This message was forwarded to you from ZDNet (http://www.zdnet.com) by [EMAIL PROTECTED] Comment from sender: FYI Next time you're about to miss a critical file delivery deadline, we've got three words for you: speed of light. UPS Document Exchange. The faster way to send your critical files. http://cgi.zdnet.com/slink?12915 --------------------------------------------------------------------- This article is from ZDNN (http://www.zdnet.com/zdnn/). Visit this page on the Web at: http://www.zdnet.com/zdnn/stories/news/0,4586,2412443,00.html --------------------------------------------------------------------- While federal officials have imposed a moratorium on new Internet taxes, some taxpayers might be surprised to find their states soon asking them to pony up for online purchases made this year. Specifically, online shoppers in North Carolina and Michigan may get a bit of a surprise come tax time. [TABLE NOT SHOWN] Tax authorities in both those states have added new line items to state income tax forms, asking residents to total up their out-of-state purchases -- including items bought online -- and cough up the uncollected sales tax. In both states, that tax totals 6 percent. Officials are quick to point out that these are not new taxes -- both states have long required consumers to pay sales or use taxes on items purchased out of state. Michigan says its law dates back to 1937. In fact, all 46 states that charge a sales or use tax expect citizens to pay taxes on items bought out of state, including things like catalog purchases and stuff ordered over the phone. Only most consumers never do. Honor system "It's on the honor system, like most taxes. We have virtually 100 percent compliance on the business end, because businesses are well aware of use tax and do pay, and we routinely audit businesses," said Bridget Medina, press secretary for the Michigan Department of Treasury. "But individuals just aren't aware of it." [TABLE NOT SHOWN] But until now, payment has been sketchy and enforcement difficult. With the sharp rise in online spending, however, states have come to the conclusion that they need to something to avoid losing out on all that uncollected revenue. "The Internet has brought it more into focus and exaggerated the effects of not collecting, especially to Michigan's Main Street retailers," Medina said. "Internet sales are just booming." Indeed they are. Jupiter Communications predicts consumers will spend almost $15 billion online this year. But very few of those sales will be charged sales tax. That's because states can't require an out-of-state firm to levy a tax on its behalf. Difficult to collect Businesses are only required to collect sales taxes in state where they have a presence such as offices or warehouses. That's why catalogs and online stores often include lines on their checkout forms saying something like "sales tax is applied to orders shipped to NJ, NY, VA and TN." Outside of the specified states, the consumer is left to his or her own devices. [TABLE NOT SHOWN] "We admit it is a difficult tax to collect. The bottom line, the tax is owed, if during the course of an audit it comes up, that's an issue," said Jeffrey Bousha, spokesman for Massachusetts Department of Revenue. Massachusetts requires residents to pay taxes on out-of-state purchases by filing a separate form. But Bousha acknowledged that many residents don't fill out the proper forms. Don't expect the states to call out the enforcement dogs to collect Internet taxes. Michigan, for example, will be holding a number of press conferences to increase awareness of the tax law, but is not planning on any extra enforcement. The Internet sales tax issue has thrown legislators and e-commerce companies into a quandary. After Congress passed a moratorium on new Internet taxes, it established a government commission to look into the matter. That commission has met several times without coming to agreement. One camp wants to keep the Internet a tax-free zone. Supporters of that notion include presidential candidate Sen. John McCain (R-AZ) and tax commission chairman James Gilmore, who is also the governor of Virginia. Loopholes hurt local government But others, particularly the National Association of Governors, object strongly to what they call "tax loopholes" that take revenue away from local governments. The NGA has proposed that the entire sales tax structure be simplified, with states and local governments adopting the same classification systems, definitions and audits so that "the primary responsibility for calculating, collecting, reporting, and paying the tax is lodged with "Trusted Third Parties" instead of the seller."[TABLE NOT SHOWN] --------------------------------------------------------------------- Copyright (c) 1998 ZDNet. All rights reserved. Reproduction in whole or in part in any form or medium without express written permission of ZDNet is prohibited. ZDNet and the ZDNet logo are trademarks of Ziff-Davis Inc.
