The Internet and Sales Tax - A Free Ride or Not?

[psadmin]

Another informative article by Neil Beaty.

The Internet and Sales Tax - A Free Ride or Not?

http://journal.pricescope.com/Articles/82/1/The-Internet-and-Sales-Tax---A-Free-Ride-or-Not.aspx

Thank you Neil for your wonderful contribution.

 

[Lorelei]

Thanks Andrey and thanks to Neil for an excellent article!

 

[Todd Gray]

Nice article Neil, this is what our FAQ page says about sales tax:

We are located within the State of Oregon which is one of the few states within the nation which does not impose sales tax. Don''t worry, what we don''t pay in sales tax is more than made up in the higher property tax and income tax rates paid by residents of Oregon - our property tax and income tax rates are amongst the highest in the nation.

But back to the question at hand. Since Oregon does not have a system in place to collect sales tax, we do not collect sales tax on our sales. Thus whether you purchase from us, online or face-to-face, sales tax is not collected at the time of sale.

Just because Oregon does not have a sales tax system, does not mean that sales tax does not apply to your purchase. While we are not required to collect sales tax from you at the time of purchase, the reality is that the laws of your state of residence may require you to report a significant purchase, such as an engagement ring, on your state income tax form or something like that, but we don''t know about stuff like that... And you probably don''t either off the top of your head, unless you''re a CPA or a Tax Attorney, but the bottom line is that it is your responsibility to determine whether you are required to pay tax on out-of-state purchases and ultimately your responsibility to file the appropriate documents as applicable.

 

[Karl_K]

Thank you Neil
excellent article

 

[John P]

Agreed. Reading that was not taxing.

(Nice job Neil)

 

[WinkHPD]

Date: 11/4/2009 7:55:46 PM
Author: John Pollard
Agreed. Reading that was not taxing.

(Nice job Neil)

Boo! Hisssssss!

That was for John''s pun ishment.

Agree, Neil, that was well done.

Wink

 

[outatouch0]

It is an interesting Catch22 the states and communities find themselves in on cooperation vs. not cooperating with each other on sales reporting. This applies to more industires than diamonds. It is also with great cynical interest that I see states complain about supposed revenue losses yet enjoy reaping the economic benefits of non cooperation with other states.

State A will complain that its residents make purchases from state B and lament the "revenue loss" (you did not loose what was never in your posession). Yet, that same State A does not cooperate with state B''s ability to collect sales taxes on big items purchased from major industries driving state A''s economy (providing jobs thereby generating income taxes etc.).

gotta love politicians

 

[Regular Guy]

So, there's facts, more facts, tax, and then what do we do. I have some links for you.

This topic has popped up numerous times over the years, I believe most recently here, and really, I was sort of hoping Neil was going to expand the discussion more.

I'll raise a couple of what seems to be facts only, will invite corrections, and will throw in some implications...none of which may go to the primary, unstated, patriotic issue raised by Neil...and perhaps that is the unstated motive embedded in the purpose of his thread. I will, I suppose, invite him to address this question, because it's the first one I have. (For this paragraph...no links).

Taking advantage of the logic that makes google as good as it is (using the pattern of searches that other users engage in to draw forward its sort of what is most relevant, etc.), note that when you enter into google: internet sales tax, one of the top documents fetched is a plainly stated review of the "facts" produced by Nolo, also here. This is not new, of course, but it does rise to the top, on Google, and we must note that this topic is not new. Language included in this article, with respect to the laws concerning tax, if you'll review it with me, includes the terms: "technically," and "theoretically," with respect to paying this tax.

I will just hand wave to provide this link, which goes to information concerning the Streamlined Sales Tax. The link above from Nolo does tell the story...it seems that the concern with respect to collecting tax on internet purchases goes back to a 1992 case, and then in 2002, solutions were contemplated, in the form of what States had contemplated, and this "streamlined sales tax" rule. Now, I am no accountant, and I can read the headlines like anyone, concerning the need more than ever by states for cash. But, coincidentally, I work at one of the 5 big tax research firms, who document what is contemporary in the world of taxation. On our "state research" portion of our service, we actually, until quite recently, used to feature prominently, a link that provided information about this streamlined sales tax. But...well...we don't right now, that I can see. My best guess is that this movement from 2002 had promise, but is actually just not moving forward to speak of, and since our tax research materials are supposed to be contemporary, therefore, we removed links to it.

Going back to the original google search for: internet sales tax, you will find other more recent references, saying that it's really gonna happen very soon. Maybe it will or maybe it won't. Neil's single article here may be the most specific motivating action that will make people start to pay those taxes that the law really does ask us to pay. Personally, I would like to know for those people a) who have already stuck their neck out to comment on his article...whether or not b) they have already have had cause to pay such a tax and have paid it, and/or c) now intend to, the next time they make a purchase that could suggest it would be needed. For my part, using the impetus of the introduction of Neil's article, I chose to introduce a separate thread here on another matter that I thought did genuinely touch on substantive matters of public policy, and I can say I am learning some things there.

At this point, it's not clear what the issue is. Is it public policy? Patriotism? A review of the law? Is it an understanding of what causes action, and how we can effect it? For some years, I've mentioned Bayesian statistics. I still don't understand it much, but do think it's related, and once again, asked my friend google to come up with something from: Bayesian statistics made simple, and turned up at least this link. It starts with an example of marbles in a sock. A primary question for us, depending on what past responders might have said about their pattern of practice with respect to proactively paying state based sales & use taxes, as well as future responders is...what would really make a difference about this practice for us, how much should we be concerned about it individually, and what will be our own causes of motivation.

With appreciation,

 

[denverappraiser]

Ira,

I think you’re reading too much into my motivations. There’s a huge amount of confusion over this topic, it comes up regularly and although most of the regulars know the rules, there are routinely people confused about. It seemed appropriate to have an article to clearly answer the question as it stands and to clearly outline a procedure how future consumers and dealers can stay in compliance with the laws if they choose to do so. This is not new and nothing has changed (yet). It’s been the situation ever since Al Gore invented the Internet. These are easy taxes to evade, lots of people do it, and so far the prosecution level has been fairly low for a variety of reasons including a Federal desire to encourage Internet commerce, some sticky constitutional questions about state’s rights and jurisdictions and simple laziness on the part of revenuers among others. For plenty of people that’s enough reason not to pay and that decision is between them and the taxman but it shouldn’t be because they didn’t know the rules or because they were led down the primrose path by some merchant. I don’t bring this up in conversation with very many people because it’s not really good cocktail party chatter and probably wouldn’t lead to me getting more dates but I would venture to guess that a significant majority of people in the US do NOT know that they probably still owe taxes on their Internet purchases even when the merchant doesn’t collect them.

I’m not surprised that there aren’t a lot of people wishing to discuss this. Issuing tax advice is most certainly a 3rd rail sort of topic and it goes directly against the objectives of most of the people who come here … getting the same stuff for less money. Speculating on what lawmakers may do in the future to bring in more money is indeed an interesting topic for lots of us but the purpose of the article to make sure that everyone is starting out at the same baseline in understanding how it works NOW. Pricescope is about empowering consumers and part of that is helping them to understand the truth about the deal they’re getting into, even uncomfortable truths.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[Lorelei]

Date: 11/4/2009 11:35:47 PM
Author: Wink

Date: 11/4/2009 7:55:46 PM
Author: John Pollard
Agreed. Reading that was not taxing.

(Nice job Neil)

Boo! Hisssssss!

That was for John''s pun ishment.

Agree, Neil, that was well done.

Wink

 

[Karl_K]

Date: 11/5/2009 8:05:46 AM
Author: Regular Guy
Personally, I would like to know for those people a) who have already stuck their neck out to comment on his article...whether or not b) they have already have had cause to pay such a tax and have paid it, and/or c) now intend to, the next time they make a purchase that could suggest it would be needed.

Every year.
I run my own business and if you buy online and claim it as a deduction and don''t pay the use tax you will get nailed eventually.

 

[Regular Guy]

Thank you Neil,

Karl...

Date: 11/5/2009 9:56:46 AM
Author: Karl_K

Date: 11/5/2009 8:05:46 AM
Author: Regular Guy
Personally, I would like to know for those people a) who have already stuck their neck out to comment on his article...whether or not b) they have already have had cause to pay such a tax and have paid it, and/or c) now intend to, the next time they make a purchase that could suggest it would be needed.

Every year.
I run my own business and if you buy online and claim it as a deduction and don''t pay the use tax you will get nailed eventually.

...yes, though they may not catch you...that sounds stupid.

Certainly, earlier purchases of jewelery, though, before you were a business concerning gems and such...this was not a business expense, was it?

 

[Karl_K]

Date: 11/5/2009 10:06:56 AM
Author: Regular Guy
Thank you Neil,


Karl...

Date: 11/5/2009 9:56:46 AM

Author: Karl_K

Date: 11/5/2009 8:05:46 AM

Author: Regular Guy

Personally, I would like to know for those people a) who have already stuck their neck out to comment on his article...whether or not b) they have already have had cause to pay such a tax and have paid it, and/or c) now intend to, the next time they make a purchase that could suggest it would be needed.

Every year.

I run my own business and if you buy online and claim it as a deduction and don't pay the use tax you will get nailed eventually.

...yes, though they may not catch you...that sounds stupid.


Certainly, earlier purchases of jewelery, though, before you were a business concerning gems and such...this was not a business expense, was it?

That is a pretty personal question indirectly asking if I paid it.
The answer is yes I did and no it was not a business expense.
One of my clients got nailed on it for his office supplies.
They went back 7 years and every deduction he couldn't prove he paid tax on they added it to the tab then added interest and penalties.
He ended up paying around $20000.00

 

[WinkHPD]

When I buy something from out of state for the office I put in on the use tax report when I submit sales tax the next month.

No way I play games with the tax man, they get paid to catch cheats, I get paid to sell rocks. I always assume that they are smarter than I am about taxes, so far they have always proven me correct...

Wink

 

[Regular Guy]

Wink and Karl,

Well, this is all public but especially personal. Wink, in particular, though I''m not Catholic, and I''m probably incorrectly suggesting you''ve committed the sin of omission...

Date: 11/5/2009 1:53:44 PM
Author: Wink
When I buy something from out of state for the office I put in on the use tax report when I submit sales tax the next month.

No way I play games with the tax man, they get paid to catch cheats, I get paid to sell rocks. I always assume that they are smarter than I am about taxes, so far they have always proven me correct...

Wink

...clearly, when most folks buy an engagement ring, it is not for the office...

 

[Karl_K]

On a related subject NY is going after Jewelers that help in state residents avoid sales tax.

http://www.brooklynda.org/press_releases/pr_jun_09.htm#01