May 24 2010

Do you pay sales tax for online purchases?

Yesterday when sharing my camping gear deals, I mentioned that I wasn’t charged sales tax, since I bought from an online place that doesn’t have a Pennsylvania location.

Reader AnnMarie commented:

“You didn’t have to pay sales tax up front, but that’s because the company isn’t collecting it on behalf of your state. But almost every state requires that YOU pay the sales tax, reporting all online purchases for which you did not pay sales tax when you file your tax return, and paying it at that time.”

Hmm. At first, I thought…well who actually does that? And is it even true?

Turns out, oh yes it’s true.

It’s called “use tax.” The Commonwealth of Pennsylvania describes its importance here, basically stating that when we don’t pay sales tax on an out-of-state item, we’re hurting businesses that are in our state since they can’t be as competitive. Because yeah — it’s essentially a 7% discount to shop out-of-state if you don’t pay the sales tax.

Pennsylvania residents — here is the form you need to use. The tax is due by the 20th of the month following the purchase.

Interesting stuff.

First of all, states (at least, PA) are not doing a good job of publicizing this. I didn’t even know it existed until AnnMarie called my attention to it.

Some Googling showed that there had been attempts at legislation to require online vendors to collect sales tax on behalf of the consumer, but it doesn’t look like that has made progress.

Honestly, if states want their tax money from online purchases, they are going to need it automated. Because if people can fairly easily avoid paying taxes, they’re going to. How can the government monitor your online purchases? You’d like to think they can’t just be all Big Brother about it and know…but ya never know.

Do you send use tax payments to your state every month that you’ve made a qualifying purchase? What do you think about the issue?



6 Responses to “Do you pay sales tax for online purchases?”

  1. Hmm… I’ve never done that, in either state I’ve lived in. I’ve also never been told to or heard it discussed. I do know that on many Websites, when you buy something they add in sales tax if you live in certain states (when you put in your billing/shipping info). Every once in a while I’ll fall into the right category and it’ll be charged when I buy something at a particular vendor. I don’t even notice either way anymore.

    Interesting! But also seems odd that the state tax authorities wouldn’t be publicizing that more. Perhaps it is only enforced on expensive things, like cars and boats and things?

  2. I shop online all the time and like Bethany said, sometimes I am required to pay sales tax and sometimes not, depending on the store locations.

    I also had never heard of this tax law. Very interesting, and surprising that they haven’t just made it an automatic thing for all online purchases. Yet.
    .-= Mary @ Tips & Treasures´s last blog ..Free Nature Made Fish Oil Supplements =-.

  3. I am all for “giving to Ceasar what is Ceasar’s” and all that jazz, but c’mon! It’s not just that people can easily aviod paying this tax; they have to go out of their way to 1)find out about it and 2)pay it. With a new little one, I’m struggling to keep on top of paying bills on time for companies who WANT me to pay them. Maybe if the government made it a yearly chore, along with other state taxes, I’d at least make an attempt to estimate what I owe.

  4. This is definitely news to me, and I have to say…I’m not inclined to pay something that you have to dig around to find and then self-report. It’s not that I’m trying to get away with something, I just simply don’t have the time to keep track of my non-taxed purchases every month and then fill out paperwork about them.
    .-= Tiffany´s last blog ..Finding Great Deals in Unexpected Places =-.

  5. I had no idea until now, it’s much easier to pay the tax when you purchase something right up front, can they go back and track you down, this is ridiculous, I seriously did not know about this.

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

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