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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."
Alabama is one of them, though it doesn't apply it to only internet purchases. It applies to any thing that you bought out of state and brought back home.
C:\>
Now, this galls me on several levels. One, they assume that every penny you earn is to be spent on sales-taxable goods in the Great State of North Carolina. Two, you definitely get the feeling that if you don't put some amount on the line, they'll be pulling your return for audit. It's almost a big brotherish attempt at coercing additional tax monies. Furthermore, if you buy something in say, SC, with a sales tax of 5%, they expect you to pay the difference between that rate and your rate.
There are people out there who say that there is no legal requirement to pay income tax to the federal government. I read last night about a guy that used to work for the IRS who resigned after doing his own research and coming to the conclusion that these people actually have a case. He hasn't filed a return since 1999.
How these people propose to fund the building of the roads that they will march on in protest is unclear, but it's an interesting case they put forward from a legal point of view.
Drill baby drill - on Mars
We don't need the luxury of schools, roads, etc.
Do I have to pay a use tax on the cost of my Slashdot subscription?
Remember the days when Republicans were the party of fiscal responsibility?
Speaking of which, good luck if they wanted to collect. As the article mentioned, the honor system doesn't work.
Tell that to my cousins who got audited. The IRS nailed them on this since they had made some rather big ticket purchases.
If it were truly a matter of "shaving pennies off", then you wouldn't have anything to be "sick and tired" of.
Example: I bought a new car stereo a few months back... The cheapest price I could find locally was about $125 more than it cost me to order online, and have it shipped UPS 3-day.
I'm all for supporting "local" businesses... And if this were, say, a $25 dollar price difference, I would undoubtedly buy locally, for some of the very reasons you state.
But for discounts of $125 or the like? You've got to be joking / stop your bitching.
When I came across this last year, it surprised the hell out of me (definitely merited a "WTF?"). I generally don't keep track of my online purchases (in as far as differentiating them from non-online purchases). And what about things I've bought from outside the country (import CDs et al)? Do those count? Seeing as how I didn't want to get in trouble, I made a rough estimation, but then again, how about the places I've bought from that ALREADY incorporated sales tax? I don't remember which they are, I don't keep records that closely on that stuff. Let's hope little graduate student me doesn't attract attention and get audited on my cute little minimum wage income. Because that would sickening if citizens are getting in trouble for this, while 60% of corporations didn't submit taxes 1996-2000 (was in the news this week). *sigh*
I'm not so sure about that. The first part, "No Tax or Duty shall be laid on Articles exported from any State." covers exports. Meaning, if I am the government of New Jersey, I cannot tax products being exported to New York. However, it does not stop New York for taxing imports from New Jersey. Such import taxes have been used many, many times since the founding of our nation.
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http://nemilar.net - Not your grandmother's soup kitchen
You can't use that justification (see my comment here), but you can cite section ten:
Article I, Section Ten:
Section 10. No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility.
No state shall, without the consent of the Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing it's inspection laws: and the net produce of all duties and imposts, laid by any state on imports or exports, shall be for the use of the treasury of the United States; and all such laws shall be subject to the revision and control of the Congress.
So yes, it is unconstitutional - but not for the reason you cite.
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http://nemilar.net - Not your grandmother's soup kitchen
For the typical consumer this is a non-issue. The government is not going to go to extraordinary lengths to figure of if I owe tax on the $50 worth of Amazon stuff I bought. It just isn't economically worth it. Now if they had all financial information in the country in one place, they could theoretically figure this out (although given the government's record of technology use this is extremely unlikely), but that would raise significant privacy concerns.
So who should worry? Well, if you are trying to buy expensive art (or any other pricey item) and trying to avoid the tax, then you are a target. If you figure that the cost of tracking down a non-payment is fixed, then you have to assume they will focus on big ticket items.
What the states are doing in this article is pretty reasonable if you think about it. They throw one line on a form and hope people will send them money. This is money they wouldn't otherwise have gotten and it cost them nothing. They won't get much but, hey, it's free money so why not.
- Alabama,
California,
Connecticut,
Idaho,
Indiana,
Kentucky,
Louisiana,
Maine,
Massachusetts,
Michigan,
New Jersey,
New York,
North Carolina,
Ohio,
Oklahoma,
Rhode Island,
South Carolina,
Utah,
Vermont,
Virginia,
Wisconsin
However, even though all these states have places to report this tax, in almost every case my firm just puts in a zero. Granted this policy may change if states become more active with enforcement, but that is our current policy. Just don't blame me if you put 0 and get audited.It's tough to say how much you are supposed to pay, even if you *had* kept track of your Internet purchases.
I moved from a Maryland to Michigan in December 2003. If I were to count all of my Internet purchases for 2003 on my MI taxes (which requires the use tax) then, I would be paying for mostly MD purchases (which, to my knowledge, does not). So, just divide it up before and after, right?
Not that simple. Around the time I was moving, I was purchasing a lot of last minute things on the Internet. Many of which, I ordered in MD, but received in MI. Or, the transaction was initiated in MD, but by the time the money was transferred, I had already moved.
Don't taxes frustrate people enough without introducing state taxes like this?
Florida also has a use tax and used to run extremely obnoxious commercials telling people that they were required to pay it if they purchased items outside the state.
I would think that a "use tax" that is applied only to people who make purchases outside the state would be attackable as an unconstitutional attempt to regulate interstate trade. You're applying a special piece of state income tax code to a class of people that isn't everyone. Since that class of people is only people who have made out of state purcahses, how can it not be an attempt to regulate interstate trade. It will certainly have that effect.
I would think that a far more legally solid method of applying taxes would be to tax a business in a specific state for any sale it makes, whether the sale was in-state or not. Of course, no mail order shop would ever set up shop in a state that did that...
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
Put another way, many frequent online buyers shave a few hundred thousand pennies a year. The only thing a use tax will do for you is make people purchase fewer products (which hurts the economy, and, indirectly, your business). It certainly won't drive them to buy things locally. If anything, it will mean that they will have less money left over to spend locally, hurting the local economy even further.
As for the disappearance of local retailers, I'm all for it. Some things make sense to have available locally. Wal-Mart SuperCenters and Big K-Marts sell most of them (day-to-day needs, groceries, etc.). Home Depot and Lowes pretty much take care of the rest. Almost everything else can generally wait a couple of days. I guess cars and furniture are, to some extent, also exceptions, just for the ability to browse, though it's not -that- important....
That having been said, if you want to compete, start by forming buying groups with other companies to increase your buying power (thus lowering prices). Scale back your selection to include only things that you can sell at a reasonable price rather than wasting space with things that you'll get stuck with. When your prices are within 5% of the online prices, it will frequently be worth it to buy something locally for the convenience, even with sales tax. As long as someone can cut the price in half by buying online, though, you're pretty much screwed.
Check out my sci-fi/humor trilogy at PatriotsBooks.
-If- there is going to be a tax on interstate sales, the tax should go to the state where the product is sold, not the state that the product is shipped to.
They can't possibly enforce it, and you aren't prepared to provide an accurate number, so ignore it.
If they want to create a significant revenue stream based on use tax, they're going to need to educate the population.
We're already taxed more than once on the same dollar. I'll sit this one out.
This is my sig. There are many like it, but this one is mine.
espo
The "honor system" doesn't apply here, because no one has agreed to pay sales tax on out of state purchases. If we had agreed as a nation or as individual states to report our online purchases, we would be on the honor system.
If we refuse to comply with unreasonable demands for money from the state, we are not on the "honor system" as far as our obligations are concerned.
-JemThen on this year's form I saw the Dreaded Line. I thought about it for a long time. I have always carefully avoided Web sites that charge taxes. But in the end I just paid the tax, for a combination of reasons:
Shamefully, I did contemplate lying. But how? I mean, it's nuts to write in "zero". When your auditor asks "why zero - haven't you ever bought anything from Amazon?" what am I gonna say? "No, I live in a cave and all my books are handwritten on vellum?"
I could claim that I didn't know what I had spent. Unfortunately, I save my credit card bills, since I want to have some evidence on my side after my identity gets stolen. Even more unfortunately, I own Quicken, which can print out all my interstate transactions for the year in, like, three minutes. Oops. So not only is ignorance not a legal defense, it isn't even a believeable defense.
I thought about only paying the tax on the big-ticket items. But the difference between that and just paying everything I knew about was, say, $15. It's worth $15 to be able to go before my auditors and NOT lie.
And there are karmic benefits. I no longer refuse to walk into my local stores because I know I can pay lower taxes on the Internet, even after shipping. Instead I refuse to walk into my local stores because they charge $25 for a book that Amazon is selling for $18. I mean, I know I am supposed to support my local stores, but $7 per book?
You're forgetting that we are on our second government / constitution.
When the United States was new, the phrase United States was more or less an oxymoron. Each of the Colonies/States thought of itself as more or less sovereign, and there were trade wars amongst the States.
The Constitution strengthened the power of the central government to regulate commerce, in part to put an end to these trade wars.
Yes, but Apple charged sales tax here in Washington well before there was an (official) Apple Store here.
"income taxes are good ideas"
I fail to see how this is the case, unless you're a fan of big government and a socialist state. If you'd like to send all your money to the Federal government in the hopes that it'll provide for your every need, feel free. Personally, I see the Federal government as an out-of-control, digustingly large, billions-bleeding behemoth hell-bent on making itself as powerful and omnipresent as possible. The original intent of the Federal government was to act as a sort of UN for the several states. In cases where states might fight over an issue, the Federal government was given the authority (enumerated powers) to ensure relations between the states remained as civil as possible. Thanks to Lincoln, amoung others, we've obliterated any semblence of states' rights, fiscal discipline, personal responsibility, or adherence to the intent of the Constitution.
The Constitution is hardly a practical document. It rarely delves into details, and largely prefers to state a general idea or principle. It does this because it is a statement of principles. It describes an ideal state in which power is always balanced, poor leadership by a few is irrelevant, extremism can be nullified, and where the people truly are the ultimate authority. The system we have now shows that with 200 years, a fist-full of wars, and a willingness to bludgeon the masses with extreme and misleading concepts repeatedly, you can pervert even the most beautiful government.
-- "Government is the great fiction through which everybody endeavors to live at the expense of everybody else."
It doesnt have to be a retail store. It could be a corporate office, distribution center, or just about anything.
Not only that, NYS has agents that check the plates in these out-of-state clothing outlets and they leave leaflets on the windshields pressuring citizens that they are evading sales tax. How's that for heavy handed tactics?
NYS has done a great job of taxing citizens and jobs out of the state and I am moving away once I am in a position too, because I have just become unemployed and there are no jobs here. Good riddance NYS, and to hell with your Gestapo tactics and your broken tax system!
Eternity: will that be smoking, or non-smoking? I Corinthians 6:9-10
Yeah, that's illegal, and always has been. Every once in a while people get busted on big purchases (car purchases are pretty routinely caught, because the authorities know which dealerships are just on the other side of the border, and there's all the registration and whatnot).
"The question of whether a computer can think is no more interesting than that of whether a submarine can swim" -EWD
> 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.
I think you might have inspired a great idea. Think about this: It would be hard to make a case for having to pay sales tax in one state, and in the next as well. For example, if you went across from NY to NJ, bought an item in a store, and came back. Right?
So the solution is, the states with 0% sales tax should change their tax rate to 0.0000000000000000000000001% so that it still wouldn't amount to anything but a customer could point to the receipt from say, NH, saying "NH Sales Tax paid" and claim immunity from further--technically "double"--taxation. They wouldn't really have to put in a tax collecting infrastructure; they could just ask that businesses pay that percentage of their sales, probably a couple of bucks a year for the largest businesses. Just add it to the business tax forms.
My idea's not very well thought through, but it's a thought. It would really only help, in the online case, for purchases you made from businesses located in NH, OR, and other states with currently 0% sales tax.
If I have to pay a 40% tax because I'm more successful than the average bear, then don't complain to me about trying to support a family of >1 on a salary of 25k/yr. I consider that a "stupid-tax" on the morons that don't use birth control and/or family planning. Any real man knows and plans for the responsibilities of supporting a family, and that includes household income.
You want to know why the rich get richer and the poor get poorer? It's because being smart makes you money and being stupid costs you money.
Your depravity is overwhelming. I kept my first reply civil. Then, you decided "bite me" was a logical comment to insert into a political/legal discussion. Way to go!
Now, I'm going to pick apart the most ill-conceived statements in your post.
First, political "scientists" can call the intertwining of levels of government anything they want. It is actually a failure to comply with the principles of federalism in the Constitution.
I do believe states have a legitimate right to collect sales tax, WITHIN THEIR JURISDICTION. Furthermore, I never argued that the Internet makes collecting sales taxes unconstitutional. The logical inference to be made from my post is that the jurisdiction of sales should be established. For physical sales, I believe the jurisdiction should be where the sale occurs. For Internet sales, I personally believe the sale should fall under the control of the state where the seller is based (national HQ for multinational organizations). So, if you buy something from a Boston-based retailer, you should pay MA taxes. The approach that the Internet is some sort of abstract country/world/universe where the sale is taking place is ridiculous. The Courts or Congress need to make a declaration as to where such transactions take place. In my mind, they could either take place at the physical location of the buyer or seller. If it was determined that you were "virtually" in the state of the seller when you made the purchase, it could set up some interesting precedents for such things as online gambling--going to a web site for a Las Vegas casino would be the same as going to Las Vegas, where gambling was legal.
As a matter of nitpicking, historians today know far more about the Constitution than lawyers. What lawyers really know about the Constitution is how the years of case law have built up to establish certain principles. Taking the time to delve into original intent/meaning (as historians often do) gives a far better grasp of what the Constitution is "about". The lawyers most certainly have a strong understanding of common law in this country, but not necessarily the Constitution. The fact that the lectures you attended were "fascinating" only means the lawyers were charismatic.