Connecticut Hunting Down Online Shoppers Who Didn't Pay Sales Tax

["Dave Farber" <farber () gmail com>]

Begin forwarded message:

> From: "Matt Murray" <mattm () optonline net>
> Date: February 24, 2018 at 10:53:44 PM EST
> To: "David Farber" <farber () gmail com>
> Cc: "'Matt Murray'" <mattm () optonline net>
> Subject: Connecticut Hunting Down Online Shoppers Who Didn't Pay Sales Tax
>
> Perhaps for the IP list? Newegg seems to have given in (or flipped as a
> mobster would say)
> http://www.courant.com/politics/hc-pol-online-sales-tax-20180214-story.html
>
>
> The state Department of Revenue Services is combing through customer records
> from major online retailers to hunt down taxpayers who skipped out on the
> often-ignored use tax.
>
> Kevin Sullivan, commissioner of the tax department, said it's part of an
> effort to ramp-up collection of the use tax; Connecticut taxpayers are
> supposed to pay the state a 6.35 percent tax on any purchases made
> out-of-state or online where no sales tax is paid, but the vast majority do
> not.
>
> "Usually we don't have the data, but in several cases companies have said .
> we'll squeal on our customers and you can beat up on them," Sullivan said.
> "The people who sold to them have ratted them out."
>
> A tax expert in Washington, D.C., said Connecticut is the first state to
> take this approach: requesting data from retailers about online purchases by
> state residents that were not subject to sales tax and checking to see if
> the customers made required tax payments.
>
> An estimated $70 million of the use tax is evaded in Connecticut annually
> and compliance with the tax stands at about 12 percent, according to the
> department.
>
> "The states at large have been reticent to pursue customers for use tax,"
> said Stephen P. Kranz, a partner and tax attorney at McDermott Will & Emery,
> a Washington, D.C. law firm. "It's much easier from an efficiency
> perspective to get the retailer to collect the tax. But data makes it
> possible to pursue customers, and Connecticut is the first state to go down
> that path in a real way."
>
> Several taxpayers told The Courant they received letters from the Department
> of Revenue Services this week detailing information about purchases they
> made from Newegg, an online retailer of computer components and other
> electronics headquartered in California.
>
> "Newegg Inc. has provided the Department of Revenue Services records of your
> online purchases during taxable years 2014, 2015 and 2016," the letter
> reads. "According to these records, you made purchases from Newegg in at
> least one of these years but were not charged Connecticut sales tax.
> Therefore, you owe state use tax on the items you purchased because you did
> not pay sales tax to a retailer."
>
> The letters contain the total amount of purchases made and the tax due, plus
> interest and penalties. Sullivan said the state is waiving interest and
> penalties for taxpayers who send a check promptly, acknowledging that many
> individuals are still unfamiliar with the use tax. An estimated 3,000 state
> taxpayers have received the letters.
>
> "We've had a lot of phone calls; the companies have had a lot of phone calls
> from taxpayers," Sullivan said. "The reason we're offering the opportunity
> to avoid the interest penalty is because we acknowledge that some taxpayers
> probably have no idea that they owe a use tax. But it's hard to miss on
> their income tax form every year."
>
> Newegg and other companies gave up their customer records in response to
> letters that the state tax department sent last summer to about 150 online
> retailers that have significant sales to Connecticut residents. Retailers
> were given two options: Begin collecting sales tax from Connecticut
> customers going forward and send that money to the state, or turn over the
> records.
>
> Kranz said he believes that companies did not have to comply with the
> state's demands but that the letters have invited further discussion about
> the prickly question of trying to assess state sales tax on online
> purchases.
>
> "I do think it's an overreach, but the discussion we have every day with
> clients is how much risk are you willing to take?" he said. "If you want to
> tell Connecticut to go pound sand, we can do that. If you want to have a
> discussion about when to begin collecting tax on your terms, we can do that
> as well."
>
> Some customers who received the letters said the amount the state said they
> spent did not match up with their own records and others questioned whether
> the state's approach was an invasion of privacy. "It feels seedy," said one
> Newegg customer who received a tax bill and asked not to be identified.
>
> "The state is sending the message to businesses that if they don't charge
> sales tax, they will go after the businesses' customers. And they will
> require the business to provide the information necessary to do so," he
> said.
>
> Another customer who received a bill said he was upset that Newegg did not
> disclose it turned over records to the state and did not notify Connecticut
> customers of the requirement to pay the use tax. The website does single out
> customers from four states - Colorado, Louisiana, Vermont and Rhode Island -
> notifying them that "although Newegg is not obligated to and does not
> collect your state's sales tax, this purchase is subject to your state's
> sales tax unless specifically exempt from taxation."
>
> Newegg did not respond to a request for comment.
>
> The issue of imposing sales tax on out-of-state purchases ultimately may be
> settled by the Supreme Court.
>
> In a 1992 case dealing with a mail-order office supply company, the court
> ruled that states could not require companies that did not have a physical
> presence in their state to collect sales tax. But last year, South Dakota
> passed a law requiring out-of-state retailers to collect the sales tax,
> arguing that failing to do so harmed local, brick-and-mortar stores. Last
> month, the Supreme Court agreed to hear a challenge to the South Dakota law.
>
> "It is a straight out shot at asking the Supreme Court to reconsider and
> overturn the [previous] decision," Sullivan said. "This is a matter of
> fundamental fairness."
>
> Copyright C 2018, Hartford Courant
>
>
> Matt Murray
>
> Mobile 203.856.3703
> MattM () optonline net



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