States working harder to collect online sales taxes
 

States working harder to collect online sales taxes - Sep 2010
With budgets in crisis, enforcement efforts gather steam

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In many states, residents who buy online are expected to complete complicated forms, like this one from the South Carolina tax return, and voluntarily send in sales and use tax payments.

Sales taxes or similar levies have always been in place on most online purchases in most states. But they are almost never paid. And with their budgets in crisis, states are more determined than ever to get their share. ?It?s just a lack of education,? said Adrienne Fairwell, a spokeswoman for the South Carolina Department of Revenue, which is estimated to have missed out on $94 million in uncollected online taxes last year.

?There are taxpayers that are willing to comply with the law and remit the appropriate amount of taxes that are due, but they don?t know that that?s what they?re supposed to be doing,? Fairwell said. South Carolina, like most states, relies on consumers to be honest. But if you happen to be audited and you haven?t paid up, you could be in for a world of hurt.

?Amazon laws? draw support
As the economic downturn has gouged ever-bigger holes in their budgets, officials have started to turn up the heat. That?s why Nebraska Tax Commissioner Douglas A. Ewald went after the March of Dimes ? one of several charities he said the state is pursuing.

Numerous other states are considering legislation or studying proposals that would crack down on non-payment of online taxes:

* The Alabama Department of Revenue is sending letters to random taxpayers, telling them to review their last three years of online purchases and send in a check.
* In February, Colorado enacted the so-called Amazon law, declaring that online retailers were part of an ?economic nexus? with state residents. Under the law ? which has been challenged in federal court ? Amazon and other online retailers are required to calculate the sales tax on every transaction and tell their customers how much they have to pay the state. They?re also required to disclose the identities of their customers and how much they spent, which has set off a fierce dispute over Coloradans? privacy rights. Amazon says the law was enacted ?over our strong objections.?
* Three other states have enacted laws like the Colorado statute since 2008: New York, Rhode Island and North Carolina. And at least a dozen more are considering following their example.

Rep. William Delahunt, D-Mass., in July introduced legislation that would give states legal authority to compel payment of taxes on online purchases, as long as they sign up for the Streamlined Sales and Use Tax Agreement, which the NCSL and the National Governors Association created in 1999. So far, 23 states have joined the effort to set up a nationwide tax collection standard.

For consumers, a rude awakening
The wild card in the deck is how everyday consumers will react.

Sharif Johnson of Columbia, S.C., was flummoxed when he learned that he was supposed to pay taxes on his Internet purchases, ?because from my understanding, you don?t have to ? that?s what I always understood.? South Carolina?s laws are typically perplexing, or, as James Rowson, another Columbia resident, put it, ?totally unrealistic with all that we have to keep track of.?

Residents like Rowson are expected to keep track of their online purchases. At the end of the year, they?re supposed to categorize each purchase by the county where the item will predominantly be used and apply the sales tax as calculated by that county ? a special headache for someone who might live in a county with a 6 percent sales tax but run a business in a neighboring county with an 8 percent levy.

The calculation is supposed to go on line 26 of the state return, where it?s labeled not as ?sales tax? but as the less familiar ?use tax.? The check, of course, is supposed to go to the state. The law is similarly complex and similarly ignored in Florida, where Amanda Grout of Panama City said she spends hundreds of dollars a year buying books and clothes online but has never paid the use tax. ?I?m not going to go out of my way to go fill out all these forms and mail them in to pay more money,? Grout said. ?The only way I would do it is if they set it up on eBay or the website and forced me to do it.?

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:2 cents: They are working hard to close this loophole and stem the tide of untaxed cash flow. By force or by consent, ultimately they will succeed.

Just another step in the future US VAT tax to come.

my accountant said he filed a bunch of these for his clients at 0

i asked him what he filed for himself and he admitted to have filed some online purchases so to play it safe.
better to throw them a bone and file it with a couple online purchases.

not really that surprising, more and more people buy online now a days...

Politicians spend most of their time finding ways to tax more

what state is your accountant in?

I'm surprised they've let this go unchecked for so long. Use Tax has been partially active in Hawaii for years. Trouble is they're only able to implement it halfway, because additional tax collection rules will need to be changed/updated/modified. So Hawaii (for example) collects (requires submission of) Use Tax on purchases that are imported to the state, but they do not yet collect on online sales to outside the state, (assuming all other requirements for that have been met).

Looks like some of these other states are getting more aggressive now though that they've run out of money.

true dat :2 cents:

and yet another reason to kick every incumbents ass right out the fucking door. Never any talk of cutting expenses, its always how to take more.

6 or 8 % is low compared to the 17.5% VAT here (going up to 20% soon too). Paying it up individually is a stupidly complicated way of doing things compared to just paying it to the shop at time of purchase.

California just sent me my "need to register" for online purchases bullshit. I have no idea what purchases they are talking about other than the ones that were in state and therefor already had taxes paid.

no kiddin'? CA actually sent you the forms to report your projected Use Tax debt?

this is interesting.... wonder if i'll get one soon. if i do, it'll be going straight to the accountant to work his magic.