North Carolina Residents Could Face Huge Back Tax Bills For Online Purchases

North Carolina has deficit problems like other states. To cover the deficit, it is trying to get records of purchases by its citizens from online retailers like Amazon so it can charge back taxes.

The web is a wonderful medium, but a nightmare for tax officials. The problem is sales tax. You are charged it when you buy a book from the Barns & Noble in the local mall, but not when you buy the same book off of Amazon online. The issue is whether the online retailer has formed a "nexus" with the state. If not, no taxes need be paid to the state, so the online retailer doesn't charge you them.

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This model is now under attack because states are broke. North Carolina is taking a unique approach to the issue. They are demanding that online retailers provide them with records of purchases by North Carolina citizens. Mind you, the state is not asking Amazon to pay the taxes. Instead, they have something else in mind.

Ready to be surprised? In most states, you are supposed to report and pay sales tax on your online purchases if the site does not collect the tax. Yes, you read that correctly. The tax is known as a "use" tax. Most people don't know it exists and those that do almost never pay it. Well, North Carolina tax authorities may change that.

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The tax authorities are demanding records from Amazon and other retailers for purchases made by citizens in the state back to 2003. Yes, they want to see seven years of transactions. Ask yourself this if you live in North Carolina - how many online purchases did you make during this period? Well, you will have to pay the sales tax on them as well as a penalty for each transaction. Perhaps you should contact your local political representative to voice your displeasure on this one!

To its credit, Amazon refused to turn over the records. Instead, it sued North Carolina claiming that to do so was a violation of your privacy. The state is showing signs of backing down, but there is a chance Amazon could lose. If they do, you are going to be paying big time.

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