Must Internet purchases be subject to sales tax? What is good and bad about it?

Question

Must Internet purchases be subject to sales tax? What is good and bad about it?

Answer 1

When the seller does not collect sales tax (regardless if an items is purchased over the internet, mail order, out-of-state, whatever), and the type if item is normally charged a sales tax in the state where the buyer resides, the buyer must report the sale and pay tax to their home state.  Even thought the tax is a technically a sales tax, when the buyer reports it, it is called a "Use Tax".

It is bad for the resident because it is a lot of work for them to do (remember what items they purchased that are subject to sales tax but no sales tax was paid, fill out forms, pay money).  Most buyers don't bother reporting it...who wants to voluntarily pay a tax which is extremely unlikely to be noticed by the state.  How is the state going to know you went to a neighboring state to purchase a TV?  And who wants to fill out an additional tax return which is above and beyond the normal income tax return?  Some states have a line for Use Tax on their income tax return...some do not.  Attached is a link for PA's Use Tax forms.

It's bad for the state because they miss out on a lot of sales tax.

The state could just say that all internet/mail-order companies who sell to the state must collect the sales tax, but the US Supreme Court determined that unless a company has nexus in the state (basically, they need to have a store or office in the state), they don't have to collect sales tax for the state.