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(San Francisco Chronicle) A perfect storm is brewing that could end the days of the Internet as a relatively tax-free zone, threatening to wash away one of the last remaining redoubts of economic enterprise in the United States.
State legislators are desperate for new tax revenue to plug massive deficits without cutting spending. And a confident Democratic Washington, D.C., now has the power to enact virtually any tax policy it wishes. Together, these two forces of nature are poised to impose sales taxes on everything you buy online.
The commerce clause of the U.S. Constitution, as interpreted by the Supreme Court in the 1992 Quill vs. North Dakota decision, prevents a state from compelling a company to collect sales taxes unless it has a physical presence in the state. For example, if you live in Indianapolis and buy a book on Seattle-based Amazon.com, Indiana cannot force the Internet book-selling giant to charge and collect its 7 percent state sales tax.
In that ruling, however, the court noted that Congress, which has the authority to regulate interstate commerce, is free to determine “the extent the states may burden interstate mail order (and online) concerns with a duty to collect use taxes.” That day is imminent.
Sen. Mike Enzi, R-Wyo., and Rep. William Delahunt, D-Mass., are expected to sponsor a bill to allow states to force out-of-state Internet sellers to collect their sales taxes.
The National Conference of State Legislatures is writing the bill. The only holdup, according to spokesman Neal Osten, is “adding some new provisions at the request of various stakeholders.”
“Stakeholders,” let’s be clear, are not American taxpayers but state legislatures wanting a new source of revenue to fill the gaps in their bloated budgets.
This bill would buffet the U.S. economy at the worst possible time. The economy contracted by more than 6 percent in the past two quarters. The last thing we need right now is more policies that suppress commerce.
The largely tax-free Internet has been a net contributor to state tax coffers by encouraging economic growth and by the collection of income taxes from those who make their living with online firms. Increase the burden on those firms, and you decrease the number of jobs. This happened in New York in 2008 when Overstock.com closed all its offices in the state in response to a new online sales tax.
Internet sales taxes also present a compliance nightmare for every online firm, from small mom-and-pop retailers to behemoths such as Amazon and Overstock. There are about 7,400 tax districts across the United States, which makes it absurdly difficult to ascertain which state gets what cut of tax revenue for a sale by an online retailer in California, made from a coffee shop in North Carolina, using a Wi-Fi connection from a company based in New York and routed through servers in Illinois, Nebraska and Texas.
Supporters of this idea – a cabal known as the Streamlined Sales Tax Project – say part of the deal will be a simplification of sales taxes from state to state. The public can be forgiven for looking at the history of tax “simplification” in America and seeing it as a scheme to force all states’ tax rates up by reducing competition among the states.
One can empathize with state legislatures dealing with budgets bleeding pools of red ink. The solution, however, is not to hammer Americans with a hurricane of new taxes but to reduce government to handle only what is really needed. The public can easily afford that without new taxes.
Usually, when buying online, there was no tax, but there was shipping. This caused most online purchases to be fairly equal to those made in store (Taxes, but no shipping). If this becomes law, online purchases will truly be more expensive than in store. (And not that it is currently cheaper online.)
I don’t know why the legislators think that this will be a source of new tax revenue. When I fill out my state income tax form every year, I have to pay the sales tax on goods I purchased from a vendor who does not collect sales tax (such as an online store). So if they start taxing me online, I will be paying less on my income tax form. Where’s the new revenue?
Who are you kidding? NO ONE pays use use tax LOL.
LOL? not funny
i think fedex and ups would not like it if they start this tax
chaverim, you can call me a no one if you want, but I learned from great talmidei chachomim how one is supposed to fill out a tax form.
squeak: Are you honestly claiming that you keep full & accurate tabs anytime you buy anything out of state, either in person, online, or over the phone, and total it each year and pay sales (use) tax on your state tax return for it in full each year?
If so you are highly commendable. But realistically no one does it, jewish or gentile, and the government KNOWS THIS and tolerates this and deals with this in other ways (like raising other taxes and doing all sorts of tricks to force out of state retailers to charge sales tax – like new york did with Amazon.com).
“But realistically no one does it, jewish or gentile, and the government KNOWS THIS and tolerates this and deals with this in other ways”
So now that the government decides that they dont want to tolerate this and is enforcing something everyone should be honest about to begin with, we are complaining.
jphone: There isn’t a single State that is enforcing use tax. They all know 99.99% of the population buys from out of state retailers and does not pay taxes on it. 99.9% of people DON’T EVEN KNOW they must pay taxes on out of state purchases.
jpone: Do YOU pay sales tax when you purchase online and the retailer didn’t charge you sales tax??
“But realistically no one does it, jewish or gentile, and the government KNOWS THIS and tolerates this and deals with this in other ways”
I don’t know how to respond to this. Should I say that the government should never have made a law sh’ain hatzibbur yochol la’amod bo? But they did. And just because (you claim) many people are not doing what is required, I myself should be less than honest?
The saddest part is how you are surprised by this to the point of incredulity.
for all those who question the legitimacy or even the existence of “Use Tax” at least in the state of NY, here is some info. This is from TurboTax. If you went to state.ny.us/finance the info is there as well. Those who do their own taxes are familiar with this question. those who dont, and were not asked by their tax preparer, well, thats up to your preparer to answer.
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Information on paying sales and use taxes on your income tax return
When do you owe New York State and local sales or use tax?
When you make a purchase of taxable property or services from a seller (vendor) located in New York State and take delivery in New York State, the vendor should collect state and local sales or use tax due and forward it to the Tax Department. However, you are responsible for paying the tax directly to the Tax Department under the following three circumstances:
Deliveries into New York State – You owe state and local sales or use tax if you:
* purchase property or a service that is delivered to you in New York State without payment of New York State and local tax to the seller, such as through the Internet, by catalog, from television shopping channels, or on an Indian reservation.
Purchases outside New York State with subsequent use in New York State – You may also owe state and local sales or use tax if you are a resident of New York State at the time you purchase any of the following outside New York State:
* property you bring into New York State for use in New York State;
* a service performed on property outside New York State, and you bring that property into New York State for use here; or
* a service (such as an information service) you bring into New York State for use here.
(You may be entitled to a credit for sales or use tax paid to another state. See the Instructions for Form ST-140 for more information.)
However, you are not required to pay state or local sales or use tax on any property or service that you bring into New York State which you purchased outside of the state before you became a resident of New York State.
Additional local tax – You may owe an additional local tax if you are a resident of a locality (county or city) at the time of purchase and you:
* bring property into that locality which you purchased in another locality in New York State that has a lower tax rate;
* bring property into that locality on which you had a taxable service performed in another locality in New York State that has a lower tax rate; or
* bring a service (such as an information service) into that locality which you purchased in another locality in New York State that has a lower tax rate.
However, you are not required to pay any additional local tax on any property or service that you bring into a locality in New York State that you purchased outside that locality before you became a resident of that locality.
Note: For purposes of these sales and use tax instructions, the word tax will be used to refer to either the sales tax or the use tax, or both.
Who is a New York State resident for sales and use tax purposes?
For sales and use tax purposes, the definition of resident includes persons who may not be considered residents for personal income tax purposes. For example, persons maintaining a permanent place of abode in New York who do not spend more than 183 days a year in the state, college students, and military personnel may all be residents for sales and use tax purposes even if they are not residents for income tax purposes. For sales and use tax purposes, an individual is a resident of the state and of any locality in which he or she maintains a permanent place of abode. A permanent place of abode is a dwelling place maintained by a person, or by another for that person to use, whether or not owned by such person, on other than a temporary or transient basis. The dwelling may be a home, apartment or flat; a room including a room at a hotel, motel, boarding house, or club; a room at a residence hall operated by an educational, charitable, or other institution; housing provided by the armed forces of the United States, whether the housing is located on or off a military base or reservation; or a trailer, mobile home, houseboat, or any other premises. This includes second homes. Therefore, you can be a resident of more than one locality and state for sales and use tax purposes.
An individual doing business in New York State is a resident for sales and use tax purposes of the state and of any county or city in which the individual is doing business, with respect to purchases of taxable property or services used in the business. Therefore, if an individual is engaged in business in New York State but has no permanent place of abode in New York State, the individual will owe use tax only on taxable purchases made with respect to the business operated in New York.
What tangible personal property and services are subject to sales and use taxes?
Most tangible personal property is subject to tax. Some examples are: cigarettes and other tobacco products; alcohol; candy; clothing and footware costing $110 or more per article; books; electronic equipment; furniture; collectibles (stamps, coins, etc., bought for collections); works of art; off-the-shelf computer software; and, generally, a garage sale item costing more than $600.
Some examples of tax exempt items are: prescription and nonprescription drugs and medicines used for humans; certain medical equipment and supplies used for humans; newspapers; periodicals; most food items; U.S. and New York State flags; Indian arts and crafts when purchased on an Indian reservation; used mobile homes; and college textbooks. Clothing and footware costing less than $110 per article as exempt from State tax but may still be subject to local taxes depending on the locality involved.
Only certain services are subject to tax. Taxable services include maintaining, servicing, and repairing tangible personal property (for example, auto and appliance repair) and real property such as land and buildings (for example, services such as house repairs, lawn maintenance, and interior decorating). Some examples of exempt services are dry cleaning, veterinary (except for grooming and boarding), legal, accounting, and medical services.
For more information on taxable and exempt goods and services, see Publication 750, A Guide to Sales Tax in New York State.
Reporting and paying sales and use taxes
You must report any unpaid sales or use tax owed for 2008 on your 2008 personal income tax return.
Note: Do not use Form IT-150 or Form IT-201 to report and pay sales and use taxes with respect to a business if you or the business is registered, or are required to be registered, for sales tax purposes. Report and pay sales and use taxes with respect to business purchases on the applicable sales and use tax return.
If you are requesting an extension of time to file your personal income tax return and you owe sales or use tax, you must pay any sales or use tax you owe at the time you request the extension. See Form IT-370 for more information.
If you receive an automatic extension of time to pay your New York State personal income tax (for example, you are in a foreign country), your sales or use tax is due when your New York State personal income tax is due.
You may report and pay your sales or use tax liability on your personal income tax return for:
* your personal purchases;
* purchases related to your royalty activities or rental real estate activities reported in Part I of federal Schedule E; and
* purchases related to your Schedule C, C-EZ, or F business (not otherwise eligible for exemption) unless the business is, or is required to be, registered for sales tax purposes.
If you are married and file a joint return, you may include your spouse’s sales or use tax liability for:
* your spouse’s purchases;
* purchases related to your spouse’s royalty activities or rental real estate activities reported in Part I of federal Schedule E; and
* purchases related to your spouse’s Schedule C, C-EZ, or F business (not otherwise eligible for exemption) unless the business is, or is required to be, registered for sales tax purposes.
If you are not filing an income tax return but owe sales or use tax for 2008, you must pay any unpaid sales or use tax by filing Form ST-140, Individual Purchaser’s Annual Report of Sales and Use Tax, by April 15, 2009. However, if you or the business is registered or required to be registered for sales tax purposes, all sales and use taxes owed with respect to business purchases must be reported and paid with the periodic sales and use tax return.
At the time of registration, the New York State Department of Motor Vehicles (DMV) collects any unpaid sales or use tax on a motor vehicle, trailer, all-terrain vehicle, vessel, or snowmobile that must be registered or titled by DMV. Therefore, do not report or pay the sales or use tax on these items on your personal income tax return.
What happens if I don’t pay the sales or use tax due?
Failure to pay sales or use tax may result in the imposition of penalty and interest. The Tax Department conducts both routine and special audits to promote compliance. In addition, the U.S. Customs Service provides the department with information from customs declarations filed by New York State residents returning from overseas travel. The Tax Department also obtains information on sales to New York State residents under information exchange agreements with other states.
Computing sales or use tax
To compute the amount of tax you owe, see the Instructions for Form ST-140.
If you do not owe any sales or use tax, you must enter 0 on the sales or use tax line of your personal income tax return.
For more information, see Publication 774, Purchaser’s Obligations to Pay Sales and Use Taxes Directly to the Tax Department, Questions and Answers.
Ames. If you live in the state of NY, there are many credits available for many different taxes paid to other states and/or localities including in Canada. so, if you pay sales tax in NJ, you can claim the credit in NY, of course the credit has to be claimed via the proper method, not simply by stating “You can’t go shopping in Jersey to save on the sales tax? Forget the government, is this halachically assur?”
ames: Thank you. You demonstrate my point very well. Welcome to the 99.9% of the population that wasn’t aware.
squeak: I can only note you studiously decided to not answer my simple question. I take that non-answer as an answer. If I am mistaken please respond to it. Otherwise may I humbly suggest not to glorify your righteousness? (That sounds odder than I wanted but can’t word it any better.)
chaverim- a no show from squeak don’t mean a thing. You have to EARN a reply from him- now aint that da truth ames?
Let me clarify chaverim- you’re arguing against squeak with the entire squeakish fan backing him. Of course this will aggravate and rile your ego and you will respond in kind. But don’t worry- there’s hope for you too! My first comment from squeak was “someone please stop this guy from posting” (or something similar). And I’m a diehard squeak fan! My message to you is don’t give up… cuz ya neva know where the CR will take ya! And I’m livin proof 😉
chaverim – didn’t mean to avoid your question. Yes.
and squeak hath done it again…
squeak: I tip my hat for you.
You truly are the first person in America that I know doing this.
And a big thank you from Gov. Paterson!
Squeak your original Question was where is the earned revenue since you have to pay it on your income tax anyways, the answer is %99.9 don’t pay that tax on out of state products. Its a very simple answer don’t get carried away with your righteousness.
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ames: In simple English… if you ever go shopping in NJ at the mall, or buy stuff from Overstock.com, etc. and save money compared to the NY sales tax… then make sure on April 15th you put all those out of state purchases on your NY tax return and pay the difference in sales tax (for the NJ stuff) and pay the full NY sales tax for the Overstock.com (and similar online tax-free retailers).
You will then have reached squeak’s madreiga!
PS to squeak: Do you have any good recipes for cholent?
chaverim- cholent… wrong thread. (sorry had to kill your joke, but it was on squeak’s cheshbon and I can’t allow that;))
ames- I take all my responsibilities very seriously. You can now nominate me the most intimidaing CR member 😉 (you can include the Lag B’omer hijack on mod72 and the threat on the Jax/mod72/mod42 for starting that DT thread about me)
chaverim- as I’ve demonstrated, don’t get mislead by my sn 😉
eye roller ames….
chaverim: Paterson doesn’t get an extra cent, I’m in exile from NY.
And I don’t get the cholent joke (maybe I’m just too tired, it’s past 7:30 pm already). I’ll read it again in the morning.
moti: I am not getting “carried away in my righteousness”. I simply do not accept as a fact that 99.9% of people do not pay use tax. I don’t mean to say that everyone keeps an accurate record, but I expect that most people use some approximations and estimates to arrive at a reasonable value for that tax. I also have to estimate some pieces, as I don’t know how to include everything in the calculation (such as gasoline). What you choose to believe is your own problem, and what you choose to do is your own problem. I am serious.
If the government feels the same way as you do, i.e. that 99.9% of taxpayers are ignoring use tax, then indeed they will think it is a new source of revenue. Whether or not they are correct is another story. But if they really believe that 99.9% of people are cheating on their taxes, don’t you think that they should crack down on that (an existing tax) before they start doing new stuff? Or get rid of it if it is such a stupid tax and then do a new one.
areivim, I didn’t realize that after all this time you still didn’t realize my post was a joke in response to yours before it.
You had said:
areivimzehlazeh
Member
To which I replied, maybe I am!
I hadn’t benn a CR addict and squeak fan yet;) Also, couldn’t change my first impression of the post… never bothered to go back and read again- ya know?
Just an observation- my earlier comments sound so strange
You don’t have to pull out your receipts to figure out how much you bought and how much use tax you owe – there are charts, based on income. And btw, some on-line and catalog retailers already collect NY taxes so if your only mail-order purchases are from such retailers and you don’t shop out of state, you don’t owe any use tax.
Is this use tax only for NY residents or do residents of other states have these rules also?
I know some very ehricheh people who will buy something at a store in NY and ask the store to ship it to them (in NJ) so that they don’t have to pay sales tax. As I understand it, the buyer pays shipping instead of sales tax which comes out to be a lot less and the store doesn’t have to pay the government taxes for that purchase because it was an interstate purchase. According to this thread, this seems to be wrong.
Haqer: Almost every state has sales and use tax. So technically it should be paid (almost) everywhere. So in your example, yes, they should technically be paying use tax. BUT, as you see, practically no one even KNOWS about this tax (except exceptional characters like squeak).
chaverim, your patronizing manner every time you mention me in this thread seems to indicate that you feel wrong about avoiding a tax that you are aware of. So why don’t you just pay it and feel good about your honesty? No need to surround yourself with others who avoid the tax – if you are straight you don’t need to check who else is standing with you.
squeak: I disagree with your assesment that it is halachicly required to pay a fee/tax that the state technically has on its books but doesn’t expect taxpayers to pay.
Chaverim,
When you file your taxes there is a place to put in out of state purchases. Do you file yourself or do you have an accountant? If you use an accountant he should be asking. We used turbo tax this year and it asked us…
sjsinnyc: And what did you answer on the tax form? Did you honestly pay your states sales/use taxes for all of your last years tax-free Amazon.com, etc. and out-of-state shopping?
Chaverim, whether I did or did not is not really the issue (I answered zero and I don’t think we had any out of state purchases). I try to be as honest as I can on my tax forms. The question is whether or not its moral, and that answer is NO.
I would compare this to a discussion of lashon hara – we all speak it, but we don’t think its the right thing to do. Talking about it being wrong is the first step.
sjsinnyc: The entire year you didn’t purchase from an online retailer like Amazon or Overstock? And you never travelled out of state and made purchases there? If you did any of those, you technically do owe your state use tax.
The thing about this is that 95% of the population is UNAWARE that use tax on out of state purchases even exists, and the state governement conciously does not enforce it. So almost no one in the population pays it.
Chaverim, I live in NJ where taxes are cheaper than NY. I don’t use the internet much for shopping and I think all my purchases required tax to be paid. I don’t shop with Amazon or Overstock. I had a busy year and I don’t really shop that much.
If the population is unaware, then it makes their accountants or tax prep people liable for not asking the question. If they file themselves, they are liable.
Just because you are unaware, doesnt make it legal.
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