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Mon Mar 5 2018 21:21:31

Connecticut Tax Clawback Could Impact Online Sales

By: Reader

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Dear Ina,
I recently received an email from Newegg.com, telling me that they were required by Connecticut law to report the total cash spent by me on their site for a three year period. Here is their letter:

Dear Mr. (Name redacted),
IMPORTANT NOTICE TO CONNECTICUT CUSTOMERS.

A recent Connecticut law requires Newegg to disclose the amount you spent with us for the years 2014, 2015 and 2016. We do not collect sales tax on behalf of the state, but customers are required to file a sales or use tax form and pay tax on all taxable purchases.

During that three year period, you purchased the following amounts from us for use in Connecticut:

- 2014 total $3X.XX (Amount partially redacted)
- 2015 total $0.00
- 2016 total $0.00

In accordance with the new law, Newegg provided the Connecticut Department of Revenue Services with the total dollar amount of purchases made by you during these years, but no information about your purchased item(s) other than the dollar amount of the purchase(s) has been provided.

You may find details of how and when you must file your return at the Connecticut Department of Revenue Services' website: www.ct.gov/drs.

Thank you for shopping at Newegg.

Ina, this may be the beginning of an onslaught of similar notices to online customers of many, many more websites from a growing number of states. So far Newegg is the only online marketplace to have sent me such a notice, but I suspect this is just the first of many more to come.

What does this mean for the future health of online shopping? How serious will CT and other states be in collecting tax payments from customers, like me, who were turned in by out-of-state online marketplaces? Also, will penalties and/or fines for late sales tax payment be levied by the states? These are serious questions, especially for BIG online spenders!

Connecticut is teetering on the edge of bankruptcy with ever-growing spending and HUGE unfunded future liabilities, so I'm not surprised by this. 

I wonder if other poorly run states are strong-arming online companies like Newegg into turning in their customers who, like me, won't buy from them ever again.
J.

Do you think Connecticut's move to claw back use tax on online purchases going back to 2014 could adversely impact sales from frightened buyers? See more information in this article from yesterday's Newsflash.



Comments (29) | Permalink

Readers Comments

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by: geoffreymason This user has validated their user name.

Mon Mar 5 22:52:27 2018

Well, if they do the calculation, collection, and remittance, so what? Will it slow sales? Of course ... for awhile.

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This user has validated their user name. by: Marie

Tue Mar 6 02:49:57 2018

I remember about 12 years ago or so the state I lived in tried something similar.  Letters were sent to individual in the state saying they owed XX $$ for sales tax due to some online purchases.  At that time it was a mere scare tactic and it worked on some people as they sent the state the payment the state requested.  I never received anything beyond that first letter.

I'm sure by now some states have figured out a better way to do this and get back taxes they feel are owed to them.  

IMHO while doing this on current purchases I might be able to understand, the retroactive stuff I do not.  Sellers of items shipped to CT did NOTHING illegal or had illegal intentions and all it does is harm people financially.

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This user has validated their user name. by: Rexford

Tue Mar 6 06:35:52 2018

I would not even respond to Newegg.  Were there laws on the books in Connecticut for 2014, 2015 and 2016 that require this?  If so, why wasn't Newegg collecting the tax?

As I read this post and the comments above, I'm thinking this could become a scammers paradise.  Unsuspecting buyers will likely be bombarded with similar but fraudulent "tax collection" schemes.

Until these states and ecommerce sites come up with an efficient streamlined means of remitting the proper and legal taxes to the various states, counties, etc. (that require it) I don't think that these letters are worth the paper that they are written on, especially if laws were not on the books for sales that took place years ago.  Is the state of Connecticut going to go after every buyer?

Clearly these ecommerce sites want to push the headache of these tax messes onto the buyers.



 

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by: papergoy This user has validated their user name.

Tue Mar 6 10:12:11 2018

Good.  I hope more states follow suit if there is a use tax in the state.  New York State is nice enough to allow us to estimate our purchases based on our income level when we file our income tax, and I always pay based on that estimate as that saves me paperwork keeping track of things.  But anything to level the playing field- if the law is the law, then it needs to be enforced (or rescinded).  I have no sympathy for anyone who skirts the law regarding taxes as I pay those that are due, yet am certain I lose business to competitors who don't have my scruples.  

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This user has validated their user name. by: Rexford

Tue Mar 6 10:56:02 2018

papergoy, I see no evidence in OP's letter that states that anyone is trying to skirt the law. There are 50 states, 3,007 counties and 64 parishes in the USA.   If they want to collect from folks who do not reside in their states they need to work with these ecommerce companies to come up with solutions. Sellers also to be educated about who is collecting and who is not.  I doubt if the average accountant has much knowledge of all of this outside of the state that he or she practices.

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by: RL15 This user has validated their user name.

Tue Mar 6 12:57:34 2018

I am in Michigan. When filing personal (not business) tax returns, a person is supposed to pay the sales tax on out of state purchases.

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This user has validated their user name. by: Rexford

Tue Mar 6 14:09:50 2018

RL15, what percentage of Michiganders do you think are complying with that?  Are you seeing any evidence from news sources that people are actually doing that?

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by: RL15 This user has validated their user name.

Tue Mar 6 19:09:38 2018

@Rexford, I'm guessing they may have 1% complying. Right now they are not actively doing anything, but, I'm sure quite soon they will be doing something like CT is doing.

A few years back lots of people were buying cigarettes online to avoid the high Michigan cigarette tax. Michigan went after every out of state cigarette sellers they could find. Got all the buyers information and billed the buyers, plus interest and penalties.

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This user has validated their user name. by: SalesBoy

Tue Mar 6 22:06:34 2018

@papergoy - ''New York State is nice enough to allow us.....''

Yes, the NYS tax bureau has a big heart! NYS is one of several states teetering on the brink due, at least in part, to mismanagement, corruption and overspending - especially in the NYC area.  Luckily for them, they have such understanding and compliant overburdened taxpayers!

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This user has validated their user name. by: Rexford

Wed Mar 7 06:39:35 2018

RL says "Michigan went after every out of state cigarette sellers they could find. Got all the buyers information and billed the buyers, plus interest and penalties."

I googled for news of that and found an article from 2005 that stated that they were only going after folks in Michigan.  It also stated that  Wisconsin, Washington and California were looking into billing residents similarly for cigarette sales.  I could not find any article stating that these states were trying to bill folks out of state.  If you find one, please share.

I wonder what the cost of putting together a program to collect the taxes was versus what they actually took in.  Seems like a costly effort.

What I can't figure out is why don't they simply pass laws that force the site to collect taxes on the cigarettes. That would be a whole lot more efficient than tracking down and billing buyers.

And they place sin taxes on these types of products to keep people from imbibing, but they all want a piece of the pie.

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This user has validated their user name. by: SalesBoy

Wed Mar 7 06:58:09 2018

@Rexford - "What I can't figure out is why don't they simply pass laws that force the site to collect taxes on the cigarettes. That would be a whole lot more efficient than tracking down and billing buyers."

Remember, we're talking about the government. Level-headed, intelligent and well thought-out are concepts totally foreign to most legislators.

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by: RL15 This user has validated their user name.

Wed Mar 7 11:16:40 2018

@Rexford, I am only referring to Michigan residents.

Inept is what Michigan is when it comes to taxes.

In 2016 I filed my business and use tax and made my payment. 10 months later I get a letter saying I did not file. I call them up. tell them I did and that I had the cancelled check. They tell me to mail in a copy of the check and the return. Mail it in, no problem. 5 months later, I get another letter stating I owe X amount of taxes, plus penalty, plus interest. I call again, explain the situation, lady asks me what was the amount of the check I paid the taxes with. Puts me on hold. 5 minutes later she comes back tells me I owe nothing. Few days later I get a check from the state I overpaid.

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This user has validated their user name. by: Rexford

Wed Mar 7 13:12:16 2018

I'm not a government basher, as I know the importance of a strong government, but the folks that serve us are always 20+ years behind as it relates to keeping up with technology.

We have a president who brags about not paying any taxes, so why should I expect that to get any better.  And yes, villagers with tiki torches, come after me for that comment.  But remember, I pay my taxes.

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by: papergoy This user has validated their user name.

Wed Mar 7 13:38:55 2018

To Rexford- the original post did NOT say he did not pay the use tax due HOWEVER that can be inferred by the fact he will no longer shop there any longer due to this being reported.  If you are otherwise happy with the product and service, and the only thing that has changed is that the government now knows the dollar amount of your purchases that may be subject to use tax...well....  (and like all things, use tax may not actually be owed as if it was resold, I'm sure there is an exemption.  Some items I'm sure are exempt from the tax...so the fact you spent a given amount at a given site does NOT mean you necessarily owe tax on it..but if you do..you should pay it- for should we not render unto Caesar...?)

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This user has validated their user name. by: SalesBoy

Wed Mar 7 22:13:27 2018

@papergoy - "should we not render unto Caesar...?"

Just keep in mind what happened to the Roman Empire, and WHY it happened.

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by: Moonwishes This user has validated their user name.
Web Site

Thu Mar 8 01:44:00 2018

PA is another state that already has it's citizens declare what they owe for taxes from buying on line. For those of you that haven't heard, Amazon in three weeks will be collecting sales tax for PA as well. Then the problem begins with okay I paid some taxes buying at Amazon for Jan-Mach and then April through Dec., plus I bought things at other places in other states and the thought of what we tax payers are going to end up trying to sort out during tax time can end up being ridiculous. Part of the problem is other states, don't really seem to care if something is taxable or not, they charge it. When I buy my some of my inventory that comes from Kansas, they charge me PA sales tax. I just bought almost $400 worth of inventory of which only one $5 item is Sales taxable, yet I was charged tax on the inventory and the shipping. How do we get that money back? Lots of questions that can't be answered because no body has thought things through very far.

Asking sellers or buyers to go back three years is not fair. I know I pack my paperwork for each tax year away when taxes are done. Doing look backs to 2014 means for some folks going back 4 years. If the person just bought some stuff and they aren't running a business on line, they aren't going to have any paperwork around to prove or disprove whether they bought something or not. Unless you run a business or whatever, I thought after 3 years most folks should feel comfortable to toss their tax stuff after that period of time. Who is going to remember that in 2014 they bought a dog leash and a dog coat from somewhere? Who would keep that kind of receipt around unless you dog is a service animal and perhaps, items for service animal are tax deductible. Most people open the package and toss the paperwork. I would think that most people that are going to get hit with the letters and other nonsense that the states think they should send out, will be shocked to say the least, besides not having a clue what the letter is talking about.

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by: Interesting Antiques This user has validated their user name.

Thu Mar 8 01:54:21 2018

Rexford-
there nothing shameful that the President doesn't pay taxes (I'm sure he does some) he has a team of accountants to ensure everything is kosher.

As a business we have a good accountant and he saves us a lot of money, he is worth every cent. Nothing shameful to know that you are using every legitimate tax  loop and write oof that is available to you as a business-nothing ilegal about it!

Plus don't forget our President is only taking a DOLLAR as his salary unlike the previous President that milked the taxpayers .

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This user has validated their user name. by: Marie

Thu Mar 8 02:30:29 2018

@Interesting Antiques

There are pros and cons to anyone that is or has been POTUS.  But that discussion is best left to some other forum other than this one.  With that said, you are only doing a dis-service to yourself if you think our current president isn't over spending taxpayer dollars on personal things.  Just as one example, all the golf trips.  Those are not cheap and we are paying the bills, not him.  I'm not trying to dis him or get into a conversation about this.  I'm just saying, there are many sides to this subject, it is not as simple as you stated.

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by: Interesting Antiques This user has validated their user name.

Thu Mar 8 02:47:08 2018

Marie,
I was speaking regarding paying taxes, since Rexford stated the current president doesn't, who happens to be a businessman as opposed to previous presidents who were predominately lawyers.

The is nothing shameful for taking advantage of any legitimate tax breaks that are available to business owners.

As presidents go, they all take advantage of  their position-some more than others.
At least the current one isn't taking a salary.  

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This user has validated their user name. by: Marie

Thu Mar 8 02:50:25 2018

@Interesting Antiques
You are making assumptions.  Since POTUS refuses to release his taxes, you have NO IDEA if his tax deductions are "legitimate".  They may be, but we don't know.  So is he hiding something, I don't know and you don't know either.  

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