Tax-free shopping - AbsoluteAstronomy.com

Introduction

Tax-Free Shopping (TFS) allows shoppers to reclaim the VAT

Vat

Vat or VAT may refer to:* A type of container such as a barrel, storage tank, or tub, often constructed of welded sheet stainless steel, and used for holding, storing, and processing liquids such as milk, wine, and beer...

(Value-Added Tax)/GST

GST

-Computing:* Generalised suffix tree, a tree-like data structure* GNOME System Tools, part of the GNOME desktop environment* GNU Smalltalk, an implementation of the Smalltalk language* GST Computer Systems, a group of companies based in Cambridge, England...

(Goods and Services Tax) they have paid on their shopping in foreign countries. Promoting the tax rebate and making it easier for tourists to claim it back, has helped to attract travellers to many countries. Fifty of the 130 countries that levy VAT/GST allow foreign visitors to have their taxes reimbursed. TFS is subject to national regulations, such as minimum spend and restrictions on the types of products on which it can be claimed. Refunds can only be claimed on goods which are exported. However, buying goods tax free whilst on holiday does not mean travellers are exempt from paying applicable taxes on their purchases when they get home.

Approximately 52,000 people benefit each day from tax free shopping around the world. Tax-Free Shopping services are available from more than 320,000 stores in 40 countries worldwide, including Bicester Village , Harrods

Harrods

Harrods is an upmarket department store located in Brompton Road in Brompton, in the Royal Borough of Kensington and Chelsea, London. The Harrods brand also applies to other enterprises undertaken by the Harrods group of companies including Harrods Bank, Harrods Estates, Harrods Aviation and Air...

, Selfridges

Selfridges

Selfridges, AKA Selfridges & Co, is a chain of high end department stores in the United Kingdom. It was founded by Harry Gordon Selfridge. The flagship store in London's Oxford Street is the second largest shop in the UK and was opened on 15 March 1909.More recently, three other stores have been...

, Galeries Lafayette , Printemps

Printemps

Printemps is a French department store .The flagship Printemps store is located on Boulevard Haussmann in the IXe arrondissement of Paris along with other well-known department stores like Galeries Lafayette. There are other Printemps stores in Paris and throughout France...

.

Tax-free shopping refers to the opportunity for customers to purchase goods or services without paying any tax normally collected at retail, such as sales tax

Sales tax

A sales tax is a tax, usually paid by the consumer at the point of purchase, itemized separately from the base price, for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale....

, Goods and Services Tax

Value added tax

A value added tax or value-added tax is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the "value added" to a product, material or service, from an accounting point of view, by this stage of its...

, value added tax

Value added tax

, or consumption tax

Consumption tax

A consumption tax is a tax on spending on goods and services. The tax base of such a tax is the money spent on consumption. Consumption taxes are usually indirect, such as a sales tax or a value added tax...

Tax Free Shopping Territories

Tax Free Shopping is available in the following countries:
Argentina , Australia , Austria, Belgium, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Indonesia , Ireland, Israel , Italy, Japan , Korea , Latvia, Lebanon , Liechtenstein, Lithuania, Luxembourg, Mexico , Morocco , The Netherlands, Norway, Poland, Portugal, Singapore , Slovenia, Slovakia, Spain, South Africa , Sweden, Switzerland, Thailand , Turkey and the United Kingdom.

Tax Refund Service Providers

GB Tax Free
Global Blue

Global Blue

Global Blue is a financial services company headquartered in Nyon , Switzerland . Global Blue was acquired by Barclays Private Equity in 2007....

Premier Tax Free
Eurorefund
vatfree.com

The Refund

The refunded amount corresponds to the VAT or GST paid and in which country the traveller buys goods. VAT/GST is a tax added to the cost of a product, calculated as a percentage of the products retail price. Often in Europe the ticket price includes VAT, this is less often the case in the US. As an example, if the VAT rate on a product is 20% and the ticket price is displayed as €100, including VAT, the VAT will be €16.67 (83.5 + 20% VAT = €100.).
A handling fee may be charged by the service provider.

Tax-free shopping in the European Union

All travellers living in a country outside the EU, are privileged to shop tax-free at shops outside EU airports. The traveller pays the VAT over goods in the shop, and can request for a refund when exporting the goods. General restrictions are that a traveller must have residency in a non-EU country, has a maximum stay of 6 months when visiting the EU, purchases are made three months prior to export, only goods meant for personal use are eligible for the refund. Travellers need to save purchase receipts and visit Customs before leaving the EU to get a export validation stamp. Receipts can then be sent back to the retailers for a refund request.

Please note: each country in the EU shows a different % of VAT which is reclaimable and a minimum purchase amount restriction.

Tax-free shopping in the United States

Tax-free shopping is a privilege enjoyed by all residents of United States

United States

The United States of America is a federal constitutional republic comprising fifty states and a federal district...

jurisdictions without sales taxes, but through so-called "remote" sales—including sales to visiting out-of-state residents, sales via catalog, and sales via Internet—customers in a sales tax

Sales tax

ed jurisdiction may also make purchases in sales tax-free jurisdictions, notwithstanding the legal requirement to pay the equivalent (compensatory) use tax

Use tax

A use tax is a type of excise tax levied in the United States. It is assessed upon otherwise "tax free" tangible personal property purchased by a resident of the assessing state for use, storage or consumption of goods in that state , regardless of where the purchase took place...

in their home state. Delaware

Delaware

Delaware is a U.S. state located on the Atlantic Coast in the Mid-Atlantic region of the United States. It is bordered to the south and west by Maryland, and to the north by Pennsylvania...

is free of all sales taxes, excluding homes and cars (3% transfer tax for real estate, and a 2.75% tag fee for cars). For example, merchants in tax-free New Hampshire

New Hampshire

New Hampshire is a state in the New England region of the northeastern United States of America. The state was named after the southern English county of Hampshire. It is bordered by Massachusetts to the south, Vermont to the west, Maine and the Atlantic Ocean to the east, and the Canadian...

regularly advertise to residents of adjacent Massachusetts

Massachusetts

The Commonwealth of Massachusetts is a state in the New England region of the northeastern United States of America. It is bordered by Rhode Island and Connecticut to the south, New York to the west, and Vermont and New Hampshire to the north; at its east lies the Atlantic Ocean. As of the 2010...

, Vermont

Vermont

Vermont is a state in the New England region of the northeastern United States of America. The state ranks 43rd in land area, , and 45th in total area. Its population according to the 2010 census, 630,337, is the second smallest in the country, larger only than Wyoming. It is the only New England...

and Maine

Maine

Maine is a state in the New England region of the northeastern United States, bordered by the Atlantic Ocean to the east and south, New Hampshire to the west, and the Canadian provinces of Quebec to the northwest and New Brunswick to the northeast. Maine is both the northernmost and easternmost...

the benefits of purchasing goods without sales tax, ignoring the fact that there is no general exemption from the use tax

Use tax

es when the goods are taken back home. Many purchasers are unaware of the obligation to pay the tax, or file the necessary return, or of the fact that it is not the duty of a merchant to collect it from them and pay it indirectly. However, it is the purchaser's obligation to pay it directly to the state, often in connection with filing their annual income tax return.

The liability of any non-exempt resident of a US state with a sales tax

Sales taxes in the United States

There is no federal sales or use tax in the United States. 45 states and the District of Columbia impose sales and use taxes on the retail sale, lease and rental of many goods, as well as some services. Many cities, counties, transit authorities and special purpose districts impose additional local...

for payment of the equivalent use tax when purchasing goods from another state (or country) through mail-order, by telephone or through the Internet

Internet

The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...

should not be confused with the issue of direct Internet taxes

Internet taxes

From the inception of the Internet until the late 1990s, the Internet was free of regulation by government in the United States at all levels, and also free of any specially targeted tax levies, duties, imposts, or license fees. By 1996, however, that began to change, as several U.S...

levied on Internet services themselves, such as bit taxes, bandwidth taxes, franchise tax

Franchise tax

Franchise tax is a tax charged by some US states to corporations with a nexus with those states. The common feature of a state's franchise tax is that it is not based on income...

es, and email taxes. Most such levies are banned until 2014 by the Internet Tax Freedom Act Amendment Acts of 2007 which extends the provisions in the federal Internet Tax Freedom Act

Internet Tax Freedom Act

The 1998 Internet Tax Freedom Act was a United States law authored by Representative Christopher Cox and Senator Ron Wyden, and signed into law on October 21, 1998 by President Bill Clinton in an effort to promote and preserve the commercial, educational, and informational potential of the Internet...

beyond its original 2007 expiration.

Goods that would be taxable at home are taxable at the same rate when taken home or delivered, regardless of where or how they were purchased. Numerous local sales tax

Sales tax

and use tax

Use tax

exemptions exist according to taxpayer status (for example, there exist exemptions for charitable organization

Charitable organization

A charitable organization is a type of non-profit organization . It differs from other types of NPOs in that it centers on philanthropic goals A charitable organization is a type of non-profit organization (NPO). It differs from other types of NPOs in that it centers on philanthropic goals A...

s), exemptions based on size of purchase (e.g., clothing under $110 in Vermont), and exemptions for specific types of goods (e.g., protective clothing, food, medication, and educational materials).

Even customers from jurisdictions that levy sales taxes can in theory have additional tax liabilities when shopping in neighboring no-tax or lower-tax jurisdictions. For example, if an adjacent state has a slightly lower tax rate than the purchaser's home, that shopper could face an additional tax burden even though the purchase was already taxed at the point of sale. The difference in tax rates is referred to by collecting authorities as "tax discount".

Taxing jurisdictions generally extend an exemption from use tax

Use tax

to commercial taxpayers that purchase business stock. This type of exemption applies to goods purchased tax-free for resale, but lapses if the goods are converted to use by the company itself (for example, a company car, office supplies, and cleaning supplies).

Some countries charge a value added tax

Value added tax

(VAT) or goods and services tax

Value added tax

(GST) that extends to retail purchases. When those customers are residents of a US state having sales taxes on such goods, the VAT or GST taxes paid might be used as a credit against the amount of use tax otherwise owed, unless excluded, such as in Massachusetts. However, when a post-travel refund of the VAT or GST is claimed, the purchaser's home taxing jurisdiction can then assert a claim for the full sales tax liability.

Despite the fact that most shoppers are unaware of their use tax obligations, there are potentially severe penalties for willful tax evasion

Tax avoidance and tax evasion

Tax noncompliance describes a range of activities that are unfavorable to a state's tax system. These include tax avoidance, which refers to reducing taxes by legal means, and tax evasion which refers to the criminal non-payment of tax liabilities....

. Any online, telephone mail-order, or traveling shopper who makes "tax free" purchases could be successfully prosecuted for evading state use tax

Use tax

es if he or she willfully fails to file the necessary return and pay the required tax, or intentionally omits the information from a required annual return. When a taxing jurisdiction enforces use tax

Use tax

liability, it often also seeks additional penalties and interest accrued for failure to timely remit the necessary tax return

Tax return

A tax return is a tax form that can be filed with a government body to declare liability for taxation in various countries:* Tax return * Tax return * Tax return * Tax return...

and tax payments, as well as possible perjury

Perjury

Perjury, also known as forswearing, is the willful act of swearing a false oath or affirmation to tell the truth, whether spoken or in writing, concerning matters material to a judicial proceeding. That is, the witness falsely promises to tell the truth about matters which affect the outcome of the...

for omissions on official forms filed. The statute of limitations

Statute of limitations

A statute of limitations is an enactment in a common law legal system that sets the maximum time after an event that legal proceedings based on that event may be initiated...

on taxes due may not begin to run until and unless a required tax return is filed. Some states also provide a "safe harbor" scale of use tax that is most likely owed by every taxpayer, based upon the taxpayer's adjusted gross income. For example, someone with an income of over $100,000 could earmark 0.0005 of his or income as payment for "use tax", without having to account for any actual out-of-state purchases under $1,000 each.

To step up the opportunity for collection of use tax

Use tax

es, several US states have been working to implement a "streamlined" interstate use tax

Streamlined sales tax project

Organized in March 2000, the Streamlined Sales Tax Project objective is to simplify and modernize sales and use tax collection and administration in the United States. It arose in response to efforts by Congress to permanently prohibit states from collecting sales taxes on online commerce...

agreement. To effectuate this multilateral interstate compact, many states have enacted, or are considering enacting, statutory changes that require residents to disclose, under penalty of perjury, their annual use tax

Use tax

liability for out-of-state purchases. The focus on use tax collection has increased because the U.S. Supreme Court has placed significant hurdles in the path of state efforts to collect sales taxes on transactions in other no-tax or lower-tax jurisdictions. In National Bellas Hess, Inc. v. Department of Revenue of the State of Illinois and Quill Corp. v. North Dakota
Quill Corp. v. North Dakota
Quill Corp. v. North Dakota, 504 U.S. 298 is a Supreme Court ruling concerning use tax. Quill Corporation is an office supply retailer...

, the Court concluded that the Commerce Clause

Commerce Clause

The Commerce Clause is an enumerated power listed in the United States Constitution . The clause states that the United States Congress shall have power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." Courts and commentators have tended to...

and Due Process Clause of the U.S. Constitution require that there be a nexus between the taxing state and the vendor of goods or services, in the form of a physical presence. This has been interpreted to apply to both catalog sales and out of state sales over the Internet. States are thus prohibited from collecting sales taxes on so-called remote transactions because to do so would unconstitutionally burden interstate commerce. The Streamlined sales tax project

Streamlined sales tax project

is the states' response, by which they are seeking to collect use tax

Use tax

es on remote Internet and catalog sales in lieu of sales taxes.

In connection with the Streamlined sales tax project

Streamlined sales tax project

there has been discussion among state tax officials of creating obligations or incentives for merchants to collect taxes from customers who are residents of sales tax

Sales tax

states, especially in the area of online sales, in exchange for a remitting to the merchant a percentage of the taxes that would be otherwise unpaid. Some US states are also considering a tax amnesty

Tax amnesty

Tax amnesty is a limited-time opportunity for a specified group of taxpayers to pay a defined amount, in exchange for forgiveness of a tax liability relating to a previous tax period or periods and without fear of criminal prosecution. It typically expires when some authority begins a tax...

, pursuant to which residents could settle unpaid use tax

Use tax

es and penalties at a discount, but only if the settlement is offered before collection of the tax liability commences.

The move to more widespread imposition of use tax

Use tax

liability on consumer transactions is not without opponents. Consumer advocates note that sales and use taxes are regressive, disproportionately hurting poorer families and individuals who are forced to spend most of their incomes. In addition, the Streamlined Sales Tax Project

Streamlined sales tax project

must track what consumers are buying online, a feature of the proposal that will inevitably lead to privacy concerns.

External links

US No Sales Tax Webpage

vatfree.com: online and offline tax-free shopping in the EU

The source of this article is wikipedia, the free encyclopedia. The text of this article is licensed under the GFDL.

Introduction

Tax Free Shopping Territories

Tax Refund Service Providers

The Refund

Tax-free shopping in the European Union

Tax-free shopping in the United States

See also

External links