Question: Which transaction(s) is/are subject to the 5.6% Arizona state sales tax?
- Lucy’s mall purchase
- Maury’s online purchase
- Both purchases
- Neither purchase
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Answer: A. Sales tax would be payable only on Lucy’s mall purchase.
Explanation: The difference in sales tax treatment between Lucy’s mall and Maury’s online purchase stems from a 1992 U.S. Supreme Court case called Quill v. North Dakota, holding that retailers must collect sales tax from out-of-state customers only if they have a “physical presence” in the customer’s state.
Impact: In effect, Quill creates an Internet sales tax loophole that gives e-tailers a competitive price advantage over brick-and-mortar stores. But a group of House lawmakers has proposed a bill to level the playing field by letting states* collect sales tax on purchases regardless of whether the retailer has a physical presence in the state. A parallel bill has also been proposed in the Senate.
*Note: 45 states and the District of Columbia currently impose sales taxes on retail transactions. The 5 that don’t: Alaska, Delaware, Montana, New Hampshire and Oregon.
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