Don’t be fooled. Connecticut taxpayers have been warned by the Department of Revenue Services (CT DRS) not to open, make a payment or reply to an email claiming to be a tax bill for Amazon and/or NewEgg purchases. The email, which is a scam, directs taxpayers to a fake website that appears to be legitimate to trick taxpayers into making payments or revealing personal and financial information.
As with many scams, thieves are trying to capitalize on a legitimate effort to collect tax revenue. CT DRS has been sending out tax notices about use tax that might be due.
Use tax isn’t new: Every state that imposes a state sales tax also imposes a state use tax. A use tax is the taxpayer’s equivalent of the sales tax. It’s imposed on goods that would otherwise be taxable inside a state for “use, storage, or consumption” when sales tax has not been paid. In other words, if you buy something that wasn’t taxed and you live in a state which does impose a sales tax, you owe the tax anyway. If you buy goods or services over the internet from a retailer which isn’t required to collect the sales tax, you may owe the tax to your state. Instead of paying the tax to the retailer (as you would in a physical store), it becomes your responsibility to figure and remit the tax to the proper authorities.
The problem – as you probably guessed – is that very few taxpayers make good on use taxes. It’s not always intentional, as many taxpayers are simply not aware of their reporting requirements. A 2015 poll conducted by the International Council of Shopping Centers found that 62% of registered voters were not aware that use taxes were payable (downloads as a pdf).
Some states, like Connecticut, are focusing on collecting those unreported, and unpaid, use taxes. Earlier this month, CT DRS notified taxpayers that bills for past use tax on known purchases “are real and so is the offer to settle by paying the tax and interest due without penalty.” The state is offering a kind of amnesty where taxpayers can settle past due obligations for a limited time before it pursues further collection efforts.
You get where this is going, right? Scammers are taking this opportunity to send bogus email bills that are easily confused with legitimate bills. And in Connecticut, the online retailers called out in the email scam, Newegg and Amazon, are purposefully named. Last year, Amazon announced that it would collect sales tax in every state that has a sales tax. And this year, CT DRS announced that Newegg Inc., which has its headquarters in California, will begin directly collecting tax on its sales made in the state effective July 1, 2018. As part of those negotiations, Newegg provided details of online purchases made in the state during taxable years 2014, 2015, and 2016. These developments resulted in a flurry of new use tax bills, making it easy for scammers to benefit from surprised taxpayers.
Of course, Connecticut isn’t the only state aggressively pursuing sales and use tax revenue. New efforts to collect the tax are popping up all over the country – including at the federal level. Last year, Rep. Kristi Noem (R-SD) introduced a bill to allow states to require online retailers to collect sales and use taxes. The bill was considered but ultimately excluded from the omnibus spending bill. At the same time, the Supreme Court has agreed to tackle the question of whether the current sales-tax-only, physical-presence requirement should stand as part of South Dakota v. Wayfair, Inc., Overstock.com, Inc., and Newegg, Inc. Oral arguments in Wayfair are scheduled to begin on Tax Day, April 17, 2018.
So what’s a consumer to do? Check with your tax professional or your state revenue department to find out what your filing requirements might be. And – this is the most important bit – when you receive notice or bill from your local or state tax authority, or from the IRS, consider it carefully. Like the Internal Revenue Service (IRS), the CT DRS never initiates contact with taxpayers by email, text messages, or social media. Also, like the IRS, the CT DRS will not request tax payments, personal and financial information such as PINs, passwords, credit card, banking, or other financial account information. Most tax agencies, including the IRS and CT DRS, will send tax notice and letters through the mail.
If you have questions about the legitimacy of a notice or a bill from any tax authority, check with your tax professional or reach out to the tax authority directly for more information.
