TN Sales Tax (2014, credit card, how much)

[jwkilgore]

I had a discussion with my tax preparer this weekend about the TN Sales Tax. I'm very aware that if you order something on line or by mail-order or over the phone and the seller doesn't collect sales tax, that you still owe them. You legally have to fill out a state sales tax return just like a federal income tax return.

My question is, what if you DO pay taxes in the seller's state? Say I want to buy an appliance for $1000. If I buy it in TN (Hamilton County), I owe 9.25% sales tax. If I buy it in Georgia (say, the Lowes on Battlefield Pkwy) and have it delivered to my house in TN, I also owe 9.25% sales tax. But what if I buy it in Georgia, pay the local 7.0% tax, and personally carry it across the state line? Do I owe the DIFFERENCE to TN, or am I covered? I can't find the answer online.

[md21722]

For your specific example of a $1000 item purchased in Hamilton County, you would pay $225 (2.25%).

The answer is on page 19, 2nd column of http://www.tn.gov/revenue/taxguides/salesanduse.pdf

TN's sales tax can be complicated by the "single item tax" as follows:
General rate on merchandise is 7% of the entire purchase price
Local option tax ONLY applies to the first $1600.
State tax 2.75% applies to the next $1600.

Examples:
If you buy a $1,500 computer, the tax is $138.75 (7% on $1500 + 2.25% on $1500).
If you buy a $2,000 computer the tax is $187 (7% on $2000 + 2.25% on $1600 + 2.75% on $400)
If you buy a $3,500 computer the tax is $325 (7% on $3500 + 2.25% on $1600 + 2.75% on $1600)

Another way to look at it, is for anything over $3200, the tax is 7% + $80 in counties/cities with a normal rate of 9.25%.

[jwkilgore]

Darn it, someone knew the answer.

And I would owe $22.50, not $225. I got a little worried for a second there until I realized a decimal point got moved one digit.

[Houston3]

How does the tax man know what you bought online? Is he hacking your computer or following you around?

[jwkilgore]

Originally Posted by Houston3

How does the tax man know what you bought online? Is he hacking your computer or following you around?

In the past, there was no way unless someone reported you.

But everything is getting linked now. Your employer sends in forms saying how much they paid to all employees. So if you don't claim all your income and are audited, the IRS can force you to pay the different plus penalties and even prosecute you for tax evasion if the case is bad enough.

My tax preparer is a scrupulously honest person. She DOES regularly fill out the TN Sales Tax form and send it in for everything she buys online. Apparently she had an issue with one of her recent forms and went downtown to argue with them. She "won" (and actually got an apology ), but during the discussion they also talked about how the state knows things. People usually buy things online using credit cards, and the state can request sales information for items purchased by TN residents where no sales tax was paid. Even though Amazon's deal with the state is that they don't have to start collecting sales tax until 2014, there's nothing saying that Amazon won't give the state its sales information earlier. They can provide the state a list of sales made to TN residents where no sales tax was paid.

Are we at that point yet? Probably not.

But it's like speeding... will a cop give a ticket to someone going 5mph over the limit? Probably not. This would be comparable to buying your groceries at Costco once a month. But someone going 11mph over will probably get a ticket (regularly buying things online and buying many large items across the state line). Someone going 41mph over could go to jail (evading owing many thousands in sales/use taxes).

I honestly can't remember the last time I bought anything significant down in Georgia. It's not worth it to me to save $4.50 in taxes on $200 in groceries to drive all the way to Costco (plus the yearly membership fees), so I don't. I just bought a dryer, but I saved way more than 2.25% by getting a slightly scratched floor model at the Sears Outlet up in Hixson instead of going to Georgia.

[md21722]

TN does like the get their sales tax, but generally only enforces it on big ticket items. For example, they will go after you if you bought furniture in NC that was not subject to TN sales tax.

Other states take different approaches. NC, for example, ASSUMES you buy some things out of state and charges 0.1% or something like that when you file your NC income tax unless you prove that you did not buy things outside of NC.

[Houston3]

Originally Posted by jwkilgore

In the past, there was no way unless someone reported you.

But everything is getting linked now. Your employer sends in forms saying how much they paid to all employees. So if you don't claim all your income and are audited, the IRS can force you to pay the different plus penalties and even prosecute you for tax evasion if the case is bad enough.

My tax preparer is a scrupulously honest person. She DOES regularly fill out the TN Sales Tax form and send it in for everything she buys online. Apparently she had an issue with one of her recent forms and went downtown to argue with them. She "won" (and actually got an apology ), but during the discussion they also talked about how the state knows things. People usually buy things online using credit cards, and the state can request sales information for items purchased by TN residents where no sales tax was paid. Even though Amazon's deal with the state is that they don't have to start collecting sales tax until 2014, there's nothing saying that Amazon won't give the state its sales information earlier. They can provide the state a list of sales made to TN residents where no sales tax was paid.

Are we at that point yet? Probably not.

But it's like speeding... will a cop give a ticket to someone going 5mph over the limit? Probably not. This would be comparable to buying your groceries at Costco once a month. But someone going 11mph over will probably get a ticket (regularly buying things online and buying many large items across the state line). Someone going 41mph over could go to jail (evading owing many thousands in sales/use taxes).

I honestly can't remember the last time I bought anything significant down in Georgia. It's not worth it to me to save $4.50 in taxes on $200 in groceries to drive all the way to Costco (plus the yearly membership fees), so I don't. I just bought a dryer, but I saved way more than 2.25% by getting a slightly scratched floor model at the Sears Outlet up in Hixson instead of going to Georgia.

I'm not saying to not pay taxes, but I will say that it is none of the states business where you shop....or how much you spend....

[swagger]

Originally Posted by md21722

NC, for example, ASSUMES you buy some things out of state and charges 0.1% or something like that when you file your NC income tax unless you prove that you did not buy things outside of NC.

Holy crap! Guilty until proven innocent, I guess.

How do you prove that you didn't buy anything out of state? What a scam.

[Ridgerunner]

Online sellers who have a physical presence in Tennessee are required to collect sales tax from Tennessee customers. This includes ebayers, most of whom do not adhere to the law, and many major retailers. For this reason I usually shop with out-of-state sellers who do not collect the tax. While I still can. When it comes to money, politicians are insatiable. They can't get enough.

[Wmsn4Life]

Well, it does pay for the stuff they're in charge of, like roads and schools and police and fire depts.