20 States Collecting Internet Tax

Patik writes "According to this AP article, twenty states, including New York and California, are "requiring taxpayers to declare any tax they owe on out-of-state purchases," targetting Internet sales. New York expects this to bring them $2.5 million this year while California expects $13 million. Many are cynical about the new push, saying taxpayers will simply leave the line on the tax form blank, though the IRS says they will audit any offenders."

It's not new, nor "Internet"

It's only being made an issue due to the increased use of out of state mail order. That's what buying stuff over the net is. States have always required people to declare out of state purchases if the person declared at the time it was for delivery out of state.

My father's TV shop was 3 miles from a state line. He regularly had people come to buy TV and such to be delivered 'out of state' and so didn't have to pay him sales tax. They were supposed to declare it on their state tax form. Sure, few did. Sure, far more are doing this now. But it's nothing something new specifically aimed at the net.

IRS says they will audit any offenders

So the IRS is enfrocing state taxes now?

Someone needs to be bit more careful attributing quotes.

Where do I pay the tax?

So if I live in Massachusetts, order something from Amazon, but have it delivered to my in-laws in New Jersey, who deliver it to my Uncle in Long Island for his birthday, which state is supposed to get the tax?

Re:Where do I pay the tax?

So if I live in Massachusetts, order something from Amazon, but have it delivered to my in-laws in New Jersey, who deliver it to my Uncle in Long Island for his birthday, which state is supposed to get the tax?

If these are the same as the Ohio Use Tax, then you pay the tax wherever the item will eventually reside, in your case Long Island. So for example, I buy a computer from California and have it delivered to Ohio I pay my Ohio county's sales tax rate as a "use tax". Actually, from what I understand of the law, if I buy a computer in an Ohio county that has a 6% tax rate and bring the item back to my county where I live where the tax rate is 8%, I owe the state 2% use tax. That's bullshit IMHO. It's entirely voluntary compliance though and Ohio has no authority to regulate interstate commerce so I'm not sure how they could ever hope to enforce this.

not a bad move, maybe

most all of us (er, not me) violate the "use tax" rules in our state with out-of-state purchases, except those in states without sales/use tax (lucky). but before you had to fill out a separate form and anyone would feel like a chump volunteering to pay a tax the state would have a heck of a time enforcing and none of their neighbors is paying.

putting it on the main form will at least get money from more people, not such bad thing, and if you're dishonest you should still appreeciate it because it will lower your taxes otherwise due. heck if it's in on the main form maybe i'll pay it just as, er, i've been paying it all along of the separate one.

if you have a problem with the collection of the tax, bear in mind your problem is with ALL sales taxes, not the "internet" flavor of some of those purchases. (hey i don't like them, i think they may inhibit commerce.) one way to ease the recordkeeping burden is to provide, say, a $1000 exemption so many people don'thave to think about it. and from a recordkeeping standpoint, it may actually be a favor for out-of-state merchants to collect the tax for you. i think asking consumers to keep the records is nutty, we have better things to do. (btw, sales tax could be made deductible for federal purposes, it once was, as state income tax is now.)

personally i'd nationalize sales tax if we're going to have one at all, the present system only works because it is unenforced. way too inefficient, both for recordkeeping and enforcement. of course getting all 50 states to agree on tax policy is ... fanciful.

Washington State

I'm glad my state doesnt have an income tax, where we have to list that crap. So which is better now, a Use tax or Income tax. ;)

Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it. - Ronald Reagan

IRS?

the IRS says they will audit any offenders.

I don't think the IRS will be involved. The IRS is for federal taxes. The state tax auditors (if there are any) will do the investigating. If you do get audited by the IRS. only show them your federal forms. Unless they have a need to know, your state forms are none of their business.

Re:IRS?

Well, I know many people who had run ins with the IRS, also you can search google for stories. It happens more than you think.

Police already make a profit on busting criminals, parking/speeding tickets, fines. Why wouldnt the State tax collectors go after people for money? Thats the whole point of the article.

Have companies report sales to states, so states can go after people. Treat everyone like criminals. It even states that in the article.

The states might have little to do now, but if theres money involved, expect it to get bigger.

On one condition would I pay an Internet tax.

I would pay if the money was used as a subsidy for "fiber to the curb."

IRS will audit any offenders

IRS: You left this line blank. Are you trying to tell us that you have not made any out of state Purchases?

Consumer: Yes.

IRS: Can you show us your out of state reciepts to prove your claim.

Consumer: Uhh .. what?? I said I didn't make any out of state purchases.. !

IRS: Damn that usually works.

POS is the only way to make this work

Unless the tax is collected at the point of sale, I don't see this working.

I mean, obviously hardly anyone keeps track of all that stuff. It's a huge pain in the ass. If it was collected at purchase time then it would be a whole lot more normal (you know, like when you buy stuff in-state).

how wil they know and...

... what's the difference if I go to the other state and buy the product in that state and bring it to CA?

If they want to really collect tax they need to find a way to make the seller responsible for collecting the taxes not they buyer to report them. So now what, all companies in CA who buy things from CDW or tigerdirect are suppose to report how much they bough on the internet and then report that to the IRS? That will create a tax nightmare. Good luck to them at auditing!

Across state lines

This concernes me for the following reason States do not have teh right to tax things outside of their own borders. If a transaction takes place across that states borders what allows them to tax it In some ways ( taken to its logical extreme) its like Texas saying it is going to tax all transactions in Massachusetts. Now if the Federal Govt wanted to tax sales across the borders this would be legitimate ( state's borders that is). Of course it will take a contest case to sort it all out.

Minor correction of facts

Recent legislation in California has it that the Franchise Tax Board is now collecting a "use tax" on the 540 (this is the CA equivalent of the 1040) for the Board of Equalization (they who administrate sales tax). The idea is that they are basically collecting sales tqax on items purchased out of state.

Mind you, they won't go after people who purchased t-shirts or books, they're pretty much looking for people who purchased (say) boats or cars from out of state.

Oregon

Well, since I live in Oregon and we have no Sales Tax, I do not have to pay any tax on purchases made out of state.

However, if I sell something online, there is no change to that policy. Realistically, if you barter (ie: no cash involved at all) you are legally required to fill out the form 1099-B Miscellaneous Income.

That income is on the Federal form, but the state form uses the Gross income from the Federal form -- thus it gets counted on your state form whether they have any lines for it or not.

Just another squeeze...

It's no secret that most states are hurting when it comes to their most recent budgets. Taxing the internet sounds good on paper for most of these politicians, and in a lot of ways it's just another form of locaization.

When most people purchase, they do so with the expectation of delivery charges. Catalogs are similiar. Whatever you don't pay in state tax, you will normally pay for in shipping fees.

The "Use Tax" is absurd. If the states which wish to impose sales tax on internet purchases, it should only to ONLY the stae in which the company resides. This would make states compete for the business of such companies. States would soon learn it's far better to not charge end users, but directly tax these companies earnings their the income of their employees.

Yet another form of short term legislation, which can't see beyond the next hill.

Hmmm

I sense a great disturbance in the force, as if thousands of online retailers all moved to Mexico or Canada all at the same time. No, it was probably nothing.

Enforaceable??

I think if more than %50 of the people ignore this, they simply won't have to the resources to aduit a signifigant portion of the possible offenders to make it worth while. If %80 or more of the people ignored it, it would probably take so much manpower that they would just have to give up on it altogether.

I suppose the same holds true on a larger scale, if no one paid their taxes at all, where the hell would they start? But when was the last time everybody agreed on anything.

Too Much Burden on the Taxpayer

I dont think it's right for them to expect us to save every internet transaction to collect taxes on the items. It's the responsibility of the vendor to collect said tax not the purchaser.

Someone in one of those states should file a lawsuit against their state for such stupid tax collection.

"Audit any offenders"

Auditing the offenders wouldn't be so bad. There are only, what, 16 million people in the whole state? Probably half of those [nclnet.org] purchase online. 8 million audits wouldn't put too much of a strain on the system.

Wait a second here.

Why would the IRS audit my STATE tax returns?

Need that cash to feed that jones

This is isn't new. Growing up in the NYC-area we always heard tales of NY state officials recording NY license plate numbers in NJ malls to subpoena credit card records.

But I think the interesting case in the context of /. is cigarette sales, because states are specifically going after internet sales and not other cases such as residents driving to a neighboring state with lower taxes. In one case, Massachusetts [boston.com] is not only going after the resident or requesting customer details from the merchant, but they've gone so far as to go to shipping companies.

Of course UPS rolled over like a crack whore. The USPS is at least putting up a front of standing up for customers' privacy.

Re:Come to Delaware

No Good. I'd have to move to Delaware to fully take advantage of that. I _think_ Florida has a better tax climate for individuals. Delaware definitely has a plus over FL for businesses.

Here in Florida, the purchaser is required to report sales tax on all goods purchased from a foriegn corporation (i.e. a corporation in a different county or state).
See for yourself: Florida DOR [myflorida.com]