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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?"
This seems dangerous to consumers. States can, at any time, subpoena Amazon.com and other online suppliers to regard tax revenue? What's the statue of limitations on this? Most states are hard up for tax dollars right now, and this could be one very scary way for states to generate revenue. Just a thought...
I'd like to say that this is a little different, but I'm not fully confident that's true. From what I can tell, there was an explicit law preventing sale in the state of cigarette packs that did not contains a stamp proving the taxes were paid.
But now I'm not so sure. Several states (including good old Taxachusetts) get very grumpy about "use tax" (what you're supposed to pay if you purchased something in another state and didn't pay sales tax), and occasionally go after people. Usually, however, they don't do that unless it's a big ticket item (car, boat, etc). The state was losing a lot of money on cigarette tax (much, much more than sales tax on the same amount), which is what motivated them in this case.
If the state was to go after everyone who purchased a few books from Amazon, they'd be so overwhelmed with paperwork, it wouldn't be worth their while. Then again, Amazon keeps selling more and more expensive things tax-free (I got a $1900 radial arm saw in my Gold Box a while back), so maybe it'll happen.
There is no sig, there is only Zuul.
Massachusetts has a state use tax. Anything bought and used in the state is taxed at 5% -- same as the sales tax, just with a different name.
P er sonal/issues/Usetax.htm
However, there's an alternative to paying it. There's a "safe harbor" provision that says if you pay a certain fixed amount based on your income, they won't come knocking on your door to check what you bought with one exception. The "safe harbor" only applies to items under $1,000. If you buy 150 widgets for $999 apeice at seperate times, you're fine, you can pay $15 "safe harbor" tax if you make under 40,000 (or $0 if you make under 25,000).
Confused yet?
http://www.massdor.com/help/guides/abate_amend/
I'm sure you're aware of this (your post seemed pretty well informed) but: Michigan Use Tax
As far as I know, every state has something like this. Most folks don't pay tax for Internet purchases, but some companies (Best Buy, for one) already applies tax based on where you live. You are supposed to report and pay tax on all goods purchased from out of state.
Given the costs of shipping (and the time it takes to deliver), I think Internet shopping can only survive if there is no sales/use tax. If I have to pay tax and shipping, I simply won't buy online.
On the other hand, it's in the state's best interest to apply that tax - not only for the immediate tax revenue, but also creating incentive for people to shop in-state.
Regardless of how the states try to phrase it, it most certainly still *is* a sales tax. It is the state's way of collecting taxes that they did not get because you went outside of the borders. (Oh, you evil person!) You do not pay "use taxes" on items that you did *not* purchase outside of the state's borders because use taxes are based on the price that you paid to acquire the item; therefore, it is a sales tax. But because states cannot force other states' business entities to collect taxes, they have used this "use tax" as an excuse.
It is, in effect, nothing more than punishing citizens of a state for daring to purchase items in places other than that particular state. This is offensive is way that cannot possibly be described in mere words.
Taxes on interstate commerce are forbidden as per U.S. Constitution, Article 1, Section 8, Clause 10, which states...
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 Controul of the Congress.
A "use tax" is nothing more than a euphemism importation duty. I don't know of any law that has ever gone through the U.S. Congress that allows duties of one state to another, thereby making "use taxes" in violation of the above clause at the current time.
Granted, I'm not a lawyer, but this is one of those things that I've done a lot of research on. I want desperately to shove this in the Pennsylvania Department of Revenue's every time they ask about this during income tax time.
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