When you make a purchase online, most states have laws that require you to pay taxes on those taxable items.
“What’s going on here? You’re no doubt aware that Colorado requires retailers to collect a state sales tax on most purchases. For example, when you check out at the grocery store, your receipt shows sales tax added.
What most people do not know is that, if they buy goods from out of state, whether online or while traveling, they are legally required to pay a “consumer use tax” on those items if the sales tax has not been collected. Because hardly anyone knows about this tax, and because the Colorado Department of Revenue makes almost no effort to enforce it, hardly anyone pays it. And that makes many or most Coloradans criminals under the law. ‘Willful’ non-compliance with the use tax is a class-5 felony.”
Essentially, if you buy something online, and your online store does not collect tax from you, then you are still liable for the tax on your purchase.
The above information is related to Colorado, but applies to citizens of most states. If you have any questions, check with your Attorney, CPA, Accountant, or an advisor of your choice.
Congress and states want to crack down on “tax cheats” (those not paying their Internet Tax). Everyone wants their hands on your money.
Not paying taxes is unfair to many retailers. Your customers are able to purchase many of the items you may be selling at a substantial discount because many of your customers are not paying the tax that they would pay if they made the purchase directly from your business.
California (for one) states that they are only able to collect 4% of the online taxes that is due to them.
Congress is getting involved and they plan to pass legislation to make sure that governments get every penny that they due.
I read a draft of the bill. It’s too complicated to summarize so read the draft at:
I could be wrong, but I’m not sure how much money is being siphoned from the states. If you make a purchase form Macy’s, Staples, BestBuy, and any of the larger retailers with an Internet Site, you are already paying your taxes. I’m not sure that passing a bill through the U.S. Congress is going to make a huge difference.
You will be hearing more about the topic in the media.