Internet Parts Sales Taxes (or the lack thereof)

[dpalmer1987]

So the latest 25% off sale (June 1 - June 9, 2025 on Autoparts.toyota.com) ended Monday (June 9th). I had placed an order for 2 sets of wipers (actual OEM not the Sightline junk) with Serra Toyota of Decatur (AL) and now have the items in hand. If I am calculating correctly I was able to get the wipers about 48% off list price (25% off sale plus the usual Serra Toyota of Decatur (approximately) 31% off list price discount). And FREE shipping. Better deal than RockAuto, right ?!?

I was rather surprised that I was not charged either Alabama sales tax or the sales tax of my state (as expected with Amazon). So I researched the matter on Grok and ChatGPT. You guys probably already know all about this, but apparently states usually do not collect their own sales taxes (or sales taxes of the destination state) on (internet) sales made by in-state entities to out-of-state residents IF two conditions are met (Per the 2018 Supreme Court ruling, South Dakota v. Wayfair):

- The entity making the sale lacks any kind of physical presence (the legal term is "nexus") within the destination state, AND

- The overall volume of sales to a particular destination state does not exceed (either) $100,000 in annual sales (or) 200 total number of annual transactions thresholds (the legal term is "economic nexus").

Some states (such as Alabama) also impose what is called a "common carrier exemption" requirement. That is, entities must utilize a "common carrier" (UPS, FedEx, USPS etc.) to make deliveries to out-of-state buyers (while also separately stating any shipping charges as a distinct line item on any invoices) in order to avoid having to collect (their) state sales taxes. Buyers themselves entering the borders of another state to make an in-store pickup are subject to the sales tax of that state.

This is one reason why entities such as Amazon.com collects the sales taxes of (their) buyer's state - Amazon may or may not have a physical presence within a particular state (warehouses etc.) but they (of course) exceed the overall sales volume thresholds. Amazon.com is also very visible to (state) Department of Revenue agencies. A out-of-state car dealership is perhaps not quite so visible.

Under such circumstances out-of-state buyers would still be legally responsible for self-reporting the transaction and paying the sales tax (or what is called a "use tax") of their state, but you know......

 

[AandPDan]

Yeah, I know...

Massachusetts is kind enough to offer a "safe harbor" provision. Basically where you pay a certain amount based on your income to reduce your liability.

Sorry, not happening here. I track all my purchases and keep receipts. They get only what is owed.

 

[dpalmer1987]

Yeah, I know...

Massachusetts is kind enough to offer a "safe harbor" provision. Basically where you pay a certain amount based on your income to reduce your liability.

Sorry, not happening here. I track all my purchases and keep receipts. They get only what is owed.

Wow. I am trying to avoid being "political" but I guess that is how it goes in the "Blue States". In my state they don't really make an issue of it unless it becomes blatant.

 

[Hall]

I knew about condition # 1 already. I ran into this many, many years ago when shopping for a Dell computer. They're in TX and I'm in Ohio and I was confused why they were adding sales tax. Turns out, if you remember, Dell used to have kiosks in many shopping malls where you could order desktops, laptops, etc and that counts as their "physical presence".

 

[JayhawkRoy]

Wow. I am trying to avoid being "political" but I guess that is how it goes in the "Blue States". In my state they don't really make an issue of it unless it becomes blatant.

For many years, Kansas (a not so blue state) required you as a resident to declare the amount of out of state purchases as a compensating use tax on their income tax form. I believe that line was eliminated after Amazon and the other mail order biggies started to collect salex tax.

 

[skyactiv]

Wow. I am trying to avoid being "political" but I guess that is how it goes in the "Blue States". In my state they don't really make an issue of it unless it becomes blatant.

The sales tax rate in Clarksville, TN which is in Montgomery county is 9.5%. And Montgomery county Tennessee taxes groceries but at a lower rate than 9.5%. The chauvinism some people have is ill founded.

 

[Hall]

For many years, Kansas (a not so blue state) required you as a resident to declare the amount of out of state purchases as a compensating use tax on their income tax form. I believe that line was eliminated after Amazon and the other mail order biggies started to collect salex tax.

Ohio still asks how much in purchases we make that are subject to sales tax, but wasn't collected. My answer is $0 last year and every year prior.

 

[dpalmer1987]

The sales tax rate in Clarksville, TN which is in Montgomery county is 9.5%. And Montgomery county Tennessee taxes groceries but at a lower rate than 9.5%. The chauvinism some people have is ill founded.

Okay, I apologize for any confusion but you have seriously misunderstood my response to the post made by AandPDan who is apparently from Massachusetts. He made the point (in response to my original post) that the State of Massachusetts seriously tracks sales made by out-of-state entities to Massachusetts residents and fully expects such residents to self-report such transactions (and pay the corresponding sales taxes) to the State of Massachusetts.

As you apparently are aware (you having made previous reference to graduating from the Nashville Auto-Diesel College), the State of Tennessee usually does not even begin to subject Tennessee residents to such levels of scrutiny, unless such "tax evasion" goes on repeatedly and/or on an elevated scale. That is all I was pointing out, I was not referring to or making any comparison of any general levels of taxation between the States of Tennessee or Massachusetts in particular or between the "Blue States" and the "Red States" in general.

Hence, that is why I said "I am trying to avoid being political" - so why are you bringing up any general levels of taxation, it does not pertain to the discussion. Even a casual reading of the previous posts makes this abundantly clear, so why did you leap to a conclusion?

Your response is quite disappointing to me in that you seemed to be one of the most intelligent participants in this forum, I had gained much insight from many of your previous responses. In any case I am perfectly well aware of the sales tax rates in Clarksville and Montgomery County, Tennessee.

 

[dpalmer1987]

The sales tax rate in Clarksville, TN which is in Montgomery county is 9.5%. And Montgomery county Tennessee taxes groceries but at a lower rate than 9.5%. The chauvinism some people have is ill founded.

Yeah, I know...

Massachusetts is kind enough to offer a "safe harbor" provision. Basically where you pay a certain amount based on your income to reduce your liability.

Sorry, not happening here. I track all my purchases and keep receipts. They get only what is owed.

Again, do yourself a favor and actually examine what the poster from Massachusetts is saying here. The State of Massachusetts offers its residents the "choice" of having to carefully track any applicable out-of-state transactions and calculate any sales tax owed and thus self-reporting and paying such amounts (and being subject to potential audits) OR:

simply taking the "easy way out" and obtaining a sort of "blanket amnesty" by making pre-payments towards such sales taxes, based not upon the number and amount of any actual transactions but upon income levels - even though such pre-payments would usually be well in excess of any actual sales tax owed (again based upon the number and amount of any actual transactions).

Hell of a choice to make, isn't it? Hence this is why the poster is saying, "Sorry, not happening here. I track all my purchases and keep receipts. They get only what is owed". And you apparently are defending the State of Massachusetts with this?

 

[Marcozi]

For many years, Kansas (a not so blue state) required you as a resident to declare the amount of out of state purchases as a compensating use tax on their income tax form. I believe that line was eliminated after Amazon and the other mail order biggies started to collect salex tax.

Virginia still requires this when you file the VA state tax forms.

 

[SumGuy]

I had a rock auto order in Feb that I had delivered to an address in Michigan. Rock charged the Michigan sales tax of 6% on the order total (about $140 USD) but not the shipping cost ($50).

 

[Pablo]

My question goes deeper. I was indeed aware and we only had one location and low sales $ in most states.

Question: All the millions of dollars collected by the states when this started goes where? WA - up in smoke.

 

[Carmudgeon]

The explosive growth of online shopping created a situation that called out to be rationalized, but the 2/3rds of the Fed government were reluctant to do so, and kicked the can down the road for years.

States wanted to tax such purchases, but lacked the legal standing to do so, which rested with the Feds, under the "nexus" standard from an old Supreme Court ruling. Which made it easier for companies to strategically locate their presences to avoid taxes. Another old game, like incorporation and ship registry. That meant states could only rely on voluntary declarations on their tax forms, which few individuals made, or paid.

The Wayfair Supreme Court ruling in 2018 finally gave the states the legal standing, and every state sets its own rules as to what, and how much it (or more accurately, the retailer), collects (on their behalf). Cheers also came from brick-and-mortar retailers, large and small.

Only a handful of states do not collect sales tax on online purchases, so trying to look at it from a political perspective would be futile, if not foolish.

And that's where we are.