Can They Really Make Me Pay Sales Tax On Internet Purchase

Business, E commerce.

The internet tax man cometh - q: i was contacted by the city tax collector to say that my business is scheduled to be audited to see if i owe sales tax on items purchased on the internet. I thought you could buy things online tax free? - - Charlie B. Can they really make me pay sales tax on internet purchase?

A: Sorry, but your local municipality is well within its rights to audit your business to identify items purchased online. - don' t be surprised if the auditor asks for access to your books and to see purchase receipts and invoices for at least the past year. The city can also demand payment of sales tax on those items if sales tax was not previously paid. One of my companies recently underwent such an audit and it really was not as painful as you might think. Since we purchase computers from a large supplier who collects sales tax at the point of sale( ditto for the development tools) , the only sales tax we ended up owing was for an inordinate number of technical manuals and books purchased at Amazon. com. Being a software company, the majority of our online purchases were for computer equipment, and software development, technical manuals tools.

If your small business is like most, the majority of your large purchases are made locally from companies that already collect sales tax. - internet sales taxation has been a topic of contention even before amazon sold its first book and priceline booked its first flight. Furniture and computer equipment are typically the largest ticket items a small business buys, so unless you bought your desks and computers off of Ebay( which is highly possible these days) you should be OK. One of the more controversial points is that no one, including our own government, seems to have a clue how to implement a fair and logical Internet taxation process. In 1998, Congress did what it usually does when faced with a potentially explosive issue like Internet tax collection - - it decided to put off making a decision. With over 7, county and state, 500 different local taxation systems in the United States, you can understand the controversy.

Congress enacted a three - year moratorium on the collection of taxes to give an appointed advisory board time to come up with an acceptable solution. - here in alabama the state sales tax collection department has aired radio spots asking alabamians to step up to - and toss dollars into - the proverbial collection plate. That moratorium ended in 2002 and opened the door for municipalities to begin collecting sales tax on their own. The commercial kindly suggests that if I have purchased anything from an online retailer, I am honor - bound to proclaim such purchases and submit the appropriate sales tax to the collection department right away. So, Charlie, when the auditor shows up at your door the best thing you can do is smile politely and be totally forthcoming. They thank me in advance for my cooperation. The sales tax that you pay is a small price for the convenience of shopping online.

Or at least that' s what you should tell yourself as you write the auditor a check