Being charged in state sales tax for out of state purchases

vladguerrero

With all the talk of flat internet tax etc... I had a question based on a recent transaction.

I buy an item on Ebay from MO and have it shipped to NY. I noticed afterwards that the seller charged me NY state sales tax? I then notice in their listing to charge sales tax to most states based on the recipients address. I emailed them and asked how they can collect taxes in MO for NY State. They respond saying that NY State makes them collect these taxes and they have no choice.

This seems to be coming up more often than ever. Is this just BS? Anything to it? It would be a nice way to help pay Ebay fee's, until you go to jail I guess.

grote15

Not only is it BS but it is illegal as well. A recent thread on here discussed this very topic (don't recall who the seller was) but when confronted by the OP, the seller admitted it was improper and that he would issue a refund (though he continues to charge for out of state tax in his auctions on ebay). It is illegal for a seller to charge state sales tax unless said seller has a physical presence wherein he/she is conducting business in that state.

mrmint23

You would owe a consumer use tax. Seller could be charging a "seller's use tax" although currently not required. However if they charge it and don't remit then it is a misdemeanor. Main Street Fairness Act could/would change internet taxation.

swartz1

not if he intends on reselling it...

grote15

Here's the thread I was referring to above..

epatmythes

If said seller has a brick-and-mortar business, or does his/her sales via a licensed business (IE. LLC, Corp, Inc., etc.)... it may very well be legit. The explanation you received sounds shady... but it's hard to prove. With so many states implementing use tax over the past decade with the proliferation of internet sales... I'm actually surpised more people don't do it. Then again, on eBay, I'm guessing it's only a small percentage of the membership that actually operates as a licensed business.

For years, I worked in the eCommerce industry... and taxes were easily one of the toughest, and strictest, parts of software integration. As long as they are actually remitting the tax with the their regular state filings, they are okay to do this!

If the retailer is located out-of-state and does not have a physical location or other type of physical representation in the state, the state cannot require the retailer to collect their sales tax. However, some out-of-state retailers voluntarily collect the tax as a convenience to their customers. If the retailer does not collect the sales tax, the purchaser has the obligation to pay the use tax directly to the state where the property is used as long as the item is taxable.

On the bright side, whether or not the seller is acting legally, if you live in a state that implements use tax (and you do your taxes to the letter of the law), you won't be responsible for most (if not all) of the use tax on said purchase!

OckhamsRazor

In this case, we don't know whether the seller is registered with the state of New York to collect and remit NY sales tax. I don't believe that NY has the online capability to verify a Sales Tax Exemption Certificate. Only a few states have this. I do know that cartain states are becoming much more aggressive in attempting to get non-resident businesses to register to collect sales tax. I have been threatened with audits, and with payment withholding for prior sales to state governmental entities, such as state universities, state law enforcement entities, etc. While my business has absolutely no nexis to the states in question, that doesn't prevent them from threatening me in an attempt to register. So, this seller either: 1) had/has a nexis with the state of New York or 2) was forced into registering with NY or 3) is not registered and is just padding their bottom line.

grote15

3) is not registered and is just padding their bottom line.

I'd go with this answer..

vladguerrero

Thanks for the details.

It's not a lot of money, and certainly not worth pursuing (though I did look up the NY state tax fraud reporting/inquiry site... which is terrible and basically non existent), but it's more the point that...

1) It's real and I would factor future out of state charged in state sales tax in purchases, especially large purchases.
2) It's BS and it ticks me off people nickel and dime others knowing most would not pursue a fraud accusation.

For what it's worth I don't mind paying state tax on Ebay purchases (it only seems to be retail stores ...boxes of cards, supplies, etc..) and typically go with those sellers over a same price (non taxed) out of state item since I'll get it faster.

Griffins

I worked for a guy that charged sales tax but didn't turn it over to the state. It may have been a misdemeanor, but a bunch of guys in windbreakers stormed thru the door one day and literally carried out every bit of equipment in the studio. Took him 3 weeks and a lot of legal fees to get it all back.
I'd rather run afoul of the IRS than the State Board of Equalization, at least the one in CA.

Wink

I contacted Ebay about the same thing and they did absolutely NOTHING. Seller was not registered in my state so you can bet he's pocketing the money. Totally disgusting.......

DCanfield

Ask for his NY state sales tax number and also, does the tax rate match your county. Tell him you are verifying the information with Albany and lucky for you, your Aunt Bea works for the NYS Division of Taxation and Finance so you shoud be able to get a very quick verification. I wonder what the response will be.

swartz1

yeah - just ask...pretty sure he will tell you his tax number...

DCanfield

<< <i>yeah - just ask...pretty sure he will tell you his tax number... >>


Then go here to verify it:
LINK