Shopping for Intimates Online? Be Prepared to Pay Sales Tax.

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15 Jul

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By Adam Welsch
Cupid Intimates

Tax.

Few things seem to inspire such hatred as that little, three-letter word.  There’s income tax, estate and inheritance tax, property tax, excise tax, and import tax (called a tariff).  They’re all a load of laughs, but the kind of tax that all of us pay most often is sales tax.  If you’re not the kind of person who asks for receipts at stores, you probably don’t pay much attention to sales tax.  For many women, it’s just a part of the prices they pay for their bras, panties, and shapewear.  And while it’s true that sales tax often amounts to only a handful of pennies per transaction, those handfuls can really add up over time.  Also, for purchases of things like cars, furniture, big-ticket appliances, and massive quantities of panties, sales tax amounts can actually be quite large.

Sales tax often seems invisible because, though we all pay it, consumers aren’t responsible for remitting it to the government (as they are for, say, income tax).  That’s because, in actuality, it’s the two-party transaction (or sale) that’s being taxed, not the consumer.  Sales tax laws are written to require the seller to remit the tax on the transaction to the tax authority.  The seller, of course, always passes that cost onto the buyer – who ultimately foots the bill.

Fifteen years or so ago, as the World Wide Web was learning how to crawl, and e-commerce was being invented, surfing the web seemed to offer the possibility of escaping the burden of sales tax.  In many cases, state and local governments were simply slow in understanding the potential of e-commerce and had not yet passed the appropriate legislation to tax it.  In other cases, laws were put on the books, but largely ignored and not enforced.  Many governments had trouble wrapping their hands around the long-distance nature of the online buyer-seller relationship and the question of whether a “virtual” e-company existed within a physical space that was subject to anyone’s authority.

Flashing forward to 2010, the landscape has changed dramatically.  Shopping online has become commonplace, and many people now find it to be the best way to buy stuff like music, books, toys, and, yes, intimate apparel.  As e-commerce has grown, state and local governments have realized that gaps in tax legislation, and lax enforcement of existing laws, cost their treasuries millions of dollars in lost revenue.  As a result, enforcement is on the rise as states, counties, and cities try to overcome budget deficits caused by a slowing economy and the associated decreases in income and property tax revenue.

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So what does the woman who likes to shop for bras, panties, and shapewear online need to know about sales tax and the internet?  Well, at least four things.  First, make sure you know whether or not the state, county, and city in which you live (or to which you’ll have your online purchases shipped) tax bras, panties, and shapewear.  Many states exempt clothing from sales tax (Alaska, Delaware, Minnesota, Montana, New Hampshire, New Jersey, Oregon, Pennsylvania, and Rhode Island), and some impose a minimum threshold through which an item’s price has to pass to make it sales-taxable (Connecticut, Massachusetts, and Vermont).  Most counties and municipalities follow their states’ leads on these minimum thresholds.  But be careful.  There are states which exempt clothing priced under a certain dollar amount, yet have counties and cities that don’t offer overlapping exemptions.

Second, make sure you understand which sales tax rates apply to your purchase.  For long-distance transactions, whether via phone, mail-order, or the internet, the sales tax rate assessed is based on the location to which the purchase is being shipped, not the location of the seller or seller’s shipping operations.  And for many locations around the United States, the total sales tax rate actually consists of state, county, city, and/or special tax-district tax rates.

If you think it’s hard to keep track of these rules for the location in which you live, imagine running a business that sells its products online and has to keep track of this for zip codes all over the country!  The hodgepodge of sales tax laws can be unintelligible to the average consumer and confounding to retailers responsible for tracking and assessing them.  This mess has caused companies to spring up whose sole purpose is to monitor sales tax rates and rules around the country, and create programming and databases that enable e-tailers to apply the proper amounts of sales tax to orders.

Third, most e-tailers are now taking the application of sales tax seriously, as governments are auditing their sales more closely.  As a result, if clothing is taxed in the state in which you live, your online shapewear purchase may be taxed as well.  Though sales tax is applied at the rate in effect at the “ship-to” location, the key factor in determining whether or not you’ll see a sales-tax charge on your order is whether or not the company with which you’re dealing has a physical presence somewhere in your state.  If it has a store, an office, or a factory there, it’s required by law to assess sales tax on your purchase.  If it doesn’t, sales tax will likely not be charged.

Finally, the fourth point to understand (and one that few consumers do) is that whether or not the company selling you something online has a physical presence in your state and assesses sales tax on your purchase, you still have a legal obligation to pay your state, county, and/or city any sales taxes to which that purchase is subject.   That’s because use tax (sales tax’s evil twin sibling) puts the onus on you for remitting to the government the tax on all purchases in which the seller doesn’t have to, or neglects to, charge you sales tax, or charges you a lower rate than the one applicable to the location in which you’ll be using the item.  Most states make the declaration and remittance of use tax part of their state income tax forms.  The good news is that many states exempt internet, phone-order, mail-order, and cross-border purchases from use tax until a certain minimum, total dollar amount for all annual purchases is surpassed.  Check the website of your state’s department of revenue for more information.

So, next time you buy your favorite pair of panties, sports bra, or body-shaping cami online, don’t be surprised when you see that your e-tailer has charged you sales tax.  The days of tax-free shopping on the internet are over.

CC Image courtesy of Steve Snodgrass on Flickr http://www.flickr.com/photos/stevensnodgrass/ / CC BY 2.0
CC Image courtesy of Seven_Null7 on Flickr http://www.flickr.com/photos/37486024@N03// CC BY 2.0

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