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Net Sales Tax - anyone falling for this?

by briancnet Roadshow staff / March 4, 2004 2:46 AM PST

New this year here in Calif. and NY, but 20 states now have a line on their income tax form demanding you declare and pay sales tax retroactively on 2003 online purchases that weren't taxed by the merchant at the time of sale.

Anyone falling for this? The law is on the side of the tax collectors, but I can't imagine . . .

Brian Cooley
Editor at Large, CNET

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Most states have had something similar...
by Edward ODaniel / March 4, 2004 3:15 AM PST

for several years on their Income Tax forms where you enumerate untaxed out of state purchases (such as mail order and magazine subscriptions, book club purchases, mail order sporting goods, etc.).

They rely on the filer's INTEGRITY.

If you have none declare none.

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Seems like you would have to have kept records, and know what's
by Kiddpeat / March 4, 2004 6:09 AM PST

taxable and what's not. You would also have to know the state's portion of the local sales tax. Seems like you should deduct shipping from the tax since, if you had purchased locally, you would not pay for shipping. Sounds pretty complicated, but I guess you could do it.

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Re:Seems like you would have to have kept records, and know what's
by Rolway / March 4, 2004 6:19 AM PST

Boy, thats begining to sound pretty complicated KP I don't think we have in this state, unless its "used sales tax from out of state" I'd would just put N/A and forget it.


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North Carolina has a simpler system ...

North Carolina calls the tax on goods purchased out-of-state a 'Use Tax' and allocates 'Use Tax' to both the county and the state.

The rules used to say that we had to keep track of all out-of-state purchases, how much sales tax was paid, and how much went to the other state vs the county in the other state. It was a nightmare to track and I never did have all of the relevant information. Even with Quicken doing the tracking I was never confident I got it right.

For the last several years NC state income tax form has allowed a simpler system. If the filer states that (s)he does not have complete records of all out-of-state purchases (I never did before, I certainly don't now) then there is an option to have the state estimate the 'Use Tax' based on your income. You still have to account for purchases valued $1000 or more but that is much simpler since most of us don't make too many purchases that large.

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You let the state 'estimate' your tax?
by Kiddpeat / March 4, 2004 1:45 PM PST

Sounds like a tax man's dream! In Illinois, we're just getting some refunds which were filed last April. The state has a bit of a cash flow problem.

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It's not a perfect system ...
by Bill Osler / March 5, 2004 9:28 AM PST

My suspicion is that their estimates are actually less than what I would pay under the old system so I'm quite content to let them estimate the tax. In any event it is MUCH simpler this way.

The estimate is based on average North Carolina consumer purchases. They basically claim a per cent of income. I probably order more online than the average person so their estimate is probably low in my case.

The problem with the alternate system is that it requires too much information and I just don't have the organizational skills to do a good job of organizing it. Too many companies do not specify which state's sales tax they are collecting, almost nobody specifies how much goes to the state and how much goes to the county ...

If the NC rules were simpler more people might follow them, but there is so much political fighting about the details and how the revenue gets split between state and county governments that almost nobody can follow the rules.

From my perspective the current system is a bit like a small increase in the state income tax. The down side is that the 'use tax' is not deductible on the federal form.

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They expect to collect on vacation purchases?
by Kiddpeat / March 4, 2004 1:51 PM PST

Are they nuts!?

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not on vacation purchases...
by Dick White / March 5, 2004 2:34 AM PST

they shouldn't care if the purchase was taxed by the other vacation state in which the sale occurred. What they are trying to collect on are all the purchases which occurred in the home state (i.e., it was ordered by phone or online from your home and it was delivered to you at your home) but were not taxed because the state's usual agent for collection of the sales tax (the merchant) is physically located in a different state and as a consequence did not (or actively refused to) act as an agent of the purchaser's home state in collecting the tax.

This is going to become a bigger and bigger problem. It is so easy now to comparison shop online for the best price or selection and then let UPS or FedEx "bring it home from the store" in a few days for me.


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Re: not on vacation purchases...
by Dave Konkel [Moderator] / March 5, 2004 12:41 PM PST

Hi, ****.

Of course, this may severely damage the Internet sales if it actually happens. Most people figure the absent sales tax is offset by the shipping charges, in terms of total monetary impact. Shipping charges PLUS sales tax and many might re-think...

-- Dave K, Speakeasy Moderator
click here to email semods4@yahoo.com

The opinions expressed above are my own,
and do not necessarily reflect those of CNET!

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Re:Re: not on vacation purchases...
by Roger NC / March 5, 2004 9:06 PM PST

Raises the old taxes on internet business moratorium issue again tho doesn't it?

While encouraging emergent internet business might be a good thing, I have to wonder how long we should expect local business to operate at a government sanctioned disadvantage?

Of course, many states are attempting the same as NC, to make each citizen and unpaid employee of the state IRS to track, report, and collect sales tax by the name of use taxes.

Sooner or later the states and feds are going to have to agree on how to handle stuff sold by business that do no business in their own state, and collect no taxes for states they are shipping goods to customers.


click here to email semods4@yahoo.com

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If I understood what it was originally
by Roger NC / March 5, 2004 9:27 PM PST

and not sure if is still the same, the law about things I would buy while travelling were still taxable, but I was allowed to subtract what sales tax I paid in the other state.

So if the other state had higher taxes, I was done with it. But if NC had higher sale taxes, I would be expected to pay the difference.

It actually began many years ago, but for years few people even knew of it, and less paid it any attention.


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