Buying Equipment over the Net

[LSCSN.com]

What is the tax situation on buying equipment over the internet? I know that you don't pay sales tax when you buy over the internet for the most part, but are you then obligated to pay the sales tax in your home state after you receive the goods?

[jazzdiver]

Unless some states have such a requirment, I've never heard of having to do that. That is generally the advantage of online or even mail order shopping...you save not only on the product but also on the sales tax, provided that S&H charges aren't absurd. At the very least, I can say that Texas doesn't require any sort of home state sales tax to be paid.

Daryl

[HotHolly]

You might want to check with your tax guy, but I thought it was like this: If you purchase an item that is being used in the creation of your product, you don't pay sales tax. Of course you have to be legit and file with the tax office. But you can get a Tax Exemption on certain things. So you may not have to pay sales tax anyway.

[*Mike*]

I'll chime in too... maybe if enough of us pool our ignorance we'll have a clue.

If you purchase something that has sales tax due on it (i.e. it is not used in manufacturing), and do not pay sales tax on it to any other entity, then you owe tax to the state of Texas. There's a form you fill out to declare your purchase and you send it in with a check. Look up "use tax."

A number of states are actually forming coalitions to collect this sales tax that slips through the holes, and arranging for it to be distributed appropriately regardless of the buyer and seller being in different states.

[LSCSN.com]

Mike so by manufacturing do you mean that a lens, which is used to "manufacture" photos to sell to folks would be exempt for this tax? And if I am reading some of the comments right and some of the research that I have seen then any taxable item that is bought out of state on the internet where taxes are not collected are liable.

So for example if I by a mp3 player (which I would pay tax on anywhere I bought one in Texas) over the internet and didn't pay taxes on it then I really owe the state of Texas sales tax on that item.

If that is correct then why in the world would Texas, or any other state, have such a law, because I don't know of anyone that buys stuff over the internet for personal use that then turns around and pays Texas its due sales tax.

[*Mike*]

Jason, yeah, no one does it, but it is there... In fact, NYC had a big crackdown on this kind of thing years ago while I was in H.S. People were going to NJ (I think it was NJ...) to buy clothes since they weren't taxed there, and then bringing them back to NY - where they are taxed. But really, nobody bothers with claiming the stuff they're buying online - which is why states are looking to form coalitions to help each other collect the tax that's due.

I heard once of a company out in CA that filed a report to with the comptroller's office of the state in which the buyer resided reporting their sale - but that was on huge purchases, and a second hand report...

As for what's manufacturing - anything required to create your final print. Camera's, batteries, CF cards, props, etc. But, if you use any of those items for any personal purpose, ever, then some tax is due. I'm already in over my head so I won't even try to elaborate...

If I'm totally off base, feel free to chime in anyone... Like I said, pooled ignorance. Cheaper than a CPA, but, well... cheaper than a CPA is probably all the good that can be said about it...

[LSCSN.com]

I wonder how many people actually "know" they are supposed to pay taxes on the stuff they buy online. And even more than that I wonder how many people would actually "know" how to go about doing it.

[boomerd35]

Not many people "know" that the tax is due. Everybody assumes that buying online removes the tax requirement, but it doesn't. The state just doesn't have the time/resources to go after individuals, and focuses its efforts on larger companies. As a Financial Controller who has gone through several sales tax audits from various states/parishes, I can tell you that failure of a company to charge sales tax doesn't relieve your obligation to pay the tax (if the item/service is taxable). This applies to online orders as well. In fact, one thing a tax auditor will definitely ask to see is a list of all your asset/equipment purchases and computer expenses. They know that many companies buy their computer equipment online, and may have not been charged sales tax.

Troy T.

[Wes]

Hmmmmm..... I thought that it had something to do with whether or not a company had a presence in the state in which the consumer lives. For example, I buy a bunch of goodies from B&H. B&H is in NYC and does not have any kind of business presence here in Texas (no distribution centers, no store fronts, no offices, etc.), which means that I do not pay sales tax on my purchase.

If I did have to pay tax, how would that work? What tax rate do you pay? The rate in the state in which the commodities were sold, or the state in which the consumer lives?

[billbunton]

Every state (as far as I know) that has a sales tax also has a use tax. If you don't pay sales tax, because the seller was not obligated to collect it, then legally you are responsible for paying the use tax. Generally the use tax is the same rate as the sales tax.

[boomerd35]

Yes, generally sales & use tax are the same rate. The issue of presence in the state is only determines wether the company must charge sales tax (ie B&H has no presence in Texas, so they don't charge sales tax). But that does not eliminate the purchaser's responsibility to report and pay the tax (as use tax). If you file sales tax returns in Texas, there is a place to report taxable purchases that you didn't pay tax (use tax). So technically, if you purchase an item from B&H which is taxable in Texas, you would report the purchase on your Texas Sales/Use tax return. The rate would generally be the rate for the location where the item is delivered.

Man, I hate sales & use tax

Troy T.

[AndrewCCM]

Does anyone know what the requirement is for "manufacturing". For instance, lets say you only shoot one or two paying gigs, but they used that piece of equipment? I know it has to do with how much you use it for personal vs. business use, but lets say you don't do much paying biz at all but do collect $ on occasion.

Just a hypothetical question.