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Sales Tax for online purchases
Old 03-28-2010, 08:34 AM   #1
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Sales Tax for online purchases

IMHO itís only a matter of time before sales tax is collected on most internet purchases. The dire financial condition of some states will force them to set aside their objections and differences and agree on a minimum sales tax to be collected and distributed.

This will be equivalent to uncounted inflation. Not necessarily a budget buster, but certainly a permanent loss of purchasing power for people that use online vendors.

Time was when it was easy for citizens to avoid paying sales taxes on some purchases made online or out of state. Ebay and Craigslist wouldn't be as fun otherwise.
But skirting the law is getting more difficult. Now 24 states, plus D.C., are pricking shoppers' consciences with a special line on the tax return that requests a payment for sales taxes on any goods bought out of state, including those from online retailersóup from 20 states in 2008. Other states collect the tax in a variety of ways, some with special forms that taxpayers are supposed to fill out voluntarily. If, like many, you don't fess up, you may get a bill (see map).
States are trying to recoup some of the $20 billion or so they lose each year to online-sales-tax evasion. The gap exists for a quirky reason: States with sales taxes always have a "use tax" on items residents buy from out-of-state vendors. But a 1992 Supreme Court decision affirmed that out-of-state vendors don't have to collect the tax. It's up to taxpayers to track what they owe. Most don't. Tax Report: The Accidental Tax Evasion -

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Old 03-28-2010, 08:37 AM   #2
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Yes, under pressure from state governments, I suppose it's only a matter of time before the "interstate commerce" clause is invoked which *requires* people to pay sales tax at the point of sale in interstate transactions -- and with the state given enforcement powers.

In other words, right now it's more or less an honor system, but I suspect in the future it will be mandatory to pay at the point of sale.

"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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Old 03-28-2010, 09:12 AM   #3
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Originally Posted by MichaelB View Post
IMHO itís only a matter of time before sales tax is collected on most internet purchases...
I do almost all of my shopping online. Sales tax is already being calculated for almost every purchase I've made recently.
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Old 03-28-2010, 09:16 AM   #4
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I think we need to know the profit margin for online stores versus brick and mortar. I'm guessing online stores will eat the sales tax as they do with shipping for purchases over a certain amount. Several online stores that have a physical presence in a state collect the sales tax - Walmart, REI - they give free shipping for an in store pick up to remain competitive.
There is a national sales tax or VAT coming in a few years. Then we will be talking about the good old days of no shipping, no state taxes and no Fed taxes.
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Old 03-28-2010, 10:09 AM   #5
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I would say it is a certainty. The problem so far has been getting one state to collect taxes for other states.

The feds (or cooperative among the states) might setup a clearing house to capture and process the tax obligation and route it to the home state. But a challenge would be identifying where the sale originated.
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Old 03-28-2010, 11:01 AM   #6
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If they do it automatically, and it shows up in the 'total price with S/H' when I do a search, fine. What I really dislike is that the letter of the law is that you are supposed to add up all these purchases for the year and then calculate the state sales tax yourself.

I don't think TaxAct actually asks me that question, so I'll use the Geithner defense. A lot of the online stuff I buy is from places with a 'presence in the state', so they do charge the state tax. I don't go out of my way to avoid it, but I don't want to go through a bunch of receipts to analyze it either.


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