not. This seems to go beyond the responsibility of a "tax payer" versus a "tax collector".


As a business owner, when I pay sales tax to the State, they pay me (a tiny amount mind you, but they do) to do that effort. It's my understanding that this "compensation" is by law.


So as an individual, shouldn't this be the case as well? Shouldn't the State pay me to "collect" taxes for the State?

 

[Taxinator]

Of my own curiosity...

As in individual, for states (such as my own, Colorado), if I'm expected to pay taxes for online purchases, I then have to be educated (informed?) about what items are taxable, and which are not. This seems to go beyond the responsibility of a "tax payer" versus a "tax collector".


As a business owner, when I pay sales tax to the State, they pay me (a tiny amount mind you, but they do) to do that effort. It's my understanding that this "compensation" is by law.


So as an individual, shouldn't this be the case as well? Shouldn't the State pay me to "collect" taxes for the State?

Depending on the state, but most states have this requirement (law), individuals not charged sales tax by a vendor must remit this tax to their own state. This is called use tax, which is sales tax for the item the individual ultimately used within the state. It's voluntary compliance, just like our our federal taxation system, but men with guns will eventually show up if a taxpayer does not comply...assuming there is sufficient tax for the government to even bother. This goes back to ignorance of the law is not an excuse. However, the government (federal or local) does have the leeway to waive penalties for first time offenders.

As a business owner (vendor), you collect sales tax on behalf of buyers and then remit the sales tax to your state. The collection of sales tax means the funds do not belong to the vendor, but belong to the state and the vendor is only the middleman. In California, vendors are not compensated for the collection or remittance of sales tax...not one penny. It's the cost of doing business within the state...just like paying a tax professional to file different types of business tax returns (sales tax, payroll tax, property tax, income tax, etc.).

The problem with economic nexus is most small businesses are unaware or unable to comply with all state and local sales tax laws. It's a huge burden for the small business owners and only an inconvenience to big corporations. This is why most states implemented a larger economic nexus threshold, say $200K of sales or a sales number plus a number of transactions. Here is a website with a summary by state: https://www.salestaxinstitute.com/resources/economic-nexus-state-guide

 

[Magnified]

I realize some places that have a physical presence in a state must charge sales tax. However, I went to get some stuff and noticed every site is now charging sales tax for online orders even if they don't have a physical presence in my state.

Something change? We're at like 10% sales tax here.

This changed back in 2018. US Supreme Court stated in South Dakota v. Wayfair Inc., that individual states can require online sellers to collect state sales tax on their sales. This overturned the Court's 1992 decision in Quill Corporation v. North Dakota. The Quill case prohibited states from requiring a business to collect sales tax unless the business had a physical presence in the state.

 

[Magnified]

I put a wheel in my cart and went through checkout, no tax

You were shop lifting dude.

 

[Speedy!]

It may have changed in 2018 but odd that it literally just started getting applied in the past couple of months, at least for my purchases. Amazon went in to effect a couple years ago however, as they had an agreement with the state of TN. Everywhere else I was still able to avoid sales tax. Not now.

 

[BULL]

...but men with guns will eventually show up if a taxpayer does not comply...

Sexist...

 

[Taxinator]

It may have changed in 2018 but odd that it literally just started getting applied in the past couple of months, at least for my purchases. Amazon went in to effect a couple years ago however, as they had an agreement with the state of TN. Everywhere else I was still able to avoid sales tax. Not now.

It's because it takes states time to understand the federal court decision and then create and pass new laws and regulations. Then it takes additional time for agencies within the various states to implement the new requirements. Many states provided ample time for taxpayers to read and learn about the new changes.

For example, California implemented a new employment law requiring employers to provide a retirement option for employees or the employees must be allowed to participate in a government run retirement plan. The employer is required to withhold new retirement funds, on behalf of their employees, and remit the funds to the state unless the employee(s) opts out...the default is opt in. The law passed in 2016 and employers must fully comply by June 30, 2022. I

 

[Paladin06]

Taxinator said:
...but men with guns will eventually show up if a taxpayer does not comply...

They are not the only ones with guns, lots of guns.

 

[Magnified]

It's because it takes states time to understand the federal court decision and then create and pass new laws and regulations. Then it takes additional time for agencies within the various states to implement the new requirements. Many states provided ample time for taxpayers to read and learn about the new changes.

For example, California implemented a new employment law requiring employers to provide a retirement option for employees or the employees must be allowed to participate in a government run retirement plan. The employer is required to withhold new retirement funds, on behalf of their employees, and remit the funds to the state unless the employee(s) opts out...the default is opt in. The law passed in 2016 and employers must fully comply by June 30, 2022. I

It also plays a role in that not all companies know the laws or even do due diligence to keep up with them. So you run into a few years lag time while they do not comply, then get popped by the tax agencies, and then scramble to implement their corrections and pay their fines.

 

[Stormtrooper1320]

Taxinator said:
...but men with guns will eventually show up if a taxpayer does not comply...

They are not the only ones with guns, lots of guns.

don't forget LOTS of ammo too

 

[Paladin06]

don't forget LOTS of ammo too

Lions not sheep.

 

[Magnified]

Detroit lions?

 

[Paladin06]

Detroit lions?

Who??

 

[Unholy707]

It’s most states now. Only place that doesn’t I’ve ran into is eastcostmoprts (probably because they order in all the parts to themselves and then ship once they receive them)

 

[RGPIII]

Another great reason to move to a state with no sales tax! One big bonus to living in DE.

 

[Paladin06]

Another great reason to move to a state with no sales tax! One big bonus to living in DE.

No harm meant but there is nothing good about Delaware. I got stuck there twice on special assignment for Boeing.

 

[Unholy707]

They have no sale tax but they have state and local income tax.

 

[Unholy707]

It’s more of a gimmick than anything. Trust me, they’re getting their tax dollars from you somehow