Sales tax on internet purchases

[mjs1973]

Do you pay sales tax on items you purchased over the internet for your business?

I'm filling out my sales tax and use form to send in my sales tax to the state, and there is a line for the amount you spent on items that you did not pay sales tax on. The only thing that I can think of that I didn't pay taxes on is stuff I purchased over the internet.

And do you include the amount you paid for shipping and pay tax on that too?

[mwfanelli2]

Do you pay sales tax on items you purchased over the internet for your business?

I'm filling out my sales tax and use form to send in my sales tax to the state, and there is a line for the amount you spent on items that you did not pay sales tax on. The only thing that I can think of that I didn't pay taxes on is stuff I purchased over the internet.

And do you include the amount you paid for shipping and pay tax on that too?

From what my sister has told me (she runs a small business from her home), you pay tax on just the purchase, nothing else. In some states, it's only the state sales tax, in other you pay all sales taxes inclucing county and city. You have to check.

Her other advice: (1) businesses should always pay the sales tax for internet and out-of-state purchaes and (2) for goodness sake, if you have a business get a tax accountant!

[mjs1973]

I talked to my accountant today. What she told me was that I only have to pay taxes on items that I bought without paying taxes on AND that I sold. So if I purchased 100 prints without paying taxes, and only sold 20 of them, I only have to pay sales tax on those 20 items that I sold. I don't have to pay taxes on the other prints until they are sold.

I'm sure things can and will get much more complicated than that, and I'm sure it varies from state to state...

[mn shutterbug]

That's different. In MN, we call it sales and use tax. It makes no difference why we buy it or what we do with it, if it's from out of state and we didn't pay them sales tax, we must pay the MN sales and use tax. The tax form even has a separate line for purchases for personal use.

[mn shutterbug]

Evidentally, you are just talking about tax on items you buy for resale. Then she is correct. When you sell your prints, you are collecting sales tax from the customer. This tax is not yours to begin with, so you owe it to the state. The unsold prints are not generating any tax, therefore you don't pay any. However, if you give some prints away for gifts or hang a couple on your wall, you are liable for the use tax, which is basically the same as sales tax except you didn't receive money in return. Wisconsin is the same as MN that way.

Dang, that reminds me, my sales and use tax is due in a couple weeks.

[mjs1973]

You are correct Mike, I'm refering to the use tax, on items that I have purchases for resale without paying sales tax on. I realize now that I need to start keeping better track of what I sell. Almost all of my prints are ordered online with no tax being paid, as well as the matts I use. On the other hand, almost all of my frames are purchased locally with sales tax, so they don't need to be figured into the use tax, but the print inside the frame does... Also, the cards I make are created with supplies I pay sales tax on, except for the print, and the bag I display them in.

It should be easy enough to come up with a figure, but I want to make sure it's pretty accurate incase of an audit. This year I plan to right out recipts for all my sales, and keep a copy so I will have a better idea of what I sold. Wish I had done that this past year.

Everyone is supposed to pay their own states sales tax on items they purchase online without paying sales tax on, but I don't know of anyone who actually does that. That is a TON of money that the states are loosing and I'm guessing it's only a matter of time before they close that loophole.

[mn shutterbug]

On the other hand, almost all of my frames are purchased locally with sales tax, so they don't need to be figured into the use tax, but the print inside the frame does... Also, the cards I make are created with supplies I pay sales tax on, except for the print, and the bag I display them in.

Actually, at least in MN anyway, even if you paid sales tax when you purchased the item, you are still suppose to collect sales tax again, when you resell it. This is another reason for the tax exempt number, so you don't pay sales tax on items for resale. I have had my number put on file at a couple local stores, so when I do purchase something for resale, I don't pay the original sales tax. Sales tax can be collected on the same item many times. Just think how many times the state may collect sales tax on the same used car. Everytime it's resold, the buyer pays sales tax on it.

[mjs1973]

Correct, you have to pay sales tax what you sell. Where my confusion is coming in, is with the use tax.

I just got off the phone with my accontant and he told me not to worry about the use tax part of the form. Just pay the sales tax on your revenue and be done with it.

[mn shutterbug]

I have to agree with your accountant. Besides credit card equipment, I sell dog and cat food. The only thing I list for use tax is the cost for 1 small bag of dog food a year, that my dog eats. Like I mentioned previously, if you hang one of your prints on your own wall, then you owe use tax on that print. Otherwise, don't worry about it.

[Medley]

The situation's a bit different where I live. Oregon is one of the few remaining states without a sales tax. Not only do I not pay a sales tax in Oregon, but can also escape a sale tax in nearby Washington state on some big-ticket items, such as cars and major electronics. Many places even advertise "No sales tax to Oregon buyers." It's how the businesses along Washington's southern border avoid losing a potentially large customer base, and stay competitive with their Oregon counterparts. Simply show an Oregon driver's license, and the tax is "waived".

Wether the tax is actually waived, or absorbed by the business, I couldn't say.

- Joe U.