They audit you.
When they audit you, they can get your credit card records and bank statements.
OK, I guess that would increase the rate of self-reporting, even if they couldn’t actually prove anything. ETA: this was a response to doreen.
Dangerosa, wouldn’t they need better probable case than just a car in a strip mall?
i don’t think they need probable cause to conduct an audit- they can certainly do it randomly.
But can they get credit card records based on a car parked in the parking lot of a mall?
The iTunes store charges sales tax. Or at least there was some on the last receipt I got for an app.
In my state everybody pays state sales tax on internet purchases, it is state law.
I rarely keep track, so I pay use tax according to the table in my state’s tax code.
But in my states, that’s 0.8% of my AGI!
Doing some quick math and records lookup…
that assumes over $11,000 in online purchases!
If you’re still in Michigan, it’s .08% of your AGI ( multiply your AGI by .0008) or $80 on an AGI of $100,000 ( somewhere around 1300 in untaxed purchases)
Its a tax audit, not a criminal investigation. They usually aren’t trying to prove fraud or tax evasion (a crime), they are trying to check and see if your tax return was complete and accurate. Often, they discover that they aren’t - pay back taxes, penalties and interest and you are good (and often they will waive some of the penalties if you indeed made an honest error). Unless you were engaging in tax evasion - then it becomes criminal. People are randomly audited every year with NO CAUSE AT ALL. Our revenue services will just randomly select people for audit. But they also select people for audit for reasons - there are audit triggers and they also follow up on a lot of tips.
The vast majority of these from the IRS are mail audits. They send you a letter saying “your broker said this and you filed this, can you explain the discrepancy?” Or “can you send us all records for your charitable contributions for 2010?” However, they also have the option to pull you in and go over things with a fine tooth comb. If they suspect fraud, they’ll dig deeper.
So they get your license plate, find out who you are, put you in for an audit and … What?
You get audited. You bring your tax returns in along with your paperwork. You justify your entries on your tax form. They get to the use tax line and say “so you didn’t buy anything on the internet or out of state that year?” You either say “well, I suppose I did, I didn’t realize I should report it - but I didn’t keep any records” and they probably just come up with some “reasonable agreeable amount” to stick in. Or you say “no, I never buy anything on the internet or out of state.” The eyebrow of the agent rises, and he may or may not decide to pursue it.
If he does, he’ll ask you for credit card records and bank statements. If you say no, then they may ignore it, or they may decide you are hiding something, open up a criminal investigation for tax fraud, and go over your financial life with a fine tooth comb, subpeoning what they need.
I’m not a tax professional though. I did used to work with IRS auditors, but that was a long time ago and I was on the corporate tax side. We always gave them exactly what they asked for in terms of data - it was WAY easier.
your state is my state, and no it isn’t.
I don’t keep track either. I regularly pay taxes on internet purchases and would prefer that all taxes are collected. I try to buy local so that local businesses get my money and the state gets it’s due but I’m not tracking a bunch of $6 internet purchases. I never buy large ticket items on the net.
In Ohio, it is a use tax we are supposed to figure when doing our state taxes. I always pay, although I usually estimate since I don’t keep exact track of everything I spend online. But I also don’t spend that much, so it is not too hard to figure out.
Yeah, doreen caught my error above. What a huge difference that decimal point makes:
Still, that’s a heck of lot more than I spend tax-free online (because Apple charges Michigan sales tax).
Now I wonder, though, if paying that excuses you from the real use tax that you’re supposed to pay? Supposing I’d spent $10,000 tax-free and use the 0.08% of AGI? My next car might just very well be mail order.
What’s the logic for this? If I purchase items in another state, what gives my state the right to tax me on those purchases?
I can almost understand Internet purchases, at least in that case your purchase is done through fiber or copper lines that go through your state.
Nitpick: states don’t have rights, they have authority. As for what gives them the authority? It’s the law. One way or another, taxes will be collected to fund state government. They try to spread the pain around so no single group gets taxed too much (reasonable men will disagree about what distribution of pain is most fair). If you somehow manage to abolish the use tax, you can expect some other tax to get increased someday to make up for that loss of revenue.
The use of/impact on your state’s infrastructure attributable to your out-of-state purchase is irrelevant; that’s not why the tax exists.
You are going to be “using” the product in your home state, benefitting from the services of your state, and thereforce liable for the taxes to provide said services in your state.
Or, more accurately, the state can get its money by taking your property, your income and your purchases. When you try to avoid some of that, they can either raise the other rates or go after those avoiding taxes.
No matter where you buy a car, you will pay sales tax on in the state where you first register it. Some states with high sales tax - California comes to mind - take note of how recently you bought your car and registered it in another state; if you are a California resident (long-time or new) trying to register your vehicle in California, and a sufficiently small period of time has elapsed since you bought your car and registered it in another state, California will make you pay the difference between the CA sales tax and the sales tax charged by the state in which the car was previously registered.