As the internet is abuzz with news of Gov. Brown’s signing of AB 155 last week (the Amazon/California compromise), we’ve noticed a disturbing trend among articles responding to the news. Frequently there is a reference to “tax-free online shopping,” or some kind of warning along the lines of, “if you want to buy online without paying sales tax, hurry, before it’s too late.”
But of course, if you live in a state with sales tax, you already owe sales tax on your online purchases. You always have. Regardless of whether or not the online shop collects sales tax when you make your purchase, you owe the state sales tax on that purchase.
While the debate over whether online retailers should collect sales tax continues (as our regular readers know, we come down firmly on the side of “yes,” for many good reasons), whether or not online purchases should be subject to sales tax is not in question. They already are, and always have been.
We hope that newspapers and pundits will get this right in the future, so that they don’t mislead the public. There are real consequences to believing online purchases are tax-free. If sales tax isn’t collected by the retailer at the time of purchase, you need to pay it on your annual income tax returns. If you don’t—well, let’s just hope you don’t get audited.
(For more myths and facts about online sales tax collection, see our earlier post.)