Cyber Monday is approaching fast, and the Idaho Tax Commission is reminding citizens of their duty to pay the “use taxes” on those online purchases.
On the off-chance you forgot, the commission issued a news release in which Randy Tilley, the Tax Commission’s Audit Division administrator, says, “We encourage folks to keep track of their untaxed purchases, total them up at the end of the year and make a payment when they file their income taxes next year.”
Forgot the name of the form? It’s Form 850-U. Go to tax.idaho.gov, and you’ll find the Idaho Self-Assessed Use Tax Worksheet and Return. It’s all coming back to you, isn’t it?
In Washington, it’s a bit different because there is no state income tax. However, online shoppers are still required to pay the use tax. The state Department of Revenue’s website explains: “Use tax is a tax on the use of goods or certain services in Washington when sales tax has not been paid. Goods used in this state are subject to either sales or use tax, but not both. Thus, the use tax compensates when sales tax has not been paid.”
So, it’s pretty straightforward. If you paid no sales tax on an out-of-state purchase, you pay the use tax. To pay that, you use your online account at the Department of Revenue. You have created one, right? Another way to pay is to complete and return a Consumer Use Tax Return, also available at DOR’s site.
However, the most popular option – though one we can’t condone – is to skip it. This tax dodge is not available if you purchase something at an in-state store, and the inequity has given rise to the Marketplace Fairness Act, a bill that’s passed the U.S. Senate and is languishing in the House. It would require online businesses with more than $1 million in annual sales to collect taxes, just as local merchants do.
Under a 1992 U.S. Supreme Court ruling, a business does not have to collect that tax if it does not have a physical presence in the state where the sale originated. So if you make an online purchase from a retailer that has a presence in your state, you’re charged the tax. Otherwise, you aren’t. It will take an act of Congress to change this.
The Idaho Tax Commission says about 9,600 Idahoans paid the use tax on their 2012 tax returns. The tax has been on the books since 1965; compliance is at about 1.4 percent. Enforcement is impossible. Scant compliance is also the story in Washington, where DOR estimates that state and local governments will be shortchanged $1.5 billion in the 2017-19 biennium. Spokane County would gain $9 million if the Marketplace Fairness Act were adopted. That would buy a lot of services without raising property taxes.
Defenders of the status quo say the requirement to pay the tax is already on the books. But do you know anybody who’s taken the aforementioned steps and paid up? The reality is that a lot has changed since 1992. People peruse items in local stores and then purchase them online, tax-free. It’s indefensible to hand the advantage to out-of-state retailers.
Congress should wrap up the Marketplace Fairness Act. ’Tis the season.
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