April 12, 2006 11:27 AM PDT

States push to tax Net shopping

Did you buy anything through the Internet last year without paying sales tax at the time?

If you did, state tax collectors warn that you'd better say so by April 17 and write a check--or else.

Online purchases from sites like Amazon.com and eBay may seem to arrive in a state of untaxed bliss. But the law actually requires shoppers to pay their own state's sales tax rate--the concept is called a "use tax"--and voluntarily cough up the exact amount owed each year at tax time.

Tax bureaucrats for years have lamented the difficulty of collecting use taxes on catalog and mail order sales. Now, with online shopping growing rapidly and nearing $100 billion a year in consumer sales, tax collectors are adopting more aggressive tactics.

New York state has added a line to income tax returns requiring all residents to calculate how much they should pay on Internet, mail order or out-of-state purchases. The threat is explicit: Anyone who creatively underestimates will face stiff penalties if an audit occurs.

"If you've written zero or left it blank, during the audit we're going to make you produce your financial records, bank statements, credit card statements," said Michael Bucci, a spokesman for the New York Department of Taxation and Finance. "If we find out you have made purchases you haven't reported to us, not only are you going to be liable for the amount owed, the tax liability, but also interest and penalties, which...could be up to three times as much as what you actually owe."

For the first time this year, California has taken its thou-shalt-pay-up warnings to the Internet through banner advertisements on four newspaper Web sites. One on the Sacramento Bee's site warns: "Make online purchases? You might owe use tax." (It has the benefit of being easily, and accurately, misread as "You might owe us tax.")

"We won't know how effective any of this is or how much money comes in this year until after April 17," said Anita Gore, a California Board of Equalization spokeswoman. Gore said the campaign has resulted in 8,000 clicks so far--not many, though, in a state with a population of some 36 million people.

If you buy something over the Internet or a catalog from a business with an office in your state, expect to see sales tax added to your receipt automatically. For example, a digital camera bought through CircuitCity.com would likely be taxed because the company has stores all over the nation, but the identical purchase from B&H Photo and Video would be shipped tax-free to anyone not in New York state. (Some states such as Delaware and Oregon have no sales taxes at all, of course.)

A dispute over missing revenue
It's not clear how much use tax goes uncollected. For one thing, the vast majority of Internet and remote purchases are made by businesses, which state tax agencies acknowledge are highly likely to comply with use tax laws.

Business to consumer e-commerce sales were $86.3 billion in 2005, up about 58 percent from the year before, according to the U.S. Commerce Department. (Business-to-business sales are about 12 times greater.) At an average tax rate of around 6.5 percent, that means the total amount of use tax due from consumers would be a maximum of $3.6 billion.

What's not taxed

California says its annual revenue lost to nonpayment of use taxes--including mail order and business-to-business purchases--is $1 billion. Washington state puts its lost revenue at $600 million; Pennsylvania at around $500 million; Connecticut claims some $230 million.

Not everyone buys those figures, which are calculated by tax agencies that may have their own incentives to embellish. Steve DelBianco, executive director of the NetChoice Coalition, said those numbers are overestimates.

"Nine out of every 10 dollars in e-commerce is business to business--that means business users, the vast majority of which pay their use taxes as a result of effective state audits," said DelBianco, whose coalition counts 1-800-Contacts, eBay, Orbitz and Yahoo as members.

Opponents of giving the government a larger percentage of Americans' disposable income say use tax collection efforts go too far.

"Unless we assume the tax man has the moral right to your entire income, I don't feel anyone should be obligated to pay" the use tax, said Lew Rockwell, an economist who writes frequently about taxation and government. "They already extract so much from us with little in return, just wars and welfare and general social trouble. The idea that we should turn over more is just outrageous."

Innovations in "use tax" extraction
States vary in how much force they apply when trying to squeeze use taxes out of taxpayers.

"One reason we want to collect the use tax and have been very aggressive about it is that 100 percent of the sales tax goes to education--the use tax does too," said Danny Brazell, a spokesman for South Carolina's Department of Revenue.

South Carolina is one of the more diligent states--or from a taxpayer's perspective, one of the most brutal. It has signed a deal with the U.S. Customs Service to obtain records about state residents who import expensive items from abroad; has sent out random mailings to taxpayers; and has added a line to its income tax return.

CONTINUED: Enforcing the use tax…
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104 comments

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This goes too far
"Use tax"? Excuse me, but this is going too far. You tax my income, my property, things I buy, and now you want to tax me for things I use.

I thought this was a democracy. Note to tax collectors: Stuff it!!
Posted by R. U. Sirius (745 comments )
Reply Link Flag
Here's a definition
Use Tax "A tax imposed by a state to compensate for the sales tax lost when an item is purchased outside of the state, but is used within the state. For example, you buy your car in a state that has no sales tax, but you live across the border in a state that does have a sales tax. When you bring your car home and register it in your state, the state taxing authority will bill you for the sales tax it would have collected had you bought the car within the state.".

it's just another way of collecting sales tax.
Posted by (409 comments )
Link Flag
This goes too far
"Use tax"? Excuse me, but this is going too far. You tax my income, my property, things I buy, and now you want to tax me for things I use.

I thought this was a democracy. Note to tax collectors: Stuff it!!
Posted by R. U. Sirius (745 comments )
Reply Link Flag
Here's a definition
Use Tax "A tax imposed by a state to compensate for the sales tax lost when an item is purchased outside of the state, but is used within the state. For example, you buy your car in a state that has no sales tax, but you live across the border in a state that does have a sales tax. When you bring your car home and register it in your state, the state taxing authority will bill you for the sales tax it would have collected had you bought the car within the state.".

it's just another way of collecting sales tax.
Posted by (409 comments )
Link Flag
This will kill the economy
As if Bush hasn't already
Posted by reallyrandy (7 comments )
Reply Link Flag
This will kill the economy
As if Bush hasn't already
Posted by reallyrandy (7 comments )
Reply Link Flag
R they stupid? This tax "loophole" boosts the economy
More demand for goods and services, UPS/Fedex make money, employ people, who in turn pay taxes.

Freaking idiots.
Posted by baswwe (299 comments )
Reply Link Flag
R they stupid? This tax "loophole" boosts the economy
More demand for goods and services, UPS/Fedex make money, employ people, who in turn pay taxes.

Freaking idiots.
Posted by baswwe (299 comments )
Reply Link Flag
Texas Use Tax
I have experienced states like New York and Connecticut going after use taxes via state income tax returns. Thankfully, my home state, Texas, like Washington, has no state income tax and is constrained by that fact as well.

While technically use tax is due and payable in Texas according to this FAQ...
<a class="jive-link-external" href="http://www.window.state.tx.us/taxinfo/sales/faq_use.html" target="_newWindow">http://www.window.state.tx.us/taxinfo/sales/faq_use.html</a>
...I've seen no push by Texas state officials to collect use taxes. Given the current property tax debate, I doubt any government official is willing to stir up this hornet's nest down here.
Posted by ssalava (41 comments )
Reply Link Flag
Texas is one of the worst predators for use tax
Heh... be warned; Texas has become one of the most predatory states for collecting both use tax and "property tax." We recently got dinged for $175 in "property tax" for hosting a web server in Dallas county -- AND WE'RE IN CALIFORNIA -- the server is only worth about $2,000. So we're paying an annual tax in another state just to host a server in Texas! If you think they won't come after you when you're IN TEXAS for taxes, then just wait for the bill with penalties in the mail. We won't be doing any business in Dallas county after this extortion -- EVER. So, don't pay use tax, but expect to be hunted down like a dog by a tax collector.
Posted by Neotrope (74 comments )
Link Flag
Texas Use Tax
I have experienced states like New York and Connecticut going after use taxes via state income tax returns. Thankfully, my home state, Texas, like Washington, has no state income tax and is constrained by that fact as well.

While technically use tax is due and payable in Texas according to this FAQ...
<a class="jive-link-external" href="http://www.window.state.tx.us/taxinfo/sales/faq_use.html" target="_newWindow">http://www.window.state.tx.us/taxinfo/sales/faq_use.html</a>
...I've seen no push by Texas state officials to collect use taxes. Given the current property tax debate, I doubt any government official is willing to stir up this hornet's nest down here.
Posted by ssalava (41 comments )
Reply Link Flag
Texas is one of the worst predators for use tax
Heh... be warned; Texas has become one of the most predatory states for collecting both use tax and "property tax." We recently got dinged for $175 in "property tax" for hosting a web server in Dallas county -- AND WE'RE IN CALIFORNIA -- the server is only worth about $2,000. So we're paying an annual tax in another state just to host a server in Texas! If you think they won't come after you when you're IN TEXAS for taxes, then just wait for the bill with penalties in the mail. We won't be doing any business in Dallas county after this extortion -- EVER. So, don't pay use tax, but expect to be hunted down like a dog by a tax collector.
Posted by Neotrope (74 comments )
Link Flag
use tax my butt...
the whole year would not pay for one month that Bush is spending in the far east... Lets brings the boys home and use the savings to make our country right...
Posted by zman2121 (5 comments )
Reply Link Flag
OH HELL YES!
I agree. Why should we have to pay for things that are exported from other states? We shouldn't.

And as for the economy...well, War's gernerally boost our economy. Look what it's done this time around.
Posted by (461 comments )
Link Flag
use tax my butt...
the whole year would not pay for one month that Bush is spending in the far east... Lets brings the boys home and use the savings to make our country right...
Posted by zman2121 (5 comments )
Reply Link Flag
OH HELL YES!
I agree. Why should we have to pay for things that are exported from other states? We shouldn't.

And as for the economy...well, War's gernerally boost our economy. Look what it's done this time around.
Posted by (461 comments )
Link Flag
Amazing, isn't it?
You get to be your own tax collector!! It's not enough that they
dip into your paycheck, skim a portion of every purchase you
make, extort you for property taxes, and tack on fees every-time
they can find an excuse to charge you. Now you have to keep a
little notebook to prove you have paid all the sales taxes that
they aren't able to collect.

Sort of makes you hate the whole system, doesn't it?

*** On Soapbox ***
Interested in a taxpayer revolution?

Write you congressional representatives and tell them to co-
sponsor the Fair Tax. Be sure to let them know their job is at
stake.

It won't save you from ridiculous state tax requirements, but it
will get rid of the titanic bureaucratic catastrophe that is the
federal income tax.

*** Off Soapbox ***

www.fairtax.org
Posted by sbwinn (216 comments )
Reply Link Flag
Fair Tax
The fair tax is not fair.

No tax on capital gains? That's fair. Because the poor have so many
stock options they're just waiting to exercise.
Posted by ethernet76 (88 comments )
Link Flag
Fair Tax
The fair tax is not fair.

No tax on capital gains? That's fair. Because the poor have so many
stock options they're just waiting to exercise.
Posted by ethernet76 (88 comments )
Link Flag
Amazing, isn't it?
You get to be your own tax collector!! It's not enough that they
dip into your paycheck, skim a portion of every purchase you
make, extort you for property taxes, and tack on fees every-time
they can find an excuse to charge you. Now you have to keep a
little notebook to prove you have paid all the sales taxes that
they aren't able to collect.

Sort of makes you hate the whole system, doesn't it?

*** On Soapbox ***
Interested in a taxpayer revolution?

Write you congressional representatives and tell them to co-
sponsor the Fair Tax. Be sure to let them know their job is at
stake.

It won't save you from ridiculous state tax requirements, but it
will get rid of the titanic bureaucratic catastrophe that is the
federal income tax.

*** Off Soapbox ***

www.fairtax.org
Posted by sbwinn (216 comments )
Reply Link Flag
Fair Tax
The fair tax is not fair.

No tax on capital gains? That's fair. Because the poor have so many
stock options they're just waiting to exercise.
Posted by ethernet76 (88 comments )
Link Flag
Fair Tax
The fair tax is not fair.

No tax on capital gains? That's fair. Because the poor have so many
stock options they're just waiting to exercise.
Posted by ethernet76 (88 comments )
Link Flag
You don't want to pay a use tax?
You don't want to pay a use tax? Then fire the monkeys in your state legislature.
Posted by anarchyreigns (299 comments )
Reply Link Flag
You don't want to pay a use tax?
You don't want to pay a use tax? Then fire the monkeys in your state legislature.
Posted by anarchyreigns (299 comments )
Reply Link Flag
It's a Violation of the Constitution
Section 9:

"No Tax or Duty shall be laid on Articles exported from any State"

But who bothers reading the Constitution anymore.
Posted by Spimby (61 comments )
Reply Link Flag
Agreed
And besides that, why is the Supreme Court's opinion on nexus (a reasoned opinion, for a change) under such attack and yet any other SC opinions, no matter how off the wall, are sacrosanct? I'll answer my own question - this one involves money!

If they start taxing all internet purchases, nobody will buy one thing they don't absolutely need. Then see how much use tax revenue is pulled in. No one seems able to see three inches in front of their nose.
Posted by Jane in KC (94 comments )
Link Flag
The cited section limits Congress
The cited section limits the power of Congress to tax state exports. I'm not sure how it limits the states from taxing imports into it.

A little research uncovers Federalist paper 32 which suggests that states have the power to tax imports.
Posted by wdevaul (2 comments )
Link Flag
so what
And what does it say about importing to states, anything at all? When you buy something out-of-state you are not exporting, the seller is. You are importing.
Posted by R Me (196 comments )
Link Flag
It's a Violation of the Constitution
Section 9:

"No Tax or Duty shall be laid on Articles exported from any State"

But who bothers reading the Constitution anymore.
Posted by Spimby (61 comments )
Reply Link Flag
Agreed
And besides that, why is the Supreme Court's opinion on nexus (a reasoned opinion, for a change) under such attack and yet any other SC opinions, no matter how off the wall, are sacrosanct? I'll answer my own question - this one involves money!

If they start taxing all internet purchases, nobody will buy one thing they don't absolutely need. Then see how much use tax revenue is pulled in. No one seems able to see three inches in front of their nose.
Posted by Jane in KC (94 comments )
Link Flag
The cited section limits Congress
The cited section limits the power of Congress to tax state exports. I'm not sure how it limits the states from taxing imports into it.

A little research uncovers Federalist paper 32 which suggests that states have the power to tax imports.
Posted by wdevaul (2 comments )
Link Flag
so what
And what does it say about importing to states, anything at all? When you buy something out-of-state you are not exporting, the seller is. You are importing.
Posted by R Me (196 comments )
Link Flag
NY, tax my air while your at it
First of all, if you want fair, consistent tax revenues, you must apply it across the board and not just those that you happen to audit. Tax those companies that do business in your state, or estimate revenues lost and surcharge ISPs, or whatever. If we have to track all purchases, and fill out forms for the convenience of the internet, then forget it! No more internet purchases for me!
Secondly, why am I not surprised that my state of NY is so gung-ho about this. Let's tax some more and drive even more business away. It's OK, we have friggin' Broadway. Funny, I thought toll roads, race tracks, slot machines, and lotto games were in place to help pay the bills. Not enough kickbacks to go around, I guess.
Posted by Fly on the Wall (15 comments )
Reply Link Flag
Last Gripe: 8% sales tax already...geesh!
Oh yeah. How come 8% sales tax can't make up for it either? I used to think my father exaggerated when he referred to the government as thieves and liars. Maybe not.
Posted by Fly on the Wall (15 comments )
Link Flag
NY, tax my air while your at it
First of all, if you want fair, consistent tax revenues, you must apply it across the board and not just those that you happen to audit. Tax those companies that do business in your state, or estimate revenues lost and surcharge ISPs, or whatever. If we have to track all purchases, and fill out forms for the convenience of the internet, then forget it! No more internet purchases for me!
Secondly, why am I not surprised that my state of NY is so gung-ho about this. Let's tax some more and drive even more business away. It's OK, we have friggin' Broadway. Funny, I thought toll roads, race tracks, slot machines, and lotto games were in place to help pay the bills. Not enough kickbacks to go around, I guess.
Posted by Fly on the Wall (15 comments )
Reply Link Flag
Last Gripe: 8% sales tax already...geesh!
Oh yeah. How come 8% sales tax can't make up for it either? I used to think my father exaggerated when he referred to the government as thieves and liars. Maybe not.
Posted by Fly on the Wall (15 comments )
Link Flag
This is why guns need to be kept legal
Now we have the government warning us that we better pay up "or else". Or else what?...Guns help keep the government in check. Anytime the government starts spewing out insults and warnings to citizens it's time to keep them in check.
Posted by bobby_brady (765 comments )
Reply Link Flag
Amen Brother...
Exactly why we need guns.

(Finally someone says it)
Posted by hahne59 (33 comments )
Link Flag
careful now!
Or good'ole Georgie Boy will send the marines after you.

Hey there georgie boy
why you go and start an illegal war
watching all the boys go marching by
smirking all the time as they quickly die
Posted by R Me (196 comments )
Link Flag
This is why guns need to be kept legal
Now we have the government warning us that we better pay up "or else". Or else what?...Guns help keep the government in check. Anytime the government starts spewing out insults and warnings to citizens it's time to keep them in check.
Posted by bobby_brady (765 comments )
Reply Link Flag
Amen Brother...
Exactly why we need guns.

(Finally someone says it)
Posted by hahne59 (33 comments )
Link Flag
careful now!
Or good'ole Georgie Boy will send the marines after you.

Hey there georgie boy
why you go and start an illegal war
watching all the boys go marching by
smirking all the time as they quickly die
Posted by R Me (196 comments )
Link Flag
People should pay there taxes...
It is how the government works. Now just because the waste it and throw it away on things like an unjust and illegal war or stainless steel toilet seats or an automatic hat fluffer for some congressman doesn't mean we shouldn't pay.

The problem is I don't think the consumers that shop online should be the ones that have to keep track of this. The companies all companies even if they don't have a presence in the state should have to collect the sales tax.

I don't know why when the government local, state or federal decides to do something they have to make it everyone elses big mess. The businesses are in business to make money, they should be the ones to deal with the sales or use tax issues, not Joe who bought a waffle iron from Amazon.com.

Robert
Posted by Heebee Jeebies (632 comments )
Reply Link Flag
not good at all
thats just plain wrong. It would put the smaller businesses in serious trouble. Who would be responsible for keeping track of the taxes. Not the individual sales made but the taqxes needed to be collected for each item. Lets see, state sales tax, local city and county taxes, and also distrct taxes. What about syncing it all up after election and tax miliges change. Who would be responsible? You, the business, tghe entity. Hell, govt does not even know what the other hand is doing. So after all is said and done and the tax collected is short who pay the difference, the penalty? You, the business, local entities?

In the present form of taxation trying to collect use tax is an impossible and expensive problem.

What entities are really trying to do is to RAISE the price of doing out-of-state transactions so expensive it is better to shop locally. Right now the taxless price is the only incentive to buy online.
Posted by R Me (196 comments )
Link Flag
People should pay there taxes...
It is how the government works. Now just because the waste it and throw it away on things like an unjust and illegal war or stainless steel toilet seats or an automatic hat fluffer for some congressman doesn't mean we shouldn't pay.

The problem is I don't think the consumers that shop online should be the ones that have to keep track of this. The companies all companies even if they don't have a presence in the state should have to collect the sales tax.

I don't know why when the government local, state or federal decides to do something they have to make it everyone elses big mess. The businesses are in business to make money, they should be the ones to deal with the sales or use tax issues, not Joe who bought a waffle iron from Amazon.com.

Robert
Posted by Heebee Jeebies (632 comments )
Reply Link Flag
not good at all
thats just plain wrong. It would put the smaller businesses in serious trouble. Who would be responsible for keeping track of the taxes. Not the individual sales made but the taqxes needed to be collected for each item. Lets see, state sales tax, local city and county taxes, and also distrct taxes. What about syncing it all up after election and tax miliges change. Who would be responsible? You, the business, tghe entity. Hell, govt does not even know what the other hand is doing. So after all is said and done and the tax collected is short who pay the difference, the penalty? You, the business, local entities?

In the present form of taxation trying to collect use tax is an impossible and expensive problem.

What entities are really trying to do is to RAISE the price of doing out-of-state transactions so expensive it is better to shop locally. Right now the taxless price is the only incentive to buy online.
Posted by R Me (196 comments )
Link Flag
Agrred
I refuse to keep a record of everything I buy, just to total up what got charged sales tax and what didn't. If they can't get Fair passed, then they can go pound sand.
Posted by PzkwVIb (462 comments )
Reply Link Flag
Agrred
I refuse to keep a record of everything I buy, just to total up what got charged sales tax and what didn't. If they can't get Fair passed, then they can go pound sand.
Posted by PzkwVIb (462 comments )
Reply Link Flag
Or else what?
Sounds to me like these states are running a bluff. I doubt if
any state could budget an audit department large enough to do
a significant number of unpaid internet purchases audits.

So are we to believe they will go after Joe Sixpack for the tax on
his Amazon purchases instead of some guy who owes them
hundreds of thousands (assuming the big crook isn't a
politician).

If a state want to collect taxes on internet purchases, imo, the
only way they are going to collect it is to agree with the 49 other
bloodsuckers on a fixed rate that can be charged by the online
company. (and how often can the greedy 50 agree on anything?)

Until they do, to quote another poster they can "pound sand".
Posted by rcrusoe (1305 comments )
Reply Link Flag
 

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