Tax collectors crossing state lines?
September 25, 2012 1:34 PM   Subscribe

My dad tells stories of New York tax collectors hanging out in the parking lots of popular New Jersey malls and Ikeas and the like, writing down NY plates and sending estimated sales tax bills or "reminders" for the voluntary portion of their bill. Is this real or apocryphal?
posted by disillusioned to Work & Money (12 answers total) 1 user marked this as a favorite
I have lived here for twenty years, I work with accountants, and I have never heard of such a thing.
posted by griphus at 1:38 PM on September 25, 2012

This seems like the kind of things that accountants tell their kids as ghost stories, tbh.
posted by elizardbits at 1:40 PM on September 25, 2012 [8 favorites]

For what it's worth, the bill is not voluntary. In New York, use tax is required for items purchased outside the state, but used in state.

Now, I suspect there are about eight people in the state that pay said tax, but it does exist.
posted by saeculorum at 1:42 PM on September 25, 2012

That has happened in New Hampshire; see the "Governorship" section of this article on Wikipedia.
posted by Admiral Haddock at 1:42 PM on September 25, 2012

Something similar used to happen in VA on the DC border for liquor. DC hooch was taxed lower (if at all), versus the state run stores in VA. There are limits to how much you can buy and bring into the state, so (anecdata) friends mom (in the 80s) would go to DC, fill trunk with booze, then have lunch and shop around so that revenuers wouldn't catch her as she went back across.
posted by k5.user at 1:52 PM on September 25, 2012

New Yorkers are often penalized for sales and use tax evasions, and in the most extreme cases are prosecuted for it, but it's rarely the thing which triggers the investigation, but is instead discovered along the way. In New York, audits are triggered by two things mainly: suspected residency fraud and suspected skimming from / failure to declare business income.
posted by MattD at 2:10 PM on September 25, 2012

My accountant told me similar stories about Massachusetts plates at New Hampshire big box stores. I'm pretty sure it's made up/based on the New Hampshire liquor stuff. The New Hampshire liquor thing actually kind of makes sense (the importation of liquor itself into MA was illegal, so cars could be flagged, searched, and then the drivers fined on the spot) whereas the big box store thing makes no sense--the agents would what, search your car at the state border, then check back 8 months later to see if you declared the value of the items you bought on your tax return?
posted by phoenixy at 2:15 PM on September 25, 2012

When I lived in Philly, the apocryphal story was that the state troopers would scope out liquor stores in Jersey and follow people back across the river.
posted by mbd1mbd1 at 2:17 PM on September 25, 2012

Likely apocryphal but influenced by the real New Hampshire liquor store incidents mentioned above. In reality, it is more likely that a jurisdiction would demand sales records from big box stores in order to tax residents who shop out-of-state/out-of-province, like BC did to Costco a while back (they eventually cancelled the demand).
posted by asnider at 2:24 PM on September 25, 2012

Nthing, liquor yes because taking it across state lines is technically bootlegging (I don't know if there is a threshold built in to the law for personal use, but if there is it's likely set pretty low), retail goods not likely.

A lot of use tax audits/violations occur when businesses buy significant items like furnishings or large quantities of supplies and don't pay tax (either because they're buying out of state or they mis-use their reseller licenses to buy things they're using, not selling). Auditors can come in, look at stuff that's in the office or warehouse, ask to see invoices where the things were bought. If no sales tax, and it's not something that's being resold in inventory, bazinga. An auditor can sometimes generate a 5-digit tax bill that way, and auditing is like everything else; it's based on revenue generated for the work put in.

It's really about impossible to audit consumers for this kind of thing. It would be a lot of work for little return, and would anger voters. Badly.
posted by randomkeystrike at 2:24 PM on September 25, 2012

I work in sales and use tax, and was an auditor back in the day.

I have been told by the state of Missouri that they'll sit at the border and watch for delivery trucks to prove out of state businesses are doing work inside the state. This was directed at businesses, not consumers.

For New York, I have read of fraud related to jewelry sales. The jeweler offers to ship an empty box to Jersey, and since it's an out of state sale, 'Voila! No tax!" Typically the business would pay the evaded taxes, but the liability is joint. So if a company went under, the state might send a tax bill to consumers.

Consumer sales tax evasion is a huge problem. We're talking billions in lost state revenue. If the Department of Revenue could get the DMV to work with them (a bit if), I can imagine the state testing a small program. But given the intense manpower required, and the likely return, it doesn't seem likely. The consumer could say someone borrowed their car. They don't have the receipt. The administrative costs of pursuing these tax bills would very high, and the voluntary response rate is likely very low. They're better off pursuing these companies. The states are very close to changing the nexus requirements, which would force these large companies to charge the correct sales tax online and out of state.

A more likely scenario which I've also seen is a bogus tax bill. For corporations, someone will send a registration for "supplementary sales registration" or something. And many businesses pay it without checking the veracity. It's hard to keep up with the registration requirements, and if it's only 200 dollars it's better to be safe than fined. I can imagine someone doing a similar scam for voluntary use tax bills.
posted by politikitty at 2:31 PM on September 25, 2012 [1 favorite]

Just to counter asnider, states are already trying to get access to these records. But current federal law protects these big businesses. It is possible that Congress will change the law, or a Supreme Court case could redefine these protections. But currently the State of New York is already aggressively trying to get at these records and can't.
posted by politikitty at 2:34 PM on September 25, 2012

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