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Mon Sep 19, 2016, 12:36 PM

 

"Use Tax": How many of us actually pay it?

If you're not familiar, Use Tax is "a sales tax on purchases made outside one's state of residence on taxable items that will be used, stored or consumed in one's state of residence and on which no tax was collected in the state of purchase." i.e. We're all supposed to be paying sales tax on our online purchases: Amazon, Ebay, any other online business. If the website itself doesn't calculate and charge you the tax, you're supposed to figure out what you owe and submit it with your year-end taxes. Most tax software today has a section dedicated to helping you calculate and pay this tax.

While some states already have at least some arrangements to collect sales tax (usually because a retailer has a physical presence in that state), many states do not. And many online businesses don't have arrangements to collect sales tax for any state besides that in which they are HQ'd. So a significant amount of the collection is up to taxpayer honesty.

An NPR article a few years ago said that while 45 states have a use tax (i.e. a system through which people can calculate and pay their owed sales tax), only about 1.6 percent of the taxpayers in those 45 states actually pay the use tax . There's something like $11 billion dollars that states are missing out on here.

My question is, how many of us are actually calculating and paying this tax every year? Are we practicing what we preach when we talk about all taxpayers paying their fair share?

I'll start; I make an effort to calculate any owed sales tax from the main places I buy online (Amazon and Ebay), but don't for the places I might buy something from one time. So I'm at least partly avoiding it.

On edit: asking because we have a business client undergoing its annual audit and they're being scrutinized regarding online purchases and whether use tax was paid, and over lunch several of us started speculating just how ubiquitous avoidance is at both the business and consumer level.

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Arrow 20 replies Author Time Post
Reply "Use Tax": How many of us actually pay it? (Original post)
MadDAsHell Sep 2016 OP
yeoman6987 Sep 2016 #1
whatthehey Sep 2016 #2
Takket Sep 2016 #3
KT2000 Sep 2016 #4
LuvNewcastle Sep 2016 #10
MadDAsHell Sep 2016 #11
LuvNewcastle Sep 2016 #13
whatthehey Sep 2016 #16
KT2000 Sep 2016 #15
Shrike47 Sep 2016 #5
Lee-Lee Sep 2016 #6
ProfessorGAC Sep 2016 #7
bluestateguy Sep 2016 #8
unblock Sep 2016 #9
MadDAsHell Sep 2016 #12
CBGLuthier Sep 2016 #14
Ron Obvious Sep 2016 #17
sarcasmo Sep 2016 #18
MadDAsHell Sep 2016 #19
bigwillq Sep 2016 #20

Response to MadDAsHell (Original post)

Mon Sep 19, 2016, 12:38 PM

1. I'm in Florida so Amazon does add the tax. I would not want to mess around

 

Doing it otherwise. I would not be the 1.6 percent that would add it. Shame on me I suppose.

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Response to MadDAsHell (Original post)

Mon Sep 19, 2016, 12:42 PM

2. Nope. Don't particularly avoid sales tax either. Taxes should be income and wealth based however.

I shop online based on product price and seller credibility. Don't even check whether they charge sales tax or not. Certainly don't go trying to find ways to pay it.

And before people get too sanctimonious, do you all send in the price of a speeding ticket, another local revenue generator, every time you exceed the posted number?

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Response to MadDAsHell (Original post)

Mon Sep 19, 2016, 12:43 PM

3. I actually do

I've never met a tax preparer that said anyone else ever kept track of their purchases. In Michigan you could report your online spending and the 6% tax is calculated and deducted from your refund, or you could use the "tax table" which came up with some number, I don't remember how, that was much less. The tax table is perfectly legal as the state gives you that option but it was actually my wife, who is terrified of being audited that insisted we keep track of it every year. It usually amounts to about $60.

So I sort of laugh when I see people up in arms about major websites collecting sales tax as if the government is trying to rip them off, but the law is already in place. In the last year or so amazon and most other sites started collecting sales tax so in 2015 we did not pay any use tax since it was all collected through the websites.

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Response to MadDAsHell (Original post)

Mon Sep 19, 2016, 12:44 PM

4. I live in Washington so

most of what I buy online is taxed. Amazon has bought up the main businesses I buy from. Actually I don't think I have ever not been taxed online.

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Response to KT2000 (Reply #4)

Mon Sep 19, 2016, 01:23 PM

10. So Amazon automatically adds on your state's tax?

I hope that's the case, because about 95% of what I buy online comes from Amazon. I have Prime, so it's much cheaper for me to pay the amount for it than to pay all of the shipping costs.

I don't intentionally seek ways to avoid my taxes, I'm just lazy and I don't want to keep up with it. There should be some way for the taxes to be added automatically for any site. If the states really want the money, they should figure out a way to do that.

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Response to LuvNewcastle (Reply #10)

Mon Sep 19, 2016, 02:10 PM

11. Depends on your state. You would see tax on the checkout screen if Amazon was automatically taxing.

 

There's still maybe 10-15 states that don't pay automatically pay tax on Amazon...yet.

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Response to MadDAsHell (Reply #11)

Mon Sep 19, 2016, 02:27 PM

13. Thanks. I think I've seen tax added before, but I couldn't

swear it. I guess I'll find out next time I buy something, which will probably be any day now.

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Response to LuvNewcastle (Reply #13)

Mon Sep 19, 2016, 02:56 PM

16. Amazon though isn't always Amazon

IANAL but I believe there is a fairly common sales threshold before an internet seller needs to start collecting sales tax from states where they lack a physical presence. $1MM rings a bell. Now Amazon has facilities all over and doubtless exceeds $1MM in all 50 states. But a huge ratio of goods you buy on Amazon, even new goods, even when fulfilled by Amazon, even shipping Prime, are actually sold by someone else and unless THEY sell more than $1MM in your state neither they nor Amazon is bound to charge you sales tax. My last notable purchase from Amazon was a laptop which I just checked had no sales tax. It was sold by a third party.

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Response to LuvNewcastle (Reply #10)

Mon Sep 19, 2016, 02:55 PM

15. Yes - I buy fabric

from a company in Georgia. There was no tax added until Amazon bought them. I do custom sewing so I tax according to the location of the customer - that means isolating city or county taxing districts.

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Response to MadDAsHell (Original post)

Mon Sep 19, 2016, 12:53 PM

5. I live in Oregon, no sales tax.

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Response to MadDAsHell (Original post)

Mon Sep 19, 2016, 01:10 PM

6. I report some on my returns every year

 

It's a best guess as I don't track it every year, but if it's a tax owed I'll pay what I owe as best I can figure it. I'm not skipping what's owed because "everybody does it".

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Response to MadDAsHell (Original post)

Mon Sep 19, 2016, 01:13 PM

7. Definition Is Awfully Specific, Isn't It Mad?

I don't do a lot of on-line shopping, and tax is added for my state on my regular purchases, but seems like there are more use taxes than this.

Technically, aren't license plates "use taxes". The money goes to the roads.

Like i said, i don't do a lot of on-line shopping so i was unfamiliar with this definition, but i think we all pay a lot of use taxes without necessarily thinking of them like that.

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Response to MadDAsHell (Original post)

Mon Sep 19, 2016, 01:14 PM

8. I pay it, but I'm sure I miss a few receipts here and there

I can't save every receipt for every little trinket I buy online for 11 months.

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Response to MadDAsHell (Original post)

Mon Sep 19, 2016, 01:19 PM

9. as a practical matter, seems to me it's mainly for cars

to deal with car buyers going to a nearby state with no or lower sales tax to buy their car but then use it in the higher tax state.

big ticket item and one that it tracked through registration, so, hard to evade if you were inclined to evade taxes.

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Response to MadDAsHell (Original post)

Mon Sep 19, 2016, 02:11 PM

12. I wonder if any websites are including local option sales taxes yet, or if it's only state. nt

 

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Response to MadDAsHell (Original post)

Mon Sep 19, 2016, 02:39 PM

14. Sales taxes and use taxes are regressive and don't have shit to do with people paying their fair

share. I will worry about the god damned use tax in my state when they start taxing the rich again.

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Response to MadDAsHell (Original post)

Mon Sep 19, 2016, 04:29 PM

17. Not me

I never try to get out of taxes I owe and I'm always happy to pay my fair share, but I just can't see any reason why King County and Washington State should get any money when I buy books at Powell's in Portland. The only Washington State infrastructure I use in those transactions are the roads, and I pay for those through gasoline taxes.

It's bad enough that the US is the only country on earth that thinks it's entitled to taxes on money earned abroad.

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Response to MadDAsHell (Original post)

Mon Sep 19, 2016, 04:47 PM

18. Paid 1500 tax year 2015

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Response to sarcasmo (Reply #18)

Mon Sep 19, 2016, 08:59 PM

19. you, my friend, are a gentleman (or gentlelady) and a scholar. nt

 

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Response to MadDAsHell (Original post)

Mon Sep 19, 2016, 09:01 PM

20. I probably pay it, but not sure

 

We pretty much pay taxes on breathing in CT

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