Tag Archives | sales tax holiday

Avoiding sales tax on the Internet? Probably not for long.

If you buy stuff online, I can almost guarantee that you are a tax scofflaw.

How can I say such a thing? Well, if you live in a state with a sales tax, you’re supposed to pay that tax on anything you buy from internet companies that are located out-of-state.

What, you haven’t sent those sales tax payments in directly to your state revenue office? Shame, shame.

You’re not the only one, of course. And the states know that millions of dollars of sales tax is going uncollected when people make purchases from companies–the gorilla in this zoo is Amazon.com–that have no physical presence or what we tax weenies call, “nexus” in a state.

The states generally aren’t going after consumers, although you may have noticed a line for internet sales tax or use tax pop up on your state returns in the past few years. It’s a lot more practical for the state to try to collect sales tax from one vendor than from hundreds of thousands of consumers.

Is it right for your friendly neighborhood bookstore to have to compete with an out-of-state company that doesn’t have to charge sales tax? Whether it is or not, states are looking for ways of collecting tax on internet sales. And internet giants like Amazon.com are fighting back.

How much does Amazon hate the idea of having to collect sales taxes? In California, the company has already spent $5.25 million to back its proposed 2012 referendum on overturning the state’s new requirement that it and other internet businesses collect sales taxes from California customers.

The Amazon-backed referendum is no sure thing–the company will have to gather more than 425,000 valid signatures before the end of September for the measure to get on the state ballot in 2012.

What’s really interesting about this is that the sales tax is, of course, a tax on consumers and theoretically wouldn’t take any money out of Amazon’s pockets. Apparently the competitive advantage of not charging sales tax is great enough that Amazon feels it’s worth spending millions to fight back.

Stay tuned–this one isn’t over by a long shot.

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