April 12, 2006 11:27 AM PDT

States push to tax Net shopping

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It's also trying to strong-arm large companies that are not legally obligated to collect taxes to do it anyway. "We're working with major retailers--don't want to give any names of course--to have them collect the tax and send that amount to the state of South Carolina," Brazell said.

Washington state has no income tax, so it's at a disadvantage when trying to collect use taxes on a form due on tax day, said Mike Gowrylow, a spokesman for the state Department of Revenue. Complicating the situation is the lure of shopping in nearby Oregon, he said, which has no sales tax.

"We try to enforce the use tax when we can come up with a paper trail, like artwork, boats, planes and other vehicles," Gowrylow said. "Very few people pay it...It's a huge problem."

Tim Connolly, a spokesman for the Massachusetts Department of Revenue, said the government tries to "make people aware that they should be paying" use taxes. In 2004, Connolly said, line 33 was added to state tax returns along with a table for use tax calculations on purchases less than $1,000.

Pennsylvania directs most of its use tax collection effort at companies rather than individuals, said Steve Kniley, press secretary for the Pennsylvania Department of Revenue. "We have just begun a pretty concerted effort to encourage use tax payments by business," Kniley said.

"In the event that we were auditing one of our customers, one of our taxpayers, if we found a use tax liability, yes they would be held accountable for that and there would be penalties."
--Anita Gore, spokeswoman, California Board of Equalization

A proposal to add a use tax collection line on state tax returns has stalled because of an unusual reason: the relative simplicity of Pennsylvania's tax code. State residents enjoy a 3.07 percent flat tax on income, with no brackets or personal exemptions, ranking the Keystone State with Colorado and Rhode Island as some of the most straightforward among the states with an income tax.

"Our issue right now is we don't have room" on the tax return, Kniley said. "Right now we have a two-page form, and we would have to go to a third page, and there are all kinds of issues with that...It would be a significant expense." If Pennsylvania eventually does add a third page, such a requirement easily could show up, he said.

Audits are another enforcement tool. (New York says it does not audit solely on the basis of suspiciously reported use tax numbers.)

"In the event that we were auditing one of our customers, one of our taxpayers, if we found a use tax liability, yes they would be held accountable for that and there would be penalties," said Gore, the California tax agency spokeswoman. Those include an interest rate of 9 percent, and, if negligence is proven, a 10 percent additional penalty.

California residents pay a sales and use tax of up to 8.75 percent in some areas, one of the highest in the nation. Golden State laws are strict: If Californians travel to a state with a 5 percent tax and shop there, the law requires them to write a check to the state tax agency for up to the 3.75 percent difference upon their return.

Ending tax-free Net shopping
If state tax collectors get their way, the days of tax-free Internet and catalog shopping will come to an abrupt end.

The obstacle that state tax agencies are currently facing is a legal concept called "nexus," which means a company can be taxed by a state only if it has a sufficient business presence. Because Seattle-based Amazon does not have offices or shipping facilities in California, for example, it's not required to collect taxes on shipments to that state.

In a 1992 case called Quill v. North Dakota, the U.S. Supreme Court affirmed the requirement of nexus--and said that only Congress had the power to change those rules. (An exception is cigarette sales, which are covered by the Jenkins Act.)

More than 40 states are participating in the Streamlined Sales Tax effort, which is designed to do two things: simplify convoluted state tax codes and make tax collection mandatory for out-of-state sellers.

Once state tax laws are simplified, the theory goes, Congress can be persuaded to eliminate the nexus requirement. Two bills that would do that--and effectively override the Supreme Court's 1992 decision--are pending in the U.S Senate.

One bill was introduced by Sen. Mike Enzi, a Wyoming Republican, and the other by Sen. Byron Dorgan, a North Dakota Democrat who is a former state tax commissioner.

In an opinion article written for CNET News.com in 2001, Enzi warned that online shopping would shrink tax revenues. "The Internet is a sales-tax loophole that is threatening to reduce our local governments' ability to provide the services we have come to rely on," he said.

But because of the fall elections, most observers don't expect Congress to consider the legislation until 2007. Until then, said Brazell, spokesman for South Carolina's tax collectors, "it's still going to be a problem because more people are shopping online."

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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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