It’s that time of year that if you haven’t already your income tax bill is due to be paid. I’m sure not many of us like paying tax. I suspect that quite a few of us would avoid paying tax if we could. Now a survey of South Carolina residents in the US has confirmed this with almost 81% saying that they plan to fiddle their tax forms.
When selling on eBay it’s pretty much impossible to fiddle your figures. Your eBay account records every sale and your PayPal account and bank account record the payments. If the tax man wants to check you’ve paid what’s due it’s pretty easy for him. The same goes for VAT for those of us that are registered – everything leaves an electronic record which is easy to follow.
It’s different in the US though, there they have sales tax and local taxes instead of VAT. What makes US sales tax incredibly complicated is that the rate varies from area to area and state to state. Up until now in most of the US it was up to the consumer to declare their purchases on the Internet which are sold without tax being collected and pay the tax on their tax return.
Many companies such as Amazon are busily opposing the requirement to collect sales tax (and for smaller sellers understandably you don’t want to be figuring out tax rates across 51 states!). Amazon have recently negotiated a 5 year deal not to collect sales tax in South Carolina on condition they merely email their customers and let them know what tax is due. That doesn’t appear to make much difference though – consumers are happily buying on the Internet tax free and costing the State some $110 million annually in unpaid tax.
No one wants to pay tax, but you have to wonder why the US never implemented Sales Tax in the way we do in the UK. When you sell regardless of which state you sell to you collect sales tax for your local state. That’s what happens with VAT in the EU, you generally charge VAT at the rate in your local country regardless of the VAT rate in the consumers country.
I can understand the opposition to charging sales tax in the US. It’s too complicated for merchants to economically process and consumers enjoy sales tax free purchases. For the US tax office it’s a bizarre situation that they’ve allowed it to continue for so long though.
If you’re in the US do you declare your Internet purchases on your tax return and pay your tax (feel free to comment anonymously).