Originally created 12/25/05

Online buyers beware

COLUMBIA - Shopping online this holiday season? You might want to save - and double-check - those receipts. You might just owe South Carolina some money.

While the U.S. Supreme Court has said companies cannot be forced to collect sales tax in a state where they don't have a "physical presence," buyers aren't off the hook.

Anyone who buys something online and does not pay sales tax is legally required to pay a "use tax" to the state. Unfortunately for the state, enforcement is difficult.

According to the National Conference of State Legislatures, state and local governments lost between $15.5 billion and $16.1 billion in 2003 because states were unable to collect sales tax from online sales.

In 2008, the group projects that governments will lose between $21.5 billion and $33.7 billion.

That could be a problem for South Carolina. Lawmakers, under pressure from homeowners tired of seeing property taxes rise each year, are considering lowering or eliminating some property taxes in favor of an increase in the sales tax.

Critics of the proposal say revenue from the sales tax is too unstable.

"If the economy turns or another 9-11 happens or something that makes your tourism drop, then your sales tax (revenue) is going to drop," said Rep. Robert "Skipper" Perry, R-Aiken.

According to Forrester Research experts, online shopping is expected to reach $172 billion this year. By 2010, online sales could total $329 billion.

But property taxes are a real issue, with a few people taking on much more than their fair share of the tax burden, said Rep. Bill Herbkersman, R-Bluffton.

The answer to the use tax dilemma, he said, is enforcement, which is the Department of Revenue's job.

Of the 1,292,508 people who had to pay state income tax last year, 9,330 paid a use tax as well, according to Department of Revenue data. At some point in 2004, 381 also filed a separate use tax form.

The revenue department's Richard Anderson said his department will bill a buyer if the state finds out they did not pay the use tax. But there's no way of knowing how many South Carolinians should be paying a use tax.

Reach Kirsten Singleton at (803) 414-6611 or kirsten.singleton@morris.com.


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