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The Online Sales Tax You’re Likely Getting Wrong

  • 16 August 2016
  • Author: Alexander Carr
  • Number of views: 4080
  • 0 Comments
The Online Sales Tax You’re Likely Getting Wrong

You may be surprised to find out that if you regularly purchase goods online, you’re likely also regularly breaking the law. How so? It’s because you may be inadvertently disregarding the “use tax” on those goods. 

Ecommerce has brought to light this major issue. When you buy something online (or by telephone, email, or fax) that is taxable in your state, you owe that tax even if the retailer is in another state and does not collect it. The use tax has several other “gotcha’s” as well. Buy something in a city with a lesser tax or in a different country, even, and you are responsible for paying the use tax that matches your specific city and state, as long as you intend to bring it home with you.

In Texas, use tax is reported and paid directly to the Texas Comptroller's Office. The state use tax is 6.25 percent. However, many Texas counties, cities and other jurisdictions tack on an extra tax of up to 2 percent.

This is one of those lesser-known tax laws that is difficult for states to investigate. However, owe more than $1,000 in use taxes each year and you may get noticed. The Texas Comptroller’s Office recommends that if you have a Texas sales tax permit, you should file the use tax on your Texas Sales and Use Tax Return form in Item 3, Taxable Purchases, by the next scheduled payment date. If you don't have a sales tax permit, you should report the use tax due on the Texas Use Tax form 01-156 and may need to file more often that annually if you’ve made large or frequent purchases.  

And if you’re the seller? The use tax obligation is typically the purchaser’s responsibility, explains Greenberg Traurig Attorney William H. Gorrod, but if the seller has enough connection with the state, called “nexus,” then the state has the authority to assert its jurisdiction to require the out-of-state seller to collect and remit the use tax on behalf of the buyer.

If your business regularly buys or sells goods online, and you have questions, contact us to discuss whether or not you’re operating on the right side of the tax code.

Image Copyright: everythingpossible / 123RF Stock Photo
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