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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...
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...
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.
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.
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)
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.]