Avoiding sales tax online is a very divisive issue, according to Rob Wood, tax lawyer with Wood, LLP in San Francisco, California. Amazon shows the evolution of this issue, as they started with not charging sales tax and now is charging sales tax in 20 different states.
Until the law changes, Wood says to look at the merchant and see by the time you check out if you'll be charged sales tax. Wood's advice is for people not to kid themselves and that if can get away with it do it, but you should know you have liability in most states and they may come after you. You may be asked to certify on your income tax return if you have any sales where you use tax.
"Self-reporting and enforcing is coming," says Wood and he tells people to be careful. For small merchants, the question is do they have enough contacts within a particular state that they should be required to withhold and send in sales tax. For big merchants, it's tougher and that's why state tax authorities went after the merchants because it's much harder to find all the customers out there.
Wood says that if you're not paying use tax, you're not safe because you clearly owe use tax if not charging sales tax because it's an internet purchase.
Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.