Are you an online-shopping tax cheat?

Senate to vote today on bill easing states' ability to collect such taxes
2013-05-06T00:03:00Z Are you an online-shopping tax cheat?The Associated Press The Associated Press
May 06, 2013 12:03 am  • 

Buy anything on the Internet lately without paying sales tax? In all but a few states, you're probably a tax cheat.

That's right, even if Internet retailers don't collect sales tax at the time of the purchase, you're required by law to pay it in 45 states and the District of Columbia.

Here's the problem for states: Hardly anyone pays the tax, and there's not much states can do about it.

The Senate is expected to pass a bill Monday making it easier for states to collect sales taxes for online purchases.

Big retailers, such as Walmart, Best Buy and Target, with stores all over the country collect sales taxes when they sell goods over the Internet. But eBay, Amazon and other online retailers don't have to collect sales taxes, except in states where they have offices or distribution centers.

As a result, many online sales are essentially tax-free, giving Internet retailers an advantage over brick-and-mortar stores. But the purchases aren't really tax free under the law.

In states with sales taxes, if you buy something from an out-of-state retailer and don't pay taxes, you are supposed to pay those taxes when you file your state tax return, said Neal Osten, director the Washington office of the National Conference of State Legislatures.

Only Delaware, Montana, New Hampshire and Oregon have no sales tax. Alaska has no state sales tax but does have local ones.

Unpaid sales taxes are usually referred to as "use taxes" on state income tax returns. Use taxes apply to purchases made over Internet, from catalogs, television and radio ads and purchases made directly from out-of-state companies.

Sen. Mike Enzi, R-Wyo., the main sponsor of the Senate bill, said it would empower states to require businesses to collect taxes for products they sell on the Internet, in catalogs and through radio and TV ads. Under the bill, the sales taxes would be sent to the states where a shopper lives.

Businesses with less than $1 million a year in out-of-state sales would be exempt.

The Senate is expected to pass Enzi's bill Monday. Already, the measure has survived three procedural votes. President Obama supports it, but the bill faces an uncertain fate in the House where some Republicans consider it a tax increase.

Supporters say the bill is about fairness for local businesses that already collect sales taxes, and lost revenue for states. Many governors, both Republicans and Democrats, have lobbied the federal government for years for the authority to collect sales taxes from online sales.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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