Taxes

Volnavy · Jan 7, 2005

I asked this question because it seems like an advantage to buy on the internet. I know if I buy a computer on the net, say from California, I am not charged tax. However, if I buy a Dell, they have a plant in Tennessee (my state) and I have to pay tax.

I've never paid tax on an ebay purchase, however many sellers say that if you are in their state you must pay their state sales tax.

I looked at the ebay policy and they politely stay out of it. They say you need to follow the law. Of course they don't state what the law is.

Being a professor, I should know how to research a topic, but I figured common practice sometime means more than law. The following is the most recent article I could find on the issue (published yesterday):

http://www.entrepreneur.com/article/0,4621,307444,00.html

Here are some important paragraphs:
Online companies with a physical presence, or nexus, in a state are required to collect and report taxes on sales made to customers living within that same state. For example, if your online business is based in California, you must collect and report sales tax derived from fellow Californians making purchases on your site.

...

And nobody knows how long that process could take, not even the states themselves. Many states are asking their citizens to take charge of the situation and voluntarily pay sales tax for purchases made online. It's sort of a "good citizen honor system" that I doubt few actual good citizens will willingly take part in.

I think I can buy a tractor on ebay, pay for it with paypal, pick it up, and never pay tax. I also think it is not only legal, but correct.

Wes

frank_f15 · Jan 7, 2005

( Online companies with a physical presence, or nexus, in a state are required to collect and report taxes on sales made to customers living within that same state )
that is just the way i understand it, but to be truthful , if i buy something online and they do not add tax, i would not be inclined to volunteer the tax at tax time. This is all hypothetical of course /forums/images/graemlins/grin.gif

DUMBDOG · Jan 7, 2005

You do not state if it is a used or a new tractor that you are looking at. If it is used, it may me a mute point, depending upon the laws of your state.

You state that common practice sometimes means more than the law, a prime defense if you are the speeder pulled out of a line of speeders on the highway.

Your state does have a form to report the purchase and pay sales tax, after looking at the form, it really does look like it is on the honor system.

Paying for the purchase with Paypal will leave just as large of audit trail to follow as paying with a check. Most dealers will not accept paypal for a larger purchase as they have to pay the discount for the use of it, if they do allow it, there is sometimes a fee becasue of the dollars involved.

A lot of states belong to a multi state audit group, mainly for corportate income taxes, but it may include other taxes as well, I do not know if your state is among them.

There are a lot of audit trails that you will leave open in a purchase such as this. Among them are the warranty registration if new, dealer records, bills of lading for shipping and your insurance records.

You state that you are a professor, does mean that you teach at a state sponsored instituition? If so, where does a large portion of the funding for your postion come? My guess would be state income and sales tax.

Bear in mind that I am not trying to judge what you are comtemplating but merely pointing out some of the pitfalls of what you are planning.

Tom4310 · Jan 7, 2005

There is no tax on internet sales as long as you purchase out of your state. There is a big movement to get this changed but as of now, that is the law. In Oregon, we have no registration or tracking of tractors. Kind of surprised me but a simple bill of sale is all that is needed for private purchases. When the local JD dealer sells a new tractor, they fill out paperwork but it is serial numbers and warranty info for their files. If you are concerned, I would email the company and discuss this with them. Find out what forms etc they file and as long as you pay cash, you shouldn't have a problem. I did read a forum about a member who finianced a tractor and had to pay back sales tax on his tractor. We all pay enough taxes and when there is a loop-hole, jump through it. Not trying to push anybody off their high horses...IMHO of course.

DUMBDOG · Jan 7, 2005

Yes, you are correct there is no sales tax on internet sales providing the purchaser is out of state. However most states have a use tax which the tractor would be subject to once it is brought into the state. A use tax is quite similiar to the sales tax but is usually put on items not subject to the sales tax.

Tom4310 · Jan 7, 2005

Yes, most states do have use taxes. Below is copied from the Tenn tax site. There is no way on this earth that I would voluntarily send them the use tax on items I bought over the internet much less a $30,000 tractor. My opinion but that is one of the reasons I live in sales-tax free Oregon.

 Contrary to popular opinion, online and catalog sales are subject to use tax. This tax has been on the law books since 1947 and is the counterpart to the sales tax. When someone buys merchandise online or through a catalog and the seller of the merchandise does not collect sales tax, the consumer who bought the item has a legal obligation to file and pay use tax on the merchandise. The use tax is the same rate as the sales tax.

And, purchasing merchandise outside of Tennessee, whether done physically or electronically, will not exempt someone from paying use tax if an equal amount of sales tax was not paid to another state at the time of purchase. Click here to learn more about how states share information about consumers' purchases.

So, how do you file and pay use tax? It’s easy. Click here to download the return. Then follow the instructions, and complete and return with use tax payment to the department.

DUMBDOG · Jan 8, 2005

What you have to realize that the majority of our tax system is based on the honor system. Income tax is partly based upon this, the reason that we have all of the 1099's, W-2's, all of the other forms and the occasional audit is due to noncompliance, people not reporting what is due, thinking let the next guy pay for it. Sales tax is collected at the source of the sale for the very same reason. People will avoid the tax like the plague if they can help it. The only tax that is collected fairly is the real estate tax as in you own, you pay the tax.

I do not know where you think that the money comes from that pays for the services that we receive, but without the income, sales and real estate tax we would not have our school systems, police and fire departments along with a host of other services. Granted there is waste in government, but what group does not have waste?

Sorry, I just feel that everyone should pay their fair share.

I will now step down from my soapbox. /forums/images/graemlins/crazy.gif

Volnavy · Jan 8, 2005

Dumbdog,

I am not trying to avoid the law. I just have not found anything yet that leads me to believe I am required to pay taxes when buying something over the internet. The use of paypal was not to prevent an audit trail, just to pay for the goods.

Volnavy · Jan 8, 2005

You are correct. When an item is purchased untaxed and brought back into Tennessee a use tax should be filed and payed.

The tennessee.gov web site states:

Tennessee, like other states that impose a sales tax, also taxes the use of property that is brought into the state untaxed when purchased. This "use" tax was enacted in 1947, the same year as the sales tax, to complement the sales tax by taxing merchandise purchased from out-of-state sources that do not collect the state’s sales tax. The use tax is designed to raise revenue and to protect local merchants, who must collect the sales tax, from unfair competition from out-of-state sellers who do not collect Tennessee’s sales tax.