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Your Take: Should Online Purchases Be Taxed?

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TaxRight now, sales tax is only collected on online purchases if the vendor has a presence in your state. In the case of Amazon, sales tax is collected if the purchases are shipped to Kansas, Kentucky, New York, North Dakota, and Washington. In some cases, it’s because Amazon has a warehouse there.

I’ve personally always believed that states should collect sales tax on online purchases for the reasons outlined here. Basically, when you aren’t able to collect sales tax from online sales shipped into your state, everyone who pays sales taxes in your state will pay a little bit more than they otherwise would have.

Another reason why I think sales tax should be collected from online purchases is because it puts local stores at a disadvantage. Maryland sales tax is 6%, which is enough reason for me to buy something online if I can find it a little cheaper and avoid the 6% tax to boot. I understand I benefit from this sales tax “loophole,” but I can also recognize when it’s not in everyone’s best interest to keep it that way.

What do you think?

{ 66 comments, please add your thoughts now! }

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66 Responses to “Your Take: Should Online Purchases Be Taxed?”

  1. Cindy says:

    I don’t think any sales taxes should be collected, so I’m not really the person to ask. We’re taxed every time we breathe in this country. When you make it, when you spend it, when you save it, when you die. It’s ridiculous. So if online purchases aren’t taxed, I’m ok with that.

    • Ron says:

      I agree with Cindy. States should shift away from the Sales Tax model, online and brick and mortar.

      States dependant on Sales Tax tend to be highly regressive. The lower income residents pay a higher percentage of their income in taxes than wealthier residents.

      A November 2009 report by the Institute on Taxation & Economic Policy is a fairly comprehensive study of State taxes. http://www.itepnet.org/whopays3.pdf

    • jsbrendog says:

      tax just frustrates me, i understand it isn’t going anywhere but could they at least include it in the price? can’t you just tell me something is $14.09 instead of saying $13.50 + tax? pet peeve…

  2. Beth says:

    I find this funny that this is a debate at all! In Canada, they manage to tax us no matter what — even though some provinces have higher taxes than others. (Hello, HST!)

    I don’t like paying taxes any more than the next person, but I’d be a hypocrite if I didn’t say I like the things that taxes provide — like roads, emergency services and health care.

  3. Andrew says:

    Jim,

    If you read the comments on the article that you linked to as a way to bolster your position; then you would understand why requiring internet merchants to collect sales tax has no legal ground to stand on. Most, if not all, states put the burden of that collection on the taxpayer (consumer) when filling out their state income tax returns.

    Please do a bit more research before writing your articles.

  4. RT says:

    Funny that Cindy feels she is taxed so much. For individuals we have the 2nd lowest taxes in the world with only Sweeden having a lower rate than us.

    • Shckr7 says:

      Hello RT,

      Having a number of friends around the world, and including Sweden, I was surprised by your statement. Can you share your source? I have not had a chance to research this.

      Does it take into account all of the various taxes that are employed in the US? (Fed income, FICA/SSN/Medicare, State income, property tax, sales tax, etc?)

      Thanks.

      shckr

      • sophomore says:

        I am with Shckr7 – can RT provide data support the assertion? The IRS indicates that about 50% of US citizens pay no Income Tax. Perhaps RT is enjoying a tax holidy at Cindy’s expense.

  5. Ann says:

    I live in Chicago, I love that there is less or no tax on the internet because I pay at least 10.25% on everything else!

  6. Matt K says:

    so, if it’s getting shipped from new york to maryland, should I be paying 6% or 8.875% or some other % based on where the warehouse is?
    How about if I’m buying a present for someone from a store in delaware and getting it directly shipped to them in atlanta while i live in md? should i be paying 0% cuz that’s where it came from? 4% cuz that’s where it’s going? or 6% cuz that’s where I live?

  7. moljacks says:

    With the state of the economy, it probably helps a lot of people to shop online and not pay tax. However, imo, you are right when you say that we should pay taxes for online purchases. Maybe we could even help the economy right now.

  8. otipoby says:

    Sales tax in the US is generally left to the states (except for specific areas such as gasoline). If a cross-border tax were levied, this would most likely be a federal sales tax (interstat commerce clause). In general, I am against having the federal government encroach upon state rights. However, if this were part of an overall tax overhall, I could be persuaded. For example, if taxation of income were eliminated and supplanted with a federal sales tax, I would sign-up.

  9. Dylan says:

    It’s not a “Loophole.” It may be tax evasion. Most states have a Sales and Use Tax, and you are liable for the tax even if its not collected at the time of the sale. So just because the merchant does not collect it, that does not mean you don’t have to pay it.

    It’s not that different from income tax withholding. You pay tax on income, even if its not withheld at the source.

    Sales tax evasion is what puts local stores and instate purchasers at a disadvantage.

    • zapeta says:

      Exactly. I know there is a sales/use tax in IL that you are supposed to pay on any online purchases. Naturally, most people don’t. Given that most state budgets are stretched pretty thin it makes sense for state sales tax to be charged on all online purchases. It won’t hurt online retailers as there are a lot of advantages of buying online that brick and mortar businesses do not have.

    • Bey says:

      Sales tax evasion is not what puts local stores at a disadvantage, their own business model is a built-in disadvantage. Larger online retailers such as Amazon have the economies of scale that dwarf most brick and mortar businesses. I think most of us would find more attractive prices at such online behemoths whether sales tax was factored in or not.

  10. Biny says:

    More tax means more people work for the governments or higher salary for government employees. People in government basically do not work to create profits, they get paid to follow all those rules, policies, codes. I do agree those rules, policies, and codes are mostly good ones, but no profits from doing that.

  11. Being from one of those few states that has to pay taxes for Amazon purchases, I am actually not opposed to paying taxes for online purchases. Sure, I would love to not pay the taxes, but I know they are a necessary evil.

  12. cubiclegeoff says:

    My only concern would be for smaller companies that do business online that would have to collect and pay taxes for each state that is different. This would be a huge hassle.

    In Massachusetts, if you don’t get it online, a lot of people get it in New Hampshire which has no sales tax. I would assume the same happens in other places, like southern Washington people going to Oregon. I know there are use taxes, but it’s hard to control that.

  13. Taxes are a necessary part of life in a country that provides so much. People who think that taxes are too high and that the money they earn is 100% their own must understand that the government provides a safe haven for your business. Without that, you would have no business and no earnings.

    That said, I believe it is far too late to tax online sales. It had to be done from day one, or not at all. I’m in favor of zero taxes for online sales.

  14. Tonya says:

    As someone who works for an online store, keeping track of taxes for each state would be almost impossible for our small company. It would require another full-time employee just to track and report to each state.

    • freeby50 says:

      Filing 45 different sales tax payments could certainly be a pain and a lot of work for a small business. So if they were to implement sales tax for online sales then thats something they’d have to address. I’m sure it would come up. Ideally they’d set up a national system so businesses could send one payment & form to a single agency which would in turn hand the money over to the individual states.

      • freeby50 says:

        Ok so it seems the system to have a single nation wide sales tax administration has existed for 10 years. Its called Streamlined Sales Tax Project. Of course at this point its mostly unused cause online businesses aren’t required to pay sales taxes.

  15. Demi says:

    I do a lot of on-line purchasing and have the items shipped right to my door. What I don’t pay in tax…I pay in shipping fees…sometimes more than the 6% PA pays for their standard sales tax. And on EBAY the seller has the option to set the shipping fees. Some shipping charges are a real rip off. If it comes to paying a tax on on-line purchases AND paying a shipping fee…I’d really have to begin to weigh the savings of visiting a brick and mortar vs. on-line with taxes and shipping vs. the convenience. Taxes are a necessary evil. And I believe on-line taxes will come soon. Perhaps it will end up as a national tax with the feds collecting it and distributing it to the states. My thinking is this would be the easiest method plus produce just another method by the feds to create a reason for states to become ‘beholding’ to them just as they have with other tax revenue the fed hands down.

  16. freeby50 says:

    As the system is now, I think that you should pay your local sales tax rate for online purchases. Otherwise online vendors have an unfair advantage over local vendors. This advantage gives people an artificial reason to buy things from far away which is inefficient. We’re wasting money and resources shipping stuff across the country.

    Ideally I think we should have a single uniform national sales tax (collected by each state) and get rid of all the different state sales taxes so we’d have a equal system everywhere.

  17. MB says:

    I don’t see a reason to treat online businesses differently than brick and mortar.

  18. Michele says:

    I live in Ohio near the border of PA. If I go to PA to shop I pay their sales tax (or none at all if I am buying clothing) So where would you collect or pay the tax. Your home state? Or the State from which the purchase is made?

  19. Online sales should be taxed. Agreed that it gives e-retailers an advantage, but it’s not the only advantage. Amazon also doesn’t need to pay for a storefront, and can get economies of scale by housing inventory in their massive warehouses. But 6-10% depending on the state counts.

  20. Mike says:

    In virginia, residents are required to voluntarily pay sales taxes on purchases in which taxes weren’t charged in Virginia or another state. This applies to internet, phone, and mail orders.

    Virginia Tax Dept gives you the option of filing the forms along with your state income tax forms.

  21. Patrick says:

    Online purchases should not be taxed. Relative to other countries, our taxes are low, but the effectiveness of our government in using those tax revenues to the benefit of the people it represents is so low they should not be given any additional money to allocate.

  22. Lesley says:

    I agree with Patrick about our government not to be trusted to use our taxes to benefit us, but in the name of fairness, and to make the playing field equal for local bricks and mortar (small business), I think taxes should be paid. If you think MD is bad, CA has a 9.25% sales tax!

  23. Stoic says:

    Yes, and each state should receive their share.

  24. Master Allan says:

    I can agree with Cindy, poster #1. Single, never married, no kids, no mortgage, college grad, the luxury of exemptions and deductions on taxes does not apply to me.

    Instead I’m taxed on my earnings, the leftovers are invested and my profits are taxed, things I buy that I need or an occasional want is taxed. Uh oh, tax year 2010 you owe even more, pay up now. Isn’t there even a tax when I die? Every dollar I earn or spend has a tax on it. Barter economy anyone?

  25. I use to live in Washington state (until the traffic, pollution, noise, and politics drove us out). The tax rate there is 8-10+% depending on the county. And yes, when you purchase online you are required to file a form and pay the state sales tax to the state. When I purchased a laptop from Dell I was informed by them of the requirement, too…both on the phone and online. I’ll bet your state is the same, check it out! (I now live in a no sales tax state.)


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