Online shopping and the hunt for sales tax dollars

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OMAHA, Neb. (WOWT) -- Beginning next year certain retailers with no physical presence in a state, including online retailers, must collect and distribute state sales tax. Local businesses believe that will finally give them a level playing field.

There are many Internet shoppers who don’t pay Nebraska tax when they order online. There are a lot of people who avoid actual stores during the holiday, choosing to do their shopping online.

Valarie does a lot of shopping that way and she doesn’t worry if the tax is included or not. “I will go from store to store. I’ll find the sites that haven’t updated yet and don’t charge sales tax.”

The State of Nebraska wants Internet buyers to self-report the taxes they don’t pay up front. Internet customers are asked to fill out forms to pay Nebraska and local individual use tax. There is a tax table broken down by city to help you figure the tax you owe.

In Omaha, there’s a 1.5 percent local tax and a 7 percent state sales tax. Officials says it might be easier just to include your Internet sales tax owed on your state tax return - Form 1040n, Line 41 on last year’s form. This is what you need to do because state officials want you to self-report.

Since many customers won’t pay their Internet taxes, starting next year the federal government wants Internet business to collect and remit sales tax.

Matthew Powell is the owner of Perspective Jewelry. He’s getting things all sparkly for Christmas and he think the new law will help him compete with Internet sales that invade his marketplace.

“I think it’s going to be challenging,” he said. “I’m not sure how it’s going to shake out just yet. I know it’s, coming from a philosophical point of view I agree with it. It kind of levels the playing field. It’s not really fair. As a local retailer we have to compete with somebody online that’s selling something and basically charging no sales tax for it.”

State officials say there is a penalty for not paying taxes on your Internet purchases. Officials can go back up to six years to access unreported tax and put a five percent penalty on top of the tax you owe and there could be interest.

But it’s a tough law to enforce. Officials say it would take a very large staff to even try so people will likely continue to shop on the Internet and take their chances on not paying the taxes.