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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."
Where is there a list of states participating in this? TFA only mentions two, and a lightweight Googling didn't reveal much more. I'm a Mass/Taxachusetts resident (so I consider the chances high), but I certainly didn't see anything on my state return about grey-area sales taxes.
Speaking of which, good luck if they wanted to collect. As the article mentioned, the honor system doesn't work. Not only that, being the organized person that I am, clearly I have kept an accurate record of every internet transaction I made in 2003. In short, the only way I can see these folks having a prayer of getting my money is by making a national system of collecting these taxes that is compulsory for retailers to take part in. Otherwise, it's doomed.
Auto-reply to ACs: "Truly, you have a dizzying intellect."
Now if that wouldn't be a violation of the Commerce Clause, nothing would be.
I understand there is an issue of fairness, assuming a state which doesn't collect sales taxes or has a very low rate sells a lot of merchandise to people in a state with high sales taxes, and local sales taxes (i.e. California)
A feeling of having made the same mistake before: Deja Foobar
That line has been on my tax return for as long as I can remember. Of course when I first started doing taxes we didn't have internet sales, and it was intended to only apply to mail order stuff. I don't know anyone who put anything in that line back then, and I don't see any reason to expect that to change now that internet sales should be added in as well.
As a brick & mortar retailer, I'm sick and tired of losing businesses to cheapskates who want to shave a few pennies off, and don't give a damn about the businesses they choose to support or not to support. I say that that's the price you pay for shopping online (along with not being able to see the product, not know who you're buying it from, shipping cost and time... etc) It's about time that the playing field is leveled. Personally, I can't wait until this country turns into nothing but a bunch of Amazon.com warehouses with residential apartments in between, with little to no retail. THEN consumers will finally understand what they got themselves into, and I'll be long gone.
From the article:
All states have provisions for "use tax,"
This is not true. New Hampshire has no sales or income tax. There is no use tax provisions. There are a number of other states without sales taxes and/or income taxes.
It makes me rather doubt the competence of the author who apparently didn't do basic research on his topic.
-- Dan Jenkins, Rastech Inc.
Your naivite needs to be addressed, while I am not even a paranoid person, I can think of 2 ways where they can go after you:
1. Get all your credit card info. When was the last time when you used cash (money order, etc) for your Internet purchases? Do not kid yourself, the banks would happily submit your finincial transactions to IRS for audit at the first request...
2. Carnivore. Nobody know what it is capable of. Would be trivial to monitor all e-commerce transactions if needed. SSL is not that secure...
Code poet, espresso fiend, starter upper.
If you want people to pay the tax it needs to be calculated and collected at time of purchase by the merchant.
If someone feels that this will kill the ability for some merchants to do business online, possibly, though it should not be any bigger of an inconvenience than figuring out shipping rates was when Ecommerce took off. Even so, I don't think it will hamper online sales anymore than consumers having to collect and collate receipts for taxes will. Plus there are a number of sites like Yahoo that will be able to use this as a new feature for their online malls.
Speaking of which, good luck if they wanted to collect. As the article mentioned, the honor system doesn't work.
That's exactly the problem they had with the income tax--once people realized how much they were expected to fork over, they refused. The solution in that case was to take their money before they ever got it. Now, states have some real control over employers and retailers within their jurisdiction, but they can't do a whole lot outside of it. I can't see this being very effective.
Of course, it's also convenient to have a system where everyone is a criminal, because you can use that against them on a selective basis.
One man's -1 Flamebait is another man's +5 Funny.
Auto-reply to ACs: "Truly, you have a dizzying intellect."
In olden days, most of the purchase used to be within state and making out of state purchase was very expensive. So the state level sales tax made sense. In today's world, the sales tax at state level makes no sense. Transportation, shipping is way cheaper than they used to be. There should be federal sales tax common for all state and each state would get contribution (from federal govt) based on where the product was purchased/shipped.
I live in Alaska, no income tax, no sales tax. (sure is property tax though!)
And I have yet to report anything on that line. Not that I feel I am trying to rip off the state, but having at one time worked for a mail order company, who often did *NOT* have to charge sales tax on out-state purchasers.
I do not see how ordering something from a company who is based soley out of, say, CA, is any different than if I do it via mail order, or over the phone ordering.
I can see paying sales tax if I order from a company like Crucial memory, who most likely has offices in Michigan. The line on a state return though, just smacks of "you didn't spend all your money in-state, but we're going to pretend you did." Does that mean the next step will be to make people pay their state sales tax on items bought outside the state?
Will their be border crossings erected between Michigan and Ohio, and you'll have to declare what you purchased in Ohio, and pay the Michigan sales tax on it?
Sheesh.
Jason A.
Do you see the FNORDS? I refuse to post anonymously, as I am fireproof!
A smarter way would be to have a smarter tax system, like a Value-Added Tax. Tacking sales tax on as an after-thought is stupid, and creates many more problems than it solves. With a fairly simple system (Person A hands a stack of bills to Entity B; B hands A a Widget; B makes an entry in a book) its worst flaws aren't really exposed. With side-spread digital transactions for digital goods it simply cannot be maintained.
This isn't as much "normalization" as it is "don't take so many drugs when you're designing tables."
Does your state have property tax? It is possible that your property tax is far higher than it is in California. And in California, property taxes do not increase when the value of your property increases. This creates a situation where the state isn't getting nearly as much money from property taxes as other states. And what about car registration? In California, registration is much lower than in other states. So watch out for all of those taxes you are taking for granted!
Anyway, my question is simple - there's this line on my state taxes that asks me how much I paid in out-of-state goods over the past year so I can fork over sales tax on the items. My answer: I have no idea. Am I supposed to?
I was rather surprised to see this on my tax forms, since I don't recall being told any time that I should be saving receipts from out-of-state purchase. And while someone probably could look up my out-of-state purchases on my credit card, I don't have instant access to those records... Even if I did, I don't know what counts and what wouldn't. For example, some things aren't taxed in Massachusetts, like clothing.
I can't see how this will possibly work. I have no way of looking up this data - is it really my responsibility to keep track of my out-of-state purchases so the state can get their $5 or whatever? I don't make many purchases out of state anyway, and I definately don't bother keeping track of which purchases were made out of state and which were not.
You are in a maze of twisty little relative jumps, all alike.
In the short-run, as the article says, there's essentially zero compliance for existing law, and the only way anyone is getting into trouble is if the state is out to get them for something else. In the long run, Liselle is entirely correct. This burden is going to be imposed on Internet vendors, the way investment firms and banks are required to do the revenuers' work for them.
What I'm listening to now on Pandora...
Two words: Al Capone
C|N>K
Liberty you never use is liberty you lose.
hey, try california here where the sales tax is 8.25% and they're talking about 9% :( My household pays ~40% income tax as well... it's quite a burdern.
Religion is a gateway psychosis. -- Dave Foley
... and bless New Hampshire too for not having sales tax or income tax.
After doing 3 years worth of work on a project under the direction of the State of Maine, a few things became very apparent to me. State governments are very inefficient -- and thus it takes more money each year to accomplish the same thing. Combine the general inefficiency with new government programs every year, and you'll quickly see that with a few exceptions, your state is likely out of control.
I happen to live in Maine at the moment, although New Hampshire is my "home land". Maine is the highest taxed state in the union. If you'd like a day long project some time, just for fun, add up all the money your government takes from you... start with the obvious stuff like taxes, and then move on to fees and tolls, etc. In maine, a little more than 50% of my income goes to government (federal and state combined).
Payroll taxes, sales tax, use tax, excise tax, room/meals tax, license fees (multiple), highway tolls, hidden taxes in communication bills, bottle deposits and so on.
But if you really think about it... the worst part is that all of these taxes -- in most cases -- are paid with money that has already been taxed once. Before you even cash your paycheck, the government has already skimmed off the top... and a good portion too! How many of you actually take a good look at your pay stubs and notice the 25%+ OF YOUR MONEY that the government simply took from you? What do you get for it? Well, you get to pay sales taxes on stuff you buy with the remaining 75%. You get to pay excise taxes on the car you drive. You get to pay taxes on the gas you put into the car -- and it's your prime pleasure to be stuck in line at the grocery store while a welfare mother pays for her food with your money. You know, she's the one with the food stamps pile, the WIC pile, and then the pile of 2 or 3 misc items that she pays for with a $100 bill.
I think I've had enough taxation. The revolutionary war was all about freedom from opressive taxes... yet we've turned into a country far more opressive than the one we fought against!
Skiers and Riders -- http://www.snowjournal.com
Your credit card statements wouldn't be enough. For example, IIRC
shipping charges are exempt (at least in some places). Also, some
on-line retailers already charge the appropriate sales tax (companies
that already have a presence in your state are supposed to track and
charge sales tax, and I know at least some do).
Some online vendors charge local sales tax even if you are out of state. I believe that Apple is one such. Does this mean that I'm supposed to pay local AND remote sales tax?
plus-good, double-plus-good
I do give a damn. I gladly pay more in a store that has well paid, intelligent, and honest salespeople. As it is, usually I hate the shopping experience in many (but not all stores). You are lied to, or you cannot get served, or you can't find what you want, or things are stocked so that everyone trips over each other and the merch.
But there are stores that manage to keep me coming back and spending more. How? These stores are pleasant, well organized and well stocked, and the sales help and cashiers are helpful and fast. If you can't pull all this off, then don't be surprised that us "cheapskates" don't seen any reason to pay more at your store.
The tax issue is only one of a zillion factors why many of us have moved a lot of our purchasing online.
Roads, the Internet, basic scientific research, education, unemployment, national defense, police, firefighters, food safety regulation, zoning enforcement, environmental safety regulations, occupational safety regulations, the 40 hour work week, parks, and the list goes on.
Anti-tax wingnuts amaze me, because they seem to think that nothing they use is touched by the government, when in reality, government is responsible for the vast majority of the things that make life for most people livable, and not some 19th century poorhouse sweatshop hell.
What amazes me is that cow mentailty attitude that if the government doesn't do it, than no one else will, no other solution will be good enough, nice enough, workable. That the only way is to coerce revenue from the masses. Well bullshit. 90% of the rest of us don't need that kind of coercive power to get results. Only a cow would just take it on faith that the government does.
Not such a bad system, honestly, but I don't think your assessment is fair since New Hampshire has no real urban areas or blight to deal with and just doesn't need a lot of the infrastructure that a "real" state (one with a more substantive population) requires.
You know...one really has to wonder.
The idea of urban areas is that they're more efficient. You can centralize and reduce transportation costs. New Hampshire lacks those, so presumably is under even tougher constraints.
Yet New Hampshire manages to do just fine with*out* urban areas, without a sales tax, and without an income tax.
What are they doing right?
May we never see th
How many pennies is that a day? In any case, living in California is a choice and having 3 or 4 kids is also a choice. You'll probably disagree with me, but that's ok I'm used to it.
Some parts of Chicago is now 10 or 11% I think. I took a ski vacation in Michigan and the stinking room tax is 14%. Jesus, Keweenaw County is such a fucking dump.
Don't ever openly defy a tax authority, they're always looking to make an example. Play an earnest sort of dumb.
So is it your claim that because the goods are sold in interstate commerce, state governments don't have the power to tax? The commerce clause doesn't work that way. It's a very complicated subject (I'm working on a law review article about part of it), but in a nutshell, the commerce clause means that the federal government has the power to regulate it, and can preempt state laws in the area, but that doesn't mean states have no power. States can tax goods sold in interstate commerce until Congress decides to take control of the subject. Which Congress certainly has not done, either directly or through implication.
[IAN(Y)AL. I am a mere law student.]
The other half of their argument is that federal law specifies income tax but does not specify that a person is liable for paying that income tax. Even if they are right about that, it would still be illegal to file the federal income tax forms with incorrect information (I, the undersigned, ... under penalty of perjury ...).
P.S. The accountant is probably right. You don't have to pay the taxes (as the state law is unconstitutional (Article 10 I think), but putting a 0 on the line could be seen as perjury. Best to leave it blank.
" Article I, Section 8 of the US Constitution:"
If Article I, Section 8 allowed Congress to pass the income tax as it exists today, and create the IRS as it exists today, then please explain the necessity for the 16th Amendment. If Article I, Section 8 authorized the system we have in place, the 16th Amendment would never have been proposed, let alone ratified. Ratification of the 16th Amendment was also conditional on its being a temporary measure, as opposed to a cash cow for a massive Federal Totalitarianocracy.
You're also forgetting Article I, Section 2, which states:
"Representatives and direct taxes shall be apportioned among the several states which may be included within this union, according to their respective numbers..."[Emph Mine]
You're also forgetting Article I, Section 9, which states:
"No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken."[Emph Mine]
The Founding Fathers specifically stated in two seperate places that the Congress may not lay direct tax, except in proportion to the census. They couldn't have been more clear if they'd carved it into Jefferson's skull and stuck his head on a pike in the middle of Philly.
You could always argue that the 16th Amendment repealed these parts of the Constitution, but it does no such thing. Thankfully, the Supreme Court has already taken care of settling any dispute you and I might have about this. They did so in 1916, Brushaber v. Union Pacific R.R. Co., 240 US [1916], in which they held that the 16th Amendment did not alter Article 1, Sections 2 and 9, and that its only result is that the Income Tax remains an indirect tax. (Stanton v. Baltic Mining Co. , 240 US 112 [1916])
"So what?", you're probably saying. "They can still collect an indirect income tax." You're absolutely correct that Congress may impose an indirect income tax. Unfortunately for the IRS and personal income tax fans, the Supreme Court clearly defined an indirect tax in Flint v. Stone Tracy Co. , 200 US 107 [1911], in which it held that:
"Excises are taxes laid upon the manufacture, sale or consumption of commodities within the country, upon licenses to pursue certain occupations and upon corporate privileges; the requirement to pay such taxes involves the exercise of the privilege and if business is not done in the manner described no tax is payable . . . it is the privilege which is the subject of the tax and not the mere buying, selling or handling of goods."[Emph Mine]
Whoops, there it goes. You may find it hard to argue with that, but the Supreme Court would respectfully disagree. If someone has the money to take such a case all the way to the Supreme Court, we might all get a huge (as in 100%) refund from Uncle Sam in the next few years. The US Federal government was never intended to be the behemoth it currently is. Once we stop sending it all our money, we'll find that many other problems go away as well. It's tough to drop a billion dollars on a police-state inducing program (TIA, CAPPS/II, MATRIX) when your discretionary budget is smaller than a billion dollars.
-- "Government is the great fiction through which everybody endeavors to live at the expense of everybody else."
You just successfully defeated the purpose of what the federal constitution was designed to do. The United States of America was established on the mantra against oppressive taxation. One of the platforms they set up was that there could be no tax on goods shipped from state to state. The intent was
A. To create the ultimate free trade zone. (For a prosperous Nation)
B. To penalize a state from excessively taxing it's people. (Because people would just purchase things out of state.)
As far a use tax goes. They have a separate form in Ohio for Use Tax. It is Clearly labeled on top 'voluntary'.
But the bastards added a line to the income tax return?? YES. Which raises the question, Is this legal?
It depends if the Income tax return is mandatory or voluntary also. If it is voluntary then yes, it would be completely legal.
The question weather the state income tax return is Voluntary depends on weather the state passed a law making the citizens liable (Ohio doesn't use the words liable for income tax but they do for sales tax) although it must also be considered on how they expect you to fill out a Income tax return based on federal returns that no law makes you liable for.
givemeliberty.org addresses the issue in the new article about Irwin Schiff
"Therefore, if the Government will simply produce at my arraignment a Code Section that similarly makes this defendant 'liable' for income taxes in the same clear and unequivocal manner as Code Sections 4401, 5703 and 5005 [that] make persons 'liable' for Federal wagering, tobacco, and alcohol taxes, this defendant will plead guilty at his arraignment and save himself and the government the expense of a trial."
Income taxes are destroying American productivity and Free Trade throws Import taxes (federal governments legitimate taxing power) out the window and moves jobs overseas so you can loose your high paying manufacturing job and get a low paying job at Wal-Mart (now US largest employer).
(To all the gutless Americans out there) Thank you for your participation in the destruction of the American economy.
"even most libertarian states require some money to operate."
:)
They certainly do, and the Constitution provides the means for legal taxation to ensure the government has all the money it needs. If the government has grown to such a size that it can no longer sustain itself via legal means, the solution should not be to throw more money at it, nor extract money from citizens by threat of imprisonment. The reason the government is as large as it is is because it has usurped authority and responsibilities from the states and individual citizens in violation of the 9th and 10th Amendments, amoung others. I'll bet if we went over every inch of the Federal government with a fine-tooth Constitutional comb, we'd be able to cut the Federal budget in half simply by eliminating aspects which are illegal to begin with.
As for taxation, I think a consumption tax is the best way to go about it. Think about this for a moment: you're suggesting we should tax the wealthy more than the poor. I would agree with this entirely. My question for you is this: who buys more, and who buys expensive things? Joe Sixpack makes $30,000 a year, and is (presumably) spending that money on a bunch of little things for the family and such. As such, his spending habits are limited to buying a maximum of $30,000 worth of stuff. We could define certain necessary items as non-taxable, like simple foods. From there, the consumption tax takes form. Joe Sixpack buys a $19,000 Honda, and pays a tax on it. Joe Millionaire buys a Jaguar, a Porsche, an H2, and a small jet. He pays a tax on each of those items, which, when based upon the value of each, turns out to run far in excess of Joe Sixpack's tax. Thus, the wealthy are indeed taxed more (assuming they choose to take advantage of being wealthy), and the little people don't have to worry about April 15th killing their rent money.
There are far more things to discuss when it comes to a comprehensive taxation system, but I think the overall simplification and fairness of a consumption tax, as opposed to an income tax, far outweighs the difficulties of moving to a totally new system.
In the end, I continue to support the elimination of the (unconstitutional) Income Tax, in favor of a more fair tax plan, a vastly reduced Federal government, and perhaps even a might bit of fiscal discipline.
As for my previous post, I would assume at least one issue you'd raise would be with regards to Lincoln. I wouldn't bother with that one; you wouldn't understand/care if you're not a Southerner by birth as well as by heart.
-- "Government is the great fiction through which everybody endeavors to live at the expense of everybody else."
IANAL either. However, I have read the Constitution in its entirety and contemplated the meanings within, something I'm convinced many of today's lawyers have not done. I have also studied and researched Constitutional issues for my personal development and university coursework.
I feel that you're overlooking a very big checks and balances system. The members of the federal Congress, though elected from states, are largely outside the sphere of influence of the state governments. I think the 2/3 vote to send an amendment to the states for ratification would likely not occur. Fortunately, there is no method in place for the Supreme Court to mandate an amendment be sent to the states.
Beyond the amendment issue, you are reasoning that because someone can get a better deal in another state on a purchase, the deprived state has a legitimate claim. That is not the case. If a state cannot attract profitable businesses or develop a solid revenue model, they have no business taking the revenue from states that encourage commerce and have taken steps to simplify their own tax systems. The "offended" states should study the open market's behavior and find out what they are doing wrong.
Also, you are assuming that every state that is drawing these sales has no sales tax. What if they merely have less of a sales tax? To paraphrase from the Constitution, "full faith and credit" should be applied to the acts of other states. So, if your citizens have already been taxed on a purchase in another state, they have fulfilled their obligation. If the state in which the purchase was made did not require sales taxes, they have also fulfilled their requirement. Therefore, their home state has no jurisdiction. Residents of states can claim states as their home, but states can not claim residents as their property (slavery by the state?) to control at whim.
References: Article IV, Section 1; Article 1, Section 10; and Article V of the Constitution of the United States
Does your state [context: New Hampshire] have property tax? It is possible that your property tax is far higher than it is in California.
I lived in NH for several years. So, I'll have a crack at answering.
Yes, NH does have property taxes, but at the time I lived there (I left 10 years ago), they weren't excessive. Certainly nothing nearly as high as California, Colorado, or Massachusetts
NH really has no state income tax. NH does have sales tax, but on a very restricted basis -- it applies only to restaurant meals, hotel rooms, ski tickests, and perhaps a few other tourism-related things. It has high gas (petrol) taxes, about comparable to most other states in the US. Everything else in ones daily lives -- clothing, (non-restaurant) food, cars, etc., truly are sales-tax free. NH also have two major toll highways, but the only portion subject to toll is the first few miles beyond the Massachusetts border - once again, it's tourism focussed.
When I lived in New Hampshire, I paid about $1000/yr in property tax (I owned a small house). I paid, say, $500 a year in restaurant sales tax, because I ate out a lot. Maybe $50 a year in tolls. And I gas (petrol) taxes which I won't enumerate becasue they're about the same in all states. This totals, say, $1550/yr in taxes.
For comparison, when I lived in Massachusetts before that, I paid almost $5000/yr in state income tax alone, even before you get to the higher property taxes, and almost across-the-board sales taxes.
Massachusettes residents who defended all the monster Massachusetts taxes (yes, some people actually like them!) would always either (a) vaguely cite alleged benefits associated with living in a more "progressive" state, and (b) alledge that New Hampshire taxes were "just as high", because property taxes made up for the difference. The numbers above belie this claim.
I certainly never saw a single shred of evidence of truth in either of these two arguements. In terms of percentage of property values, New Hampshire property taxes were about comparable with those in a typical Massachusetts town. But in terms of absolute dollars, they were _much_ lower, because New Hampshire didn't suffer from Massachusetts's outrageous housing prices. I don't know how that's changed in recent years?
The bottom line, NH gets by without income and sales taxes, in two ways: By taxing tourism, and by keeping it's spending under control. I lived there enough to know that it REALLY does work.
I never saw any downside to the moderation in spending. The state legislature was part-time and unpaid. Essential services all seemed to work just fine. Road maintenence, snow clearing, hospitals, courts, etc., all seemed excellent. I can't comment on schools, since I didn't have kids.
Now if only I could live in New Hampshire, without having to be on the east coast!
The concept of sales tax is ridiculous in itself.
Why do we pay taxes ? To fund services provided by the government.
What service is provided by gov't when I go pick up a 61" Plasma TV for 9999$ that justifies blowing another 1100$ in taxes ? NOTHING!
Property tax is reasonable (water/police/firemen), driver's license is another honest tax (to pay for road maintenance). Income tax is kind of fishy since gov't has little to do with my work and employer, but it is one way of taxing somewhat fairly across working classes. Now to be 100% fair they should get rid of the indexing/bracketing and just charge a fixed percentage for everyone.
Sales tax ? Why should we pay the state/country for someone else's product and labor ? Because they will hunt us down and lock us up if we don't ? That's no good reason, that's racketeering no better than the mob.
[soapbox ON]
The only reason such excess funds are required is because gov't is grossly inefficient and corrupt. It's all been said before, but the main problem is that gov't is getting special treatment. The truth of it is that it should be no different from any other private company. If you put an owner on top, someone whose wealth is in the hands of the company, then suddenly you will see efficiency improve tenfold, but when you're spending other people's money you really don't care if you're being overcharged for this or whether such-and-such project is bullshit.
[soapbox OFF]
The bottom line: taxes suck. =)
-Billco, Fnarg.com