0

My understanding of US practice is if I buy something from a seller who doesn't have a business presence in my state then I don't pay sales tax if it's being shipped to my state.

If I live in state A and go across the river to a store in state B, can I purchase an item and ship the package back to my house in the back of my car, and thereby avoid sales tax?

There's two parts to this:

  • What kind of contract would we have to sign, if any, to authorize me to be a short term shipping-carrier for the seller? Would a simple verbal agreement suffice? I suppose we'd want to specify I'd be liable for loss during shipment.
  • Is this fraud of some sort? I'm not trying to break any laws here, but I don't understand how this would be fraud. I'm actually delivering the item to a different state, and I can offer a shipping service no more or less (though somewhat less efficient) than some big corporation. There's no lying.

I've never heard of or seen this done so maybe I'm missing something about why it wouldn't work legally or practically.

  • 3
    This answer touches on use tax which, by the sound of it, might be (at least theoretically) payable if sales tax isn't. – TripeHound Feb 3 at 15:57
  • State B almost certainly has a very precise definition of what it means to sell to someone out of state, one that doesn't include the out-of-state person buying the item in state B but having it shipped back to state A. It would likely also preclude you from ordering the item over the phone/internet/etc and simply picking the item up in person. – chepner Feb 3 at 16:03
  • 3
    For example, if I buy something in person on vacation and have it shipped to my house (rather than taking it with me on the plane), I still bought it in the seller's state and will pay sales tax. (And strictly speaking, I would have to show proof that the sales tax was the same or higher than my own state's sales tax to avoid paying applicable use taxes on the difference.) – chepner Feb 3 at 16:06
7

Your understanding is incorrect. Unless you live in a state that does not have sales tax, you are obligated to pay tax on that purchase. Whether you are paying origin-based tax or destination-based tax is determined by where the business selling you the item is located. Reference: https://www.thebalance.com/which-sales-tax-rate-do-i-charge-my-customers-3193251

It used to be that online sellers and sellers without physical locations in your state did not have to charge sales tax. This is one of the reasons Amazon became such a popular purchasing option. However, if you lived in a state with sales tax, you were obligated to report those purchases on your tax returns (state-dependent, of course). It was rarely, if ever, enforced. Individual states have started passing laws requiring it and major retailers like Amazon have moved to just apply the rules to all states regardless of legislation to save themselves more headaches over the calculations.

| improve this answer | |
  • This seems to be sidestepping the question by saying it's not common. Are you saying there is no scenario where my case could happen? – Partial Fraction Feb 3 at 19:53
  • @PartialFraction - If you don't live in a state that has no sales tax, then no. I'm not aware of any scenario in which you could legally get around having to pay taxes either in the state where you live or in the state where it was purchased. I'm also not saying you would ever actually get caught/audited on it, but if you did there might be penalties. Amazon was the shining example for this, and even has the "Amazon Tax" laws which have come into effect. en.wikipedia.org/wiki/Amazon_tax – BobbyScon Feb 3 at 21:45
  • Ok, so what about if I lived in Oregon and was over the border shopping in Washington? Could I agree to be a courier to drive my goods back home to Oregon and legally avoid paying sales tax to Washington? – Partial Fraction Feb 4 at 15:38
  • 1
    @PartialFraction - Here are the real questions - Why would a business agree to make you a courier for them (how does going through the effort actually benefit them)? If they do that for you, then should they do it for everyone from Oregon that shops in their store? Do they offer ordering, or can you only buy from their physical location in-person? If the latter, then you're probably not going to get around sales tax for Washington. I guess what you're asking is theoretically possible, but the logistics are too variable for us to give a definitive answer here. – BobbyScon Feb 4 at 16:07

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.