NEW YORK (CNN/Money) -
If you order something on the Internet, you probably have to pay shipping costs. But at least you don't have to pay sales tax, right?
Actually, you do. And in some states, you'll soon be getting a little reminder of that fact.
You could be forgiven -- by us, anyway -- for not realizing that you're supposed pay your home state's sales taxes on all purchases, regardless of whether they're made from stores in your own state or in another state.
When you buy something in your own state, the store selling it is required by law to collect sales tax, if the state has one. (Five states do not, according to John Logan, a senior analyst for tax-information company CCH.)
If you're buying from a vendor that doesn't do any business from a physical location in your state, however, that store isn't required to collect state taxes. But that doesn't mean you don't owe those taxes.
"There's an independent obligation on the part of the purchaser," said David Bunning, a New York City attorney with the firm of Greenberg Traurig.
Or, in the words of the New York State Department of Taxation and Finance in their "Publication 774, Purchaser's Obligation to Pay Sales and Use Taxes Directly to the Tax Department":
You owe state and local sales or use tax directly to the Tax Department if you:
purchase property or a service which is delivered to you in New York State without payment of New York State and local tax to the seller, such as through the Internet, by catalog, from television shopping channels, or on an Indian reservation.
Now it's time to pay up.
On the move
Until now, state tax authorities have generally not tracked down and prosecuted those who violate sales tax laws, with the exception of major scofflaws like Tyco's Dennis Kozlowski. (His failure to pay sales tax on large amounts of expensive art work landed him in court.)
"We focus our efforts on that small percentage who are dishonest," said Mark Bucci, a spokesperson for the New York State Department of Taxation and Finance.
Now, however, New York and a number of other states are devoting a bit more effort to collecting sales tax from ordinary citizens as well as fallen fat cats.
The tool is subtle but effective: a single line added to state income tax forms.
Last year in Albany, the state legislature forced tax collectors to get out their big stick, said Bucci. The legislature required a line -- line 56, to be precise -- to be added to state income tax forms, on which a tax filer is required to enter the amount of sales tax owed on out-of-state purchases.
Gov. George Pataki tried to block the rule but the legislature overrode his veto. So the line is in.
Tax collectors in California have been trying to get something similar going since the 1990s, said Victor Anderson, a supervisor in the audit support unit in California's Board of Equalization. It was difficult to implement there, he said, because sales taxes and income taxes are collected by different departments.
Beginning this year, however, California tax returns will include a sales tax line, which the state estimates will yield an additional $13 million in collections. New York's budget office is figuring a $2.5 million take from the new line, though the Albany legislature was expecting 10 times more.
So far, 21 states collect sales tax as part of the income tax filing process, according to Logan. According to a report compiled by the California Board of Equalization, just 0.58 percent of filers have paid the tax in Utah in 2001 and as many 1.6 percent in Michigan.
Michigan netted about $3.1 million, according to the report. Utah collected less than $250,000. But such relatively small amounts of money may not really be the point.
"The idea is just to remind taxpayers that they have that obligation," Logan said.
What you need to do
Realizing that New Yorkers may not have kept all their out-of-state receipts, the state's tax form includes an option for estimating the use tax. (Technically, it's called a "use tax" when it's paid after-the-fact by consumers. But it equals the same amount.)
The estimate is based your adjusted gross income. Instructions for the tax forms include a table of AGI ranges and, for each range, an amount that taxpayers can enter on the "use tax" line as an estimate.
For example, if your AGI is between $75,000 and 100,000, you'd enter $43. That's what a New York City resident would pay in sales taxes on purchases of about $500.
If a resident decides it would be better to be more specific, he can add up all the purchases made out of state, as well as from any localities within the state that have a lower sales tax rate than where he lives. Then, he can figure out what the New York sales tax would have been on those purchases.
|An earlier version of this story incorrectly stated that Michigan had been doing this since 1988. Michigan has been collecting use taxes on income tax forms only since 1999, according to the California report. However, several accountants in Michigan said the same typical practice of estimating use tax applied there.
Next, he can subtract the amount of any sales tax he paid when he made the purchases. The difference is the amount owed. And he'd better not forget to save those receipts.
Of course, if he never shopped online and never spent money outside his home town -- or just said that he didn't -- the taxpayer could enter a zero.
"Putting a zero there will not trigger on audit," claimed Bucci.
For tax accountants in Wisconsin, a state that has been doing this since 1988, it hasn't been a huge hassle, said Jim Brandenburg, a CPA with Kolb+Co in Milwaukee. They simply ask clients to provide the amount they spent out of state and do a quick calculation.
In the absence of receipts, a good-faith estimate is acceptable, he said.