Quote:
Originally Posted by BobC
Mmmmmmm, not exactly. Under old laws, sales tax was only collected by sellers who had a physical presence in a state in which they made a sale. That physical presence gave them what is known as "nexus" in that particular state then to be responsible for collecting and remitting sales tax on sales to customers in that state. This was from back in the days before the internet and online sales. So back then, if you bought something through a catalog or magazine from an out of state seller who had no physical presence in your state, they had no sales tax nexus in your state and wouldn't charge you sales tax. And then under the "use tax" part of your state's sales and use tax laws, you were supposed to send what you should have been charged as sales tax on that purchase to your state yourself as "use tax". But virtually no individuals ever do. Truth is, the states primarily use the "use tax" part of sales tax laws to go after big businesses that would buy machinery, equipment, and such, and have it shipped to them from out of state suppliers with no sales tax nexus in the state the items were being shipped to.
However, when you go into a store and buy something there, that is where you physically take possession and ownership of an item, and that location is where the sales tax is based on and paid, not where you might live or be taking the purchased item to. You cannot generally charge someone sales tax twice on the same item, and all the states with sales taxes have agreed to not allow such a double tax to happen. It would be impossible to keep track of anyway. In some states the sales tax is not uniform, and rates can vary by county or region. So if you go visit a friend or relative one county over (that also has a lower sales tax rate), and on the way back you stop and buy some carryout food and drinks in that lower sales tax county to then take home and eat, do you really think any state sales tax agent in their right mind is going to tell you to figure out the additional sales tax you would have paid had you stopped and bought that carryout food in your home county, and be sure to then send that difference to your state as "use tax"? Probably not if they want to keep their job.
And going from state to state is pretty much the same thing. Granted, if you go to the next state to buy say a living room set because they have a lower sales tax rate, your home state might be interested in that because it is probably a more expensive purpose. But the thing is, to my knowledge no state has written into their sales and use tax statutes any de minimus or threshold amount under which they say to not bother with any "use tax" and over which they say you have to calculate and pay any "use tax". The states just don't bother normally even trying to enforce the "use tax" on individuals because of how impossible it is to track and figure it out.
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So let’s say for a moment there’s a business involved in large dollar transactions on behalf of customers who reside in a high sales tax state. And that business is even so cheeky as to actively advertise to customers to use their service to avoid paying sales tax. Let’s assume for a moment that for a particularly tax-happy state, the lost revenue adds up to 5% of the state budget for any given year.
Query:
1) what are the odds that the state will care?
2) what are the odds that the state will go after the business whose marketing message entices customers to evade sales tax?
3) what kind of penalties and interest might be applied to that situation that the state would seek to recoup from the business that deliberately aided and abetted their customers in evading those sales taxes?
4) what are the criminal penalties that might apply to the business so involved?
Maybe the state won’t care. And maybe no one will ever have to pay in such a situation. But it seems like the risk of the above possibilities has to be a nonzero number. And once that ball gets rolling with the right politician who gets wind of it or the right newspaper that decides to highlight the obvious and flagrant practices here, it could start to pick up momentum fast.