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Why is Some Internet Shopping Tax-Free?

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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 01 November 2016
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Many people are pleasantly surprised when Internet shopping is tax free. However, not all Internet shopping is tax free-it depends very much on where you live, and where the company from which you are ordering is located. In most cases, you are only assessed sales taxes on products you purchase from an Internet company that is located in your state. If you order outside your state, purchases are generally tax free.

There are a few states where all purchases are tax free. Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon do not have a sales tax. So even if one lives in one of these states, most Internet purchases from companies in the home state are not taxed.

If one visits and shops in another state that applies sales tax, one usually cannot make tax free purchases. However, if one is physically in that state at the time of purchase, one may be benefiting from some things the taxes pay for, like good roads.

Conversely, shopping on the Internet means one is not physically in the state where one is making the purchase. One cannot be said to be using any of the resources of that state, thus one does not benefit from any money paid in sales tax. Therefore tax free purchasing seems only fair.

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However, tax free purchases on the Internet may not exactly be tax free. In fact, in some states, one is supposed to report all Internet purchases, and duly pay sales tax at the end of each tax season. This is especially the case when one orders things from an online site that exists in one’s state. Often online merchants charge sales taxes to no one, not even people who should be taxed under state law. So technically, one should police one’s self and pay appropriate taxes.

This type of self-monitoring is seldom done. Most people don’t report tax free purchases where a tax should have been paid. They may cite that assessing taxes should be the job of the merchant. If a merchant fails to charge appropriate taxes, then the merchant should pay the government appropriately. It wastes time for consumers, some argue, to research which sites are physically located in their own state.

Some politicians argue for taxing Internet use to make up for losses to local businesses. However, this idea has yet to become any type of law, and is opposed by many. At some point in the future, however, Internet purchases might not be tax free if Internet use is taxed.

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GraniteChief
Post 4

until federal legislation is truly passed on how to regulate Internet shopping taxes the conundrum of doing with state state commerce on the Internet will remain prevalent in our new e-commerce economy. This is just one way that the Internet and Internet technology has brought to our society massive social changes in the way that our government even functions. Some even 10 years ago by the thought that these kind of implications would be very minimal considering the amount of e-commerce actually occurred 10 years ago. Since then e-commerce giants have taken over and now large amounts of retelling is done exclusively online. For this reason we must figure out how to tax e-commerce and Internet shopping can not be tax-free much longer.

FrogFriend
Post 3

It seems really unlikely that the federal government is going to step up soon but I really think that we need a centralized tax method for Internet shopping services. It doesn't seem right for money from one state to be used in another simply for consumers to avoid an Internet sales tax. This is counterproductive to local markets and create a spread of the monetary value in the economy to locations that don't necessarily deserve it. The biggest problem of course with these concepts is the ability to enforce Internet taxes If the local government decided that they want to tax all products being sold on the Internet to people in their location, it would be a daunting technological feat

to actually monitor such activities. Some would argue that it wouldn't even be in the jurisdiction of this local government perform such a task and in that case I think the federal government needs to step up and do something about the situation.
fitness234
Post 2

It may not seem fair but I don't think all the laws of taxation in this country are fair. For this reason, I purchased major electronics and things that cost a lot of money and are easy to ship over state lines and on the Internet because it avoids sales taxes. This may seem like the wrong thing to do, but the reality is as we get taxed on our paychecks as well as the things that we purchase. If I'm going to buy a new camera I will certainly will buy it from an Internet website that is located in someplace other than the state I live as to avoid these Internet taxes.

I think consumers have become aware of this issue and are starting to do this more and more as they see the savings that it results in when making a large electronic or other types of purchase for that matter.

lwilkum
Post 1

I am in Arizona. If I buy a car from an individual in another state and drive it here, do I have to pay sales tax?

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