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MadDAsHell

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Member since: Wed Nov 5, 2014, 11:56 AM
Number of posts: 2,067

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"Use Tax": How many of us actually pay it?

If you're not familiar, Use Tax is "a sales tax on purchases made outside one's state of residence on taxable items that will be used, stored or consumed in one's state of residence and on which no tax was collected in the state of purchase." i.e. We're all supposed to be paying sales tax on our online purchases: Amazon, Ebay, any other online business. If the website itself doesn't calculate and charge you the tax, you're supposed to figure out what you owe and submit it with your year-end taxes. Most tax software today has a section dedicated to helping you calculate and pay this tax.

While some states already have at least some arrangements to collect sales tax (usually because a retailer has a physical presence in that state), many states do not. And many online businesses don't have arrangements to collect sales tax for any state besides that in which they are HQ'd. So a significant amount of the collection is up to taxpayer honesty.

An NPR article a few years ago said that while 45 states have a use tax (i.e. a system through which people can calculate and pay their owed sales tax), only about 1.6 percent of the taxpayers in those 45 states actually pay the use tax . There's something like $11 billion dollars that states are missing out on here.

My question is, how many of us are actually calculating and paying this tax every year? Are we practicing what we preach when we talk about all taxpayers paying their fair share?

I'll start; I make an effort to calculate any owed sales tax from the main places I buy online (Amazon and Ebay), but don't for the places I might buy something from one time. So I'm at least partly avoiding it.

On edit: asking because we have a business client undergoing its annual audit and they're being scrutinized regarding online purchases and whether use tax was paid, and over lunch several of us started speculating just how ubiquitous avoidance is at both the business and consumer level.
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