That no-sales-tax promise? Misleading | Arkansas Blog

Friday, January 6, 2012

That no-sales-tax promise? Misleading

Posted By on Fri, Jan 6, 2012 at 1:03 PM

MISLEADING: Tax IS owed, state officials say.
  • MISLEADING: Tax IS owed, state officials say.

A friend noticed this pop-up brag on the Urban Outfitters website and did a double-take. Didn't Arkansas try to do something about taxing Internet sales?

Not exactly.

Arkansas, despite a recent law change, still has no way to force sales tax collection from out-of-state businesses like Urban Outfitters that have no operations in Arkansas. The state did pass a law that required collections from Arkansas affiliates of national on-line outfits such as Amazon that paid a commission to Arkansas affiliate websites for driving business to them. The new law, pushed by Walmart and other retailers, was mostly for show. Amazon just cut off affiliate relationships in Arkansas after the law passed so it does not have to collect sales taxes on sales in Arkansas. In time, the solution to putting local sales taxes on Internet sales will come from Congress or the courts.

But .... it is a widely ignored fact that everyone owes the "use" tax for purchases made outside Arkansas by Internet or mail or phone order. The state makes a vigorous effect to collect it on big ticket items — such as autos — bought in other states. There is even a spot on your state income tax return to report the use tax you owe for purchases in other states. Some taxpayers actually report and pay this use tax, says Tim Leathers, deputy director of the Department of Finance and Administration. He says quite a few DFA employees do. In all, however, somewhere around 500 taxpayers file use tax reporting forms with their income tax returns, I was told.

By the way: Be aware that states help each other on reporting of out-of-state purchases. Leathers recalled a famous case among taxmen in which Tennesee authorities reported the sale of a high-dollar fur coat in Memphis to Arkansas tax authorities. They sent a bill to the purchaser's Arkansas home. Oops. The wife at that address had received no such fur coat.

Leathers said the Urban Outfitter claim of no sales tax is at least misleading, even though Urban Outfitters is under no obligation to assess the tax. The purchaser, at least in theory, IS required to pay by law. You voluntarily calculate and pay a use tax on all the books you purchase from Amazon, don't you?

Perhaps the attorney general's consumer protection division might want to jump on this deceptive practice. Leathers, who's been working for 30 years on legislation to apply the sales tax to out-of-state sales to Arkansans, notes that Amazon has a feature that will tell you exactly how much you've spent with them in a year so that you may readily figure the use tax due for voluntary reporting. Get with it.

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