California Internet shoppers, beware of the tax collector
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California Internet shoppers this holiday season better hang on to their sales receipts in case the tax collector comes calling.
The state’s sales tax collection agency, the Franchise Tax Board, and a coalition of California retailers, the Alliance for Main Street Fairness, warned Tuesday that shoppers could wind up with a tax-due bill if they get audited for Internet purchases.
‘Many web sites do not collect sales taxes, but that doesn’t mean it is not owed,’ the alliance said in a ‘Holiday Shopping Tips’ news release.
The agency stressed that if the seller doesn’t collect a base 8.25% sales tax on an Internet purchase, then the buyer legally is required to pay a ‘use tax’ at the same rate for the goods.
The release lays out what it calls ‘five easy steps for complying with sales tax requirements’ that -- in reading -- don’t seem easy at all.
Step one is check and see if you might be paying the tax. If so, there’s nothing more for the buyer to do.
Step two is keep all paper and electronic receipts.
Step three is go online to calculate your local and state use tax rate.
Step four is go back online to get a Use Tax Return form.
Step five is pay your taxes. The easiest way to make the payment is through the annual state income tax return.
What the news release doesn’t say is that fewer than 1% of individual Internet shoppers pay the use tax, and that the state doesn’t attempt to collect the money on most transactions.
For that reason, California recently passed a new law that would require Internet sales giant Amazon.com and many other e-sellers to start collecting sales taxes and remit them to the state. Amazon has agreed to start doing so in September of next year.
The law, though, does not cover many out-of-state Internet sellers that do not have any bricks-and-mortar or sales affiliation links to California.
To close that loophole, California and other states are lobbying the U.S. Congress to pass a national law that would set uniform rules for all states to collect sales taxes from Internet sellers. A number of bills with bipartisan support are being considered by the U.S. Senate and House of Representatives.
The Board of Equalization estimates that the state loses more than $1.1 billion a year in unpaid use-tax revenue.
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-- Marc Lifsher
