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Online Cigarette Customers Get Bill from State
wakebrdr writes "The Michigan Treasury Department has sent bills to state residents who purchased cigarettes online to avoid Michigan's high taxes. One pack-a-day smoker received a bill for $2,500 in back taxes. If a simple subpoena of customer data allows them to easily go after lost cigarette taxes, how long until state treasuries across the country subpoena Amazon.com or other big online retailers to collect unpaid sales taxes?"
It isn't a 'sales tax' it's a 'use tax'.
The back of my Illinois tax form has had a 'Use Tax' form forever. You're supposed to pay it for all items purchased outside of the state.
There is nothing new about this - it's been around as long as mail-order has. It only become a big deal since the Internet made it a lot easier to do it.
I remember when I was a kid (1960's) that states were making a big deal about mail-order catalog companies not paying sales tax...
"It is illegal to bring any cigarettes into Michigan from other states unless by licensed sellers who pay the appropriate tax."
This has nothing to do with taxes on purchases from Amazon or similar online retailers.
The Jenkins Act requires anyone who sells cigarettes into any state, to report those sales to each state monthly. This would include your name and order information. Native Americans are exempt from the Jenkins Act because they are independent nations under their federal treaties.
This is correct. It's not a tax made on the sale of the article, but rather on its use/consumption. Several years ago, I bought a car in Illinois, but paid no sales tax there because I was in the U.S. military and was on my way to my next duty station in Florida (yeah, I know, real rough duty!!). So when I went to get a Florida license plate, I was required to pay Florida's "use tax" in order to title the car and get the plate. The "use tax" was at the same percentage rate as the sales tax for Florida on a new car, but was not a tax on the sale of the item, only a tax on its use in the state of Florida. Anyhow, it worked out O.K. in this case personally as the tax amount turned out to be less than any sales tax that would have accrued in Illinois. The point is, that for better or worse, it's necessary to understand the sometimes subtle differences when discussing a subject.
1) The taxes here are not sales taxes, they are CIGARETTE taxes, which are excise taxes. Excise taxes are not exempted by interstate commerce
2) Sales taxes are only exempt if the vendor of the purcased item does NOT have a business entity in the state where the purchaser lives.
3) Sales taxes can be levied by your home state, regardless of whether the transaction is interstate, if the state of purchase does not levy its own sales tax. (Example is PA-DE - no sales tax in DE, so PA can tax things you drive to DE to buy to avoid sales tax)