April 15, 2006 | In Technology |
For years, many people who buy online have treated the internet as a tax-free shopping loophole. American state authorities are now trying to crack down on this, however, by finding new ways to extort extra sales tax from consumers.
Online retailers like eBay and Amazon aren’t obliged to charge sales tax to buyers in a state where they have no major physical operations. For example, Seattle-based Amazon.com doesn’t force its California users to pay tax on purchases.
But the state of California, among others, is stepping up efforts to make its citizens pay taxes at California rates, on purchases made from out-of-state customers, including those made online. The state government has taken out banner ads on numerous websites reminding web surfers that they “owe use tax” (often misread as “owe us tax”).
New York, meanwhile is trying to force taxpayers to keep track of their online purchases, and declare them on end-of-year tax returns. Officials in that state will audit those who seem to be “creatively underestimating” their purchase habits, and inflict stiff penalties.
State governments believe that they are justified in doing this, claiming huge revenue losses in recent years as a result of people not declaring online purchases. California claims to have suffered $1 billion in lost revenue, last year alone, while Washington, Pennsylvania, and Connecticut have reportedly lost $600 million, $500 million, and $230 million, respectively.
These are gross overestimates, however, according to Steve DelBianco of the NetChoice Coalition. With a total of $86.3 billion in e-commerce sales last year in the U.S., the maximum amount of use tax due in the entire country couldn’t come to more than about $3.6 billion, and the vast majority of online buying is classified as business-to-business, where use tax is almost paid.
In short, state governments are going to extreme lengths to reach their hands just a tiny bit deeper into the pockets of consumers. Even if they manage to scrape every penny of use tax, they’ll probably turn a huge loss by conducting such a huge number of audits. Are they simply trying to prove a point?
All in all, the whole exercise seems to be a ridiculous waste of taxpayers dollars, just so that government busybodies can assert their dominance online as well as off.
