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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?"
These styles of cases are going to have to be settled in the federal court system. The state, upon joining the union, gave up specific rights to regulate interstate commerce that is up to the Federal system. The Federal law currently doesn't allow states to tax imports from other states and has banned any Internet taxes. Thus, the only recourse is a federal ruling to set precedence - of course there is already precedence but may not be specific enough to thwart the state attempt of taxing.
In Massachusetts, the state income tax fillers have to estimate the value of imports to the state thus taxing the citizens that way. This too will be settled from a federal case, as all these types should be. If the law says you can't tax interstate commerce then that is the way it is. If the law is twisted forcing imports to be taxed then that is fine too - we will just all know the law and not be hit with a $2500+ unexpected (or should I say unjustified at this point) tax bill.
This case is where state law and federal law collide but it will have implication to all internet purchasers.
'The collection of purchasers' names is allowed by a 1949 federal law called the Jenkins Act' - Sec. 376. Reports to State tobacco tax administrator
(a) Contents
Any person who sells or transfers for profit cigarettes in interstate commerce, whereby such cigarettes are shipped into a State taxing the sale or use of cigarettes, to other than a distributor licensed by or located in such State, or who advertises or offers cigarettes for such a sale or transfer and shipment...
I don't see where this individual is required to pay state tax.
In my "opinion", sales tax should work by the seller charging for sales tax based on the physical location of that business. So if someon from like Oregon buys cigarettes from like Florida, the Oregonian would be paying Floridian sales tax.
My logic is that if someone travels from one state to another, in person, you end up paying the sales tax at the location of the business. That is, a Californian travels to Texas for vacation, wouldn't he or she be paying Texan sales tax at the place he or she is staying?
If we have it the other way around, where the buyer pays the sales tax where he or she is located, and not the business, it complicates things a whole lot more.
Here's a thought. What if someone travels in-state to a Native American Reservation and pays no tax?
Most tax as far as I know is levied against items sold in the state. Is the online service is located in your state you will pay tax otherwise you are not required to do so. Unless the state is taxing not on the purchase but on the shipment into the state of specific items. They should check their tax laws to see how it is written.
if they decide to tax porn...
who pays for porn?
I quit smoking. Because, coughing, smelling terrible, yellow teeth, cancer and a premature death weren't enough.
Now, the reason I finally quit was not monetary. Once you start paying for smokes, the 30 bucks a week doesn't kill you, because you are accustomed to paying for it. Hitting people in the pocket books isn't going to make them quit. Taxing the hell outta them isn't going to make them quit. The bottom line is, if they want to smoke, they will. It's taxation masquerading as the Gov't helping people quit smoking, and generating revenue at the same time. Baloney.
Now, kindly stop harassing these online retailers, and let the smoking masses get back to systematically killing themselves.
hi mom!
As a EU citizen I'm allowed to buy anything from any EU country paying sales tax in the country from which I purchase the goods. It's a key part of the "free movement of goods and services" idea upon which the EU is founded.
To me, it seems as though trade between US states are more restricted than between EU countries. Is this correct?
It seems to be a red herring on what they call it. It amounts the the same thing, they could call it a 3 headed chicken. However a court will have to decide if it is in fact a sales tax (aka purchase tax, a sales tax would have to be paid by the seller:P)
Quite true. I have to wonder though whether there would be more public pushback if it was given a more apt name like "buying tax". After all it isn't the sale that's being taxed (it isn't the seller's state that's important), it's the buyer.
IMHO, if they want to continue calling it a sales tax, they should tax the seller and the price listed is the final price to the consumer. This would mean no more silliness about trying to figure out the over-the-top tax rates when one buys goods, no stupid use tax traps, and make interstate commerce a LOT easier (calculating tax often requires knowing the actual municipality based on zip code -- quite a pain the tuckus).
It seems that States want it both ways - they like to get nicotine addiction classified as a handicap (MN) in order to pursue tobacco companies to get huge settlements, then they turn around and enact outrageous, disporportionate taxes on this same addiction. Is it morally right to collect $1.7 million based on people being addicted to a substance? Are Michigan smokers really just a big nicotine fueled cash cow? If the state is able to tax that much based on something a person is addicted to, what motivation does the state really have to help get that person off nicotine? It seems as though all of these lawsuits against the tobacco companies were just a way to give the state a cut from our addictions - more like the Gambinis muscling in on the Gottis than any sort of public representation.
"It is illegal to bring any cigarettes into Michigan from other states unless by licensed sellers who pay the appropriate tax."
That state law is a violation of federal law and of the constitution. States may not regulate interstate commerce. Cigarettes can only be illegal to import into Michigan if they are illegal to possess in Michigan (like, for example, marijuana). They obviously are not illegal to possess, so the Michigan law is unconstitutional and won't hold up to a legal challenge. Which, if someone sent me a bill for $2500, would be exactly what I would do: join with everyone else who also received these rediculous bills and sue the state in federal court, getting the law overturned and maybe a little pocket money in punitive damages as well.
The Future of Human Evolution: Autonomy
Naaaah. Smokes are just low hanging juicy fruit that people think is bad so it's okay to take said juicy, juicy fruit. Mmmmmmm....taxes.
postmodernsideshow.com
So you're saying you look up address information for each company you buy from online, including all subsidiary offices, and actually manage to track, for an entire year, all such purchases for the sake of tax filing?
Ok, now that we've determined you're an accountant, how about an option for the rest of us?
Read: Rabbit Rue - Free serial nove
Just because the states claim the right doesn't mean that they will be allowed the right. Look at gay marriage and slavery.
But beyond that, it seems that the easiest way to beat this wrap is to take a vacation elsewhere (especially a place that doesn't have high smoking tax or regulation such as D.C., Mexico, or Puerto Rico) and take legal evidence of smoking and consuming these products outside of Michigan. You may not be able to show that you consumed all of the cigarettes outside of the state, but it will add a significant burden to the prosecution's case to prove that you consumed the majority inside the state.
Even so, I think the prosecution is going to have a hard time proving that the cigarettes were consumed at all. Some people collect cigarette packaging (or wine bottles or coke cans) and don't give a flip what happened to the content. Did the defendant smoke the cigarettes or did he simply throw them away? Prove it! Where were these sticks consumed
I personally don't smoke anything legal or illegal. But I find government regulation of smoking to have gone to greedy excess. As soon as this revenue stream starts drying up, they'll all move on to other items to tax (or other internet revenue). This needs to be stopped right now.
Heh! I'm assuming you meant that as a joke.
I follow up only because I know there are people out there who will actually believe this as a serious point.
I really can't wait till they levy (higher) taxes on all alcohol products (especially wine) because those products also raise the cost of health care for everyone.
One glass of red wine per evening has been demonstrated in numerous scientific studies to lower the risk of heart disease and stroke. Your "sin" tax (the kind of thing a Mormon would propose) would penalize people who are living healthier than teetotelers and reducing the cost to the health care system.
The Future of Human Evolution: Autonomy
This shows how a "universal" healthcare system, into which everyone contributes at the same rate, places a disproportionate burden upon people who live a healthier lifestyle.
Since smokers are far more likely to develop health problems and would draw more from the system, why should healthy people be punished for living more responsibly?
There's a Mercedes gap too. I want one and can't afford one, but it's not government's job to do anything about it.
But no one gets hurt when I don't pay you say. I disagree that money was planned for allocation somewhere and someone else will be making it up in raised taxes elsewhere.
How can they account for and plan to spend money generated from the sale of an item that I might not even have decided to make yet?
Oh, you mean they are guessing how much people will spend, and thus how much sales tax they will make? Sounds like they'd better figure out a new way to project budgets.
Presumably his state taxes works like North Carolina's does. If you do not keep all of your receipts, there's an option that allows you to use their estimate, which is something like 0.07% of your gross income.
So for instance, if you make $50,000 a year, you pay $35 in out of state "use tax".
You could argue that it's unfair for some, but for the majority of Slashdot readers, I suspect this is actually an underpayment. None the less, it's a perfectly legal way to fill out the tax forms.
So basically, then, MI (and other states) aren't going to be able to do what they're doing for long. I imagine those people will just start buying tobacco from companies on Native American reservations.
-- Fugacity: Confusing chemists since 1908
I think it IS just a matter of time before online retailers are required to tax based on state legislation.
Mercy was given to me by Christ...I must give the same to others.
> Studies paid for by the alcohol industry?
Try peer reviewed scientific journals instead:
Beer and health: Preventive effects of beer components on lifestyle-related diseases.
Plant polyphenol antioxidants and oxidative stress.
Flavonoids in food and their health benefits.
---- Take the Space Quiz!
The obesity tax cannot be levied on food because it unfairly discriminates against those who are not obese. I am a picture of health and I'll be damned if I am going to pay a tax on a food just because other people are fat.
Similarly, since obesity is a federally protected disability, the obesity tax could not be levied solely against fat people because it would violate discrimination laws.
Excise taxes can only be levied against the users of the product which is taxed. This is just a peculiar instance where there is no way to legally apply the tax since the users of the product are a protected class.
As a short rebuttal, legislatures should not pass laws they are hardly able to enforce. The "use tax" is so little enforced (from being inherently unenforceable) that it simply creates criminals, and from that, it also develops in the population a widespread disrespect or contempt for the law.
Such taxes should be repealed, yes. But civil disobedience is a force to be reckoned with.
[You have a stable society when some nut guns down a schoolyard and the law doesn't change.]
Maybe not in your state, pal.
I have no problem with the tax on cigs, and no problem with the fact that states are now looking to actually collect on cigs purchased online.
However, sending a bill for 2,500 to a man out of the blue is wrong. While a lot of us "know" that states are supposed to collect taxes on cigs bought online, we've very rarely seen it in effect.
What Michigan did was wrong and too fast. They should make the public aware that at a certain point in the future, these things will actually be taken seriously. An ad campaign simply saying *As of m/d/y, we will track all cig purchases online and make you pay taxes on them* would be much better than the possiblity of massive hear attack deaths because people are getting 2500 dollar bills in the mail.
If O2 is good, O3 must be 1.5 times better!
You've never taken anything to federal court, have you?
Moores law of...well...Law. (specifically tax law)
Law will double in size and complexity and have the efficiency cut in half every 18 months.
Paying taxes to buy civilization is like paying a hooker to buy love.
While I don't smoke and hate being around those who do, what can be done to smokers can be done to the rest of us on everything else too. I'd be more willing to patronise retailers who promise that the records of the sale are destroyed as soon as the order is received. This isn't the first time that an on-line retailer has been forced into revealing records that have then been used even by private companies to extort legal purchasers.
Now how long before some 89-year-old grandmother who never smoked in her life is sued because her grandkids used her name to buy a pack?
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
How is this insightful and not flamebait? I think it's obvious that you don't know the average smoker's opinion. As a former smoker, let me break it down for you:
Smokers have the right to purchase cancer-causing tobacco sticks at a low price
I wouldn't say the right, but they do unreasonably tax the hell out of them. I used to joke that it's a rip off to slowly kill yourself now a days. I don't know how things work where you come from, but here in Cleveland, our professional sports facilities were in part paid for by a "sin tax" on tobacco and alcohol. Jacobs Field should have been named The Ashtray, b/c that's what paid for it. Of course, if you want to smoke there, you can only do it in certain areas, b/c we don't want to offend the non-smokers. So, we were welcome when it comes to paying for it, but not when it came to using it.
light those cancer-causing tobacco sticks on fire anywhere they want to
You know, I've never met a smoker that assumed they could light up wherever they want to. Apparently "smokers = no manners" in your book. I think you're just being angry on that one.
raise the cost of health care for everyone
I thought it was primarily the greed of the insurance companies combined w/ the fact that most people don't eat right and exercise that really drove up costs. I'll grant you that smoking plays a part, but it seems that the average health of Americans as a whole is going down, whether they smoke or not.
cause cancer in people that are affected by their second-hand smoke
IIRC, I read somewhere the numbers affected by second-hand smoke were statistically insignificant, something like 1 in 6 million or 600,000. It was my understanding that the effects were blown way out of proportion, and that the initial gov't report that the anti-smoking organizations use to fuel their fire was later overturned by that same gov't department (I don't remember which one it was). Just b/c someone yells something over and over again doesn't make it true. After all, I'm still waiting for proof that Iraq was allied w/ Bin Laden.
and shirk taxes that have been levied on products they purchase
So, by your logic, not only do "smokers = no manners", but also "smokers = criminals". Am I correct on that? An interesting point of view, but I'll have to respectfully disagree w/ you.
Again, I don't smoke anymore, and I prefer it that way, but I can't sit idly by and let this obvious flamebait go unanswered. After all, your words: I think that pretty much sums up the average smoker's opinion. I think it's pretty obvious that you don't know what that is...
It isn't a 'sales tax' it's a 'use tax'
You can try to call it a use tax but really it's a 'sin tax'. Sin taxes are the second dumbest tax method after corporate income tax and on the same tax-stupidity level with inheritance tax. All three ought to be abolished.
How in the world can income tax unfairly penalize the poor? In the US the poor don't pay any income tax! How can paying nothing be a penalty?
When discussions about smoking in restaurants and bars comes up, there's always a forgotten group of people involved, and the reason for the ban is primarily them: employees. The waitstaff in a restaurant have to deal with the smoke if smoking is allowed, and it's not considered acceptable to tell them simply to find work elsewhere if they don't like it. By the logic of "go elsewhere", your office manager could allow smoking in your office and tell you to go find a job somewhere else if you didn't like it. Since that was made illegal, the same rule applies to restaurant and bar owners.
Virg
That's such a trite, smug, holier-than-thou phrase it's beneath you. Your chances of getting any law changed without having millions to spend are exactly zero.
If taxpayers are supposed to be paying out of state sales taxes the way to collect them is to go after the sellers and get changes in the federal laws, not beat up individual taxpayers.
Some of my online purchases have sales tax added to them, some do not. How is the average Joe Sixpack reasonably expected to keep track of the difference? Where do you send them and in what form? This is the state saying, "Well, we don't have any uniform policy for identifying or collecting these taxes, but we're just going to go beat up on a few hapless people because we need the money."
Your state has a tax form where you estimate your taxes, that's a little different. But our state has no income tax and no state tax forms (except for businesses). We're just supposed to know where to send it? Or run out and have the laws changed? Bullshit. Just because the state can do something doesn't make it right to do it.
That's our life, the big wheel of shit. - The Fat Man, Blue Tango Salvage