This article is by staff writer Lisa Aberle.

When you order something online, does the retailer charge you sales tax? Do you pay attention to that?

I haven’t always.

Online purchases and sales tax

After we became Amazon Prime users, our online internet orders went waaaaaay up. That free shipping will getcha every time. That year, my husband and I sat in our CPA’s office, as oblivious to most tax things as, unfortunately, every other year.

“So,” said Paul, the CPA, “have you made any online purchases?”

“Yes,” I said, confidently.

“How much?”

“Um … a lot?” I said, much less confidently.

Paying online sales tax reminds me of a quagmire.

It’s confusing. It’s murky. But it’s the law in most states.

So, here’s the lowdown:

If the merchant has a store in your state, the merchant will collect the sales tax, even if your order was shipped from out of state. That’s easy. Nothing for you to do, except pay it already.

In a fairly recent change, the online retailing behemoth (also known as Amazon) collects sales tax if an Amazon order is shipped to these 26 states — whether or not there is a physical store present in that state:

Arizona Indiana Minnesota Ohio West Virginia
California Kansas Nevada Pennsylvania Wisconsin
Connecticut Kentucky New Jersey Tennessee
Florida Maryland New York Texas
Georgia Massachusetts North Carolina Virginia
Illinois Michigan North Dakota Washington

For some of the states on this list, that’s a new law. Take Illinois, for example. Earlier this year — after an Illinois Supreme Court battle — Amazon is now charging sales tax on all orders shipped to Illinois. Again, you don’t have to keep track of your Amazon orders — for sales tax reasons, anyway.

But that’s not all.

In five states where sales tax is NOT charged on Amazon purchases, Amazon is still required to report your online purchases. The Colorado law is currently under legal challenge — but Oklahoma, South Carolina, South Dakota and Vermont still require reporting.

Sales tax vs. use tax

And here is another scenario:

If you buy, for instance, a boat in a state that does not have a sales tax, but you bring the item into a state that does have a sales tax, you’re responsible for submitting the sales tax on this item. Only now it’s called a use tax, a tax that refers to physical goods that are consumed, stored, or used within a state.

The question is: How can you be a law-abiding citizen if online retailers don’t charge you sales tax, but your state requires you to pay the sales tax?

I want to be a law-abiding citizen; but after our meeting with our CPA, I realized my methods were lacking.

So here is my simple system:

I created a folder in Gmail cleverly called “Internet orders I didn’t pay tax on.” Every time I order something that I didn’t pay tax on, I move the order to this folder.

If you’re more of a paper person, print off the order and save it in a folder (kind of like our editor’s filing system she talked about recently).

No matter which method you use, when it’s tax time, review your items and pay the sales tax if required.

Are insurance benefits taxable?

Your purchases aren’t the only things that may have a surprise tax tag.

If you die, will your beneficiaries have to pay taxes on your life insurance?

Probably not, but it depends on state law and a couple of other factors. And also, if interest is generated, the principal is most likely not taxable, but the interest is.

With disability insurance benefits, paying tax depends on whether you paid the premiums with pre-tax or after-tax dollars. If you paid the premiums with pre-tax dollars, you’re likely to pay taxes on your benefits.

What isn’t taxable

With all this talk about what is taxable, I thought it would be fun to throw in something that you can enjoy without worrying about a big tax bite.

Credit card rewards are viewed as a discount, not income. Therefore, spend (wisely!) or save your credit card rewards without worrying about tracking them.

Death and taxes are certain

Although tax law is complicated, it is (somewhat) simplified by remembering that you should not be paying taxes twice on the same income/product. So if sales tax has already been collected, you should not be paying sales tax again.

If you’ve paid for your life insurance premium with after-tax dollars, your beneficiary should not pay tax — unless interest has been generated and no one has paid taxes on that.

Keep track of your online/out-of-state purchases for the year. And if you do happen to receive any insurance payouts, whether you’re a beneficiary or if you receive disability insurance payouts for yourself, save about a third of this money and consult with a tax professional at tax time. After all, if you do owe taxes on this money, you don’t want to scramble to find the funds to pay your tax bill. And if you don’t owe? I’m sure you can find another account to fatten up.

As I mentioned, the tax code is confusing. What isn’t confusing is that you won’t get a free lunch (or a pass on paying taxes). Eventually, taxes will catch up to you.

What else is (or isn’t) taxable that surprised you? Tell us about it in the comments!