Collecting Sales Tax: Some Sites Have To, Some Don't
If an online retailer has a physical presence in a particular state, such as business offices or a warehouse, it must collect sales tax from customers in that state. If a business does not have a physical presence in a state, it is not required to collect sales tax for sales from customers in that state.
Consumers' Responsibility to Pay Sales or Use Taxes
Consumers who live in a state that collects sales tax are technically required to pay the tax to the state even when an Internet retailer doesn't collect it. When consumers are required to pay tax directly to the state, it is referred to as "use" tax rather than sales tax.
The only difference between sales and use tax is which person -- the seller or the buyer -- pays the state. Theoretically, use taxes are just a backup plan to make sure that the state collects revenue on every taxable item that is purchased within its borders. But because collecting use tax on smaller purchases is so much trouble, states have traditionally attempted to collect a use tax only on big-ticket items that require licenses, such as cars and boats.
Some states, including Connecticut, Maine, Nebraska, New Jersey, and North Carolina, have changed their attitudes and are stepping up efforts to collect use taxes. But bureaucracy, complex tax rules, and limited state resources have thus far prevented most states from pursuing use taxes. Since state governments are losing substantial revenue, the collection of use taxes may become a priority if the federal government continues its ban on Internet e-commerce taxes.
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