Sales/Use Tax Question

[WhiteKnight]

I live in Maryland and I'm helping my buddy pick out an engagement ring. He has been looking at some online retailers as a starting point, and we are going to be up in NYC to check out some B&M places there too. My question is this: if an online retailer has a B&M establishment in NYC and a purchase is made there, does he simply pay NYC sales tax? Would it be better to go there to see the rings in person, but then actually complete the transaction over the internet so that he is only subject to MD's (lower) use tax rather than the higher NYC sales tax?

 

[sygyzy]

First of all, almost NOBODy plays by USE tax laws. Technically that is what states are pissed off about. They don't want a Maryland resident driving to NY and taking the item back to Maryland and not paying taxes. People say "But I bought it in NY and paid tax there!" Well Maryland knows this but they are pissed because you are gaining benefit from the item in Maryland, not New York.

There is no right or wrong answer but I'd buy over the net to save on taxes. You would be subject to MD's tax but only if you follow the USE tax doctrine. Ask yourself all the 100's of items you have bought online. How much taxes have you voluntarily paid for them on your most recent return? Exactly....

 

[WhiteKnight]

Oh, don't get me wrong, I fully understand the opportunities presented by the voluntary reporting of use taxed items. I'm just speaking in terms of the letter of the law. Whatever my friend decides to do is of course up to him. 😉

It just seems like the best option to me to deal with an online retailer that also has an out of state B&M. Then he can select the ring and everything in person but handle the transaction online.

 

[sygyzy]

Then yes, I agree with your logic.

 

[Christoph]

If your buddy wants to buy the ring at an out of state B&M retailer, he can buy it at the store and have them ship it to his home address. This will generally eliminate the retailer's need to collect sales tax.

Conversely, if he wants to buy from a local retailer, have the store ship it to an out of state friend or relative, who then sends it back.

I've also heard of cases in which the salesperson will bend the rules a bit and give the purchaser the ring at the store, and ship just the box out of state so there's a record for tax purposes. YMMV.

 

[arcas]

Kentucky law requires that citizens which buy something in B&M stores in other states pay the difference between Kentucky sales tax percent (6%) and the other state's sales tax if Kentucky's rate is higher. That is, if I buy something in a state where sales tax is say 4%, Kentucky law requires me to pay an additional 2% "use tax" to the Kentucky state treasury even though the entire transaction took place in another state. Oh. And it's a one-way door: If I bought something in a state where sales tax is more than 6%, the Kentucky treasury will not refund the difference (surprise, surprise).

 

[sygyzy]

Arcas brings up a good point about the difference aspect. I had forgotten about that.

 

[WhiteKnight]

Is the use tax determined by one's state of residence? i.e. My friend and I live in Maryland now for grad school but he's actually from PA. If he were to follow the letter of the law, would he pay MD use tax or PA tax? To further complicate the matter, his gf is from CT. Kinda gets confusing then.

 

[WhiteKnight]

Is the use tax determined by one's state of residence? i.e. My friend and I live in Maryland now for grad school but he's actually from PA. If he were to follow the letter of the law, would he pay MD use tax or PA tax? To further complicate the matter, his gf is from CT. Kinda gets confusing then.