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Amazon, online taxes and your pocketbook

Molly Wood Sep 14, 2012

Amazon, online taxes and your pocketbook

Molly Wood Sep 14, 2012

Your Amazon purchase could soon cost you more. On Saturday, the online retailer will start charging sales tax to folks in California. Meaning that here in Los Angeles, a $500 TV is going to cost an extra $44. And, it’s not the only state where tax-free shopping is ending.

“There’s a host of different states across the country including Pennsylvania and South Carolina that will be enforcing sales tax collection over the next couple of years, ” said RJ Hottovy, an analyst at Morningstar. “Eventually we expect some sort of national sales tax enforcement.”

But he doesn’t think it’s a change that’ll keep dedicated Amazon shoppers away. “I think you will see prices will increase on Amazon. But at the end of the day I think Amazon offers enough stuff that it will still be a starting point for online sales.”

We asked people in downtown L.A. what they make of the sales tax change.

David McCarthy: I buy things on because I think they provide a really good price value, and I think it’s appropriate that they’re charging taxes now.

Howard Kott: It probably matters to me a little bit about the fact that they don’t charge taxes as far as my willingness to shop there. On the other hand, I think it’s probably a good idea that they do charge taxes for the state.

Kai Weathers: I honestly didn’t even realize they didn’t charge taxes.

It turns out many Amazon shoppers, who haven’t paid sales tax — with or without realizing it — have been skirting the law.

Marketplace Senior Producer Paddy Hirsch explains.

Paddy Hirsch: If you’re buying things, if you buy something in the state at the mall you pay tax on it. If you buy something out of state then the state wants you to pay tax on that thing as well. Now of course, up until relatively recently, the advent of the interwebs, you couldn’t really do that. It was tough to do. You’d have to cross state lines in a car and come back and all the rest of it. But now, you can obviously do it really, really easily and people are doing it hundreds of times a year and buying books on Amazon, gear from REI whatever it is. And you are supposed to pay tax on all of those purchases.

Hill: Where would I pay them?

Hirsch: You pay it on your tax return. And, in fact, if you have a tax preparer, your tax preparer will ask you if you’ve made online purchases or out of state purchases, how much they are and how much tax you should pay. The other thing you can possibly do is actually pay in advance. You can actually look at a chart that California gives you and says you can pay X-amount and then you are just free to go after that. But that’s rather a large amount, so that’s not what I do.

Hill: So Amazon charging sales taxes now is actually keeping me more legal?

Hirsch: Exactly. They are keeping you real.

Hill: Thank you.

Hirsch: They are keeping you in bounds. You now can look the IRS In the eye and say that you are clean.

There are still ways to save on your online purchases.

Certified financial planner Louis Barajas has a tip: “You really need to decide where you want your products shipped to you, because you’re going to be charged a different sales tax for the city that you live in or the county that you live in. Let me give you an example: My office is in Santa Fe Springs, where they charge the normal Los Angeles County tax, which is about 8.75 percent. But about a mile down the road is a city called Pico Rivera; they’re charging 9.25 percent sales tax. But my home is in Irvine, Calif., and they charge a 7.75 percent sales tax. So if I buy a product on Amazon and have it shipped to my house in Irvine — that’s what I want to do.”

Louis’ mailman, be warned.

“That’s true,” said Barajas. “The FedEx guy, and the UPS guy.”

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