TrustFile > Blog > Sales Tax > The Sales Tax Implications of Shopping Local vs. Shopping Online

The Sales Tax Implications of Shopping Local vs. Shopping Online


For many of us, the Sunday shopping trip has been replaced by hitting the “buy” button at an online store. There is an undeniable appeal to having goods delivered to your door without ever leaving your living room.

When you shop locally, however, not only do you get yourself out of the house; you also help build your local community through the sales taxes you pay.

Buy Local, Build Local Communities

In most of the states that levy sales taxes, the money collected is divided between the state and local communities--counties, cities, and transit districts and other special taxing jurisdictions. Sales taxes generally provide about ten percent of local revenue. 

Residents of Alameda County in northern California recently voted to extend a local sales tax and increase it from a half-percent to one percent. The money raised by this tax funds local transit improvements--everything from fixing potholes to making bicycle travel safer to keeping transit affordable.

In Texasten different transit districts impose an additional sales tax in the areas they serve to help fund public transit. In Cook County Illinois, a one percent sales tax helps fund the “L,” Chicago’s famous elevated trains.

Lodging Taxes: the Ultimate Local Tax

Also called an occupancy tax or hotel tax, this special sales tax on overnight accommodations provides revenue for local governments to pay for everything from marketing their city to tourists (Washington State) to paying for historical preservation (Texas) to giving grants for the arts  (San Francisco).

This tax is also under threat from the Internet, as people rent their homes through online services like Airbnb and HomeAway. Some cities require Airbnb to collect local lodging or occupancy taxes--a service automated by HotSpot Tax, an Avalara property. In other localities, tax collection is left up to the people who rent out their homes, who may or may not understand their tax obligations.

If you rent your home or a vacation home, it’s in your interest to understand and pay lodging taxes. Not only do your avoid potential penalties, but your city may use those funds to bring in more tourists and more revenue for you.

Shop Local

Local retailers of all stripes have been banding together to encourage local residents to come out and support local businesses. The American Independent Business Alliance (AMIBA) offers a guide to creating a successful Buy Local campaign.

Plaid Friday started in Oakland, California, as an alternative to the Black Friday shopping madness. Businesses across the country have adopted the free Plaid Friday model and hold events that offer entertainment, special sales, and discounts to customers wearing plaid.

Even online retail powerhouse Etsy is getting in the shop-local bandwagon with listings of local events where you can find Etsy sellers. 

Understanding and complying with your sales tax obligations isn’t just one more piece of paperwork you need to complete for your business; it’s a way to do your part and give back to your local community.

To make sure you’re in compliance with all the applicable sales tax regulations, you may want to get help from a service such as Avalara TrustFile.


Avalara Author
Laura McCamy
Avalara Author Laura McCamy