Thursday, December 24, 2009

The state sales tax

This time of year, people are shopping gifts both online and in brick and mortar stores. Both have their own appeals. Some people seem to like the crowds or at least tolerate them well. Cell phones certainly make waiting in line more bearable, and I would guess that some people multitask their Christmas shopping while stuck in a slow-moving queue.

Online retailers do have one highly unfair advantage. Indiana's 7% sales tax applies to purchases made in stores, so the tax is automatically added to the price you pay at the cash register. When you buy something online while in Indiana, you are supposed to report that on your IT-40. Human nature being what it is, you can bet that many people either forget or refuse to add up everything they bought online in a year. But order to ensure compliance with this law, the state would have to subpoena financial records such as your credit card statement.

So retailers who choose to locate in our great state are at a 7% disadvantage to retailers who locate elsewhere. The state would be wise to find other sources of revenue.

Yes, I report my online purchases and pay the tax. I pretty much have to, since blogging about this matter might put me on the Indiana Department of Revenue's radar. I don't want to be the test case, nor do I think any judge is going to allow the "everybody does it" defense for tax evasion.

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