Abuse Tax
November 5, 2024 7:53 AM Subscribe
I recently learned of Use Tax. The use tax I learned about is a little different than that defined above in that it is a small town enforcing a tax on goods purchased elsewhere, even though a sales tax is applied in the other location. I am flabbergasted that this is legal. Has there ever been any legal challenges to this?
So I get the there can be a tax for each level of govt, i.e. if you buy something you may pay tax for the local municipality, county, state, possibly even fed. I'm no libertarian, but what seems wrong to me is that a local municipality charges a use tax if you buy stuff in another municipality. In this case, when getting a building permit in say, Springfield but buying concrete blocks in Shelbyville, Springfield levies a "use tax" in the permit. And what is worse, the use tax is levied even if concrete blocks are not available in Springfield. From some research, I see the the word "use" is carefully chosen, as opposed to "sales".
So I get the there can be a tax for each level of govt, i.e. if you buy something you may pay tax for the local municipality, county, state, possibly even fed. I'm no libertarian, but what seems wrong to me is that a local municipality charges a use tax if you buy stuff in another municipality. In this case, when getting a building permit in say, Springfield but buying concrete blocks in Shelbyville, Springfield levies a "use tax" in the permit. And what is worse, the use tax is levied even if concrete blocks are not available in Springfield. From some research, I see the the word "use" is carefully chosen, as opposed to "sales".
ie, from the brief Google I did, Illinois will credit you for the sales tax paid in another jurisdiction, and only charge the remainder.
posted by sagc at 8:19 AM on November 5 [2 favorites]
posted by sagc at 8:19 AM on November 5 [2 favorites]
Best answer: To the limited question you asked - about legal challenges to sales/use taxes - the answer is South Dakota v Wayfair Inc. The Supreme Court held that states can require sellers out of state to charge sales taxes, even if that seller doesn't have a presence in that state.
posted by saeculorum at 8:37 AM on November 5 [4 favorites]
posted by saeculorum at 8:37 AM on November 5 [4 favorites]
Best answer: The Use tax wikipedia article. For more on the history of US legal wrangling re use tax, see
Miller Bros. Co. v. Maryland -> National Bellas Hess v. Illinois -> Quill Corp. v. North Dakota, and, as saeculorum mentions, South Dakota v. Wayfair, Inc.
posted by zamboni at 8:43 AM on November 5 [2 favorites]
Miller Bros. Co. v. Maryland -> National Bellas Hess v. Illinois -> Quill Corp. v. North Dakota, and, as saeculorum mentions, South Dakota v. Wayfair, Inc.
posted by zamboni at 8:43 AM on November 5 [2 favorites]
Best answer: We lived in Vermont for a long time, near the New Hampshire border. Vermont has a 6% sales tax, with some municipalities slugging an optional 1% "local option tax" on top of that. New Hampshire has no sales tax. Guess where everybody who lives near the border goes shopping, especially for major items? So Vermont has a 6% use tax, charged to Vermont state residents on those out-of-state purchases.
Vermont is mostly able to collect this tax if you buy something in New Hampshire and have it delivered to your house in Vermont, in which case the N. H. merchant is obligated to collect it. (Same for online purchases.) But if you pay cash and load that refrigerator in your own truck and drive it home, Vermont has no way of collecting. They do ask, very nicely, on your annual Vermont income tax return whether you have any such purchases to report, and to calculate the tax thereon. Guess how many people actually do this?
A primary reason for a state to have a use tax is to level the playing field for the retailers located in their state, who are at a competitive disadvantage versus retailers in a neighboring state with a lower sales tax, or no sales tax. In practice, this mostly helps sellers of big ticket items like cars (Vermont will not register your car without proof you paid the sales tax), appliances, loads of lumber delivered across the state line, etc.
As for the situation you ask about, " it is a small town enforcing a tax on goods purchased elsewhere, even though a sales tax is applied in the other location," that kind of double taxation should not be happening. In general the sales or use tax is collected where the delivery of the item (or taxable service) takes place, not both.
posted by beagle at 10:32 AM on November 5 [6 favorites]
Vermont is mostly able to collect this tax if you buy something in New Hampshire and have it delivered to your house in Vermont, in which case the N. H. merchant is obligated to collect it. (Same for online purchases.) But if you pay cash and load that refrigerator in your own truck and drive it home, Vermont has no way of collecting. They do ask, very nicely, on your annual Vermont income tax return whether you have any such purchases to report, and to calculate the tax thereon. Guess how many people actually do this?
A primary reason for a state to have a use tax is to level the playing field for the retailers located in their state, who are at a competitive disadvantage versus retailers in a neighboring state with a lower sales tax, or no sales tax. In practice, this mostly helps sellers of big ticket items like cars (Vermont will not register your car without proof you paid the sales tax), appliances, loads of lumber delivered across the state line, etc.
As for the situation you ask about, " it is a small town enforcing a tax on goods purchased elsewhere, even though a sales tax is applied in the other location," that kind of double taxation should not be happening. In general the sales or use tax is collected where the delivery of the item (or taxable service) takes place, not both.
posted by beagle at 10:32 AM on November 5 [6 favorites]
Has there ever been any legal challenges to this?
Sure. But like the rest of the Sovereign Citizen collection of dipshit legal theories, they don't go anywhere for the same reasons.
Local jurisdictions get to set their own tax rates on sales/use, and they figured out that "one weird trick" of buying goods in a jurisdiction with a lower rate and bringing those goods back to the jurisdiction with the higher rate like 120 years ago.
And just because you've been putting zeros into your tax fillings each year in the section on Use Tax (DR 0104US, if your profile is correct about living in Colorado), that doesn't mean you didn't actually own Use Tax, or that Colorado hasn't been asking you for it all this time.
posted by Back At It Again At Krispy Kreme at 12:52 PM on November 5
Sure. But like the rest of the Sovereign Citizen collection of dipshit legal theories, they don't go anywhere for the same reasons.
Local jurisdictions get to set their own tax rates on sales/use, and they figured out that "one weird trick" of buying goods in a jurisdiction with a lower rate and bringing those goods back to the jurisdiction with the higher rate like 120 years ago.
And just because you've been putting zeros into your tax fillings each year in the section on Use Tax (DR 0104US, if your profile is correct about living in Colorado), that doesn't mean you didn't actually own Use Tax, or that Colorado hasn't been asking you for it all this time.
posted by Back At It Again At Krispy Kreme at 12:52 PM on November 5
This has been true since pretty much forever for motor vehicles and is called excise tax.
posted by scolbath at 9:07 AM on November 7
posted by scolbath at 9:07 AM on November 7
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posted by sagc at 8:17 AM on November 5 [1 favorite]