Um, About Those Tax Free Internet Purchases...You Still Owe Taxes On Them

There’s a lot of coverage about the fact that California will soon begin collecting sales taxes on Internet purchases for the first time.

It’s stirring  heated discussion. However, it also happens to not be true.

On Thursday, the State Board of Equalization put out a press release to correct that misconception. In fact, the state has required consumers to pay sales taxes on all purchases for 77 years, even if they came via the mail or the Internet.

The problem was that when the Internet came along, the state didn’t require out-of-state retailers to collect them. Instead, you, dear consumer, were supposed to calculate them and then send the taxes to the state.

Hands up if you ever did that. Yeah, that’s what I thought.

Don’t worry, you weren’t alone. According to the BOE:

“If consumers do not see a line item for the sales tax charged on their bills when making these purchases, they are responsible for paying the use tax on their own, based on the tax rate for the area in which they live. The BOE makes it simple for Californians to pay their use tax, through eReg, or as a line item when they pay their state income taxes.”

What’s actually changing this weekend, is that retailers are now supposed to calculate the tax, and include it when a purchase is made, and then send that money to the state. Even so, that will only slightly close a fairly large hole in unpaid sales taxes, according to the BOE:

“In December 2010, the BOE estimated that $1.145 billion dollars in use tax was going uncollected. The new law will not fill this entire gap, but is expected to generate millions of dollars in revenues for the state each year. Like the state sales tax, use taxes are used to fund state and local services.”

There, aren’t you feeling guilty now? Hope you kept all those receipts.