now,
i would be happy to support an estimate based on agi similar to the current situation where you have the option on your federal income taxes to take a state sales tax deduction based on agi or take your actually state income taxes paid…since I would support anything other than having individuals actually collect records of their actual use tax and report it.

unfortunately, that doesn’t protect local business from out of state busioness that are taxes locally. If a consumer knows he is not going to pay the actual tax-but just an estimate based on his agi-and he will pay that same amount no matter what-then there is agian an incentive to buy from the lower taxed vender.

on the other hand it would protect state revenue.

i would think that if it were so easy to change policy to the yearly agi estimate-then all states would have done so already.

2.im not doubting that there are limited circumstances of actual use tax compliance by individuals in this country (im happy to take your professional word for that). Out of pure, non argumentative curiosity however, id be greatly interested to understand what an example of that would be.

1. Yes, I’m saying that states are getting away with needless complexity, purely because it’s hidden from consumers. And further, that rather then grasping at new legal theories in order to force a business to do their work for them (NY and it’s ‘affiliate nexus’ theory), they should instead simply enforce their existing use tax laws. Of course, doing that would mean that they’d have to somehow educate their citizens of how sales/use tax laws actually work (and really, most people have enough grasp of the concepts to fundamentally realize they’re not buying something that’s exempt, but they’re just cheating the system. I seem to recall an article (WSJ I think) that mentioned that merely by adding a line on a state income tax return for use tax was enough to bring in more revenue.

2. Use tax policy does not defend instate business from lower taxed out of state business. It protects revenue for the state, and protects local businesses who collect tax from out of state businesses who don’t.

Given that use tax is a fact of life for business, I’m not sure why you think it’s so unworkable for individuals. For states with an income tax, add a line and supporting schedule to the income tax return, with an option for a ’standard’ amount based on AGI, similar to the federal sales tax deduction amount. Monthly reporting is obviously ridiculous.

3. What about the privilege of doing business in our state? See Quill. If I don’t physically enter your state, your state can’t make me collect sales tax. Obviously, if my state and your state have an agreement, the results change. But, that will never fully solve the problem, since states like OR, with no sales tax, have no reason to join the SST.

Finally, use tax compliance by individuals is possible, and is done now in limited situations.

Just for the record, I’m not, and have never advocated for aggressive use tax collection against individuals. But I argue strongly against states exceeding their legal power to force businesses to act as their tax collector.

Kelly, my original post to you was somewhat tongue in cheek. I don’t file personal use tax returns either. But then, itunes collects sales tax from me.

what i think your saying is that becuase this tax is currently only really enforced against business (if at all)-states can get away with charging it. if this tax was enforced against individual consumers-it would be impossible to administrate and hence would be forced to be repealed (or simplified to the point where it could be somewhat viable)

furthermore its unfair/unconstitutional to businesses out of state to be forced to collect taxes (even if the tax is being charged to the consumer) to a sovereign they are not under.

is this correct?

if so, two responses:

re: the repealing/simplifying idea…one would HOPE that if use tax suddenly became an enforced tax, that states would respond by simplifying the tax. But we all know that states do not always respond to such problems in the tax code.

the use tax has policy benefits too. One is of course being fair to in state businesses and protecting them from lower taxed out of state businesses. Another is protecting state gov revenue.

how would you simplify the use tax and still accomplish these goals. There are possibleties-but presumably it would tax years to
work out compromises on that.

re: the unfairness/legality of out of state business collecting against people in state:

a) what about the privilege of doing business in our state? it seems fair that if gov x lets you do business with someone in my state by mail order and ship goods into the state that they should have the right to tax (or in this case-have you collect the tax from the buyer) for that privilege.
b) suppose the out of state businesses is in a state that has a deal with the in state business (ex; WA and MD have a deal that they will each require each other’s business to collect. Now, the sovereign forcing you to collect the tax is your own-not the out of state sovereign. I believe this is the theory being the streamlined sales and use tax compact currently in the works.

in short,
actually enforcing this against individuals might relive business of admin costs-but it would impose impossible admin costs against individuals who would be unable to bear them,

Yes, absolutely serious, though I obviously realize it’s not going to happen, but this is all pie in the sky theorizing anyway. But yes, it’s fundamentally wrong for a gov’t to coerce businesses into doing their tax collecting for them AND have business bear the admin costs, burden, and risk of doing so, particularly businesses with no physical connection to that jurisdiction.

You make somewhat reasonable points re complexity, but I think you’re missing a big one. Because they’ve offloaded the collection burden to business, politicians have been able to enact all sorts of unintuitive and illogical twists to sales taxes. Hiding this from consumers does nothing but perpetuate it. Changing the system to where consumers had to deal with the complexity and randomness of the would hopefully lead to change.

You’re way off with your last paragraph though. Out of state businesses may be in a position to collect sales tax, but there’s absolutely no reason to. For example, I’m in WA. I can buy mail order from OR, from businesses with absolutely no physical connection to WA (and WA has sales tax, while OR has none). Why would they be willing to collect sales tax for WA? The tax is my responsibility, not theirs, so why would they ever willingly add such an admin burden to their business?

Sheesh back at you.

are you serious! you think people who go on a road trip or buy ink cartridges online should be prosecuted from not investigating whether those things would have had sales tax in their state or locality and then calculate what it is and remit it quarterly??

suppose you buy ink from a guy online. you don’t know what kind of dealer he is. suppose he makes less than a certain number of sales per year and would be exempt from sales tax in your state and hence your exempt form use tax.

how about people that drive across town and buy a can of soda in a locality without the additional 2% tax that applies where they live? should they fill out a return and report and pay the 5c they owe? should not doing this be criminal tax evasion (assuming done willfully-and the special intent required of normal tax evasion laws, which unlike most crimes, usually requires knowledge of the law) if not-should they be sued for their liability to the gov and forced to pay penalties and interest?

how would you administrate this system in the case of children who buy things online with their own money and don’t tell their parents? the elderly who have their children do their taxes? the illiterate? etc..

what if past purchases are no longer recorded? or recorded but the item purchased is not-so you don’t know whether it would be taxable?

i think ONLY businesses out of state are in the position to collect and remit such use taxes NOT the individuals.

sheesh

Good comments. I see this a lot too. There are huge misconceptions out there about how sales/use taxes work, and how they apply to out of state and online purchases. Here in WA, it leads to endless b**ching when people register cars in WA that were purchased out of state.

I just wish state and local gov’ts would go after their citizens in their compliance efforts instead of trying to force out of jurisdiction businesses to collect on their behalf.