Results 1 to 9 of 9
  1. #1
    Join Date
    Sep 2017
    Posts
    14

    Default Sales Tax when Purchasing Online from Another State

    I live in CT, and have just purchased an item from a vendor in CA, which was shipped to my home. The sales tax applied is not the 6.35% rate we have here in CT - it's higher.

    I am still waiting for them to get back with me, but in the meantime -

    We are not talking about Etsy, Amazon, etc. It's a small, local brick and mortar store, with one location in CA. My understanding is that if they have a presence in CT, they charge sales tax at the CT tax rate, but if they do not have a presence in CT, they do not charge sales tax, and it is then up to me to pay the tax directly to CT.

    Is this the way it works?

    Thanks!

  2. #2
    Join Date
    Mar 2013
    Posts
    17,281

    Default Re: Sales Tax when Purchasing Online from Another State

    No, it's obviously not the way it works for that particular business.

    A business owner can choose to collect and pay sales tax anywhere.

    If you have paid more than your tax rate, keep careful records and you should be able to get a credit when you do your taxes. Look into that. Probably a lot easier than hassling with the seller.

  3. #3
    Join Date
    Jan 2011
    Posts
    303

    Default Re: Sales Tax when Purchasing Online from Another State

    Quote Quoting CharWorks
    View Post
    My understanding is that if they have a presence in CT, they charge sales tax at the CT tax rate, but if they do not have a presence in CT, they do not charge sales tax, and it is then up to me to pay the tax directly to CT.

    Is this the way it works?
    Not any more. Do a Google search on last year's "Wayfair" decision from the Supreme Court. Merchants need to collect sales tax and remit it to the purchasers state if their gross sales to that state exceed a certain threshold during the prior year; that threshold value varies by each state's law.

  4. #4
    Join Date
    Oct 2006
    Posts
    15,739

    Default Re: Sales Tax when Purchasing Online from Another State

    Quote Quoting adjusterjack
    View Post
    No, it's obviously not the way it works for that particular business.

    A business owner can choose to collect and pay sales tax anywhere.

    If you have paid more than your tax rate, keep careful records and you should be able to get a credit when you do your taxes. Look into that. Probably a lot easier than hassling with the seller.
    In your scenario this response is more likely to be accurate than bct229's response.

  5. #5
    Join Date
    Oct 2014
    Posts
    7,454

    Default Re: Sales Tax when Purchasing Online from Another State

    Quote Quoting CharWorks
    View Post
    It's a small, local brick and mortar store, with one location in CA.
    If the conditions met in CA Department of Tax and Fee Administration (CDTFA) Publication 101 were met then the seller was not required to collect the California sales tax. If the seller will not refund to you the sales tax paid then perhaps the state itself will.

    Quote Quoting CharWorks
    View Post
    My understanding is that if they have a presence in CT, they charge sales tax at the CT tax rate, but if they do not have a presence in CT, they do not charge sales tax, and it is then up to me to pay the tax directly to CT.
    That was the way it worked up until one year ago when the U.S. Supreme Court overturned its prior holding from 1992 that said an out-of-state seller must have physical presence in the state in order for the state to be able to compel that seller to collect sales tax on a sale to resident of that state. In the case from last year the court overturned that stating:

    The physical presence rule is a poor proxy for the compliance costs faced by companies that do business in multiple States. Other aspects of the Court's doctrine can better and more accurately address any potential burdens on interstate commerce, whether or not Quill ' s physical presence rule is satisfied.

    South Dakota v. Wayfair, Inc., 138 S. Ct. 2080, 2093, 201 L. Ed. 2d 403 (2018). So today CT could require that out-of-state seller to collect CT sales tax on a sale to you even though it had no physical presence in the state. Of course, if the seller fails to collect it you are indeed obligated to pay it yourself via the CT use tax.


    Quote Quoting llworking
    View Post
    In your scenario this response is more likely to be accurate than bct229's response.
    bcr229's answer was spot on, actually. Adjusterjack is not correct that CT would give a credit for the excess tax paid to CA. It won't. What it would do is allow a credit up to the CT tax rate, thus making the CT use tax for the OP zero. In short, there would be no CT use tax to pay here. But that doesn't do anything to get the extra the OP paid to CA back.

  6. #6
    Join Date
    Nov 2013
    Posts
    6,511

    Default Re: Sales Tax when Purchasing Online from Another State

    What percentage of the population do you think have any knowledge or understanding of what use tax is? Close to zero I think.

  7. #7
    Join Date
    Oct 2014
    Posts
    7,454

    Default Re: Sales Tax when Purchasing Online from Another State

    Quote Quoting budwad
    View Post
    What percentage of the population do you think have any knowledge or understanding of what use tax is? Close to zero I think.
    The use tax is not all that well known, which is one of the reasons the states with sales taxes were keen to get the Supreme Court to overturn the physical presence requirement and let them require the out-of-state sellers to collect sales tax on sales to their states. That said, a lot more people should be aware of the use tax in their state because most states with both an income tax and a sales/use tax actually put the use tax on the state income tax return. For example, see line 15 of the Connecticut CT-1040. So if you do the income tax return carefully you cannot miss that the state requires you pay use tax, too, and by signing that income tax return you are also attesting to the use tax being correct as well.

  8. #8
    Join Date
    Nov 2013
    Posts
    6,511

    Default Re: Sales Tax when Purchasing Online from Another State

    Quote Quoting Taxing Matters
    View Post
    The use tax is not all that well known, which is one of the reasons the states with sales taxes were keen to get the Supreme Court to overturn the physical presence requirement and let them require the out-of-state sellers to collect sales tax on sales to their states. That said, a lot more people should be aware of the use tax in their state because most states with both an income tax and a sales/use tax actually put the use tax on the state income tax return. For example, see line 15 of the Connecticut CT-1040. So if you do the income tax return carefully you cannot miss that the state requires you pay use tax, too, and by signing that income tax return you are also attesting to the use tax being correct as well.
    I don't disagree with you that people should know what a use tax is. But they don't and they don't keep records during the year to be able to compute what use tax may be owed. So if someone buys something and pays sale tax that is less than their jurisdiction's rate, they are supposed to pay use tax to compensate their jurisdiction the difference between what they paid and what their jurisdiction charges in sales tax.

    A business has a resale certificate to buy materials tax-exempt. They go to the supplier and buy materials that will be part of what they manufacturer. The sales tax will be collected by the reseller on the finished value. But they also buy some tools that will not be part of the product. They are required to pay use tax on those tools if they were not taxed on the sale.

    Only once in 45 years of business did one of my clients get a bill from their state for use tax based on a bill of lading.

    Point being that nobody pays attention to use tax.

  9. #9
    Join Date
    Oct 2014
    Posts
    7,454

    Default Re: Sales Tax when Purchasing Online from Another State

    Quote Quoting budwad
    View Post
    Point being that nobody pays attention to use tax.
    Many businesses do pay attention to the use tax, particularly medium to large firms, because they have to keep records for a variety of purposes, including, but not limited to, taxes and states do bust them for not paying use tax. And at the scale of larger businesses it is worthwhile for the state to put in the resources for it. But I agree that few individuals (and I put independent contractors in that category for this purpose) pay use tax or really track of their purchases to enable accurate computation of the tax. For a lot of them, they just don't know about it. For others they know but figure the state will never find out about their occasional out of state purchases. It does sometimes happen that individuals do get caught, but rarely does it make a big news splash such that it might motivate others to pay the tax. The states are fully aware of the use tax compliance problem, of course, which is why they wanted the Supreme Court to dump the physical presence rule and allow them to require the out-of-state sellers to collect the sales tax. And now that the Supreme Court has done just that in Wayfair, the states will start getting a lot more of their cut on those out-of-state sales.

    1. Sponsored Links
       

Similar Threads

  1. Business Issues: Online Wine Sales
    By lnib in forum Business Law
    Replies: 1
    Last Post: 03-25-2011, 12:07 PM
  2. Purchase Contracts: Can I Void Sales Contract - Buyer Changing Purchasing Parties and Financing
    By justcraig in forum Buying, Selling and Conveying Real Estate
    Replies: 2
    Last Post: 09-28-2010, 01:33 AM
  3. Drug Possession: Purchasing Controlled Substances Online
    By MOMTOCARLY in forum Criminal Charges
    Replies: 4
    Last Post: 01-11-2008, 04:03 PM
  4. Business Issues: Online Wine Sales
    By That's Me in forum Business Law
    Replies: 2
    Last Post: 12-14-2005, 03:36 PM
 
 
Sponsored Links

Legal Help, Information and Resources