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Use(less) taxes

August 24, 2009

When you buy stuff from E-bay or Amazon and pay no sales tax, it's not really supposed to be "tax free." If the seller doesn't charge sales tax, the buyer often is supposed to make it up by sending the state a check for "use tax." Businesses tend to file use tax returns because this gets looked at in their sales tax audits. Individuals, on the other hand, rarely pay their use tax, much to the chagrin of the state revenue collectors.

Kay Bell ponders the issues of use tax noncompliance and concludes:

And until states can come up with a reliable third-party way to track residents' taxable out-of-state purchases, they will continue to lose this potential revenue.

What the states are trying to do is get Amazon and other online retailers to do the collecting for them. I expect someday that Congress will mandate that.