Our Research, Your Gain
MyTAXFREEshopping.com is designed to link consumers to retailers who do not collect Sales Tax in their state. There are a number of reasons why an internet retailer may not collect Sales Tax in a particular state, including the following:
- The product being purchased is not subject to a Sales Tax in the state. For example, some states exclude certain food items, prescription drugs, vitamins, and certain clothing purchases.
- Internet retailers may pay the Sales Tax on behalf of the consumer.
- Some states, such as Oregon, do not charge a Sales Tax at all.
- The most common reason is that retailers without a sufficient presence in a particular state are not required to charge Sales Tax based on U.S. Federal Constitutional guidelines for interstate commerce.
The United States Constitutional guidelines for interstate commerce require retailers to only collect sales tax in those states in which they have a physical presence. Generally, that means that states can only require companies to collect sales tax in states where they have business operations, and as a result, a company will not collect sales tax in states where they have no business operations.
Consumers who live in a state that has a sales tax are technically required to pay a separate “use” tax to the state if the sales tax is not collected by the retailer and the product purchased is subject to sales tax. Theoretically, use taxes are an attempt for states to collect revenue on every taxable item that is purchased within its borders. But because tracking down and collecting use tax on every single small purchase would be a nuisance, states have traditionally attempted to collect a use tax on only big-ticket items such as cars and boats. However, as a result of increased internet sales, certain states have begun to increase their collection efforts on use tax. Even though you may be required to pay the use tax, many states provide estimate processes and/or allow the use tax to be paid at the end of the year, providing the consumer with flexibility on the timing and the amount of payment. As such, you should review your state’s use tax rules and file the appropriate returns.
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