27 Investigates

Online shoppers get caught up in sales tax snafu

Some online shoppers are getting hit with inaccurate tax rates

LIBERTY TWP., Ohio (WKBN) - Online retailers could be charging 150,000 people across the tri-county area the wrong tax rate and state and county officials don't seem to know how to fix it.

Ohio’s tax holiday begins Friday but it isn’t just for shoppers heading out to the mall or other stores -- online shoppers get the tax break, too.

The deal sounds great but 27 Investigates Reporter Amanda Smith found out shoppers can’t count on online retailers to get the tax right during the special weekend -- or ever.

Americans have spent $389 billion online since 2016 and that number is going up. The U.S. Department of Commerce reports that online sales grow about 15 percent every year.

In most cases, people now have to pay tax for what they buy online.

Online retailers figure out sales tax rates when they bill bank accounts and credit cards. Each company collects the sales tax and then sends the money to the state of Ohio.

But the state doesn't tell the companies what the tax should be, so companies subscribe to databases to find sales tax rates. There are lots of different databases, all using different information.

Online shopper Andy Sefcik, of Liberty, discovered the companies don’t always get the tax rate right.

Hockey pucks, stadium models, figurines -- bit by bit, Sefcik has built up his sports collection. He buys much of it online.

"It's just more convenient," he said.

But last month, he noticed something a little odd with his final bill.

“I do all of our finances and I was checking over some of the emails, and a couple companies I was dealing with, the numbers just didn’t add up,” he said.

Sefcik lives in Trumbull County but his mailing address says Youngstown, which is in Mahoning County. It turns out retailers sometimes charge him the lower Trumbull County rate (6.75 percent) and sometimes the higher Mahoning County rate (7.25 percent).

He thinks that zip code is confusing retailers like Hallmark, Home Shopping Network and Barnes and Noble. All of them charged him the higher Mahoning County rate.

27 Investigates discovered that 6,000 people in Liberty Township alone could be paying too much tax when they shop online.

“If they are going to a zip code for Youngstown City, we are being overcharged. Where is that going?” Sefcik said.

Across our viewing area, 150,000 people live in zip codes that cross county lines.

"It started getting the gears clicking in my brain, 'What the heck is going on here?'"

The short answer is, no one really knows.

Officials at the county and state level -- and even companies themselves -- are struggling with the problem.

The State Department of Commerce didn’t completely understand what the problem was.

"We are trying to figure out what could be the problem or if there is a problem, so we are going down a couple different avenues," Laura Stanley said.

The other part of the question -- are the counties getting the taxes they're owed?

"I don't know," said Mahoning County Auditor Ralph Meacham. "I've looked into it several times."

Part of the issue is how the tax is sent to the county -- one big lump sump, online sales and physical sales taxes all mixed together.

"I don't know what recourse we have. We can't really go back to every vendor and audit their mailing locations," Meacham said.

In the meantime, Sefcik said he's pretty sure he's paying too much tax on about half of his online purchases but there's not much he can do about it.

"It's going to be up to me now to make phone calls to some of these vendors and say, 'Listen, you are overcharging us,'" he said.

This problem could be a lot more widespread than just in Andrew's Liberty neighborhood. Across the tri-county area, 150,000 people live in zip codes that cross county lines.

We contacted the companies that were charging a higher tax rate. Home Shopping Network said it's looking into it.

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