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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?"
if they decide to tax porn...
Isn't it against federal law to tax interstate commerce? Plus if you bought them via the internet the fed's have specifically made it a "no tax zone".
Love stupid the taxes
how long until state treasuries across the country subpoena Amazon.com or other big online retailers to collect unpaid sales taxes?
18 months. You heard it here.
Do you Gentoo!?
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.
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...
State - Did you make any online purchases this year? You - *fills in no whilst using your new uber computer you just dropped a few K on from newegg...*
The cigarette tax pursuit is aided by a 1947 FEDERAL law specifically geared towards tobacco that authorizes states to use these measures to subpoena records from other states. I don't think officials trying to collect state sales taxes would have that authority.
NOTE: I'm going from memory from an NPR story I heard on the way in this morning. 1947 may not be accurate.
While I do not want to pay sales tax on out of state items, each year on my state tax return there is the box to make my own claim. Each year I make my contribution so I can legally sign that I have represented all taxes owed.
In a way, people have abused the ignorance of the system. If you live in a state, like mine, that requires you pay and you do not, don't complain when they catch you. You committed tax fraud. If you don't like it, have the law changed.
People who complain about this amuse me. Would you complain if the police pulled you over for doing 70 mph through a school zone? 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.
But please don't get me started about useless spending of our tax dollars. I could not agree more.
"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.
Thank goodness all you have to do in the U.K. to avoid paying tax on something is to buy it abroad and hide it under your hat while going through customs...
One good turn - gets all the covers.
At $2500 per year for a pack a day habit a P.O. box at a private place (like the UPS store) and a preloaded Visa grift card would present a viable altenative. Wow thats something like $6.80 a pack and P.O. boxes only run about $10 a month. Its the same old story whether their talking about movies, songs or cigarettes... People have always pirated the stuff, but "the internet has maid it so easy to do" so the powers that be are freaking out with reactive litigation instead of responding with new law that incorporates new technology.
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.
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.
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?
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.
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.
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)
Ok.. So this really isn't about cigarettes.. and it isn't about how the consumers got cigarettes. Read inbetween the lines here.. All States are suffering because the feds have cut their funds. They are trying ANY way to make more money. This is just a test case for this State. Like it or not, if this goes smoothly without opposition, the WILL start taxing every internet purchase. Don't think this taxing everything under the sun is getting out of control? Take California as a good example. For years they have been pushing their citizens to drive less, drive fuel efficent cars, and or use fuel alternatives. This actually SAVED them money becuase their is less pollutin = less sickness. Now they want to tax cars by the mile using GPS because "hey, we are loosing SALES TAX on gas! Forget the fact that these smaller cars probably rip up the road much less than a large gas guggling truck. Forget the idea that it was their idea that consumers should drive smaller and more efficient cars. And dear god, forget that this will also save in health bills throughout the state. Then again.. I ramble... :)
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.
Actually, speaking as someone who has operated a company and dealt with UK Customs & Excise, VAT is not 'horribly complicated' really, you just charge 17.5% on everything you sell, subtract from this amount the VAT on everything you buy in order to make/supply those goods, and return the difference to Customs & Excise. It only gets complicated if you are dealing with a mix of VAT exempt and liable supplies, or if your trying to claim every penny of expenses (depreciation, to offset you VAT liability. For most retail operations (i.e. box shifters) it's really quite simple.
*--BigMan--- Time flies like an arrow.. but personally I prefer a nice glass of wine!
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.
The Overrated mod is for reversing inappropriate, positive mods, not for voicing disagreement with a post.