Monday, July 4, 2011

Internet Sales and Taxes

Okay, today, I'm not writing a fluffy craft piece (b/c we all know that I'm so good about writing those regularly). Today is the 4th of July, Independence Day and I'm writing something a bit more - um - political - yeah, that's a good word for it.

The internet is a great marketplace - you can find what you want at the best price and have it shipped to you without getting out of your PJ's or at 2 AM! But with our government in financial distress (National debt ceiling will be reached Aug 2), they are looking for ways to boost revenues through manipulation of various tax laws. This isn't just happening on the National front. Take for example, state sales tax. Now I know that the whole Boston Tea Party thingy was about the stamp tax on tea so sales tax has been around for a LONG time and it sort of makes rational sense (although I can see it as also taxing money twice since that money was taxed as income already).

So with that thought, how do you get around paying sales tax? Buy something from a merchant that does not have a physical presence within your state. uh... well, that's not all together true - you aren't subject to sales tax upon payment but you actually ARE supposed to pay a tax on those items. It's called Use Tax. It is only very recently that I have figured out what it is when TurboTax asks me about it. Basically, this varies state to state a little bit but you should keep track of everything you buy out of state - whether online or while traveling and record any taxes you pay on those purchases. If you did not pay taxes on an item, you are responsible for paying use tax (which is generally equal to sales tax) to your state on your annual tax return. If you did pay sales tax on an item, you owe your state the difference if your state charges more tax than where you bought it. However, this tax isn't well-enforced and most people just plain don't know about it. More info and some tax remittance forms are available on GoTo's blog

Here's the kicker now - Some states want to apply sales tax to internet purchases made out of state to in-state businesses. California is the most vocal about pushing it through but they aren't alone in exploring this. Will this help increase revenues? I'm sure it will. Is this a good solution? Is it fair? I'm not sure about that.

There is another movement called Streamlined Sales Tax Project that seeks to unify tax rules and definitions across the states. This seems a bit like Canada's HST (Harmonized Sales Tax) which Canadian Etsy sellers say is fairly easy to do. Hmmm... much to think about! Now, to keep track of my online purchases so I can comply with Use Taxes...

Happy 4th of July!

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