Indiana tax officials want to ensure residents pay Hoosier State use tax
Sunday, December 05, 2010
About this time last week, shoppers were getting their gift lists in order so they could rake in Cyber Monday deals via their personal computers.
State tax officials across the U.S. also were preparing to lose a chunk of sales tax revenue.
This happens not just in December, but year round as people buy items from out-of-state vendors who don't charge the online buyers any sales tax.
But most states that collect sales taxes from sellers physically based within their borders also have legal authority to collect use taxes from residents who buy a product elsewhere but, as the tax's name indicates, use the item in their home state.
The Oklahoma Tax Commission was quick to get the word out to its residents that they likely owe the Sooner State treasury some use tax money.
Hoosier cyber shoppers, beware: Now Indiana is working to alert its residents about the state's use tax.
The Indiana Department of Revenue is urging shoppers to check online receipts to see if the Hoosier State's 7 percent sales tax was collected. If not, they should report the use tax amount owed on their 2010 income taxes next filing season.
More states in recent years have put their use tax requirements right on their state income tax returns. That way, residents can't claim to not know about the levy.
States also are making payment of use taxes easier by putting the process online.
Tracking online sales and unpaid taxes: Taxpayer compliance, however, even after a state's use tax is brought to their attention, is another matter.
Just 24,000 Indiana taxpayers paid use taxes last year out of 3.1 million people who filed individual state income tax returns, according to Indiana tax officials.
Will similar statistics in other sales and use tax collecting states prompt more collection efforts? Maybe.
The Illinois Department of Revenue tells its taxpayers it's increasing efforts to collect use taxes. The instructions for the state's use tax filing form (ST-44) note:
Illinois shares sales information with other states and bills Illinois residents for unpaid tax, penalty, and interest. Illinois also gathers information on overseas purchases from the U.S. Customs Service.
"We'll see the value of the data or whether they just slam taxpayers with audits," says my Twitter pal @vkan, a tax attorney and tax blogger in the Land of Lincoln. "From what I'm hearing on the enforcement side, it's not so much # of folks as it is $ value of items like jewelry."
Personally, I think the number of folks who consciously decide to shop online rather than visit a local, Main Street store just so they can avoid paying a few dollars in sales tax is exaggerated.
Still, I can see how cash-strapped states might decide it worthwhile to look for ways to track expensive, and not-taxed, transactions and those state taxpayers who are part of them.
And it might explain why the hubby bought me those diamond earrings from an online jewelry store!
- Oklahoma tax man wants use tax money
- Will Cyber Monday jump start the stalled
national streamlined sales tax effort?
- Sales tax collection on online purchases:
legislation to ease it, lawsuit to stop it
- Streamlining various state sales taxes
- State use taxes tend to be useless
- State tax departments
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