Why Online Holiday Shopping Could Result in an Unexpected Tax Bill

By ResidencyHQ  DEC 03, 2012 11:47 AM

States have begun to pursue online retailers for their customers' address information to ensure they are paying their share of state sales taxes. Find out what further steps they are taking toward helping you fulfill your state tax obligations.

 


MINYANVILLE ORIGINAL Not long ago, the state of North Carolina decided to sue Amazon.com (NASDAQ:AMZN) in an effort to obtain information on any North Carolina resident that had bought goods from the site. Amazon of course refused and subsequently dragged out litigation, but North Carolina’s move was only one of the first against the online retailer to get it to charge online sales tax that is legally due.
 
The tax pressure against sites like Amazon have been very public, and the coverage quite extensive.  But how have the states moved forward on the topic? And does it affect you directly, especially since the customer is actually the one responsible for the tax payment? Should you be worried, and do you need to check your online receipts to be sure your state sales tax was indeed accounted for in your purchase?
 
Let’s back up for a moment before we answer those questions directly. 

In states where sales taxes have long been a primary revenue source, legislators developed ways decades ago to capture sales tax from their residents. Florida, for example, has no income or estate tax which means they rely heavily on sales taxes to fill the state coffers.  Florida began looking at shipment manifests for trucks to determine delivery from outside states to their residents as those trucks crossed state lines. These bills of lading outlined what was getting delivered, from where, and to whom. The state would then send a copy of the bill to the resident, along with a letter that outlined their tax responsibility. While no one likes receiving a tax bill, it was usually enough to spur a reluctant payment from the resident. And this practice still exists, but states are now trying to become more savvy and efficient in their search for unpaid taxes.
 
Moving back to North Carolina, the aforementioned lawsuit resulted in Amazon building a large distribution center in neighboring South Carolina instead of North. It was clear that lines were being drawn and if the state intended to hold the company’s feet to the fire, Amazon was willing to play the same game by excluding the state from new jobs, new residents, and new income sources.

Oddly enough though, South Carolina did not willfully turn a blind eye to the tax issue. The state negotiated a tiered approach, where Amazon would implement the state’s sales tax over time which would help even out company revenues (and competitive edge), but also satisfy the state’s sales tax need. This compromise is something that will be worked out eventually with each state, and quite frankly, these are just the inevitable growing pains that will continue to occur as our world adjusts to a more mobile and tech based economy.

The point here is that states are catching up, they are finding ways to ensure they receive their legally owned slice of your proverbial pie, and the burden is slowly shifting onto that of the resident instead of the offending company.
 
Today, there aren’t many states actively pursuing sales tax to the extent North Carolina has. But, the burden is truly the consumer’s, not the company’s. So does this affect you now? And how might it into the future?
 
Legally, you need to be paying your state sales taxes as required. But, there aren’t many states that currently have the capability to hold you to the obligation. There are many states trying to close the existing ‘loopholes’, but as usual, it will be difficult for them to keep up. Technology moves so fast these days, that it really would be inconceivable to expect otherwise.
 
But if you do live in a state where actions are being taken to ensure you are paying your fair share, it is worth considering how much tax avoidance/delinquency is worth. States are making their rules stricter and punishments harsher. Instead of owing just the tax that is due, states have started implementing penalty and interest assessments. The clock begins ticking when you have been put on notice via letter, and the juice accrues until the meter is paid in full.
 
These ‘taxes plus some’ tactics are requiring residents to reconsider their choices. Omission and negligence are no longer viable excuses in many states, so you need to be very aware of how your state is positioned. In this world, your ability to keep up with news that impacts you directly is becoming simpler, so responsibility is falling on the shoulder of the resident more than ever before.  It is strongly suggested you stay ahead of the curve, allowing you to make choices ahead of state mandates, and keep you and your family away from a possible state residency audits or otherwise.
 
Hard truth is the tax man cometh, and with him are not tidings of joy, but a bountiful bill for you and your’s! Proactivity now can save you a lot of trouble in the long run!

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