Out of State = No Taxes?
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Legally, you will owe a "use tax" on your purchase to the state in which you live. If the vendor does not collect the tax for your state, you are supposed to report and pay it yourself.
Since this is virtually impossible for the state to enforce most of the time on individual consumers, people typically don't pay the tax. Businesses usually do because they get audited on a regular basis. If, somehow, the state found out about your purchase, they would force you to pay the tax as well as any applicable penalties. |
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Unless your state has some wierd law, in most states, you can make a purchase from outside of the state and have it shipped into your state and not pay any sales tax. It is also true that an internet company or any other company can sell to someone outside of the state and not charge them sales tax. But if you take possession of an item from the company directly in that state you must pay that state's sales tax even if you live outside of that state.
If you live in the state where the item is being sold and trying to beat the state out of their legal sales tax, that can get very tricky and you could end up on the wrong side of the law. |
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Some states "require" their residents to declare out of state purchases on their state income tax form and others do not... Consult a CPA in your state for specific advice regarding the laws in your state... But as Smooth pointed out, it is practically impossible for the individual states to monitor internet transactions and to enforce or even monitor compliance, let's face it, they have more important issues to worry about... And it's not like any of us are required to report our sales to any state other than the one we operate from... We moved from California because they are intent on imposing an internet sales tax on all merchandise entering or leaving the state (my brother actually assisted in drafting that "brilliant" piece of legislation)... Oregon has no sales tax system (yet) and so we've had quite the chuckle about how we're going to respond when California requests that we report all the sales for diamonds we've sent to California... It's going to go something like "Um, yea... Right... Like, we're not in your tax jurisdiction so go *@!& yourself!" 'cuz it is not legal for one state to impose it's tax laws upon another... God Bless America!
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Ohio has gone to a line item on the State return labeled "use tax". It is strictly on an honor system basis.
I wonder how many returns they got that actually had anything but "zero" on that line. 'Bout zero, I suspect. The internet is bringing some interesting problems and questions to light. While NiceIce is not located in California, the argument could be made that if you sell and ship to a person in California you are doing business there and should follow their rules. The only thing may be for the Feds to step in and regulate internet transactions as "interstate commerce". |
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Virginia was loosing quite a bit of the "furniture" business to the outlets in NC. VA audited many of the NC books & slammed many consumers who avoided sales tax by shipping to VA. VA residents must pay the sales tax regardless of where the purchase *is*. Much like R/A's state except we have a specific form.
Just a caveat folks! |
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California will charge a use tax when it has information about the purchase, i.e. large items brought in from out of the country and declared for customs. There currently is no way for them to know about Internet sales on a big scale that I know of, but all states are trying to figure out how to close this loophole -- espeically with their budgets in such bad states.
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It isn't up to NiceIce to make sure their customers pay taxes. NiceIce is following all of CA's rules, the customers aren't.  A similiar thing is with switchblades or balisongs (butterfly knives). These knives are legal in Oregon but illegal in Washington and most other states. However I can buy a switchblade from a dealer in Oregon and have them ship it to Washington. The dealer knows Washington doesn't allow those knives, yet it is my responsibility to follow the rules. |
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As a tax lawyer that specializes in state and local tax I figure I would add my 2 cents and end this debate. ALL states that impose a sales tax have a complementary use tax. Currently, a vendor is only required to collect sales tax from customers in states where the vendor has a physical presence. There is legislation at both the federal and state levels that will require all vendors to collect sales tax on every sale. This type of law is probably a long way off. Bottom line is this: if you buy a ring on the internet and the vendor doesnt collect sales tax and you live in a state that has a sales tax you are requred to self assess use tax. Will you get caught if you dont?? Probably not. I hope this ends this string because it is getting old!
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