For years, California residents have used online shopping for its ease, convenience and lack of sales taxes. While purchasers can still reap the benefits of having goods shipped directly to their home or office, they can no longer avoid paying sales taxes on items bought from larger retailers.
A week and a half ago, California began requiring certain online merchants to begin collecting sales taxes on purchases made by state residents. Affected companies include those that do not have a physical presence in California, but have sales in excess of $1 million in the state. Most prominent among the group of approximately 200 affected companies is Internet giant Amazon.
Although online retailers did not charge a sales tax before this year, California residents were still required to pay an equivalent tax. A law says that taxpayers must list on their returns any purchases they made through the Internet or through the mail from companies operating outside of the state. Those purchases are used to calculate the so-called “use tax,” a stand-in for ordinary sales tax.
But few filers properly reported their qualifying purchases and paid the required use tax. According to the state Franchise Tax Board, less than 1 percent of California taxpayers admitted use tax liability in 2010. State taxation officials did not reveal how many people were audited and pursued for tax evasion for failure to properly disclose purchases that would have triggered the use tax.
Some have suggested that the online sales tax could generate as much as $200 million or $300 million in revenues for the state.
Source: NBCBayArea.com, “Online Sales Tax Hits California Shoppers,” Melissa Pamer, Sept. 16, 2012
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