While the internet itself isn't taxed, the transaction of buying goods online often is.
Sales vs. Use Tax
There are three main scenarios:
- In-State Vendor: If the seller has a physical presence (nexus) in your state (like a store or warehouse), they must collect sales tax.
- Out-of-State Vendor: If the seller has NO physical presence in your state, they generally are not required to collect sales tax (based on the Quill Corp. Supreme Court decision).
- Use Tax: Even if the seller doesn't collect tax, the BUYER is legally obligated to remit "use tax" to their home state for the purchase. This is rarely enforced against individuals but technically required.
Future Outlook
States are losing billions in revenue and are pushing for legislation or a streamlined sales tax system that would allow them to require remote sellers to collect tax.