Internet sales tax?
The Exponent, an independent college newspaper published primarily by Purdue students, carries a story today titled, “Indiana makes progress toward online sales tax.” Although not stated explicitly within the article, Indiana will join twelve other states in pushing Internet and mail-order vendors to collect sales taxes from their out-of-state customers. As C-Net reported on Friday:
On Oct. 1, 13 states will officially launch reformed systems that pledge compliance with the Streamlined Sales Tax Agreement, first devised in 2002 by a committee of state tax officials and billed as a way to make tax administration simpler and more uniform. Five more states have passed laws that, over the next two years, will bring them into compliance with the agreement.
Compliance with the system won’t change the fact that tax collection remains voluntary for companies without a physical presence in the states where their orders originate, thanks to a 1992 Supreme Court decision.
In 1992, the U.S. Supreme Court concluded that a remote or mail-order retailer has to collect sales tax only from customers who order from states where the retailer has a physical presence. Nevertheless, for residents in the 45 states with a sales tax, customers who purchased goods out of state “tax free” online are supposed to pay a use tax, typically levied at the same rate as the sales tax, on those out-of-state items. In practice, though, very few citizens file such returns.
