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.

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.

[R. U. Sirius]

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!!

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.

[Stan Kee]

im with you

The states are crack addicts when it comes to taxes. You'd think income taxes and the other taxes they hit us with with would be enough but like a junkie they want it all.

[R. U. Sirius]

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!!

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.

[Stan Kee]

im with you

The states are crack addicts when it comes to taxes. You'd think income taxes and the other taxes they hit us with with would be enough but like a junkie they want it all.

[reallyrandy]

This will kill the economy

As if Bush hasn't already

[reallyrandy]

This will kill the economy

As if Bush hasn't already

[baswwe]

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.

[baswwe]

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.

[ssalava]

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...
http://www.window.state.tx.us/taxinfo/sales/faq_use.html
...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.

[Neotrope]

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.

[ssalava]

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...
http://www.window.state.tx.us/taxinfo/sales/faq_use.html
...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.

[Neotrope]

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.

[zman2121]

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...

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.

[zman2121]

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...

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.

[sbwinn]

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

[ethernet76]

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.

[ethernet76]

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.

[sbwinn]

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

[ethernet76]

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.

[ethernet76]

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.

[anarchyreigns]

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.

[anarchyreigns]

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.

[Spimby]

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.

[Jane in KC]

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.

[wdevaul]

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.

[R Me]

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.

[Spimby]

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.

[Jane in KC]

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.

[wdevaul]

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.

[R Me]

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.

[Fly on the Wall]

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.

[Fly on the Wall]

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.

[Fly on the Wall]

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.

[Fly on the Wall]

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.

[bobby_brady]

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.

[hahne59]

Amen Brother...

Exactly why we need guns.

(Finally someone says it)

[R Me]

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

[bobby_brady]

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.

[hahne59]

Amen Brother...

Exactly why we need guns.

(Finally someone says it)

[R Me]

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