Should I be paying sales tax on Internet purchases?
Q. Can you tell me why HP on a direct purchase from its website insists on charging me a sales tax? To my knowledge, they do not have a retail outlet within Massachusetts. I hope you can tell me that I am currently exempt from paying state sales tax to a company totally based outside Massachusetts. I know other states, like Michigan, are working to resolve similar questions. Can you explain what’s going on?
GEORGE SEDARES, SHREWSBURY
A. Indeed, Hewlett Packard is based outside Massachusetts. Unfortunately, the answer isn’t going to be one you like. You’re still on the hook to pay sales tax on your purchase.
Given how many people shop online, you, no doubt, are not the only one wondering why sometimes you get charged sales tax and other times you don’t. Paying sales tax for Internet purchases is no simple matter.
Having a retail outlet in the state is not the trigger as to whether you have to pay sales tax online. Under the federal Internet Tax Freedom Act, retailers just need to have some physical presence in a state, whether it’s a warehouse or a tiny office, to be responsible for collecting sales tax from that state’s residents.
HP has several facilities in Massachusetts, including a campus in Andover and offices in Cambridge. In an e-mail to you, the company explained its obligation to collect sales tax from Massachusetts residents.
“The hp.com Sales Center is a division of HP and we are required to collect sales tax in all states where state law requires compliance with the Internet Tax Freedom Act,” the company wrote.
Even without a physical location, an online business could still opt to collect state sales tax. So, if you’re looking to save money by avoiding sales tax in an online transaction, you should research that first.
Businesses still have to follow a state’s sales tax exemptions, which can confuse online retailers. They can’t charge sales tax to someone in Massachusetts on a clothing item that costs $175 or less, for instance.
Meanwhile, Congress continues to debate whether to require Internet sellers to collect sales tax. As for Michigan, it started collecting sales tax on all online transactions on Oct. 1.