New York recoups $34 million in unpaid sales tax for web/catalog purchases
About 20 states are recouping revenue lost to unpaid sales tax on web and catalog purchases by simply asking taxpayers to estimate it in their tax returns. New York leads the way with $17 million garnered in each of the first two years of the program, 2003 and 2004. “That’s revenue we would not have otherwise collected,” a spokesman for the New York Department of Taxation says.
Retailers with interstate sales are not required to collect sales tax when they have no physical presence in their customer’s state, and many promote on their web sites that consumers in certain states can purchase things tax-free.
But what many consumers in such situations don’t realize, says John Logan, senior tax analyst for CCH Inc., is that they are still required by law to pay any due sales or “use” tax to their home state.
Few consumers bother to pay sales tax on their own, figuring the chance of getting audited is extremely slight, experts say. But consumers may not be as free as they think, Logan says. If a consumer makes a non-taxed purchase from an out-of-state retailer that eventually gets audited, a record of that consumer’s purchase could be forwarded by the retailer’s state to the consumer’s state as material to be used in a possible audit of the purchaser, he adds.
Still, some states figure that it’s unreasonable to require consumers to maintain records of all untaxed interstate purchases. That’s why New York includes a table in its tax-return worksheet that suggests how much a taxpayer should pay for uncollected sales taxes based on his or her income. The formula ranges from $5 in tax due for income of up to $15,000, to the smaller amount of either $200 or 0.0355% of income on income of $200,001 or more.
“We feel that’s very generous to the taxpayer,” the spokesman says, noting that taxpayers can use the table for all purchases of under $1,000 each.
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