Bay Area Estate And Tax Planning Law Firm

California sales and use taxes can be tricky for online shoppers

On Behalf of | Sep 8, 2014 | Uncategorized |

When we think of shopping online, we generally think of ourselves as consumers. We lay back on the couch or get comfortable in our ergonomic desk chair and wander through website after website. If we need something, we are confident we will find it; the Internet is our oyster.

If we are just window shopping, we may or may not click “complete my order.” We have a friend who sheds the anxiety of her workday in San Francisco by placing hundreds of dollars’ worth of goods in her “shopping cart” but never clicking “check out” — all from the comfort of her Oakland condominium. In the past year, she has cyber-refurnished her living room and cyber-refurbished her wardrobe without making a single purchase.

Had she bought anything, she would have had to review each receipt to see whether the merchant added sales tax to the purchase and whether the merchant had applied the correct California tax rate.

But, online shoppers need to remember that California will ask for use tax payments in some cases if the merchant does not collect sales tax. So our friend’s tax task would have had a few more steps.

The law changed in 2012, as we noted in our article, “California Sales Tax Collectors to Target Online Merchants.” Before, only Internet merchants with a physical presence in the state had to charge tax on purchases made by California residents. After September 2012, though, the physical presence requirement was expanded to include what amounts to a significant economic presence requirement. Even small businesses based a thousand miles away should be adding sales tax to Californians’ purchases.

No every business knows this, though, so our friend may have felt that she had gotten a good deal by ordering from outside the state. That feeling would not have lasted long, though, when she realized — or we told her — she had to pay a use tax on the merchandise if the goods were not tax-exempt.

These are just a few things that Internet shoppers need to think about. If we put on our seller’s hat, the issues are a little different but just as numerous.

We’ll explain more in our next post.

Source: California State Board of Equalization, “Sales and Use Tax in California,” accessed Sept. 5, 2014