When not quite tax free is actually sales tax exempt – Wacky Tax Wednesday

When not quite tax free is actually sales tax exempt – Wacky Tax Wednesday

I recently traded my gas-guzzling car for a sweet little electric number. It was a pivotal purchase, and not just because the car puts the joy back into driving. For the first time ever, I was informed by a retailer that I could avoid paying sales tax by purchasing something — an electric car charger — online.

The retailer undoubtedly thought he was being helpful. Normally brick-and-mortar businesses resent the fact that consumers window-shop at their stores (going so far as to try on merchandise) then buy online tax free. But in this case, the seller was indifferent because he sells electric cars, not electric chargers. He also let me know I could go to Amazon and pay sales tax.

Little did he know I live and breathe this stuff.

Why would one company collect sales tax when another company doesn’t?

Generally, a retailer is obligated to collect sales tax in states where it has a physical presence such as a store, warehouse, or office.

This physical presence standard was upheld by the Supreme Court of the United States in Quill Corp. v. North Dakota (1992). It’s now being challenged by South Dakota, which is seeking the right to use economic activity as a basis for tax collection. Hoping for a South Dakota win, many other states have enacted laws similar to South Dakota Senate Bill 106, which triggered the lawsuit.

The Supreme Court heard arguments in South Dakota v. Wayfair, Inc. on April 17 and is expected to issue an opinion in June. (Learn more about that case here.) Unless and until the court abrogates the Quill decision, physical presence nexus remains the law of the land.

Back to the car charger. Amazon has a physical presence in Washington state, where I live. The company’s headquarters are in Seattle, so of course Amazon collects Washington tax on its sales. As of January 1, 2018, it also collects Washington tax on behalf of its third-party sellers who may not have a physical presence in the state.

I didn’t look up the vendor the retailer mentioned and I don’t remember its name, but presumably it doesn’t have a physical presence in Washington and therefore isn’t required to collect and remit Washington sales tax.

The use tax component

The reason I didn’t go with the other vendor is not that I just love paying sales tax. It’s that I happen to know I would owe the state use tax if a retailer didn’t collect sales tax on a taxable item at checkout.

I figured it would be much easier to have Amazon collect and remit the tax than to buy it tax free then have to go to the Washington State Department of Revenue use tax web page, download a Consumer Use Tax Return, fill it out, and send the form to the department with my payment. Who has time for that?

Joke’s on me

If I had gone for the tax-free option and checked out the Department of Revenue website, I might have stumbled across this page: Electric vehicle batteries and electric vehicle infrastructure (charging stations) – sales/use tax exemption, leasehold tax exemption.

Apparently, Washington provides a sales and use tax exemption for “tangible personal property that will become a component of electric vehicle infrastructure during the course of installing, constructing, repairing, or improving.” That car charger we paid sales tax on? Had we provided Amazon a Buyers’ Retail Sales Tax Exemption Certificate at the time of purchase, we could have purchased it tax free after all. Legally. Wonder if I could get a refund?

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