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Use Tax - anyone else not know about this?

B

bozack

Diamond Member
So I was looking into buying something in a neighboring state which has no sales tax and stumbled upon a website which referenced "use tax" which is apparently a mechanism my state employs to collect taxes on items purchased from sales which either result in a lesser tax or no sales tax being collected...

Apparently people are supposed to record all purchases throughout the year be it online or in person where they weren't assessed a tax and then report and pay it via their state tax form.

I figure this also applies to purchases made while travelling abroad where no tax is assessed?

Anyone else know about this and or have any information....from a few articles I have read it seems very few comply but states are getting more aggressive about auditing folks.
 
yeah my state has always had it but funnily enough, i've never bought anything out of state :whiste:

actually now that amazon.com started charging tax in my state, that'll cover %99 of my out-of-state purchases
 
Pretty much always knew about it. I don't know what gives any state the right to tax the use of your own property any more than the sale of the same property in another state, but I know they expect to. Sad reality.
 
I worked for a small company a while back, and for a number of years we made a lot of online purchases - printers, computers, monitors, components, books, office supplies. Got audited by the state and hit with all of the back sales taxes, plus interest. We reported all such purchases afterward. I believe it's not just at the state level, but if you have municipal and county sales taxes, you're expected to pay sale & use taxes to those entities as well.
 
I was under the impression that any state with a sales tax required you keep track of out of state purchases and pay that tax come tax time and they called that a "use tax". Essentially, a out of state purchase sales tax.

-KeithP
 
A lot of people know about this, and most just don't seem to care. For a while people talked about Amazon's perk of not charging sales tax. That should never make a difference, because you'll just pay that sales tax when you file taxes. People know this, but still don't bother paying hoping they don't get audited.
 
It is widely enacted and seldom enforced unless you own a business of some substantial income. I have kept records for several such businesses and they are regularly audited, but I don't know of an individual that has had difficulty with this. Forget it, the burden of proof is on the state. JMHO.
 
I've personally paid it for years. I realize that I'm one of the few people who do so. But, in the end, it costs me maybe $30 to be legal in a given year. That isn't a risk that I want to take. I download the Amazon purchase list for the year, multiply by 7% any purchase that wasn't already taxed, and I'm done.

All that needs to happen is for a state to get into a dire financial situation and to make a deal with a company like Amazon to split the proceeds of the back taxes, fines, and interest. It will instantly prove that millions of people are illegals while simultaneously bringing in millions of dollars to the state/company in the deal. It isn't likely, but it isn't unthinkable either.

Edit: a Federal Court recently ruled saying that states can require companies to turn over that information. http://www.bookweb.org/news/federal-court-upholds-constitutionality-colorado-use-tax-law
 
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brianmanahan said:
do you guys actually pay that tax?
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In some cases you have no choice. For instance - a couple years ago I bought some things in Canada and had them shipped to the US. Customs opened it, reported it to my state, and they contacted me demanding use tax on the items.

Be careful. They'll catch you when you least expect it. The bastards.
 
An interesting thing happened to me since I am one of the few who do pay the use tax. A couple years ago I sold some stock on Dec 30 or 31. I didn't make estimated tax payments ahead of time since I had no plans to sell the stock that day. But the stock skyrocketed and I sold it. When it came to pay my taxes, I didn't bother to see if I had a penalty for underpayment of estimated taxes. The state determined that I owed it 57 cents of interest for not prepaying estimated taxes on that stock sale before I sold it (one day of interest and penalty for the year).

The interesting part was that the automatic state form attributes the 57 cent fee to the last non-zero thing on the state tax form (usually the penalty for underpayment of estimated taxes). In my case it assigned it for underpayment of use tax, because technically that was the last item on the tax form that was non-zero. It took several days and multiple people at the state to figure out what happened because they had never seen someone both (a) pay use tax before and (b) not calculate their tax form correctly.

That is how rare it is for people to actually pay the use tax.
 
If I travel out of state and I pay that state's sales tax on something I bought there, screw it I'm not also paying Ohio taxes on that. I'm not getting taxed twice, geez.

Use tax for online stuff? Yeah, I'd pay it. Except now it is far less an issue since Amazon now is collecting tax in Ohio. One less thing for me to have to remember to look at.
 
SparkyJJO said:
If I travel out of state and I pay that state's sales tax on something I bought there, screw it I'm not also paying Ohio taxes on that. I'm not getting taxed twice, geez.
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I haven't looked at all state laws, but of the ones that I have looked at, you owe the use tax but get a credit for taxes paid to other states. Basically, you either (a) owe a bit if your state taxes more than the other state or (b) your state actually owes you money if the other state taxes more than your state.

For example, if your state sales/use tax is 7% and you paid 6% state tax in another state, then you technically owe the remainder 1% to your state (in the states that I've looked at) if you use it in your state.

Obviously, if it not used in your state, there is no use tax in your state. So you can buy and use something entirely in a different state and it has no impact on your state.
 
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My state has a line on the state income tax returns for use tax. However they allow you to estimate it for your income rather than have to calculate it. Its pretty conservation though and I pay it just to stay legal. In reality probably buy many times the amount they estimate.
 
It has always been that way, and you are supposed to report. Very few do.

The only time I have encountered reporting it is when making purchases off of Grant money for the lab in the days before Amazon charged sales tax (while in CA). We had to submit invoices to the grants people so that they could calculate the missing sales taxes each month and charge them to the grant.
 
Can anyone tell me how it's legal for them to tax you for using personal property purchased outside of their jurisdiction with income that's already been taxed? "Personal property" means personal property. State property taxes typically apply to items that the state has continued jurisdiction over while you use it, like land and cars. It seems a clear violation of our right to property.

I've always wondered this.
 
Legally, yes you are supposed to pay it. In reality nobody keeps track of it or pays it. And now with a lot of retailers having a presence in almost all states (all they need is a warehouse) then they are required to charge sales tax, which frees you from the use tax burden.
 
CZroe said:
Can anyone tell me how it's legal for them to tax you for using personal property purchased outside of their jurisdiction with income that's already been taxed? "Personal property" means personal property. State property taxes typically apply to items that the state has continued jurisdiction over while you use it, like land and cars. It seems a clear violation of our right to property.

I've always wondered this.
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They give you a tax credit for items that have already been taxed.

I think the use tax was created back when Sear's catalog orders became common in the 1930s. The states say as soon as the item crosses state lines, the state has jurisdiction on it.
 
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