The Straightdope on tax form RC-44 (Tobacco tax)?

Anyone with first hand experience with this? The state of Illinois just sent my father a whole slew of forms going back a couple of years for having bought cigarettes online. Totaling to a huge sum of money owed to the state. As much as some of you love this idea, I’m not looking to start a debate on smoking. And of course he’s going to pay, if he legally must, even if it wipes him out. So on to the goods…

Why isn’t the state going after the merchant in this case?

Or did they, and fail, and are now targeting the buyers?

If they failed to collect taxes from the merchants, that’s it? They get off free, yet the buyers don’t? What pentalties did they face if any? If it was simply putting them out of business, is that enough?

I know you can’t claim ignorance of the law, but there are so many laws it’s not even funny. My father was simply looking for cheap cigarettes, found them online, and bought them. If he actually new that he would be responsible for the tax, he would have just kept going to the gas station to get them. Shouldn’t the merchant have stated on their site, “oh by the way, these are duty free, and the state will rape you later”?

I am not your lawyer, I am not a lawyer at all, etc. etc.

Probably because the state can’t go after out-of-state merchants, or if they do, they must do so in federal court. The state law might also stipulate that for goods bought ouf of state, the tax liability is on the person importing the good(your dad).

If you have to contest this, it’s probably the legality of the tax as applied to out-of-state purchases not “Go after the seller”.

IANAL, but they are probably going after your father because he lives in Illinois. Other countries (or any states that don’t tax tobacco) probably don’t bother with extradition agreements over tobacco stamps, and I guess that it could be argued that your father acted as importer by having the cigarettes shipped into the state. The seller didn’t violate any laws in their jurisdiction.

If the merchant is out of state, the merchant has no obligation to the state (with perhaps some exceptions for particular states).

Keep in mind though, that sales tax is to be paid by the ultimate purchaser (consumer). Merchants within the state are charged by the state with the duty of collecting it on the state’s behalf, and they are required to remit it whether or not they actually collect. But they are considered collectors of the tax and the assumption is that the consumer paid it to the merchant.

With an out of state merchant though, no such agreement exists, and the state doesn’t have the right or authority to enforce collection. Thus the state turns to the one who was always considered ultimately responsible for paying the tax, the consumer.

But shouldn’t the tax be put towards the state the tobacco was purchased from? Where does Illinois get the nerve of asking for a tax if the sale was made on a server in another state? If I buy ciggs online from Florida from a merchant that didn’t charge for taxes, shouldn’t Florida send me their tax forms, not Illinois? Or is it a matter of shipping and crossing state lines?

What about buying other products? It’s been awhile since I’ve purchased from Newegg.com, so I don’t remember if I paid taxes for goods bought. Assuming I didn’t, is Illinois going to send me a tax form soon for my online purchases from Newegg.com from California? If not, would Illinois go after Newegg.com? Or is Illinois only concerned with Tobacco bought online, and nothing else?

Good questions, and I’m sorry I don’t have good answers.

Probably the key issue is where the transaction occurred. Depending on how the laws are written (or interpreted by state revenue departments), the transaction might be considered to have “legally” (for tax purposes) occurred in the seller’s state, the buyer’s state, both, or neither. For years most, if not all, states didn’t bother with sales across state lines. I presume this was because the legalities were iffy, and the volume was miniscule. Now with the internet, volume is rising, and so is concern about missing out on sales tax.

Here’s an overview of the situation. Google on “sales tax” “out of state” for more.

Whoops! Here’s an overview.