This past weekend, North Carolina held a back-to-school sales tax holiday and the stores were packed.
School’s either started or in the case of my kids will start in a couple of weeks so why not take advantage and save some money. I also hear this a lot when people explain to me why they do most of their shopping online. You see, in quite a few cases, the online retailer does not charge sales tax on your purchases.
Take for instance Amazon. I know you’ve all heard about the battle that’s taking place in many states over the fact Amazon normally does not charge sales tax. The argument being made by brick and mortar businesses is that it provides Amazon with an unfair advantage. The consumer will pay less for the product if they purchase from Amazon as opposed to the store down the street.
Technically speaking, that is not 100% accurate.
Although Amazon is not charging sales tax on the purchase, the end user is still responsible for paying this amount. This is what’s called a “Use” tax. 70% of the people I’ve talked to had no idea they were required to pay use tax on these purchases. They just figured they were savvy shoppers.
What is a Use tax?
Use tax is a tax due on purchases, leases and rentals of tangible personal property and certain digital property for use or consumption in your specific state. Use tax is also due on taxable services. It’s basically the same as sales tax but it’s paid to the state by the purchaser instead of the seller.
Now if you live in a state that does not have a sales tax, you would not be required to pay a use tax either. With state governments looking for ways to increase revenues I would not be surprised if we start hearing more and more about Use Tax in the near future.
So a word of caution, be diligent when making online purchases and keep track of those where you were not charged sales tax so you can accurately report these on your state return.
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