posted 10-10-2012 11:44 PM ET (US)            

Does everybody always do this? No.

posted 10-12-2012 08:50 AM ET (US)            

I bought my new engine from my local dealer in Michigan, and I paid sales tax on it.

I do a lot of boating in Michigan, and Michigan has a fantastic system of state-run harbors, marinas, launching ramps, and facilities.

There is no doubt that there are probably some people who bought an outboard engine and shipped it to Michigan to avoid paying the sales tax on it, and those same people are probably using the state-provided launching ramps, harbors, and marina facilities when they go boating. Heck, they probably tow their boats to the ramps on highways maintained by the State of Michigan, too. But someone has to pay taxes to Michigan to fund all of those roads, ramps, harbors, and marinas. If everyone avoided paying sales tax on their outboard engine, who would pay for the facilities needed to use the outboard engine?

posted 10-12-2012 01:50 PM ET (US)         

But here in Illinois, that is not the case. I just bought some Virginia peanuts, and had them shipped to me. No sales tax. Did I cheat the State of Illinois? No I didn't. If they want to tax a sale like that, they should change the laws. But in the meantime, my peanut purchase did not make me a sales tax cheater. Nor would I be a sale tax cheater if I bought a Mercury from Jaco's in Tennessee. And when I bought expensive Mercury propellers from them, I also did not cheat on Sales Tax, since there was none required.

posted 10-12-2012 02:10 PM ET (US)            

Boats and motors are generally subject to sales and use tax in Illinois. If you purchase a boat and motor outside of the state for use in the state, it is subject to use tax. See: http://www.revenue.state.il.us/publications/bulletins/2005/Fy200504.pdf . The use tax is usually collected when you initially register the boat.

posted 10-12-2012 07:58 PM ET (US)            

Ah, listen fellas, Larry bought a MERCURY. A Mercury is nothing but a brand name for BRUNSWICK--it is not a separate company. BRUNSWICK operates from Illinois. So clearly if Larry bought a Mercury engine from a dealer outside if Illinois, he is a tax cheater if he did not pay sales tax (or use tax) in Illinois.

posted 10-12-2012 11:25 PM ET (US)            

There was a great comment from Kevin about the legalities of buying items in one state and importing them to your home state.

posted 10-13-2012 08:19 AM ET (US)            

The market place has changed with the internet and some of you
just cannot wrap your heads around that. Fairly large corps like Amazone, Crutchfield, ABT, Bass Pro, Frys, Zappos, Sears
and Walmart are doing big sales in different states.
The states cannot regulate and tax these sales unless they have some presence of that business inside the state.
I understand that some people like to tax, tax and tax but I am sick of it! I live in 3 different states. Florida is the one that has the best of the 3 with regard to tax's. Florida has the least financial problems of the three.
Boat ramps are paid for differently in all three states.
Everyone knows who favors the big taxes in the upcoming election.

posted 10-13-2012 08:38 AM ET (US)            

Long and short: just because a sales/use tax is not collected at the point of sale by a seller it does not mean that the item purchased is not subject by law to a sales/use tax. If the item is subject to a sales/use tax there is an obligation for the purchaser to submit the tax payment.

Not much different than the income tax. If you do not receive a 1099 or W2 etc for income earned it does not mean that you do not have an obligation to report that income for taxation purposes.

Rich

posted 10-13-2012 10:17 AM ET (US)            

When Larry buys a Mercury outboard from a dealer in Kentucky (or wherever it is he like to tell everyone to buy those deeply discounted engines he is so fond of recommending from his favorite dealer friend that is underselling every other Mercury dealer in the country and in the process pissing them all off), the seller most likely does not have a presence in the state that Larry receives the shipment. The seller does not feel like he is obligated to collect any sales tax, and he doesn't.

If Larry receives the cheap outboard engine in a state that requires him to pay a sales tax or a use tax on his out-of-state purchase, and if Larry does not pay that tax, then Larry is a tax cheater, and his conduct is unethical. Based on what Larry has said, I don't think he is paying any tax, and it may very well be that the state in which he received or lives or maintains a residence thinks that Larry has a tax obligation that he is not paying.

It is ironic that Larry talks about Michigan cities as being "bankrupt, mismanaged cities." One of the reasons that certain cities in Michigan are in financial trouble is due to the unethical behavior of the residents of the cities as well as the unethical behavior of the leaders of those cities. If people conduct themselves in an unethical manner, if they do not pay their taxes, if they cheat on their tax obligations, if they defraud each other or the government and steal money, etc, this is all unethical behavior, and the result of this will be bad cities, deep in debt, and badly managed.

It is not consistent to act in an unethical manner on a personal level and to encourage others to act in an unethical manner, and then to be critical of others--the residents of certain cities in Michigan, for example--because they act in a similar unethical manner.

posted 10-13-2012 10:51 AM ET (US)            

States do have ways in many cases of finding out whether tax was not paid, but it is frequently so cumbersome they may not bother. For example they could probably get a list of tax-exempt sales from all other states via mutual cooperation (that is done a lot), and then cross-check it against reagistrations and local tax data.

The example I have is cross-border, but same idea. I had some parts shipped in from Canada for my business SIX YEARS ago for which no tax was collected on either side of the border. I just now got a bill for the sales tax - they got it by cross-checking customs records against tax receipt records.

posted 10-13-2012 10:59 AM ET (US)            

My understanding, as a former resident of both Michigan and Illinois (and a couple other states!), is that every state I've lived in has a line on your state income tax form that is used to report and pay any use tax owed to the state from online or other out of state purchases where tax was not collected from the state where the purchase was made. So, if I went on vacation to Indiana and bought something, and paid tax, I don't owe my home state anything. However, if my purchase did not include a state sales tax, then I must report that purchase on my annual tax form and pay my state the taxable rate (unless, as is the case with autos and other registered vehicles, the state may collect that tax at the time of registration).

posted 10-13-2012 11:03 AM ET (US)            

quote:

---

If I buy a book on-line from Amazon and have it sent to me, do I owe the state in which I received the book from the shipper a payment of sales tax?

---

posted 10-13-2012 11:29 AM ET (US)            

Also, if and when I buy a book on Amazon, the book may not be available from a local book seller. I used to buy most of my books at the local BORDERS BOOKS store, but they went out of business, and, ironically, I think they got into trouble due to the prevalence of internet on-line sales.

When Larry buys an outboard engine from his buddy down in the South, there is no question that there are local brick-and-mortar dealers selling the same item, at least there are in Florida, Wisconsin, and Illinois.

Larry endorses buying out-of-state for apparently two reasons:

--the seller offers a lower price; and

--the sale avoids sales tax.

Larry writes:

"I always have given my local Mercury guys the chance to meet the shipped quote...."

From this I infer his motivation to buy out-of-state because the price will be lower.

Next, Larry writes:

"Our sales tax is a killer 9.5%, so they understand."

posted 10-13-2012 11:34 AM ET (US)            

quote:

---

Is a paperback book tangible personal property? Is a electronic copy of the book for reading on an electronic reader the same as a printed copy?

---

Yes and yes.

Jim -- My question still stands: Do you pay your Use Tax on all your online purchases or are you an unethical tax cheater too?

posted 10-13-2012 11:54 AM ET (US)            

In any case, I am not at the moment in an inconsistent position because:

--I am not recommending people to buy out-of-state outboard engines

--I am not recommending people avoid paying sales taxes by buying outboard engines out of state

--I am not making disparaging remarks about cities in Michigan

posted 10-13-2012 12:03 PM ET (US)            

Do I owe the State of California any sales tax? Any use tax? Any property tax?

Do I own the State of Michigan any sales tax? Any use tax? Any property tax?

Do I owe a use tax to any of the state I flew over?

posted 10-13-2012 12:41 PM ET (US)         

I am also curious as to whether you pay the sales/use tax on any online/catalog purchases you make on which the sales/use tax is not collected by the seller.

You are legally and morally (by your own insistence) responsible to do so.

10K outboard, 100 dollar accessory, 7 dollar book... doesn't matter. You are legally obligated to report those purchases and pay the associated tax.

Now I know it is a very rare bird that does report and pay on these purchases but most of us don't call out others as cheaters on an open forum.

posted 10-13-2012 12:49 PM ET (US)         

quote:

---

Further in regard to "on-line" purchases, Larry has noted that his dealer down South does not make sales on-line. You have to call them on the telephone and arrange the purchase, send them the money by mail or some other method, and conduct the transaction in that manner. This is in contrast to a sale made on an on-line store where the transaction occurs in cyberspace. In Larry's situation the purchase transaction occurs in the State in which the seller resides.

---

jimh,

The obligation to pay sales/use tax on purchases not taxed at the point of sale has nothing to do with online sales. This standard procedure has been in place far longer than the internet has existed in its current popularity.

It is really very simple. If you purchase, by any means, a taxable item you are obligated to pay the tax. Via mail through a catalog, via phone, in person or via an online store.

About this time every year the State of Vermont makes some noise about prosecuting folks who don't pay the use tax. This is because it has become tradition for many to make an annual pilgrimage to neighboring New Hampshire to do the Christmas shopping. New Hampshire does not charge sales tax.

I have never heard of anyone being nabbed for failing to pay the tax though.

posted 10-13-2012 12:52 PM ET (US)         

Whatever state you file your tax return in is the state you likely owe the use tax to.

posted 10-13-2012 12:58 PM ET (US)         

It gets a bit sticky when you are trying to impose your ethics on someone else.

There is a big difference between recommending a seat belt and calling someone an unethical cheater for not wearing a seat belt.

If you had recommended LHG pay the use tax you probably wouldn't be taking much heat.

You flat out called him a cheater. That opens your closet door for a bit of scrutiny.

posted 10-13-2012 01:10 PM ET (US)            

If you're a normal consumer, living in Michigan, purchasing paperback books or e-books from Amazon.com, you should be paying sales or use tax on those books.

If you're a normal consumer, living in Illinois, purchasing outboard motors from out-of-state for use in Illinois, you should be paying use tax those motors. Fourdfish's pronouncements on tax law are not correct. When you fail to pay the use tax, you're breaking the law. The fact that you're not likely to get caught does not change that fact.

Finally, even though my boat has been put away for the winter, and I've got nothing to do today other than watch the Michigan State football game and the Detroit Tigers baseball game, I have have no desire to spend a couple of hours researching and analyzing the hypothetical question posed by Jim about his cross-country flight. Maybe fourdfish can give Jim an answer. My legal advice to Jim: don't rely on any legal advice you receive from fourdfish.

posted 10-13-2012 01:14 PM ET (US)         

quote:

---

If I follow the suggestions made so far by Tom and others, I believe what is being suggested is that when I return to my home state of Michigan, I must report to Michigan all the purchases I made in other states where there was no sales tax charged and then pay a sales tax to Michigan?

---

Yes.

posted 10-13-2012 02:17 PM ET (US)            

--if he has a tax obligation and if he knows he has it; I am not expert on the laws of his state, how he made his purchases, and his state of mind; and,

--if he paid it his tax obligation.

From what Larry has said, it seem like he may have a tax obligation, and it seems like he has not paid it. If that is true, then I think it is reasonable to describe that behavior as cheating on one's taxes.

The sidebar begun by Tom about my hypothetical Amazon book purchase is mainly a distraction from the principal issues, which I would characterize as follows:

There are two themes involved in out-of-state outboard purchase:

--buying from a distant high-volume dealer at a lower price and not giving the sale to your local dealer; and

--avoiding paying sales tax.

If everyone bought their outboard engines from the low-price high-volume out-of-state dealer there would soon be no local dealers. Larry and others apparently want the chumps to buy from the local dealer so they can remain in business and give Larry and others out-of-state engine buyers a place to get installation, warranty repairs, and service done, but the out-of-staters are going to send their real money--the big ticket money--with someone else. They're not supporting the local dealer. They're too smart, and they'll let the chumps keep the dealer in business while they buy engines for less a thousand miles away. This method saves them money.

There is a general notion in capitalistic society that everyone ought to operate their lives as a business and run with the most efficiency, that is, conserve their money and get the most value. However, there is a general notion in the Christian traditions of our nation and in the morality of man that perhaps we ought to do a little good in the world while we are in this life. Perhaps that means we ought to throw a few bucks extra into the community we live in so we can keep it functioning. Are we as recreational boaters to always act as ruthless capitalists? Or are we go give some consideration to how we can maintain the boating community we enjoy and benefit. If you have a good local dealer selling outboard engines, it has always been my recommendation that you ought to give him your business, even if you have to pay a little more for some things.

In buying out-of-state there is also the strong suggestion made that there is a potential to save further by avoiding payment of sales tax. This is actually a rather serious matter of legal obligation to pay taxes. From all that has been said so far, my impression is that if Larry or anyone else buys an engine from Larry's recommended seller down South and ships that engine to Illinois, the State of Illinois has tax law in place that obligates the buyer to pay Illinois a tax, either in the form of a sales tax or a use tax, on that transaction. If that is true--again, I am not a tax expert on Illinois--and if that obligation is not paid, then the buyer has violated the law of Illinois.

Now a sales tax of 9.5-percent is high, and on a $10,000 outboard means an added burden of $950. It is human nature to want to avoid spending $950 if possible. We cannot change human nature. But humans must act beyond their most basic nature. We live in a society of laws, including tax laws, and if the law says the $950 is to be paid, that is the law. If the implementation of the law leaves compliance with the law up to the individual, the individual must decide if they want to comply. (And my analogy to seat belt wearing is precisely the same; in MIchigan seat belts must be worn as a matter of law.)

Now we turn to the matter of LHG and my criticism. Larry writes:

quote:

---

Outboards have a way of falling through the sales tax crack in States where there is no title on outboards. If you replace an engine on a boat you already own, there is literally no way for your Registration authority to know you have done so.

Having one shipped to you (or a marine facility that can receive and handle it for you), whether new or used, is definitely the way to go.

---

I read that as an endorsement or recommendation in opposition of the two major issues I have described in this thread, which, again, are:

--buying locally to keep your guy in business

--paying your tax obligation

I am not willing to stop my objections to Larry's position on these issues on the basis that I have or have not ever ordered a $20 book from Amazon and whether or not I owe Michigan a $1.20 in sales tax on that book I might have ordered. On the topic at hand, outboard engines, I have done the following:

--bought a new outboard engine from my local dealer

--paid Michigan the sales tax on the purchase.

As far as I am concerned this gives me the standing to talk about buying new outboard engines and paying the tax on them.

The significant difference between Larry and I in these issues is as follows:

--I do not recommend buying mail-order on everything just to save money compared to the price on from local guy. I am willing to pay more for many things by buying them locally in order to help maintain my local businesses, even at the price of a new engine; and

posted 10-13-2012 02:45 PM ET (US)            

I guess none of us are going to run for President...avoidance of Use Taxes could become a major campaign problem!

:)

posted 10-13-2012 03:58 PM ET (US)            

I did not however come across any discussion about the ethics of how government handles our money. Is it assumed that government's handling of our money is above reproach?

And more on the topic of the boating and maritime services we get for our money. CA takes about 10% of my income and gets about 9% on sales tax. What maritime services do I get for my trouble? I pay by the hour to use my boat in the ocean--for BOTH my trailer AND tow vehicle. An average of $16 for each of my short outings.

So if I save a few pennies on sales tax by mail ordering for a flashlight or (recycled) ink cartridges, or an impeller for my 40hp Yamaha, I don't lose any sleep over it--even if a poor state employee has to work a couple of extra years until he's 58 to collect his six-figure pension as a result of my callousness.

posted 10-13-2012 04:14 PM ET (US)            

Now I will address all this blather about whether or not I have paid any taxes on any Amazon book purchases. This question was asked of me because it was decided that in order for me to participate in the discussion I must divulge my own situation with compliance about taxes on out of state purchases. I am going to use this same logic on all the people who have asked me; you must tell me if you have paid all the taxes on your out of state purchases in order to ask me about mine. This is the same reasoning you put forth regarding me discussing the situation with Larry (and others) who advocate buying outboard engines out of state. Note that I have never asked Larry if he paid his taxes on his outboard--Larry made a statement himself about it which implied he had not and I simply made that inference from his statement. I would consider it extremely rude and an invasion of Larry's privacy to ask him about his taxes. Apparently Tom and others think nothing of asking me about mine, but that is a different discussion.

I am sure Tom and all the others (gnr, perhaps Fordy) will tell us if they have always paid sales tax on an out-of-state purchase because they are the ones who set up this criterion and imposed it on me. So, as soon as I hear about my critic's compliance, I will consider their inquiry. But until then, they have been caught in their own Catch-22. They insist I must never be critical of anyone unless I have paid every cent of sales taxes on any of my out of state purchases. I use their own criterion on them--they are in no position to criticize me until they avow their own compliance.

So please, Tom, Fordy, gnr, tell us your situation.

posted 10-13-2012 04:14 PM ET (US)            

http://www.state.nj.us/treasury/taxation/pdf/pubs/sales/su4.pdf

A prime example in New Jersey. There is a significant State tax on cigarettes. A pack costs 7-8 bucks here (fact-yeah I smoke I know what they cost yeah I'm a dumb ass). When they passed the new tax law people began ordering them online at half the cost. The cigarettes did not have the New Jersey tax stamp on them. New Jersey tracked the shipments and sent a bill to the individuals. Some were quite significant. Caused quite a stir. I don't order online to avoid the tax. Parents live in Delaware where they are half the cost. If I'm visiting I'll by a few packs but I do not want to be in a position in being acussed of tax avoidance. It's not a place I want to be but to each their own.

Moral of my story is there is no law unenforcable if it is not unconstitutional in my opinion. The typical limitation on enforcement is a practical one- having the available man power and/or the technological resources to efficiently and accurately enforce the law. The technology is being developed for enforcement and collection. At a snails pace but that is how government moves.

Every dollar spent online is traceable. Be careful in avoiding taxes due. You may get a bill if your government decides to ramp up efforts to collect. The burden to be aware of the law and comply with the law is your own I believe. Government is notorious for pushing the applicable statute of limitations on matters like this so it may be years later that you get the unfortunate "nasty gram".

I work in taxation (not sales and use/personal property) so this topic is interesting to me from a technical perspective. It's a difficult job these days but I take a lot of pride in educating and helping those I'm in contact with pay no more than the law requires. Nobody likes taxes but the law is the law.

Rich

posted 10-13-2012 04:23 PM ET (US)            

Now for sales arranged over the telephone with sellers that keep their books on a paper ledger and may in pencil, the chances of being detected electronically are lower.

posted 10-13-2012 04:26 PM ET (US)            

rich

posted 10-13-2012 05:11 PM ET (US)            

No one came back at me regarding my recommendation of _not_ deflating the purchased price of used vessel (or vehicle, which is usually the the type of incident that floats to my attention) when registering it. Is that done daily, hell ya.

But it's a dumb, dumb action to do, especially for someone that may hold any sort of professional license.

posted 10-13-2012 07:04 PM ET (US)            

Don is correct. Professional license or not. It's fraud plain & simple.

Funny personal story on this. My boss a few years back (we both hold the same taxation certification- nothing to do with personal property taxation) had an old beat up Chevy Blazer SUV that he was selling. Think he had it sold for $1,000. The day before the delivery date he took it out for a quick run to a store down the street. As he was leaving he backed up into a utility pole and buckled in the rear door and shattered the rear window. Called the guy sale off with the damage.

Came in the next morning grumbling about it said he was just going to send it off to the scrap yard for a couple hundred. I told him I'll take it- give him scrap value-knew it ran- I needed a local vehicle for the fishing stuff. He said just take it he's done with it. Ok.

He signed the title over to me for a basically worthless vehicle- no consideration. New Jersey collects sales tax on registration. I put the consideration paid down as $1000 if I remember correctly so eyebrows were not raised. Paid the tax.

Received a letter from the Division of Taxation requesting payment of tax on book value of $3500 dollars. New Jersey is not a pure blue book value entity with regard to vehicles like other states. If that was so it the book value would have been asserted at registration.

Long story short I had to construct an affadavit for the inflated purchase price of $1000 stated for taxation purposes. I could have atually challenged the excessive tax I volunteered to pay but life's too short.

No good deed goes unpunished : ) . (I actually don't believe in that)

Rich

posted 10-13-2012 07:33 PM ET (US)         

To answer your question, no. I am not in that very very very very small group who makes sure to track, report and pay tax on every untaxed purchases I make.

For the record. I do not question your ethics. I think you may have been ignorant of your responsibility in these situations. I would also be surprised if you now began to track, report and pay the tax on all your untaxed purchases now that you are aware. I wouldn't hold it against you if you didn't.

posted 10-13-2012 09:13 PM ET (US)            

JW_Spencer asks a simple question about sale tax on an out-of-state purchase. I immediately answer it concisely and accurately. Larry answers inaccurately. Jim spar back and forth.

quote:

---

The sidebar begun by Tom about my hypothetical Amazon book purchase is mainly a distraction from the principal issues...

---

Jim -- I began no sidebar discussions. You introduced the sidebar discussion about your Amazon book purchase by asking a simple question, which I also answered concisely and accurately.

You also introduced the idea of ethics and called Larry a "[i[]tax cheater[/i]". I have passed no judgment at all. I have, as I so often do, simply answered the questions correctly. If correctly answering a question posed here on ContinuousWave is a "distraction," then just about all of the discussion area is a "distraction" by your reasoning.

On the other hand we find you initiating and/or participating in, several sidebar discussions on topics ranging from my residency, to the current weather, to sports events, to your late father's investments, to your personal purchasing habits.

posted 10-13-2012 09:20 PM ET (US)            

Again, it is not sales tax one pays, it is use tax. You do not need a tax attorney to understand this law. It is written and described in plain English, the same English that is used in Washington as is used in Michigan.

It is also clear that Michigan law makes no distinction between books and outboard motors nor is there any threshold of dollar value. You are either in compliance, or you are not.

As to my own compliance with Washington State law and out-of-state purchases, on the advice of counsel, I refuse to answer the question.

posted 10-13-2012 11:09 PM ET (US)            

Prior to this discussion I really was not aware of "use taxes." I have to read more about them. I don't know anything about use taxes in Michigan. My ignorance is due to my very limited experience in buying things like outboard engines in remote locations and having them sent to me.

As for my hypothetical book bought while I was hypothetically in Oregon, I don't believe I could possibly owe any tax to Michigan on that book, no matter how it travels back to Michigan. I was standing in Oregon when I bought the book. No matter if I ship it back via UPS or carry it back in my luggage, I can't believe there is any sort of legal obligation for me to pay Michigan any sort of tax on that book. When I hypothetically bought the book in Oregon, I would have paid all the required fees or taxes. People travel all the time to difference places in the USA, and I never heard of having to pay a tax on the things you bought while you were traveling once you bring them home.

posted 10-13-2012 11:41 PM ET (US)            

quote:

---

jimh--You brought ethics into the discussion. You, at the very least, questioned LHG's ethics.

---

Yes, I did bring up ethics. I think it is important to consider ethics in our conduct of our lives.

Re LHG, I pointed out that if the hypothetical conditions exist, then the hypothetical conduct would be, in my opinion, unethical.

What I did point out about what LHG said--which is not hypothetical--was the irony in his complaints about the bankrupt condition of some cities in Michigan (which I posited were likely due to people not paying their taxes) and his apparent encouragement of a method of buying outboard engines which avoids paying taxes. These seem like inconsistent positions to hold. I simply pointed out that if no one pays their taxes, bankrupt cities are a likely result. If no one pays taxes there won't be boat ramps, harbors, marinas, and facilities.

When I bought a new outboard motor from my local dealer and pay a substantial amount of sales tax to Michigan for that purchase, I considered that perhaps the money might help the State maintain the boating facilities I enjoy using. Sure, some of that money might go to welfare cheese, but it helps me feel better about the sales tax on my outboard engine if I think it goes to re-paving a boat ramp.

posted 10-14-2012 12:58 AM ET (US)            

There is no reason at all why the local dealer can not compete in the global world and still provide exceptional service to his/her local clientele.

My business provides merchandise to corporate clients around the country and I am very familiar with the sales and use laws in many states, as well as the "Nexus" arguments being won and lost around the country. Amazon is actually losing these legal cases as more are brought to light.

We file and pay sales and use taxes in states were we have a presence, but do not collect said tax from clients in the other 40+/- minus states. In those states, the burden rests solely on our clients. Larger clients have tax departments that DO in fact pay use taxes for everything they purchase, which I suspect that smaller clients may not (I don't see their taxes returns, so this is only a suspicion).

The only way for states, cities and local municipalities to collect 100% of the taxes due would be for there to be a law mandating the collection of said taxes from ALL retailers nationwide. I am NOT, however, in favor of this approach as it would be an incredible burden on small business and put companies such as Amazon at a huge advantage.

posted 10-14-2012 01:01 AM ET (US)            

As for what body of water I cross, I depend on my official government charts to inform me of the names. I understand some locals have other names for things. Locally here we have a stretch of water that is charted as "Chanel Ecarte" and the fellas call it "Snye Cartie." Or another example: Ile Aux Galets is called Skillagalee Island.

I know you guys in the Pacific Northwest have some local names and notions about your water and what to call it, but not being a local, I just go by the charts. Entered the USA at Friday Harbor, I think, and the immigration and customs agent got a laugh out of my Michigan boat registration. First Michigan-registered boat he could recall entering the USA there. Maybe I can find my old passport and scan it for you, as you seem to becoming a skeptic about everything I say!

posted 10-14-2012 01:38 AM ET (US)            

quote:

---

Every state that has a sales tax has
a companion tax for purchases
made outside that state by catalog,
telephone, or Internet. In Michigan,
that companion tax is called “use
tax,” but might be described more
accurately as a remote sales tax
because it is a 6 percent tax owed on
purchases made outside of Michigan.
Use tax is due on catalog, telephone,
or Internet purchases made from
out‑of‑state sellers as well as
purchases while traveling in foreign
countries when the items are to be
brought into Michigan. Use tax must
be paid on the total price (including
shipping and handling charges).

---

I had no idea that I should have paid a use tax on that tee-shirt I bought in 2003 in Canada. Amazing. Also, there is more interesting stuff:

quote:

---

Use Tax on the Difference

If you paid at least 6 percent to
another state on your purchase, you
do not owe use tax to Michigan. If
you paid less than 6 percent, you owe
the difference.
Note: The full 6 percent use tax is
owed on purchases made in a foreign
country.

---

I think this has some amazing implications. If I am boating in Canada, and I buy some gas over there for my boat, when I come back to Michigan with the boat and there is any Canadian gas in the tank, I should pay Michigan and additional 6-percent tax on the gas in my boat's tank. Is that right?

If I bought a postcard on a trip in a State with only 4-percent sales tax, I should pay Michigan a 2-percent sales tax on that post card when I get back home.

posted 10-14-2012 02:13 AM ET (US)            

Let's compare costs of two outboard engines.

In-state purchase
ENGINE = $11,000
TAX = 6-percent sales tax
TOTAL = $11,660

Now we assume we save $1,000 buying out of state,

Out-of-state purchase
ENGINE = $10,000
SHIPPING = $500
TAX = 6-percent use tax including shipping
TOTAL = $11,130

The amount saved by buying out-of-state is not really $1,000 but now only $530 due to the shipping costs and the use tax.

posted 10-14-2012 10:32 PM ET (US)            

There I was in 2003, in another country, buying a tee shirt. I paid provincial sales tax to British Columbia and general sales tax to Canada on the purchase of the shirt. Now Michigan tax code says I owe them 6-percent of the price of the shirt, too. What possible legal construct can justify taxing purchases I made in another country?

posted 10-15-2012 09:50 AM ET (US)         

You really are a piece of work jimh. Instead of showing some spine and simply admitting you were wrong and maybe even offering a thank you to those of us that educated you you instead use your moderating "powers" in a pathetic attempt to maintain some sort of "hand". (10 bonus points for anyone who gets that reference. Better guess quick before jimh takes his ball once again though). Deleting relevant posts completely and replacing others with your passive-aggresive BS.

posted 10-15-2012 10:13 AM ET (US)            

quote:

---

I am curious to know--if anyone happens to have some background on this--when the concept of use-tax was added to the taxing power of the States.

---

Yes.

quote:

---

It seems to now be a common feature of tax law in many states.

---

Yes.

quote:

---

As I see it, because I am a resident of a particular State, that State seems to have imposed a tax on everything I purchase, no matter where I happen to be when I buy it.

---

Yes.

quote:

---

This seems like a crazy concept that the law of one State can extend to and govern behavior in another State and even in another country.

---

No, the law only applies once you have returned to your own State.

posted 10-15-2012 11:23 AM ET (US)         

lol

You're welcome jimh.

posted 10-15-2012 11:57 AM ET (US)            

The same year, a co-worker recieved a similar letter for an ATV he had purchased in Alabama. It seems that Tennessee has somehow convinced at least some businesses in surrounding states to report purchases made by its residents.

I honestly didn't know there was tax due. If I had, I'd have just bought the table here and paid it up front. That would have been much preferable to getting a bill I didn't anticipate (and frankly didn't have the funds to cover) long after the purchase was made.

posted 10-15-2012 05:19 PM ET (US)            

I announced: "I am curious to know--if anyone happens to have some background on this--when the concept of use-tax was added to the taxing power of the States."

And you reply: "Yes."

Tom, sorry, but there was no question asked, and not a YES-NO question. Questions are indicated by the question mark. Lets go on to the next response.

I comment: "It [that is, use-tax law] seems to now be a common feature of tax law in many states."

And you reply: "Yes." Again, no question was asked. I guess you are agreeing with me, it is a common feature, but I was not asking a question. On to the next response.

I observe: "This seems like a crazy concept that the law of one State can extend to and govern behavior in another State and even in another country."

You reply: "No..." I think you meant that this is not a crazy concept, that you think it is a good concept. Then you elaborate your response: "...the law only applies once you have returned to your own State."

I disagree. The obligation of the sales or use tax attaches when the tangible personal property returns to the taxing State, not necessarily the person. If I don't come back with the property, there is no obligation.

Tom then comments: "There is nothing new or unusual about sales and use tax. As far as I know it has been around in many States since before World War II."

At this point, I would be tempted to reply "yes" in a sardonic mockery of Tom's replies, but I won't. I will instead just say:

Tom--Thanks for sharing your knowledge of the history of use-tax.

posted 10-15-2012 05:46 PM ET (US)            

I bought the tee shirt in BC in 2003. I paid the local taxes on it. I give the tee shirt as a gift to the sales clerk. She says, "Thank you," and hands it back to me as a gift. I receive the tee shirt from her as a gift. Later, I return to Michigan. Do I owe a tax obligation on any gifts I received while abroad?

posted 10-15-2012 10:40 PM ET (US)         

Yup. I sure am the one looking foolish here.

Keep up the good work!

posted 10-16-2012 09:01 AM ET (US)            

The same situation could occur with two States. Ohio residents might be paying more sales tax in Michigan than Michigan residents in Ohio. A strict accounting might end up costing Michigan tax revenue.

Andy's point is akin to or a corollary of this notion: in collecting use-tax the States want you, the individual, to be the collecting agent. In most other sales tax situations the seller is the collecting agent for the State's tax. In use-tax the buyer is supposed to self-report his tax obligation and collect the tax from himself, and send it to the taxing authority. (I know this same responsibility exists for income taxes, but typically most citizens are not self-employed and their employer withholds the required tax from their pay.)

This also raises an interesting question of responsibility. Suppose I buy an outboard motor from a local dealer. The motor is $10,000, and the sales tax in MIchigan is then $600. I pay the dealer $10,600 for the outboard motor. The dealer never sends the State the $600 in sales tax. If the State asks me for the tax due on that purchase, I would say I had already paid it to the State's agent at the time of purchase. I don't want to pay the taxes twice/

I would then want to apply that doctrine to my use-tax. When I bought the tee shirt in BC I was willing to pay Michigan's agent the required tax but Michigan did not have an agent present in the transaction to collect the tax. They did not have an agreement with BC to get their share of the tax I did pay. I'd say, again, I don't want to pay the taxes twice.

posted 10-16-2012 11:57 AM ET (US)            

http://www.immigroup.com/ImmigrationNews/CrossBorderShopping.aspx

According to that site, the sales tax refund policy in Canada was terminated around 2007, and now Americans vacationing in Canada can only get a partial rebate on sales taxes and only on certain qualifying expenses.

Certain USA States do have tax refund policies, but Michigan does not.

posted 10-16-2012 09:29 PM ET (US)            

By the way, my compliments to Tom W. Clark for his excellent explanation of sales and use taxes. As a retired CPA, I found his comments to be a very good clarification of a topic that often is found confusing.

posted 10-16-2012 11:30 PM ET (US)            

"The use tax is an excise tax imposed upon the privilege of using tangible personal property which one has caused to become located in this State and which is not within the exemptions provided in the act..."

(See previous cite linked above.)

Here is the actual law:

http://www.legislature.mi.gov/(S(mdeqhyicqj1ix445glfpl1bg))/mileg. aspx?page=getobject&objectname=mcl-Act-94-of-1937&query=on& highlight=use%20AND%20tax

The most application portion is stated in

http://www.legislature.mi.gov/(S(mdeqhyicqj1ix445glfpl1bg))/documents/ mcl/pdf/mcl-205-93.pdf

posted 10-17-2012 02:15 PM ET (US)            

This is more consistent and logical. If I buy an outboard engine in Tennessee from a brick and mortar dealer in Tennessee, then let me pay the sales tax in Tennessee and stop trying to collect it from me in another State. This will accomplish several things:

--remove the incentive to buy out-of-state to save on sales tax by buyers ignoring the present use-tax laws;

posted 10-17-2012 09:26 PM ET (US)            

The trouble is that this would have to be a Federal taxation system and Americans love nothing more than to bitch and moan about their Federal government.

Then there are all the practical hurdles. Some states have sales/use tax. Others do not. The tax rate is different in virtually all the states and what we call state sales/use tax is not really just a state tax, it is a state/county/municipal/special tax district tax in may locations.

The sales tax I pay (and collect) here in Seattle is 6.5% for the State of Washington and 3% for the City of Seattle.

Not all items are taxed equally. Until October 1st of last year, all restaurant meals here in Seattle were subjected to an extra one half percent tax to pay for...wait for it...the baseball stadium. I don't follow baseball. I don't visit the stadium. I couldn't care less about Seattle's (or anybody else's) professional baseball team. But I paid for that stadium with every meal I ate out.

posted 10-17-2012 10:28 PM ET (US)            

quote:

---

Jim "Use Tax on the Difference" what if I paid more outside of Michigan, would the state (Michigan) send me a refund check?

---

Huh? Why do you put quotes around something only you have said?

posted 10-17-2012 10:31 PM ET (US)            

quote:

---

How are folks in the rest of the country going to feel about paying for Seattle's sports stadiums?

---

posted 10-18-2012 09:46 AM ET (US)            

I think there are some special district taxes that tax hotel room rentals and meals at restaurants in some places, like airports for convention centers. And then some items are exempted. For example, in Michigan there is or was a tax break on new car purchases. If you bought a new car and traded-in an old car, you only had to pay sales tax on the difference in the values. I suppose this was seen as a method to stimulate new car sales.

posted 10-18-2012 10:27 PM ET (US)            

I understand the difference between a sports stadium and a ramp, but thanks for the explanation. But they are not really all that different.

A sport stadium may provide a venue for entertainment for 75,000 people every week and for millions more that watch events taking place there on television. A boat ramp might provide a venue for entertainment for 75 people a week. The stadium entertains one thousand times more people than the ramp, so it is expected that it might cost one-thousand times more.

I wrote earlier about the improvements in the launch ramp at Leland and the general improvements there to the facilities. The State has spent $1.1-million. If we allow for a factor of 1,000 to scale up to a sports stadium, we could spend $1.1-billion on a sports stadium before we overspent on the stadium compared to the launch ramp.

They are both businesses. The ramp and other improvements attract people to Leland, where they spend money. It's just like the sport stadium. And State money collected by taxes built both.

This is an interesting sidebar, but the real discussion here is about the concept of the use-tax which applies to the importation of an outboard engine to your State from outside your State.

posted 10-19-2012 10:17 PM ET (US)            

In regard to exporting of products, with modern electronics it has become possible for systems of control to be included in the products so that they will operate only in the region for which they were intended. I can think of two systems that employ these controls.

Commercially made DVD recordings typically have encoding that indicates the particular region of the world for which they were intended to be sold and used, and commercially made DVD players typically are configured to respect this coding, If a DVD recording intended to be sold in the USA is inserted into a DVD player that is in Asia, the recording may be disabled or may not play. However, this regional coding bit has been overcome in many implementations of the DVD player. The actual coding of the recording in a DVD was itself supposed to be encrypted and not able to be decoded except by authorized players, but this attempt at encryption was overcome very shortly after the DVD format was in production.

Another control system designed to affect use of electronics in various regions is the Geo-Fencing system used in certain electronic chart plotters with GPS receivers. Because the device will know its location on the Earth--that's the point of a GPS receiver and chart plotter, after all--some devices are encoded with limits that disable the device if use is attempted outside the authorized sales region. See my article on Geo-Fencing for some details.

Lowrance Geo-fencing
http://continuouswave.com/ubb/Forum6/HTML/003007.html