Taxes - State Consummer Use Sales Tax

[rrrose]

I will do my best to be neutral with my opinion on taxes. (note I failed)

In Colorado they started a new law in July 2017 that requires all business that sell greater than $100,000 of tangible property to residents of Colorado must file a report to the state with the name address and amount that each Colorado resident spent. The resident if they spend more that $500 out of state is to pay the tax, yes technically this means even if you travel and purchase something out of state while traveling you are supposed to come back home and file a report and pay 2.9% tax on what you bought out of state. As part of the reporting the businesses are required to do, if a person does spend more than $500 with a vendor they need to send said consumer resident a notification letter with the total amount they spent for the year and that they may be required to pay use tax on that amount.

In previous years we residents as part of our annual tax filing were asked to self report on how much we spent out of state and dutifully pay that tax. There was no way for the state to know though. Now they will have far better records for each person of what in fact they did spend in online purchases. These letters by the way were jolting reminders of how much I have spent in modification parts for my build. Mama raised an eyebrow.

As it turns out the law has some teeth to it now because if you under report and the state checks against its records that businesses have provided, they can haul you in to audit you, apply penalties and interest on top of the assessment of what they say you do owe in use tax. Seems there is significant responsibility of record keeping on us as individuals to keep track of our out of state online purchase where the business does not collect sales tax. It isn't very clear but they could even go so far as to require you to file a monthly remittance. They want their money, oh wait who's money is it.... sorry my opinion slipping through.

I moved from my homeland Toronto, Ontario Canada back in 1992 because I was a hard working successful professional and by the time i finished paying my provincial income tax my federal income tax the provincial sales tax and federal goods and services sales tax, putting gas in my car and being an average early 30 something with no kids amount of social drinking, I was paying just over 60% of my income in taxes. Yea I was young and spending what I was earning, buy a house, buy a car, furnish a house, go out to eat (no kids), drink some alcohol (case of beer over $25 due to taxes back then now it is $40 or more for a case of your standard domestic Molson Canadian or Labbatts Blue 24 bottles). I did smoke way back then and a pack of cigarettes was about $6 70% taxes as I recall (now it is $12 ). Anyway it was more than a far too material minded baby boomer could take so I moved to Texas and yes there was a girl involved in that decision too :)

I have not got a letter from FFR about what I spent for my complete kit, it could still be coming.

So what are the other Colorado residents doing here? I read that other states have passed or are using the Colorado model to create their own laws for collecting these revenues from their citizens. Anyone else from other states facing the same dilemma?
Ron

[Papa]

Ron,

When we finally get to the momentous point in our builds where we get to visit our vehicle registration office with an application for registration in one hand, we will be holding our checkbook in the other as we will need to pay sales tax on the kit, engine, transmission, rear end and any other "major" component used to build the car that we haven't already paid tax on. So, hold onto those receipts and don't pay tax twice. If you feel compelled to pay the state based on the ridiculous and nearly impossible to enforce law, keep track of what you pay tax on now and deduct it from the total that will be due when you register your car. For what it's worth, I haven't received any of those silly letters from out-of-state retailers since Amazon began charging us sales tax a couple of years ago.

Dave

[CraigS]

Do you get to deduct the amount of tax you paid in the state where you bought the item from what Col wants you to pay? I know from buying a couple of boats out of state that I paid tax in one state but not in both.

[jrcuz]

Last year when I had my taxes done my tax preparer told me that Virginia was working on being able to find out if taxes were paid on out of state internet purchases. So it sounds like it isn't too far down the road.
JR

[shark92651]

I don't think I would ever voluntarily pay use tax for items purchased out of state. I think the likelihood that they would ever find out, let alone pursue an individual, is very low. There is no way that Factory Five is providing any sort of invoices to the various state or local governments of the customers that purchase their kits. Do you have to pay properly tax on vehicles in CO? If so, they will get theirs then right?

[rrrose]

Ron,

When we finally get to the momentous point in our builds where we get to visit our vehicle registration office with an application for registration in one hand, we will be holding our checkbook in the other as we will need to pay sales tax on the kit, engine, transmission, rear end and any other "major" component used to build the car that we haven't already paid tax on. So, hold onto those receipts and don't pay tax twice. If you feel compelled to pay the state based on the ridiculous and nearly impossible to enforce law, keep track of what you pay tax on now and deduct it from the total that will be due when you register your car. For what it's worth, I haven't received any of those silly letters from out-of-state retailers since Amazon began charging us sales tax a couple of years ago.

Dave

Thanks for that information Dave.... a few years ago I looked up the process for when we need to get the car passed so I could register but never went passed that point. Just like a new car purchase then when we hit the DMV to get tags. Oh joy. I have all the car receipts in a folder.
Ron

[rrrose]

Do you get to deduct the amount of tax you paid in the state where you bought the item from what Col wants you to pay? I know from buying a couple of boats out of state that I paid tax in one state but not in both.

I have not purchased anything expensive enough out of state in person in the past few years for this to come up so I don't know how they work that. I know I am not going to voluntarily fork over more $$ and I sure am not going to go out of my way for anything either. Things that require a registration like boats and cars though are going to force you through the process some how.
Ron

[rrrose]

I don't think I would ever voluntarily pay use tax for items purchased out of state. I think the likelihood that they would ever find out, let alone pursue an individual, is very low. There is no way that Factory Five is providing any sort of invoices to the various state or local governments of the customers that purchase their kits. Do you have to pay properly tax on vehicles in CO? If so, they will get theirs then right?
They made some changes last year though where they have a record for each individual from businesses. They fine businesses for not reporting on us if that business is selling more than $100,000 of goods in the state, how they are figuring that out I don't know. The conundrum comes with if they figure out how to get their computer systems to compare what you self report on your state tax return vs what businesses have reported and they start the whole audit and penalties and interest debacle. Those additional charges can quickly add up to more than what you owed as a tax as well as all the headaches associated with trying to get it sorted out.
Ron

[rrrose]

So for the car specific items the path seems pretty clear, pay the tax at registration. Now I just need to decide how to deal with a few grand for garage floor tiles, a lift, some furniture ..... ug if they want their tax dollars then setup a boarder and collect the damn money before the goods get into the state. Some time back was there not a tea party because of taxes that eventually lead to the formation of a country... wait I forget that was really a wealth transfer transaction disguised as a freedom initiative. <sarcasm>

Ron getting back to work to earn some money to pay the taxman, bills and some leftover to send to FFR and a few others to put a smile on my face:)

[Gumball]

Careful what you guys post on-line, as your words may be used against you in the future.

[videodude]

Google is your friend. Search for the Quill Decision, a brief summary follows:

"Under the 1992 Quill decision, states can require businesses to collect sales taxes for them only if those businesses have a physical presence—such as a building, warehouse, or employees—in that state. Congress must not expand the power of states to compel out-of-state retailers to collect sales taxes. Instead, it should codify the safeguards laid out in Quill, ensuring that they will be preserved."

This is a VERY current topic in Washington, and there is lots of discussion as it relates to States Rights vs. Federal Regulations. Stay tuned, the party is just getting started . . .

Video

[rrrose]

Careful what you guys post on-line, as your words may be used against you in the future.

Thank you for the reminder Gumball. You are right about that.
Ron