I order everything for my #smallbusiness online so I don’t have to pay #salestax!

I had to turn down an engagement once because of a statement like this. I could tell the client had no interest in becoming or remaining tax compliant.

It is true that when you order online from a business that doesn’t have “nexus” in your state you are not charged sales tax on your purchases. Small business owners need to be aware, however, that different states define nexus differently and many states are expanding their definitions of nexus to increase state sales tax revenue. Take a look at your purchase confirmation or receipt next time you order online from a big retailer, if the retailer has nexus in your state, you are charged sales tax no matter what.

“That’s why I order everything from amazon.com.” And that, taxpayers, is where #usetax (or sometimes #compensatingtax) comes into play. State departments of taxation and revenue are not unaware of this type of tax avoidance and neither are state legislatures. Most states have some form of use or compensation tax filing requirement designed to ensure that the state gets at least some portion of revenue from purchases made with companies operating outside the state (and the state sales tax requirement). Here in New Mexico we file and pay our use tax with our gross receipts tax returns. This tax applies to online purchases (depending on the state it can even apply to purchases of used items from places like craigslist or e-bay) not subject to regular sales tax. For example, if I purchase my office supplies from amazon instead of from a local supplier or an online supplier with local nexus, I have to report the amount purchased and pay the state #usetax of a little over 5%. Same thing with furniture. Same thing with reference materials or artwork or a new phone system. Some states may even have a #usetax requirement for services. Now, this does save me a little bit of money because the state #usetax is a couple of percent less than the #salestax I would be charged if I went to a store and bought the items. But states are cracking down on the failure to report this tax.

Don’t get caught unaware! Check your state and municipal requirements and definitely consult your #taxpro if you have been buying online to avoid #salestax.