online sales tax, Illinois website buyer in australia
March 25, 2013 1:22 PM   Subscribe

Hello, I bought something from an online store from a business in Illinois. I am in Australia, which does not require sales tax to be paid on items bought from overseas for less that $1000. When I realised the Illinois website had charged me sales tax, I pointed it out to them. They claim that: 'If you purchase something in Illinois, and that is where our "store" is you will be charged sales tax.' I don't think that is correct. Is it? Do you know of a clear authoritative document online I can send them a link to? Thank you
posted by compound eye to Law & Government (19 answers total)
 
Nothing authoritative, but Illinois tax rules are going to be ruled by Illinois. If the seller is subject to those rules, the seller will have to charge you the taxes.

It has been a point of some pretty heav contention in the States, but that is the way it seems to be breaking down.
posted by SLC Mom at 1:31 PM on March 25, 2013


The seller is correct, as far as I know.
posted by hoyland at 1:32 PM on March 25, 2013




You (the asker) are correct. Here is the authoritative document from the Illinois department of revenue:
The following list contains some of the most common examples of transactions that are exempt from tax. (See the Illinois Administrative Code, Section 130.120 and Publication 104, Common Sales Tax Exemptions for a comprehensive list.): ... Sales to out-of-state buyers (Nonresidents may not claim the out-of-state buyer exemption it the motor vehicle or trailer will be titled in a state that does not give Illinois residents an out of state buyer exemption on purchases in that state of motor vehicles or trailers that will be titled in Illinois.)
The retailer's "store" being in Illinois means that they are required to collect tax from buyers who are also in Illinois (even if the order was placed online). Possibly this is what is confusing the store owner. The store owner is not required to collect tax from buyers in other US states or other countries.
posted by enn at 1:32 PM on March 25, 2013 [1 favorite]


scody, a retailer having a physical presence in a state means that they are required to collect sales taxes from customers who are in that state, not out-of-state customers (at least not in Illinois).
posted by enn at 1:33 PM on March 25, 2013


I'm wrong. enn has read the correct part of the page I linked to.
posted by hoyland at 1:35 PM on March 25, 2013


The seller, by the way, probably does not understand these rules themselves and are not necessarily being malicious.
posted by aramaic at 1:40 PM on March 25, 2013 [1 favorite]


thank you everyone, enn especially.
posted by compound eye at 1:50 PM on March 25, 2013


I am in Australia, which does not require sales tax to be paid on items bought from overseas for less that $1000.

This is not entirely correct. You must pay GST on some classes of goods even if the goods being imported are valued at less than $1000, namely alcohol and tobacco products. Be sure to have the seller labels the goods appropriately.
posted by kithrater at 2:26 PM on March 25, 2013


You can always threaten to raise the issue with the Illinois Department of Revenue. If they're doing it to you, they're likely doing it to other people too, and very likely skirting the pesky little requirement that they actually submit the collected tax to the state. If IDoR is bored/irritable/etc it could easily result in an audit of their sales and tax collection.
posted by jgreco at 2:35 PM on March 25, 2013


The law could be interpreted differently depending on how shipping is handled. If you own the product as soon as it is dropped off at Fed Ex (which is not the norm), you purchased that good in Illinois. If you do not accept ownership until you have opened your package and said it isn't defective, then you purchased that good in Australia.
posted by politikitty at 2:37 PM on March 25, 2013


It is very likely that they have not run into this situation before and do not understand the rule, and are more afraid of getting caught not charging the tax when they should, then concerned about accidentally charging someone who they shouldn't. Thus they default to charging the tax to everyone who isn't obviously exempt. Many stores just charge sales tax to everyone as a matter of course unless they have a proof of tax exemption, e.g. for being a charity or a government agency. You are sort of a rare case in that you're exempt from tax but do not have a tax exemption certificate to wave around.
posted by Kadin2048 at 3:11 PM on March 25, 2013


I am a sales tax professional, and you are getting bad advice in this thread. Illinois provides an exemption for deliveries out of state only in certain circumstances. The ROT is a gross receipts tax, and the location of the seller is far more important than the customer.
86ILAC130.605(d)
Nor does the tax apply to gross receipts from sales in which the seller, by carrier (when the carrier is not also the purchaser) or by mail, under the terms of his or her agreement with the purchaser, delivers the goods from a point in this State to a point outside this State not to be returned to a point within this State. The fact that the purchaser actually arranges for the common carrier or pays the carrier that effects delivery does not destroy the exemption. However, it is critical that the seller is shown as the consignor or shipper on the bill of lading. If the purchaser is shown as either the consignor or the shipper, the exemption will not apply.
Further, there consumer protection laws associated with taxing a customer excess tax and with taxing customers and not remitting the tax. It is possible that the retailer is doing either of these things, but it is not common because the penalties are far more onerous than undercollecting sales tax.

Without knowing the exact relationship the retailer has with their shipping carrier, we simply cannot know if you were improperly charged tax.
posted by politikitty at 5:15 PM on March 25, 2013 [1 favorite]


Well, if you walk into a store in Illinois and tell them "I'm from Australia, I don't want to pay the sales tax," they are going to laugh you out of the store. But I realize online and catalog sales are, for some reason, different.

I would peruse the IL Department of Revenue website. I think there is a form somewhere that you can fill out to get a refund. Or possibly a number to call. My interactions with the state of Illinois people when you call them has generally been positive. They usually want to help, and you've got a 75% shot of getting someone on the phone whose day will be made getting a call from Australia.

The timezone in IL is GMT -5 right now, and they are generally open for business 8:30 - 4:30. They did get 18.5" of snow last night, so they may not be responsive for a couple of days...
posted by gjc at 5:18 PM on March 25, 2013


thank you politikitty

Without knowing the exact relationship the retailer has with their shipping carrier, we simply cannot know if you were improperly charged tax.

I bought software which I downloaded, however I didn't really pay for the software, which I do not own, I paid for a licence, which they emailed me. :)
posted by compound eye at 6:40 PM on March 25, 2013


I bought software which I downloaded, however I didn't really pay for the software, which I do not own, I paid for a licence, which they emailed me.

In Illinois, that is considered a taxable purchase. You own the license, with all the rights and responsibilities that comes with it. Only services are not sales-taxable here, and I'm fairly certain that doesn't count as a service.

I still think the ILDOR is who you'll have to contact.
posted by gjc at 7:19 PM on March 25, 2013


You (the asker) are correct. Here is the authoritative document from the Illinois department of revenue:

Dear asker--please don't listen to that answer. The only authoritative document is the actual text of the code sections. I think the cite to the code further down is where to look.
posted by Ironmouth at 8:49 PM on March 25, 2013


Here is a letter ruling. While informative, the Department falls over itself explaining it is not binding.

It would seem that it is a taxable product, and the retailer is responsible to pay the ROT due. Less clear is whether the retailer is able to charge you the Use Tax to reimburse themselves. Given the sale occurred on a server in IL, I would guess they'd treat it the same as you buying something in IL.

Not only am I not your tax professional, this is an area of tax which is just emerging and is in constant litigation. Technology and bureaucracy do not mix well.
posted by politikitty at 9:37 PM on March 25, 2013


thank you gjc,

...I paid for a licence, which they emailed me.
and
... that is considered a taxable purchase

I only mentioned that with respect to the details of the delivery, which politikitty mentioned can be relevant.
posted by compound eye at 9:55 PM on March 25, 2013


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