Texas internet sales tax/Use tax

[dizzy]

Is Texas the first state to start taxing internet sales? I sure hope California and Wisconsin follow suit. :wink:
Mitch

http://www.window.state.tx.us/taxinfo/s ... q_use.html

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Frequently Asked Questions
Purchases/Use Tax
What "purchases" are subject to use tax?
What is the tax rate for use tax?
Do I owe tax on goods purchased via mail-order catalogs or Internet merchandise?
How do I report a use tax liability?

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1. What "purchases" are subject to use tax?
A purchase may be subject to use tax for a number of reasons. The most common reasons are:
You used property purchased with a resale certificate. If you use a resale certificate to purchase merchandise that you intend to resell, your supplier will not collect sales tax. However, if you use the merchandise for another purpose before you resell it, you are liable for use tax. (Using merchandise for display or demonstration purposes before the property is sold is not subject to use tax. But, providing free samples to customers is a use and you would owe tax on the amount you paid for the samples.)
You used property purchased with an exemption certificate. If you use an exemption certificate to purchase taxable items, your supplier will not collect sales tax. However, if you use the merchandise or service for a non-exempt purpose, you are liable for use tax. (Purchasing manufacturing equipment but using it to perform contractor work is a non-exempt use.
You used property purchased from an out-of-state retailer. In general, if you purchase a taxable item from an out-of-state retailer without paying Texas tax and use the property in Texas the purchase is subject to use tax and must be reported. If you paid Texas use tax to such a retailer, you are not required to report the tax. That retailer must provide you with a receipt showing, among other things, the amount of use tax collected. You should retain a copy of the receipt showing you paid Texas tax.
2. What is the tax rate for use tax?
The tax rate for sales tax and for use tax is the same. The Texas state sales and use tax is 6.25%, but local taxing jurisdictions (cities, counties, special purpose districts, and transit authorities) may also impose sales and use tax up to 2% for a total maximum combined rate of 8.25%. If you purchase a taxable item, you will have to pay state and local use taxes. For information about the tax rate for a specific area, see Local Sales and Use Tax Rate Information.
3. Do I owe tax on goods purchased via mail-order catalogs or Internet merchandise?
Yes. A seller who uses catalogs or the Internet to sell goods is treated the same as any other seller of taxable items. If you purchase merchandise through a catalog or the Internet from a seller located in Texas, you owe Texas sales tax on the purchase. If you purchase merchandise through a catalog or the Internet from a seller located outside of Texas and use the taxable item in Texas, then you owe Texas use tax on the purchase. An out-of-state mail-order company or an Internet company may hold a Texas Sales and Use tax permit and collect Texas tax. If the out-of-state seller does not have a Texas permit or does not collect Texas use tax, the use tax is due and payable by the purchaser.
4. How do I report a use tax liability?
If you have a sales tax permit and bought goods or services that are subject to use tax, you must report your purchase on your Texas sales tax return on line 3, "taxable purchases."
If you do not hold a Texas sales and use tax permit and you bought items on which the seller did not collect Texas sales or use tax, you must report your purchases on form 01-156, Texas Occasional Use Tax.
If you paid another state's sales or use tax on the merchandise, you can take a credit for the amount of sales tax paid to the other state. Texas Online Statewide Search from the Texas State Library State Link Policy Texas Homeland Security Susan Combs, Texas Comptroller • Window on State Government • Contact Us

Privacy and Security Policy Accessibility Policy Link Policy Public Information Act Compact with Texans

 

[Race]

Wisconsin and California already have it. Sales tax is applied on all livestock originating in California and shipped to destinations within California. The same is true of Wisconsin. I have often wondered if any of my competitors pay it. Could be a good investigation for you Mitch. Even frag swaps are not exempt. I pay my sales tax and so does Quality Marine on their dropships. Transparent is my middle name.

 

[dizzy]

Race,
Are you collecting sales tax on items shipped into Texas? And BTW if Wisconsin has the same law as Texas you should be collecting sales tax on all items dry and wet shipped anywhere. At least that is the way I understand it. I recently bought a CO2 regulator from a Texas supplier and they charged me sales tax until I sent them my resale certificate number.
Thanks,
Mitch
"In general, if you purchase a taxable item from an out-of-state retailer without paying Texas tax and use the property in Texas the purchase is subject to use tax and must be reported. If you paid Texas use tax to such a retailer, you are not required to report the tax. That retailer must provide you with a receipt showing, among other things, the amount of use tax collected. You should retain a copy of the receipt showing you paid Texas tax."

Race I sure hope you are doing this.

 

[Race]

I am not sure if we ship enough into Texas to meet the minimums. That would be a job for our CFO and legal team. Most states have some sort of a use tax but you need to send a minimum quantity of taxable merchandise into that state. Some products are exempt, medications vary whether they are for use or resale. Ordinary state sales tax is different. Whatever the laws and amounts they are small and insignificant. Many dog foods are subject to a tax based on weight sold within the state. I do not know which states we pay and which we do not.
The first three years I was dropshipping within California from California I did not pay, did not know it was required as I own no entities in that state. I paid QM the $36,000.00 which they then paid the state. I am all for collecting sales tax, I wish all wholesalers and dropshippers would pay, but I would never turn one in.

 

[dizzy]

Race if I was was you I would have someone from the legal department look into this. I wouldn't stoop to turing anyone in either, but God knows who is lurking out there. So anyway I ordered two slow flow regulators from a Texas gas supplier. When we get the invoice I notice the sales tax was added. When I call to complain they say it is a new law that out of state sales need to be taxed. I just said fine take it off since I am buying it to resell, and then provided the proper resale number, and all is fine now.
Mitch

Don't mess with Texas.

 

[Race]

Thanks Mitch. I am not sure where we pay and where we do not. I will have them look into it. Some we collect and pay, others we simply pay. I wish, as does the DMA that they would have a national standard tax. That day may come but right now it is up to the states and I do not see that changing in my lifetime. With the internet, at least the calculations are easy at checkout, this was a nightmare in the old catalog days when consumers and agents could not easily do the calculations. Also have county taxes in some areas. In time they will get it all sorted out.

Out for the night, thanks.

 

[Raskal311]

How does Marinedepot.com work it? Are they covering the tax for the customer? From what I recall orders that are shipped inside CA are not taxed.

 

[Anonymous]

Whether people know it or not in almost every state they are responsible for paying sales tax on stuff they bought mail order or on the internet.

 

[dizzy]

I'm not sure about other states, but Kentucky is facing serious budget shortfalls this year. They are having a devil of a time making the necessary cuts in spending to balance the budget. I know higher education and economic development having taken serious cuts. The bottom line is that states really need this sales/use tax money they are being cheated out of. So it makes perfect sense to require the really big etailers to collect this for them just to make sure the people don't 'forget'. All they really have to do is place a sample order with a company and see if they are doing their job. Kentucky retailers get to keep 1.5% of sales tax they collect up to $1000 per month, IIRC and 1% of the amount above that. So it isn't such a bad things for etailers to do. All states would really need to do is set up a hot line where people could report possible violations and I'm pretty sure people would be willing to do their duty to help their schools. Perhaps this would also serve to level the playing field a little too.
Mitch

 

[Race]

I agree with Mitch. Most of the larger players such as DFS already play the sales tax, food tax game, while the smaller ones are not on the state's radar. I wonder if the other California dropshippers and Wholesalers pay or are even aware that California has a dropship law?

 

[Anonymous]

I'm not sure about other states, but Kentucky is facing serious budget shortfalls this year. They are having a devil of a time making the necessary cuts in spending to balance the budget. I know higher education and economic development having taken serious cuts. The bottom line is that states really need this sales/use tax money they are being cheated out of. So it makes perfect sense to require the really big etailers to collect this for them just to make sure the people don't 'forget'. All they really have to do is place a sample order with a company and see if they are doing their job. Kentucky retailers get to keep 1.5% of sales tax they collect up to $1000 per month, IIRC and 1% of the amount above that. So it isn't such a bad things for etailers to do. All states would really need to do is set up a hot line where people could report possible violations and I'm pretty sure people would be willing to do their duty to help their schools. Perhaps this would also serve to level the playing field a little too.
Mitch

In NC it is up to the consumer to honestly report how much they purchased over the internet and pay it on their state income taxes.

 

[JeremyR]

Yeah, like anybody does that lol.

NH people come down here and think they shouldn't have to pay sales tax when in mass because they are NH residents. Heh.

 

[jhemdal1]

JeremyR,

Well, I guess I do that.....Michigan also has a self-reporting "use tax" on out of state mail order sales. You are required to report your out of state purchases and then pay 6% of that.....OR you can pay an "estimated tax" using their handy little calculator. I choose the latter method. On your tax return you are allowed to just declare that you made NO purchases out of state, but one look at my Ebay feedback would make me a liar if I ever tried to do that; so I wimp out, and with much grumbling, I pay the stupid tax.....

JHemdal