When to pay tax, when not to?

I bought a coin on ebay and no where in the listing did it mention the seller collects state sales tax. The seller accepted my offer but when the invoice came it was "plus $24" (sales tax)
I sell on ebay and don't collect tax. How do I know the seller isn't just pocketing it? The sellers ebay name doesn't even sound like a business... i.e. "Gold Rush Coins and Collectibles" etc. It's more like "Rmleopard"

What should I do?

 

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Do you live in the same state as the seller ? If so does the state have sales tax on coins or bullion ? If those are true he may have to collect . I wouldn't give the ebay name any thought though many people who pay taxes dont have business sounding name ID's.

 

Send him a question on e-bay and ask him.

 

If you don't pay a sales tax to the seller, you are still liable for the same amount to your state as a "Use" Tax. Many people don't voluntarily declare all their purchases that had no "sales tax" applied/collected on their state tax returns so that they then pay the amount to the state as the "use tax". But I can see that most states will in the future probably try to identify what is purchased by their residents "out of state" and find a way to collect the taxes as well as any penaties they can impose.

 

To pay or not to pay, that is the question. Whether 'tis nobler in the spirit...

 

Every state in the country that levies a sales tax also has a use tax, subject to the same regulations of the sales taxes. If you buy something and the seller did not charge sales tax, you as the purchaser legally owe use tax on the purchase. Now, pragmatically, do most people self report these purchases and pay the use tax? No, they don't. States know this, and its just easier to force more sellers to collect sales tax, so that is why they are going after sellers more than buyers. However, that does not change the fact that someday a state could pull your purchase records from Paypal or another source and charge you back use taxes.

My fear of the future is two fold. Either the Constitution regarding nexus and interstate commerce will be trampled and sellers will have to collect sales taxes for all states, or states will start to seriously crack down on use taxes using their new access to Paypal and all credit card records in this country. I am pretty sure one or both will happen, since the states are just as broke as the Feds are.

 

CC and PayPal only has info that you bought something, not what you bought. You may or may not have bought something that is taxable in your state. Your state cannot use those records to impose sales/use taxes.

 

Yes they can. Sales tax is assessed on total purchases, YOU must prove it was not subject to tax. They have written the laws this way on purpose, just for the situation you describe sir.

I used to work in the sales and use tax department of a nationwide firm. EVERY SINGLE EXPENDITURE we had to have proof why it was not subject to use tax. Every cent WE had to prove it was not taxable. So, the same logic would apply to individuals, they would take your CC/Paypal account, and make YOU prove it was not subject to use tax.

Woudl it suck? Yeah, it would. Would it REALLY tick everyone off? Yeah, but that does not change the law.

 

If the auction said sales tax would be added then you already agreed to pay it. If it doesn't, there is no way i would pay that much extra. Take the negative feedback and move on.

 

Excellent insight. It reminds me of the state billing a number of local cigarette smokers for "taxes due" for internet purchases. Some received bills for over $10,000!

 

Apples and oranges, Medoraman.
What you describe is the different uses of purchases by a business. Was it purchased for resale or for use by the business?
Floor wax purchased by a business for resale is not a taxable purchase, but that same floor wax purchased for
use on the floors of the office is taxable. When you report an expense for floor wax, that expense has to be
broken down for tax filing. Your response to my post is in no way related to my post.

 

No resale whatsover, neither was there any capital equipment. Its not apples and oranges sir. These were simple expenses paid by the company, (the largest mortgage firm in the US), and we had to go through every cent to see if sales tax was already paid, if not we had to either prove why no use tax was due, or pay use tax on the transaction.

The EXACT SAME laws that we were following for this firm applies to EVERYONE, not just businesses. Large businesses are just bigger targets, so are more likely to be audited. However, there have strings of cases in NYC where people have been sentenced to jail for not paying use tax on artwork they purchased and brought into NY. In NY, art is a taxable purchase, and its a big enough dollar value its worth it to chase down.

However, what is stopping a state from getting someone's Paypal statement of $5,000, see they did not report Use tax, and sending that person a bill for $5000 worth of taxable purchases? Then the taxpayer would have to prove WHY they don't owe the tax. Its coming, they are not getting these records for nothing.

 

Much like Doug's Florida law, we in CA also are charged tax automatically on Ebay and other sites. If I got a bill for more taxes I'd tell the seller where he could shove them.

 

So, by that logic, when I spend $300 at my local mega-store and my taxable purchases are only $65, I should be taxed on the $300 and prove to my local tax collector that $235 is not taxable so I can get a refund on my taxes? Or, the gov't gets my CC records for the purchase and demands proof that the $235 was spent on non-taxable items and expects me to pay the tax unless I can prove that the items were not taxable?

We're talking sales/use tax here, not business income taxes. That's why I called apples and oranges.

 

What state are you in, and what state is the seller in? Was sales tax mentioned in the auction?

 

From experience it is best to split the transaction and pay for the consumables first and then the non-taxable stuff second when you pull out your exemption certificate.

 

Only businesses and non-profits have need and eligibility for an exemption certificate. The op was not asking about purchases by his business, he was asking about personal purchases being taxable. Two different animals.

 

If you had a receipt from a business in your state, most states accept the premise the business collected the appropriate tax. So, for our Paypal example, maybe you could list under every instate purchase, "sales tax collected" and the DOR would not question it.

But, bottom line, YES, it is the PURCHASERS RESPONSIBILITY to PROVE they paid the tax, or tax was not due, on the purchase. The sales tax laws were written SPECIFICALLY this way to ensure maximum collection. If a state wanted to be brutal, they legally could make you PROVE the in state store collected the appropriate taxes. They don't do that though. While working in that department, if I could prove we purchased the goods within the same state, every tax department I met with would accept that as proof adequate taxes were paid.

I am not talking about income taxes at all, so I have no idea what you are talking about.

 

Let me ask this question then - is this considered an investment? Simply because I don't see the purchase of PM as a "use". The letter of the law may (and usually is) very different than the logic of it. I can see tax on pretty much everything we use, and actually including jewelry, but how can you justify a "use" tax on an instrument of money?

The way I look at it is that I don't pay any taxes on the stocks I "buy", but when I sell, I'm either assessed a tax based on the gains, or a deduction based on the loss. I approach the purchase of PM's and collectible coins the same way. I should be responsible for logging the purchase price, and the sales price only if and when it's sold, and calculating the gain or loss as I would any other investment vehicle.