INTERNET SHOPPING:  No-Tax Holiday

As the holidays quickly approach, many people are turning to Internet shopping to find the best deals this year.  But if shoppers are turning to the Internet because they believe that internet purchases are tax free, they should heed the old maxim: let the buyer beware.

One of the lures of Internet shopping has always been the idea-and sometimes the promise-of tax-free shopping.  Since the Internet's inception, it has been ballyhooed in the popular media as a tax-free zone.  Unfortunately, this is only partially based in fact.

Although taxation of Internet service providers has been limited by state and federal regulations, there was never a ban on taxing purchases made over the Internet.

Normal state and local taxes, such as Louisiana's sales and use tax, apply to purchases made on the Internet.

The misconceptions have been exacerbated by online retailers that advertise that they do not charge sales tax.  While this may be true, it often misleads consumers into believing that they do not owe any tax on the purchase.  Almost all states, however, have the mechanism for taxing online purchases.  Typically, it is the use tax, which is the complement to the sales tax, that applies to online purchases.

The sales tax is designed to tax the sales that occur within the taxing jurisdiction.  Whenever a sales tax is on the books, there is usually a use tax on the books as well.  The use tax is in place to tax items that were not purchased in the taxing jurisdiction but are purchased tax free elsewhere and brought into the taxing jurisdiction for use in the taxing jurisdiction.

Put simply, the use tax is designed to prevent people from going out of the state or parish to make purchases and avoiding the sales tax.  When the item purchased tax free in another jurisdiction is brought into the taxing jurisdiction, it is subject to a use tax.  Thus, the use tax typically applies to both catalog and Internet sales.

When a consumer in Louisiana purchases something out-of-state, over the Internet, or through a catalog and a sales tax is not imposed, they owe a use tax to the state.  Additionally, in those parishes that impose a use tax-all but Cameron-they also owe a use tax to the parish.  In this situation, the purchaser is responsible for filing a tax return with the state or parish and remitting the use tax.    Because of constitutional limits, the use tax must be imposed at the same rate as the sales tax. 

Despite all this, there are some "tax-free" offers that are legitimate.  Some local retailers advertise "tax-free days," stating that they will pay your sales tax on purchases.  This is allowed by state and local statutes provided that: (1) the retailer states in the ad that they will remit the tax on the purchaser's behalf; and, (2) the retailer provides customers written evidence that the retailer will be responsible for the tax.

If you do shop online and need sales and use tax return forms, they can be obtained on the Calcasieu Parish school system's website, www.calcasieusalestax.org.  The use tax is reported on line 14 of the current parish sales tax return.  The sales tax return form for the state sales tax is available on the Louisiana Department of Revenue's website, www.rev.louisiana.gov.  The use tax is reported on line 2 of their current form.

To avoid finding coal in your stocking this year, make sure you are fully informed before deciding to go for a "tax-free" deal.  Either shop with vendors that collect the sales tax for the state and local governments or spend some time fully exploring "tax-free" offers.  For more information on sales and use tax, check out the Louisiana Association of Tax Administrators' website at www.laota.com.