Clever Colorado

[Coach]

I order frequently from amazon.com and of course enjoy not paying Colorado sales tax. The party may be over -- I notice that shipping notices on my orders now contain a link that gets me the following:

We are not obligated to, and do not, collect Colorado sales tax. Your purchase is subject to Colorado sales tax unless it is specifically exempt from taxation. The purchase is not exempt merely because it is made over the Internet or by other remote means. The State of Colorado requires that the taxpayer file a sales/use tax return at the end of the year reporting all of the purchases that were not taxed and pay tax on those purchases. Retailers that do not collect Colorado sales tax are obligated to provide purchasers an end-of-year summary of purchases in order to assist purchasers in filing their tax report. Details of how to file this return may be found at the Colorado Department of Revenue's website, www.taxcolorado.com. Retailers that do not collect Colorado sales tax are required by law to provide the Colorado Department of Revenue with a report of the total amount of all of your purchases at the end of the year above certain thresholds set by the Colorado Department of Revenue.


I have a feeling Colorado is going to get me, come year end.

Coach
​

 

[travelover]

I've been waiting for this shoe to drop. In Michigan they ask you to rat yourself out on the yearly income tax form.........but I've pleaded the 5th.........

 

[ikonomore]

Connecticut has threatened this for years with the use tax. You must fill it out on the year end income tax return. If it's zero you must put in 0, you just can't skip it.

 

[braumeister]

In Michigan they ask you to rat yourself out on the yearly income tax form.........but I've pleaded the 5th.........

Ohio does the same. My excuse is that many counties add an additional percentage to the state sales tax rate, but there is no way to determine the correct amount in this situation. In terms of Amazon, they have no physical presence in Ohio, so I don't see it as applicable.

 

[RonBoyd]

I have been wondering for a couple years now: If those companies that do add tax to the purchase actually turn it back to Colorado. I, generally, abort the purchase when a Tax shows up but this isn't always feasible (Adobe, for instance). How would you check to see if they turn it over to the State without putting yourself in harms way?

 

[ERD50]

Ohio does the same. My excuse is that many counties add an additional percentage to the state sales tax rate, but there is no way to determine the correct amount in this situation. In terms of Amazon, they have no physical presence in Ohio, so I don't see it as applicable.

That is exactly the case where it is applicable. If they have brick mortar presence, they will add it to your bill. You don't have to add county tax, this is the state that is asking, so just state tax. County will be asking next year .

AFAIAC, if the state is actually has legal claim to the tax, then they need to do the same as when I buy at a brick&mortar store - add it at the amount due at the cash register when I check out. Its a bit of a burden for the average Joe to collect every receipt from every on-line purchase made to see if he was required to, but did not already pay state tax, add them up, and calculate the amount due. If they want the money, collect it at the transaction point.

What would Timmy do?

-ERD50

 

[ERD50]

I have been wondering for a couple years now: If those companies that do add tax to the purchase actually turn it back to Colorado.

The only ones adding it now, as far as I know, are the ones with B&M presence in the state. As I understand it, it's pretty risky to not turn it over, but I would have no idea how to track it.

-ERD50

 

[ronocnikral]

i don't understand how colorado can require someone who does not have a physical presence in their state to file paperwork. we own a small business...and if they wanted us to file paperwork in every state we ship something to, i'd tell them to get lost. what are they going to do? send me letters? it's the other state's problem, not mine.

isn't there a law or something somewhere who says who gets to control interstate commerce?

 

[RetireAt80]

I assumed this thread was going to be somebody complaining about the decrease in increase in Colorado state pensions. in-budget-crisis-states-take-aim-at-pension-costs: Personal Finance News from Yahoo! Finance

 

[Martha]

Lawsuits have already started over the law, which is meant to put some teeth into the requirement to pay a use tax on what you purchase online without payment of a sales tax.

Details here: Colorado Tells Online Retailers “It’s Tax Time” « E-commerce News

Whether an online business has to collect a sales tax depends on whether that business has a "nexus" with the state where the purchaser is located, such as a retail store or offices. IIRC Congress could decide to allow states to require these businesses to collect sales tax but it has not.

 

[samclem]

It would be wrong and illegal to fail to pay taxes due.

I wonder if Amazon accepts money orders as payment? I wonder if they would ship your purchase to a PO box, to "I.M Customer or another identifier you choose? I wonder if several people chipped in together to get such a PO box, how it could be determined who that shipment was for?

But, it would be a lot of trouble to cheat the system, and it would be WRONG.

 

[Westernskies]

...above certain thresholds set by the Colorado Department of Revenue.

Which are? Seems like an important bit of information to avoid running afoul of the [-]latest revenue-grubbing tax scheme[/-] law.

 

[samclem]

Alaska, New Hampshire, Delaware, Montana, and Oregon have no state sales taxes. It seems you could set up a mail forwarding business in one of those states. Amazon (and other online retailers) wouldn't charge sales tax on purchases shipped there. You'd just charge people a small handling charge in addition to the actual shipping costs to re-mail packages to them. I don't think there's anything illegal about forwarding items to people in this fashion. The ultimate recipient would still be obligated to pay the sales taxes, but it would be impractical to track them down without the "sold to" records from the retailer.

 

[Martha]

Alaska, New Hampshire, Delaware, Montana, and Oregon have no state sales taxes. It seems you could set up a mail forwarding business in one of those states. Amazon (and other online retailers) wouldn't charge sales tax on purchases shipped there. You'd just charge people a small handling charge in addition to the actual shipping costs to re-mail packages to them. I don't think there's anything illegal about forwarding items to people in this fashion. The ultimate recipient would still be obligated to pay the sales taxes, but it would be impractical to track them down without the "sold to" records from the retailer.

But if you are audited there likely will be a paper trail to Amazon evidencing your payments to them.

 

[RonBoyd]

You'd just charge people a small handling charge in addition to the actual shipping costs to re-mail packages to them.

Which would end up being about the same as the Tax. Doesn't seem like a "Money Maker" to me... and an incredible amount of labor involved.

 

[samclem]

Which would end up being about the same as the Tax. Doesn't seem like a "Money Maker" to me... and an incredible amount of labor involved.

I think it would depend on the item. Lots of people buy jewelry and electronics over the internet. Several states have sales tax rates of 7% and higher, and they are far more likely to up in the future than down.

 

[ronocnikral]

I think it would depend on the item. Lots of people buy jewelry and electronics over the internet. Several states have sales tax rates of 7% and higher, and they are far more likely to up in the future than down.

your solution presents many problems. the biggest being that the sales tax liability for purchases made over the internet or mail ordered are the purchaser's responsibility. you aren't saving taxes, you are technically deferring it. so i could ship that bad boy all over the country and the world even, regardless of how many different tax free places it went to, i would still owe sales tax on it in my home state.

my state has sales tax and i could easily setup a business to do what you say and i would never have to pay any sales tax.

when it comes, it will be some kind of national tax.

 

[Martha]

your solution presents many problems. the biggest being that the sales tax liability for purchases made over the internet or mail ordered are the purchaser's responsibility. you aren't saving taxes, you are technically deferring it. so i could ship that bad boy all over the country and the world even, regardless of how many different tax free places it went to, i would still owe sales tax on it in my home state.

He understands that. He is just speculating a ways not to get caught in the trap that Colorado has set.

I thought about putting up a poll on whether people pay sales/use tax on online purchases but why have people admit they are tax cheats?

 

[samclem]

you aren't saving taxes, you are technically deferring it.

No, I'm proposing a way that the law might be successfully broken. Amazon collects no taxes and (presumably) files no paperwork with any taxing entity when it ships a $500 item to Bill Smith in Delaware (to a PO box at a forwarding company). The forwarding company re-ships the package to Bill Smith at his home in California (sales tax rate= 8.25%). Mr Smith still officially owes California $41.25, but how are they going to know about this purchase without the information provided by the seller?

Martha has proposed that they'd find out if they audit your record of payments made via credit cards, etc. I just never thought they'd do that.

Next stop: Buy a gift card and use that for payment.

 

[ronocnikral]

but how are they going to know about this purchase without the information provided by the seller?

exactly. which is why we wouldn't your business.

i wish an audit on no one. but it is an eye-opening experience...

 

[Brat]

There is software which calculates the sales tax, including any locality sales taxes, for retailers based on the ship-to address. This is not a 'labor intensive' task, it is a data management task.

Amazon is not only a store front, it is a mall. I don't think they are responsible for sales tax collection on behalf of the 'mall' retailers.

 

[samclem]

exactly. which is why we wouldn't your business.

Who are "we"? Amazon certainly won't have any qualms about shipping the item anywhere, provide it is paid for.

As I said--it's wrong. But this law is a nightmare for many people who shop online--with compliance costs that are out of sight because the States haven't put in place effective mechanisms to collect their taxes. I'm against laws and rules that penalize honest people (costing them time, money, or both) and cannot be effectively enforced (allowing dishonest people to ignore the law). This arrangement decreases respect for the law.

 

[Pete]

I wonder if Amazon's sales and stock price will be affected. Always wanted to buy it, but thought it was on the expensive side. Maybe there'll be an over reaction and I'll finally get my chance.

 

[Martha]

Next stop: Buy a gift card and use that for payment.

Clever boy!

 

[RonBoyd]

This Blog echos my thinking:

Do You Cheat On Your Taxes? - The Finance Buff

Most people don’t pay the use tax as required by law. And the states know it. They can’t do much about it because they don’t have any records about those out-of-state purchases. And people know it. That’s why they don’t pay that tax.

So it shows if people know the authorities don’t have any records, they cheat. People choose to disregard the law when there’s virtually no chance of being caught. You wonder where else people cheat on their taxes.

If most people don’t want to pay the use tax, and the states are not getting much revenue from it anyway, should use tax be taken off the books? I think so. The law should reflect citizens’ will, right?

"We the People"