Sales Tax When Purchasing Online – Is There Anything We Can Do?
What is sales tax?
Simply – a tax that is assessed based on a purchase. For example in Connecticut the sales tax is currently 6.35%. So if I purchase something for $10 then it will really cost me $10.64. Not such a huge deal but if you apply that same sales tax to a car that costs $45,000 (in my dreams of course), it would cost $47,857.50. I may not miss the $.64 cents but surely would “miss” the $2,857.50!
There was a time not so long ago when Amazon didn’t charge sales tax. Then they started charging for some states and now as of 10/1/19 there are only a few that they do not collect and that seems to be primarily because those states don’t have a sales tax – Alaska, Delaware, Montana, New Hampshire and Oregon. It is hard to believe in this day and age that there are any states that don’t have a sales tax – but I guess it is true and makes me want to move from Connecticut!
There are still some online stores that have been able to get around charging customers sales tax. Generally speaking though – if they don’t charge sales tax, they are basically covering that tax through their profits. Which means you are paying it anyway just as part of the purchase price. It used to be if the online store didn’t have a physical presence – they didn’t need to charge sales tax. That isn’t necessarily the case anymore.
I don’t think the charging of sales tax has impacted online purchases at all – after all, we would be paying the taxes if we were at a brick and mortar store anyway. It was a nice little bonus before but it is what it is.
What can help?
Amazon is not the only online shopping experience that charges sales tax – more and more are. But you can still save money. I use apps/sites like Rakuten, TopCashBack and Swagbucks to try and get a rebate on any online purchases. My goal is to at least earn a rebate to cover my sales taxes but in some cases I can earn even more than that – alot more! Plus it is really nice to get that quarterly check or points towards gift cards.
Utilize sites that don’t charge sales tax – more of a person to person sale such as Facebook Marketplace, Craigslist etc… Bartering is another great option and the more expensive things are the more welcome bartering has become especially when it comes to services.
Sellers and sales tax
If you are a seller – make sure you are in compliance. This is serious business and you don’t want to get in trouble, nor do you want to get shut down simply because you haven’t been as careful as you can be. As a seller it is considered a pass through tax where you collect it and ultimately pass it on to the state either monthly, quarterly or annually (depending on the state). Based on the appropriate frequency you will need to submit the sales tax based on your nexus states. Each state is different and being late will result in being penalized financially – so don’t be late! I highly recommend a sales tax filing service so you don’t have to be stressed out about if you are doing it properly. Make your life as easy as possible and leave it to the specialists.