Is it true everyone is required to declare sale taxes on purchases done online even if they are not charging? How is this done?

The IRS does not charge sales or require the reporting of sales tax. The state of California does charge this. You may have misread the notice. Hope this helps Phillip M. Smith Jr. Los Angeles Tax & Business Attorney Licensed in the United States Tax Court www.culvercitytaxandbusinesslaw.com www.corporateattorney.com www.worlclasslawyers.com Call: 323-292-4116 or 562-505-1004

Yes, it's true. But there is a big push to get the online retailers to collect and pay sales & use taxes so that the consumer doesn't have to be troubled by it.

California has a "sales" and a "use" tax. Normally, when you buy something in CA, the vendor withholds the applicable sales tax and pays it. However, with certain online vendors, there is no requirement that they withhold the sales tax (due to complex tax nexus rules). However, if you will be using the product in CA then you are responsible for paying the "use" tax on the items, which is equal to the sales tax you would have otherwise paid. You must report this on your CA tax return and most CPA questionnaires ask for this (although few people actually do). Most people have a misunderstang that they don't "owe" any taxes on these purchase just because the vendor doesn't withhold. I have added a link that may be helpful to you.

The tax is a state use tax not a tax payable to the IRS. However, depending on your reporting, payment of the tax may operate as a deduction on your federal income tax. It has long been the law in California (and probably elsewhere too) that you pay a use tax on purchases from out-of-state vendors. When you file your tax returns, that is when you are suppose to compute and pay the tax. However, as a practical matter, unless the tax is collected by the out-of-state vendor few individuals pay the tax. The law was recently changed in California to require out-of-state vendors who have sales to California residents to collect the tax. The way it will be done is that Amazon will start to collect the tax when you purchase a product online from Amazon

Slight addendum to the prior answers. First, hopefully you missread the article that the use tax reporting and payments are due to the state and not the IRS, but it would not surprise me if a reporter got this fact wrong. I've seen a lot of completely wrong articles written on Amazon and sales tax legislation over the last year or so. Second - as previously stated, the tax laws of each state have always had a complimentary use tax that legally required you to report and pay sales tax if you bought an item somehow sales tax free (with a few exceptions and exemption that usually don't apply to individuals). Most people were just not conscience of the law until some states put the USE TAX line on the state income tax returns. Even then, few people reported the use tax. In state's like Florida with no personal state income tax, there is a separate tax form (DR-15MO) for reporting use taxes. Third - and the main reason for my post, the new law is testing the bounds of the constitution. The new law is what is known as an affiliated nexus statute or click-through-nexus statute. The new laws effectively try to force California's taxing jurisdiction over out-of-state companies will no physical presence in California just because the company has an affiliated entity or vendor assisting with sales in California. This statute directly conflicts with the US Supreme Court Case Quill vs North Dakota from the early 1990's, which requires physical presence of the entity being required to collect the tax. So the law is not certain by any means. Lastly, what is making the press so much this time is that Amazon has agreed to collect the tax in PA and CA. This is new as Amazon used to be the biggest defendant of out-of-state's company's right to be protected from overreaching state taxing laws. Ok - enough sales tax lessons for one day. Have a great day everyone! James Sutton, CPA, Esq. www.FloridaSalesTax.com