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My question is this... If I sell a product to a customer out of state but ship it to an in-state address, do I have to collect sales tax?
And what about the opposite? I sell to a person in-state, but ship it out of state. Do I have to collect sales tax?
ACK! I HATE the way they let things sneak through the legislature behind big headlines.
Although, it seems to me that Internet taxes should work the same way as catalog sales, wherein you only need to collect/pay taxes if both the vendor & customer are both based in the same tax area...
There is an informative article here [bcentral.com], and I'm digging for more.
Aha! NoLo [nolo.com] has a definitive article on it.
Amending my NY -> NM statement:
From the reference above, NoLo [nolo.com]:
>The obligation to pay sales tax is determined by the location of the buyer, not the seller. If a business does not have a physical presence in a particular state, such as a store or warehouse, it is not required to collect sales tax for sales from customers in that state. In legal speak, this connection between sales and location is referred to as a "nexus" and was established by the U.S. Supreme Court in Quill v. North Dakota, 504 U.S. 298 (1992).
There are details and exceptions below that, of course.
In other words, the example I gave applies to me, but probably not to you, unless you live in one state and pay income taxes in NM.
And just so it's out there, Ivan Hoffman's site [ivanhoffman.com] provides a lot of legal information.
Apologies for any confusion.
However, according to the NoLo article mentioned above, if a buyer in a sales tax area buys from a vendor outside the area, while the vendor doesn't have to collect sales tax, the buyer may be technically liable for paying a "use" tax to his own sales tax area...
From the NoLo link:
If you live in a state that collects sales tax but avoid paying it on an Internet purchase, you are still required to pay the tax to the state. When you pay it directly to the state, it is referred to as "use" tax rather than sales tax.
The only difference between sales and use tax is which person -- seller or buyer -- pays the state. Theoretically, use taxes are just a backup plan to make sure that the state collects revenue on every taxable item that is purchased within its borders. But because collecting use tax on smaller purchases is so much trouble, states have traditionally attempted to collect a use tax only on big-ticket items requiring a license, such as cars and boats.
>Seems the freight company that delivered it had to file tax on service they performed
Yep. It's a common way the state revenue offices check for likely large-$$ deliveries. Mentioned here [webmasterworld.com], some time ago.
A wise move. In NC, purchases subject to use tax now have their own line-item on the state income tax form. You have to specifically list your out-of-state/online purchases. Even a novice programmer working for the dept of revenue could devise a cross-check of income levels and demographics and compare it to the amount declared to sniff out suspects.