March 04, 2010 06:26 PM UTC

Use Tax update

• 0 Comments
• by: DavidThi808

Well we’re making progress on this, but still have a ways to go in terms of getting answers.

The biggest shocker was the large number of legislators who do not order online. One or two makes sense as they represent the small segment of our population that does not shop online. But we have a much larger segment in the legislature – which leaves you wondering how little of today’s world they actually understand.

The second biggest shocker was the response rate. The GOP Senate is at 50% (and climbing) while the Democratic House members are an anemic 26%. Which makes our GOP Senators the champions of transparency on this issue. Ask you legislator why they didn’t answer!!!

Also a large number of legislators made a BIG point of saying that they shop locally. That’s actually bad for our local economy (subject of another diary) but it is good politics for an elected official.

Ok, so what is the use tax (asked by many – including a number of the legislators). Keep in mind I am neither an accountant nor a lawyer. And I have not been able to talk to anyone at the Department of Not Answering Questions Revenue to verify some of this.

For everything you purchase in the state you are assessed a sales tax. This tax is generally applied based on where the purchase is made (food, clothes, etc) but is assessed on where you live for big ticket items (cars, boats).

But if you purchase something from out of state, like Amazon, then no sales tax is assessed. In that case you owe a use tax – which is not the same as a sales tax but is complementary. It’s the same amount owed to the same government entities except…

First off, you only pay once so if you pay sales tax in another state on a mail order purchase, no use tax is due. However, if that purchase in in Oregon which has no sales tax, then… they aren’t sure. Second the home rule cities do want use tax. And so does the state. But counties (according to a very nice person at Larimer County) do not. So you do get a free ride on their tiny part.

Second, this law has been in effect forever. All that changed in the legislation this year is Amazon & others now have to report sales made to people in Colorado. But you, yes you, have owed this forever.

And what do you owe? The last 3 years worth because that is the statue of limitations on this. So pull out your visa slips for 2007, 2008, & 2009 and get to work calculating it. And if on a given visa charge you don’t know if tax was charged, find the invoice for that charge (which for most people requires contacting the vendor and asking them for a copy).

Third, going forward the tax is not due yearly. It is due every time your total purchases since the last payment hit $300.00 or more. So waiting till the end of the year may put you in violation of the law.

What’s also interesting is how many people have paid this up to now. Pueblo has had 0. One official in Boulder thinks it’s 1. People, including our state legislators, have not been paying it. (My guess is the low response rate from legislators is they don’t want to admit they are all scofflaws.)

What does this all mean? Well clearly we do have a tax that essentially no one is paying. So lots of money to be gained there with no required TABOR election. But it brings up the following issue. It may take me $0.0001 or $10.00 to determine that I owe the state $1.00. All the state cares about is it got $1.00. But to me losing $1.0001 is very preferable to losing $11.00. And I don’t think the state took this in to account.

Second many in the legislature hope this will cause Amazon to asses sales tax. Are you kidding me? With our non-responsive Department of Revenue, our patchwork of taxing districts, and the great expense of determining what districts a given address is in – no way. Absolutely no way. Maybe if we had a single statewide tax that was paid to a single authority. And a Depart of Revenue that answered the phone. Then maybe. But in the present situation – no way.

An interesting question is will Amazon and others report the sales. Does the state have the authority to tell a business in another state what they must do. At my company we occasionally get “demands” from other states to report sales to their state. We throw them out because of the time hit (fill out this 5 page form, attach a check for $125.00 for a tax license, and return to…)

Here’s my $0.02 worth on all of this. First the state should have a state-wide sales tax that is the only tax assessed for Internet and mail order sales. Second, that tax is reported by zip code and nothing more and every zip code is apportioned to which authorities are in a majority of the zip code. That makes it very simple for Internet stores to collect and pay sales tax.

Second, instead of passing a law putting more bureaucracy on both companies and taxpayers, why not start with an education campaign. “You may not be aware but…” And change the law so that individuals can pay once a year regardless of the amount purchased.

Finally, please think about the cost to businesses and individuals of determining what is owed, not just what you will collect. If you increase my income tax rate, you have not increased the cost of figuring it out by even a penny. But you bring in a whole new system and you have caused businesses and individuals significant additional cost – in many cases to raise pennies.

Not smart.

 Loading ...