Online Shopping Could Get Pricier
States now have more latitude to collect sales tax on internet purchases.
If you live in a state that charges sales tax, you could soon pay more for your online purchases. In June, the Supreme Court ruled that South Dakota may require online retailers with a certain volume of sales in the state to collect sales tax, even if the sellers don’t have a physical presence in South Dakota. The ruling has paved the way for other states to collect sales tax on more online purchases.
Hawaii, Kentucky and Vermont passed legislation effective July 1 of this year that requires remote sellers to collect sales tax. Alabama, Connecticut, Georgia, Illinois, Iowa, North Dakota and Wisconsin have new laws that will go into effect this fall or winter. Other states passed laws last year that would become enforceable pending rulings by the state courts. And several states—including California, Kansas and New York, which have high sales tax rates—are likely to tackle the issue in upcoming legislative sessions. In most states, you can expect to be hit with local sales tax for
online purchases, too.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Generally, shoppers who buy from midsize online retailers will be the hardest hit, says Carl Davis, research director for the Institute on Taxation and Economic Policy. South Dakota’s rule requires remote sellers to collect tax if they have at least $100,000 in sales or 200 transactions in South Dakota. Other states are imposing similar thresholds. Many larger merchants already collect sales tax nationwide. Amazon.com charges state tax on direct sales in all states that have a sales tax. However, in most states Amazon doesn’t collect taxes for purchases from third-party sellers that use its platform.
There’s a thin silver lining. Customers who live in states that charge sales tax are supposed to pay “use tax”—usually when they file their state tax return—on taxable purchases from out-of-state retailers that don’t collect sales tax. The vast majority of consumers don’t pay use taxes, leaving them liable for penalties if their state chooses to enforce the rule. But if retailers collect the sales tax, online shoppers have less risk of running afoul of the law, says Diane Yetter, president of the Sales Tax Institute.
-
I'm 73 and hate winter, but I can't afford to be a snowbird.How can a snowbird wannabe warm up without the expense? We asked professional wealth planners for advice.
-
5 Smart Things to Do With Your Year-End BonusAfter you indulge your urge to splurge on a treat, consider doing adult things with the extra cash, like paying down debt, but also setting up a "fun fund."
-
Gen X Investors: Protect Your Portfolio From an AI BubbleAmid talk of an AI bubble, what's the best course of action for investors in their 50s and 60s, whose retirement savings are at risk from major market declines?
-
Kiplinger's Tax Map for Middle-Class Families: About Our Methodologystate tax The research behind our judgments.
-
Retirees, Make These Midyear Moves to Cut Next Year's Tax BillTax Breaks Save money next April by making these six hot-as-July tax moves.
-
Estimated Payments or Withholding in Retirement? Here's Some GuidanceBudgeting You generally must pay taxes throughout the year on your retirement income. But it isn't always clear whether withholding or estimated tax payments is the best way to pay.
-
How to Cut Your 2021 Tax BillTax Breaks Our guidance could help you claim a higher refund or reduce the amount you owe.
-
Why This Tax Filing Season Could Be UglyCoronavirus and Your Money National Taxpayer Advocate Erin M. Collins warns the agency will continue to struggle with tight budgets and backlogs. Her advice: File electronically!
-
Con Artists Target People Who Owe The IRS MoneyScams In one scheme, thieves will offer to "help" you pay back taxes, only to leave you on the hook for expensive fees in addition to the taxes.
-
Cash-Rich States Lower TaxesTax Breaks The economic turnaround sparked a wave of cuts in state tax rates. But some say the efforts could backfire.
-
The Financial Effects of Losing a SpouseFinancial Planning Even amid grief, it's important to reassess your finances. With the loss of your spouse's income, you may find yourself in a lower tax bracket or that you qualify for new deductions or credits.
