Not only do you need to keep track of your purchases on Black Friday and Cyber Monday (make sure you buy something for your officemate who's watching you shop!), you need to keep track of your sales tax.
Granted, it's a total holiday buzzkill. But if you're constantly complaining about the beat-up roads and poor educational system in your state, then tally up and pay up.
What is a Sales Tax?
It's basically a consumption tax on the goods and services you buy - and is generally charged at point of sale.
And that includes your online purchases.
"Online sellers have to collect sales tax from customers in the states they have physical presence,'" reminds Lisa Greene-Lewis, CPA and tax expert at TurboTax.
So if you order something from Macy's and there is a store in your state, the company is supposed to charge you a sales tax and send it to your state.
Your state then uses that money to fix those roads and hire better teachers.
Nowadays, thanks to the Amazon laws, most states require an out-of-state retailer to collect its sales tax and send it to them. So if you're a New Jersey resident and you buy something online from a store in New York, the site should collect your state taxes and send them to Jersey.
But while some states mandate this, others don't.
So then what?
And There's a Use Tax?
In theory, you're supposed to keep track of the all purchases you made that don't have a sales tax attached, says Carol Kokinis-Graves, a senior state tax analyst for Wolters Kluwer Tax & Accounting U.S.
You would then have to figure out the tax owed and report it on your state tax return in April.
But you would report that amount as a use tax, not a sales tax. (Because the IRS lives to confuse you.)
Stay with us here: a sales tax is charged at the time of the transaction, whereas a use tax is imposed when you get a purchase from out-of-state and actually use it (or store it) in your home state.
As an example, let's say you're from New Jersey and you bought something from Colorado but you weren't charged a sales tax. You're still responsible to pay the N.J. Department of Revenue when you use the item in N.J.
Big note: you can't be hit with both a sales tax and a use tax. It's one or or the other. (Well, thank goodness for that.)
Most states let you report your use tax on your state tax return. So save your receipts, because you'll need them to calculate that use tax come tax time. Now some states attempt to make this calculation easy for you. California, for instance, has a Use Tax Table. So if you spent $50,000, your use tax is $21, according to the California table.
And while it's not a ton of money and does go to help your state, collecting it clearly is difficult to enforce.
Many sites now put up a consumer warning that says, "You are liable for use tax if you are not charged a sales tax at time of purchase."
There actually are bunch of states that don't even have a sales tax. Alaska. Delaware, Montana, New Hampshire and Oregon don't bother will all this, so shop away, residents. You win.
"But remember what matters is where you live when you use, store or consume the item," says Kokinis-Graves.
Yes, another buzzkill coming.
If you live in Oregon (no sales tax) and you send a sweater to your aunt in Connecticut (sales tax), you, in theory, will owe a CT use tax when she receives the sweater.
Frustrating, we know. And to make matters worse, local municipalities charge additional sales taxes that need to be collected as well. As you can imagine, this collection process can be so onerous to businesses, large and small.
So enjoy your online shopping. And if the potholes in your town are really giving you a headache, then pay your fair share come tax time.