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Online Shoppers May Have to Pay Come Tax Day

Shopping for clothes, accessories and home goods online is a smart way to save money versus heading to the mall. After all, not online can you combine deeps discounts and daily deals with free shipping and other promotions, many online shoppers can save a few dollars every time by avoiding sales tax. However, avoiding sales tax at time of purchase might just kick it down to tax time.

Each state has its own rules when it comes to sales tax. Forty-five states and Washington D.C. all charge a sales tax at time of purchase. The states with no sales tax are Alaska, Delaware, Montana, New Hampshire and Oregon, so readers in those states can move on to more pressing matters. If you reside elsewhere, you’ll want to heed these words.

When it comes time to file your taxes, one of the important questions asked by your accountant or tax prep software is whether you made any purchases online or in another state. This is called a use tax. Answer truthfully, but also know that any sales made outside of a physical brick and mortar store in your store may result in a tax penalty. Yes, even if you paid sales tax in another state, a high-ticket purchase may double ding you as your local state takes a slice of tax revenue.

It’s important to note that not every purchase will require you to pay on tax day. Collecting small use taxes on trivial purchases is not entirely cost effective for the various taxing agencies, so big ticket items are what flips their radar. We are talking about cars, boats, and other five-figure purchases. If you are one of the lucky ones who made such a purchase in the last year, be prepared to open up your checkbook. Working with a good accountant or saving money with a Turbotaxcoupon may prove to be a wise investment if you fall in this group.

Online retailer who operate a physical location in your home state – whether a brick and mortar retail shop, warehouse or any other physical presence – are required by law to charge sales tax at the time of purchase if your state has a sales tax law. Know who you are shopping from and the tax implications the next time you are making a big purchase – or be prepared to pay the price come April 15.