MA Requires Internet Tax for 2002 Tax Season

Flamesplash writes "Yahoo! is running this story about how Taxachusetts has added an "internet" tax to it's 2002 state forms, 'this year's income tax form will have a new line item -- asking you to estimate and pay the sales tax on items you've purchased from out of state.' It should be noted that 'the law has been on the books since 1967. But only car and boat owners registering their vehicles in Massachusetts paid.'"

Comments

Re:"Use tax" -- very old news

[babbage]

Expanding on your examples, the general rule seems to be that anything that all people *need* to get by -- clothing, supermarket food, medicine, and newspapers & magazines [Also, as leviramsey writes above, this isn't anything new. My impression (I am neither a lawyer nor an accountant, though both my dad & my fiance are accountants so I'm not *totally* talking out of my ass here :-) is that it has always been expected that Massachusetts residents would pay state sales taxes on out-of-state purchases, but this is generally unenforceable.

There are situations where you can't get around the tax though -- we recently went shopping in New Hampshire, partly because the item we were looking for was on sale, but also partly because NH doesn't have a sales tax. The salesman told us that if we picked up the item on site then we could buy it without paying the tax, but if it needed to be delivered into Massachusetts then they were required to collect the tax. I'm sure that many border-town retailers have to be able to handle this sort of thing.

So, applying this to internet transactions isn't a new thing, just a new application of an old thing. My dad could explain this better than I can, but it seems like (at least in theory) nearly all states structure their sales tax laws such that you just have to pay a tax to the state you reside in. (That's why catalogs & mail-order offers usually say something like "residents of AA, BB, and CC must pay sales tax" -- those are the states where they have a physical presence; for others it's assumed that the consumer will be honest & pay the same sales tax manually.)

The obvious problem with that is that most people don't report out-of-state purchases that they owe on, but at the same time most retailers don't report out-of-state purchases that they over-collected; my hunch is that as long as these two sides roughly cancel out the tax won't ever be widely enforced, but it's no big deal in that case. The exception is things like big ticket items, catalog purchases, and now internet sales -- mainly because all of these are easier to account for systematically, if the will is there to do it. It sounds like the only twist here is that MA is starting to ask people to start doing that.

Really though, we all knew this was coming, especially now with many state budgets in the red after years of prosperity. MA is doing particularly badly right now, but I know it's not the only one and probably not even the worst off. If internet sales taxes are inevitable this doesn't seem like the worst way to tip our toes in the pool...