The days of avoiding the sales tax for online purchases are likely numbered.
CPA Kenneth Hall of the New York State Society of CPA’s discussed the anticipated change and why it’s coming Monday during News 8 at Sunrise.
“Back in 1992 the Supreme Court ruled that unless you have a physical presence in a state, bricks and mortar, you weren’t obligated to collect sales tax from people you sell to,” said Hall. “Since that time, there’s been a state, South Dakota, who came forward and said no, we think we’re going to pass a law that says you have to collect tax. A company called Wayfair, which is a famous online reseller – you can outfit your house with furniture from them and not pay sales tax – challenged it and said no, we think the 1992 rule still applies. So, it goes to the Supreme Court and the Supreme Court says, we think that now the world has changed. We think that everybody should be able to collect and remit sales tax.”
Hall noted that currently in New York that is not the case. “In New York, right now we’re not required online, or people that sell out of New York to other states currently aren’t required, but with the Supreme Court now ruling that you can, I would say it’s a matter of time.”
The Supreme Court ruling will impact both shoppers and retailers. “If you’re a shopper, like myself, and you buy tires online or clothing, you cannot pay sales tax because you’re not in that state,” Hall said. “For the retailers, for the companies, and think of the Finger Lakes – all the wineries, they sell wine around the country, around the world – they’re not charging sales tax. They have one physical location. It’s going to be a huge burden on them to figure that out. What are all the deadlines? What are the rates? Who do you send it to? So that’s where I think a good CPA could probably help them out.”
Hall said in New York there are tax obligations that taxpayers already have. One line 59 of your IT-201 personal tax form, all taxpayers are required to keep track and self-assess Use Tax on items purchased online. He added, most states are likely to believe collecting tax “at the pump” is more effective than taxpayers self-assessing.
For online shoppers, Hall suggested keep an eye out on prices if the sales tax revision is passed in New York. For retailers, it’s time to have a conversation with their business or financial advisor about how the changes will impact their company.
And, continue to keep a record of your current online and out of state purchases and give the information to your CPA/tax preparer for inclusion in your 2018 NYS tax return.
For more “Smart Money” advice from the New York State Society of CPA’s, click here.