Quirky tax law can mean hidden costs for shoppers
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Do you cheat on your taxes? If you've done a lot of holiday shopping online and don't know your tax law well, you might owe the government some money.
Online retailers don't always charge sales tax, but that doesn't mean you don't have to pay it. What you owe depends on where you live and how much you spend.
In Minnesota, if you buy more than $770 a year in products online, or through the mail, that would have been subject to 6.875 percent sales tax, you owe the same amount in general use tax.
If you've never paid general use tax or even heard of it, you're not alone.
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"Compliance is very low, I think people don't even know about it," said George Hoyum, director of the sales and use tax division of the Minnesota Department of Revenue. "Whether they would be inclined to send in a tax payment or not is an individual matter."
Hoyum says enforcement is rare because it's difficult for the revenue department to track who is buying things, especially through catalogs or on the internet.
To follow the law, you'd need to know exactly what is subject to Minnesota sales tax. Then, you'd need to keep track of your receipts for online or catalog purchases that exceed $770, and declare the purchases in your annual tax filing.
With the explosion of online shopping, it's becoming more common to pay for expensive items online. Computer software, art, jewelry, candy, ATVs, tools, furniture and appliances are all subject to Minnesota sales tax.
To make matters more complicated, the law is quirky.
In general, clothes aren't subject to sales tax in Minnesota. A jacket with a fake fur collar is tax exempt, but the same jacket with a real fur collar is suject to sales tax.
Regardless of the tax law, it's clear many consumers think buying online is a way to save money in taxes, and aren't keeping track of purchases with the auditor in mind. "I shop online and in the stores," said Julie Schnell, while shopping at Macy's in downtown St. Paul. "Shopping in the stores is better because you can physically see the item but some things online don't have any tax."