Online Cigarette Customers Get Bill from State 856
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?"
To federal court or bust (Score:5, Insightful)
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.
Sales tax based on location (Score:3, Insightful)
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?
I would refuse to pay it (Score:2, Insightful)
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.
Re:Sales tax based on location (Score:3, Insightful)
Re:We're doomed... (Score:1, Insightful)
who pays for porn?
Yet another reason I'm glad.. (Score:1, Insightful)
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.
No free trade within the US? (Score:4, Insightful)
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?
Re:Isnt' against federal law? (Score:4, Insightful)
Misnamed Tax (Score:5, Insightful)
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).
Taking advantage of the handicapped (Score:3, Insightful)
Re:Pointless Article (Score:5, Insightful)
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.
Re:How long? (Score:5, Insightful)
Re:Not Long At All (Score:3, Insightful)
Ok, now that we've determined you're an accountant, how about an option for the rest of us?
Line in the Sand (Score:5, Insightful)
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.
Check Your Facts prior to Proposing Legislation (Score:2, Insightful)
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.
Good Argument Against Socialized Healthcare (Score:3, Insightful)
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?
Re:Not Long At All (Score:3, Insightful)
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.
Re:Not Long At All (Score:4, Insightful)
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.
Re:Legal under Jenkins Act of 1949 (Score:4, Insightful)
eBay (Score:4, Insightful)
I think it IS just a matter of time before online retailers are required to tax based on state legislation.
Re:Violation of Smokers' Rights (Score:3, Insightful)
Try peer reviewed scientific journals instead:
Beer and health: Preventive effects of beer components on lifestyle-related diseases. [nih.gov]
Plant polyphenol antioxidants and oxidative stress. [nih.gov]
Flavonoids in food and their health benefits. [nih.gov]
Re:Get the Target Off of My Back (Score:3, Insightful)
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.
Re:Not Long At All (Score:5, Insightful)
Such taxes should be repealed, yes. But civil disobedience is a force to be reckoned with.
Re:Isnt' against federal law? (Score:3, Insightful)
Maybe not in your state, pal.
Re:Taking advantage of the handicapped (Score:2, Insightful)
We need people to quit smoking! Lets raise the tax so that they have more incentive to do so!
(At this point, Jon Q. Smoker goes about business as normal. The addiction is much more powerful than the extra $0.40 a pack he's now paying.)
It didn't wo...oh, look at all that money! Hmmm...The general public didn't go into an uproar...shall we try it again?
(John Q. Smoker proceeds to grab his ankles next time he buys a pack.)
LOOK AT ALL THE MONEY!!! ITS EVERYWHERE!! LET'S DO IT AGAIN!
(John Q. Smoker proceeds to voluntarily bend over twice for his pack.)
This is what the logic is in my state (Michigan). Tax the smokers because they are a minority and therefore, we don't have to worry about being kicked out of office.
This "cost of healthcare" stuff is interesting. You know what? I didn't ask for the government to support my healthcare, and frankly, I'd rather it didn't. I accept that I am paying for it through my taxes, paying to help others, yada yada yada. I understand that some people can't afford healthcare, and for them this is a Good Thing. You know what? I even accept that someone may..gasp..have to have medical attention for something that they willing inflicted on themselves, and that even though I would never do that, that I'm going to help support those expenses. You want national healthcare? You take the good with the bad. You pay for the people who don't live as sterile or as good of a life as you. You pay for the people with poor judgement. You pay for everyone, and everyone paying tax pays.
BTW, I am a smoker, but even before I became one, I could see the flaw in the Michigan Government's logic. You can't expect a government to receive more revenue from a tax and honestly try to help the people that are paying the tax on something the government deems bad, can you? That would destroy the revenue!
There needs to be a warning (Score:2, Insightful)
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.
Re:Isnt' against federal law? (Score:3, Insightful)
You've never taken anything to federal court, have you?
Re:No free trade within the US? (Score:2, Insightful)
Actually the "personal use" restriction is most probably illegal. However that doesn't stop Customs going after you and confiscating your car.
Re:How long? (Score:3, Insightful)
Law will double in size and complexity and have the efficiency cut in half every 18 months.
Re:Line in the Sand (Score:5, Insightful)
You make a HUGE mistake in trying to apply logic to tax laws...
Yes, you could point to a million possible ways that the "use" taxes don't apply. But state taxation departments simply don't care - They can and will make your life hell, even if you "win" your argument.
Case in point... My SO and I moved from state A to state B roughly four years ago. Last year, she received an excise tax bill from state A, plus tons in penalties, for those three years.
After literally dozens of hours wasted on the phone (which at her salary, arguably cost quite a bit more than the tax bill itself), she finally convinced them she no longer lived in state A. She STILL had to pay the late penalty charges on the bill that everyone involved agreed she never actually owed (the "logic", if you can call it that, ran something like "You may not have owed us that money, but you did fail to pay it promptly, so the penalties still apply even though the original bill doesn't"... Whiskey Tango Foxtrot???). She paid it just to get the whole miserable mess over with. Okay, all seemed great.
Guess where she got a new excise tax bill from this spring?
Can't do it without the data (Score:3, Insightful)
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?
Re:Line in the Sand (Score:2, Insightful)
I think the prosecution is going to have a hard time proving
What prosecution? The state sends you a bill assessing use tax due (and possibly penalties). You either pay it or sue them in civil court (and lose; see below). If you don't pay, they come after you with further civil 'remedies' that do not require them to charge you with any crime.
that the cigarettes were consumed at all
This is utterly irrelevant. The use tax has nothing to do with consumption. The mere purchase and presence of the goods in your state makes you liable for the tax. Even rented goods (such as Netflix DVDs) are subject to the tax.
Re:Violation of Smokers' Rights (Score:2, Insightful)
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...
Re:To federal court or bust (Score:3, Insightful)
Ah, but then it's a form of corporate welfare by allowing "internet" transactions to be tax-free. Internet (and mail-order) companies are supposed to be able to offer wider selection and lower prices because of the way they operate (i.e., you don't have to hire X people per store to man the stores 12 hours a day, pay property tax on every store, pay leasing fees for your store, etc.). Instead, you pay for a giant warehouse in some oddball part of the US where taxes are literally $1/year. All you need is an Internet link, power, and road to the airport (remember that IBM commercial of $3/square foot?). You don't have to distribute the goods to every store, you don't have to run stores. Just a few computers to take transactions (cheap), a few bodies to package, ship, receive and program computers (much less than X people for Y stores), and a much wider selection since you don't have to maintain 5 pieces of product per store, but can maintain 50 pieces in a warehouse.
You see, the margins of internet stores is supposed to be larger, allowing them to discount more (enough to make up the difference in shipping). And you know, the lower cost of entry should give one a much larger market. There are people who sell only one product worldwide, which is easier than trying to convince thousands of stores to carry their product.
So cutting taxes is a form of corporate welfare. The cost of shipping should be eaten by the savings that an internet based company should be able to achieve by not having stores (and bodies to man them - remember labor is the largest cost in a company). And large shippers can often get breaks on shipping by the shipping companies (and the postal system, to an extent).
Might want to consider if "List Price" is really what you should be paying for an item via e-commerce vs. picking it up from a store. Of course, if a local store doesn't have it, then it's not like you'd have paid more now...
Re:Isnt' against federal law? (Score:3, Insightful)
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.
Re:Line in the Sand (Score:3, Insightful)
Well, beside the black mark on her credit, we also visit State A fairly often (every couple of months), as all of our family still lives there. Kinda inconvenient when simply getting pulled over means a night in jail (since they could put out a warrant for her in that state).
And, although I don't know how much of it they can actually do, they threatened all manner of nasties, from getting her insurance, license, and registration suspended, to actual prison time if they ever did manage to catch her back in state A.
Overall, not worth the hassle for a few hundred bucks... Also not worth getting a lawyer over, which would certainly cost 10x the bill itself.
And sadly, that last point nicely sums up exactly why tax agencies get away with so much... The cost of fighting the BS fees exceeds the fees themselves.
Re:Isnt' against federal law? (Score:1, Insightful)
Re:Line in the Sand (Score:2, Insightful)
The Forgotten People (Score:3, Insightful)
Virg
Re:Not Long At All (Score:3, Insightful)
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.