Hertiage Auction Net Effective Rate

[BobC]

Arnie,

If you check the laws in the state you live in, you'll see that if there is a sales tax, it is generally referred to as a sales/use tax. It is basically the same thing with the difference being, who actually collects and pays the sales tax to the state. Sales tax is generally paid by the seller, and use tax by the buyer.

Typically a sales tax is collected when someone sells an item of tangible, personal property to the final end user/consumer. Just like when you walk into a Walmart and buy a pair of socks, they'll hit you with sales tax. Walmart has a physical presence and what they call "nexus" within that state because they have a store and employees there. In that case, the state requires Walmart to obtain a license/permit/whatever to sell within their state and to collect and remit the sales tax on items sold. If you go online instead and buy that pair of socks off the internet from some outfit that only has a store/warehouse on the other side of the country, chances are they don't have a physical presence in your state and, therefore, don't have the "nexus" in your state that requires them to charge and collect sales tax from you on that pair of socks, and to then send it to the state. This is where the counterpart of the sales tax laws, called use taxes, kicks in. Just because you didn't get charged sales tax on the socks you bought online doesn't mean the state isn't entitled to the sales tax on that purchase. In most states that have sales tax, they also have a use tax which basically requires the buyer to voluntarily calculate and pay in the sales tax to the state that they would have otherwise owed had they bought the socks at a regular store.

Sales and use tax laws are solely a state issue, not a federal tax issue. So the actual rules can vary from state to state, with different exemptions, rates and quirks. Each state will also then have their own mechanism for charging and collecting the use tax they are owed but, it is pretty much up to the purchaser to be honest and calculate and pay the tax when it is due. In reality, most individuals ignore this use tax requirement and assume it either doesn't apply to them or that they are entitled to some kind of exemption because they aren't a business or they only do it occasionally and/or the amounts are too small. To my knowledge, there really isn't an overall de minimus amount that exempts someone from owing use tax in most states. To check, just do an internet search for the state you live in and look at "use tax requirements" or "regulations". You should get a lot of links showing up to look at and better explain the use tax requirements for your particular state.

BobC