Question

the sales tax treatment of internet or mail-order purchases is quite controversial, as discussed in the section. think about the products you have purchased using the internet or by mail order in the recent past and roughly how much you spent. does NY state have a use tax? did you pay the use tax on taxable items? why or why not? how much did the opportunity to avoid sales tax influence your decision to purchase over the internet or by mail order? do you think that companies that sell through the internet or by mail order should be required to collect state sales or use taxes on purchases? if not, then what other methods might state use to collect these taxes?

Answer 1

For consumers that order tax-free items online, but live in states that charge a sales tax, they are technically required to report that purchase to their state tax agency and pay the sales tax directly to the agency. When consumers are required to do so, it is often called a "use" tax.

But I did not pay sales tax. Yes it did influence my decision. Companies that sell through the internet or by mail order should be required to collect state sales or use taxes on purchases.

cases where Internet sales are indeed subject to state sales taxes depends on:

Where the Buyer Is Located:

Generally speaking, if an online retailer maintains a physical presence in a state that charges a sales tax on most purchases, then that online retailer must charge sales tax on any items that are sold to customers within the home state. However, if the online retailer is selling an item to a customer outside of its home state, then it is not required to collect sales tax from that customer.

Large websites avoid sales tax by establishing subsidiaries that are solely responsible for the Internet part of the business model.

The issue becomes complicated when the online retailer allows a customer to make returns to a brick and mortar store that is technically a separate legal entity. Consumers will buy an item online that is free from sales tax, but are then able to return those purchased items to brick and mortar stores.The sole difference between a sales tax and a use tax is the person that ends up giving the money to the state government. When it is a sales tax, the retailer is the one handing over the money, while a use tax is handed over directly by the consumer. However, collecting use taxes on small purchases often costs more than simply letting the consumer not pay the use tax. Instead, state tax agencies try to focus more on collecting use taxes for big ticket items that are purchased online with no sales tax, such as cars and boats.