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Are You Reporting Your Internet Purchases?
theodp writes "Over the next week, taxpayers in 19 states will be confronting new sections on state returns that ask them to fork over unpaid sales taxes for items purchased out of state, including Internet transactions. A NY Daily News editorial characterized the addition of use tax to state returns as a rip-off and advised taxpayers to fill in a zero on the line, although an accountant suggests doing so may even be worse than just leaving it blank and put you on the line for tax fraud."
Mass is definitely one of the states. It's on the tax return under "use tax".
This is my sig. There are many like it, but this one is mine.
Here in N.H. there is no sales tax. I often forget that other states even have sales tax. It seems I am only reminded when I am on vacation, and the clerk wants me to pay $10.55 for the item that is clearly marked at $10.00. Then I get this dumb look from the poor person behind the register, "Uh, sales tax?"
It makes me wonder, how our state can run without sales tax, and without state income tax. I mean, it's a wonder we survive at all! Now, look at Mass, and California, loads of taxes! Boy, those people sure are better off with all those taxes and government programs! But, I digress.
Seriously, if you live in NH, and you buy goods over the Internet, no tax, case closed, Live Free or Die!
Modest doubt is called the beacon of the wise - William Shakespeare
Article I, Section Nine:
No Tax or Duty shall be laid on Articles exported from any State.
Additionally:
No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another: nor shall Vessels bound to, or from, one State, be obliged to enter, clear, or pay Duties in another.
One state cannot tax a purchase made in another state. Taxes are too high as it is.
Business isn't willing to pay for products, innovation and careers, so we get brands, mortgage commercials and layoffs.
States with sales tax lines on their tax forms include Alabama, California, Connecticut, Idaho, Indiana, Kentucky, Louisiana, Maine, Massachusetts, Michigan, New Jersey, New York, North Carolina, Ohio, Rhode Island, South Carolina, Utah, Vermont, Virginia and Wisconsin, according to the Federation of Tax Administrators.
Read more about it here.
The IRS has a pretty comprehensive PDF online debunking most of these schemes.
4 ,1,7068670.story?coll=la-home-business
[registration required, blah blah]
http://www.irs.gov/pub/irs-utl/friv_tax.pdf
While clearly the IRS is biased, they do cite many court cases that have legal precident covering many of these loopholes or misreadings of the tax code.
There was also a related article in the LA times last week which touched on the same topics
http://www.latimes.com/business/la-fi-taxman4apr0
since I run an on-line business in AZ, telling me to report any internet purchases I had made. I thought about it for a minute and then realized of the two known internet purchases one had been refunded entirely by the company (NewEgg, which resulted in me getting a server case for free after they jerked me around for several months) and the other was less than $100 and had just taken place a couple days prior. It's actually pretty rare that I buy things on-line and I don't keep records unless it's a purchase for the business since it's a tax write-off. The only purchase I could report was a business expense.
The tax only applies if you purchase tangible goods and import them into your state of residence. It falls under a "Use Tax."
If you're not running a business you most likely will not be bothered. I was probably sent a letter not only because I run a business but also because I don't pay any taxes on sales since they're all internet based and out of state. Every month I have sales to report but no tax. It also may have raised a flag.
Ben
Work Safe Porn
Article I, Section 8 of the US Constitution:
The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States.
Amendment 16 of the US Constitution:
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.
Sorry, but I find it hard to argue with that...
States have no right to tax interstate commerce, buying something out of state is interstate commerce and constitution clearly states that states have no right to levy tariffs or taxes on interstate commerce.
Have you ever been to a turkish prison?
It's pretty common along the Washington(8+% sales tax) Oregon (no sales tax) border too. Incidentally if you live in a state that doesn't have a sales tax you are exempt from other state's sales taxes (probably true about all states, but they might come after you for the use tax if you live in a state with a salels tax). You were supposed to report the items purchased and pay the sales tax on them (mail order too). Companies are only required to collect if they have a physical presense in the state.
Degaussing scares the bad magnetism out of the monitor and fills it with good karma.
Apple has to charge sales tax in states where it has retail stores. IIRC most states require sales tax on mail/internet orders if the company has a brick and mortar presence in the state. I could be wrong though; IANAL applies.
In case you aren't familiar with this tax-evasion technique, a corporation sets up a shell subsidiary (in name, an independent entity) is some place like the bahamas. The third part of the triangle is in the country that supplies the raw materials. Say I'm making shoes, and sell them for $100 a pair. Ordinarily that would mean a lot of profit for me, so to lower my apparent profit, I buy the raw materials for $90 from myself (the bahamas subsidiary). The bahamas subsidiary, however, bought the raw materials for $9, not $90, from somewhere in argentina. The US-registered corporation in fact makes a profit of $91 per pair of shoes (less labor and other expenses), but appears to have only made $10 profit per pair. The actual income is in the bahama shell, which has no obligation to pay US taxes.
How does this tie into income taxes? Well, ordinary people don't pay income taxes; they pay wage taxes, which are not the same. If I am allowed to deduct the cost of groceries, rent, gas, tuition, and healthcare, then I'll glad pay 30% tax on whatever's leftover.
Si la vida me da palo, yo la voy a soportar Si la vida me da palo, yo la voy a espabilar
That's how New York works. It's pretty interesting to. If you don't actually look at the instructions they provide you with a handy dandy little chart to compute the tax owed based on your income. This is supposed to cover all purchases less then a thousand dollars. But only at the end do they mention that you can put a zero in this line. I wonder how many people that skim through their taxes just paid it without even looking at what it was? Quite the cash cow for the state.
They do apply it to everything though. Quoted from the instructions for IT-201 (the New York State standard tax return):
So it's not just the Internet they are going after. I don't know what I'm going to do with mine (haven't filed yet). I don't think putting a zero down is a good idea -- it could be considered fraud. That said many tax professionals have told me in the past that they won't audit you unless the amount of cash they can get back is greater then the cost of the audit. It probably wouldn't be worth their time unless you buy tens of thousands of dollars worth of stuff off the 'net or in a catalog.
I'm impressed that it's 18 states doing this. I thought only New York and California pulled this sort of stuff. Guess all the budget crises probably have something to do with it?
I want peace on earth and goodwill toward man.
We are the United States Government! We don't do that sort of thing.