Sales tax isn’t part of Cyber Monday sales
- Nov 28, 2016 | Gail Cole
It’s looking like Cyber Monday 2016 will be perhaps the biggest shopping day of all time. Online sales alone will reach approximately $3.36 billion. Looking ahead, sales during two other branded online shopping days — Giving Tuesday and Green Monday — are expected to hit $2 billion each this year. According to Adobe Digital Insights (ADI), internet sales throughout the 2016 holiday period could top $91 billion.
For many internet shoppers, not paying sales tax is part of the appeal of shopping online. Yet, as state departments of revenue are fond of reminding us, online purchases are not sales tax free (unless the consumer lives in one of the few states without sales tax). Whenever sellers do not collect sales tax on taxable transactions, consumers are obligated to remit the equivalent use tax directly to the state.
As with sales tax, use tax laws and policies vary from state to state. For example:
Florida: Only the 6% state sales tax rate applies in Florida — use tax doesn’t include local discretionary surtax. The tax is due on the first day of the month following the quarter in which purchases are made and is late after the 20th.”
Indiana: Use tax is generally remitted with Indiana individual income tax returns.
Minnesota: Although businesses owe use tax on all taxable items purchased without sales tax, individuals “can buy up to $770 worth of taxable items during the calendar year without paying use tax.” However, if untaxed purchases total more than $770 in a year, use tax is owed on the entire amount. For most businesses and individuals, use tax is due by April 15 of the following year, but use tax returns and payments are due by the 20th day following the end of the month in which purchases exceed $18,500.
Texas: Individuals must remit a Texas Use Tax Return (Form 01-156) no later than January 20 of the year following the year in which the item was purchased. Businesses must report use tax on the Texas Sales and Use Tax Return (Item 3).
Use tax notification requirements
While it has historically been challenging for states to enforce use tax compliance, many are taking steps to make enforcement easier. Colorado, Louisiana, and Vermont, for example, have all enacted use tax notification requirements, whereby non-collecting out-of-state retailers are required to inform consumers and/or the state of purchases made and use tax obligations.
The most effective way for businesses to fulfill sales and use tax obligations is to use tax automation software. Learn more.