Online Shoppers Beware: You Could Owe Internet Sales Tax

Online shopping has become as common as buying gifts from brick-and-mortar stores during the holiday season. But did you know that the law now requires you pay sales tax on every online purchase? 

In July, Gov. Jerry Brown signed AB 155, also known as the "Amazon Tax," which requires online retailers to collect sales tax just like physical stores. The rub: Not every website collects sales tax—and some won’t do so until months later (Amazon.com, for example, won’t start collecting sales tax until September 2012).

To protect yourself and prevent getting audited, it’s important to save your receipts. After all, just because sales tax isn’t collected doesn’t mean it’s not owed.

Here are some tips straight from Sacramento to help you:

• Before you make your purchase, check to see if you’re being charged sales tax. If you are, then you don’t need to take any other steps. But if you’re not, move on to step two…
• Keep your receipt. If it’s emailed to you, create a special folder in your inbox just for receipts. You can also copy and paste the receipt into a document and save it, or print it out.
• Calculate the tax rate. Sales tax in Eagle Rock is 8.75 percent. Multiply your total purchase by .0875, and you’ll get the total amount you owe.
• Download and print the “Use Tax Return” form from the Board of Equalization web site. There will be space for six items you purchased online. Fill out the form and then…
• Pay your taxes. It seems like a lot of work and can be a drag, but at least it’s protecting you from the possibility of fines or penalties. And, look at the bright side: sales tax goes into the Los Angeles General Fund, which supports local services such as the public library, parks and street cleaning.

If you’re confused, call the Board of Equalization at 1-800-400-7115.

Will you shop online this holiday, or will you shop locally? Take our poll and weigh in.

Editor's note: The original version of this story referred to the California legislation as the "Market Fairness Act," which happens to be federal legislation similar to California's AB 155.