How To Lose Debt

Even among the most tax repressive states, many states have come to rely on “sales tax holidays” to drive local business.  You can watch out for these holidays in your jurisdiction and take advantage of them to save money.  Often however, these holidays do not include big ticket items like washer and dryers, etc. so their value may be somewhat limited.  But, if you were planning on purchasing an item in the first place and there is a sales tax holiday coming up, more power to you.

Now at the time of this writing, Congress has prevented local jurisdictions from imposing taxes on internet commerce.  The states in their ultimate wisdom get around these laws two ways.

The first is if you are purchasing something from a national company, say Barnes and Noble, and that company happens to have a physical presence in your state or local area, they will be forced to collect state and local sales tax on the internet, because they are required to collect the tax by state law. The second way is that most states with a sales tax have initiated a tax called a Use Tax.  This basically means that if you are able to buy items from an out-of-state entity on the internet, or through mail-order, you are legally obligated to pay a Use tax equal to the amount you would have paid if you had paid sales tax.

This was the States attempt to circumvent what Congress had laid down in Federal Law.  Now I am not one to ever advocate breaking a law, this Use tax, like all other taxes, are based for the most part on voluntary compliance. No out of state entity is going to willingly give a list of its clients, or purchases made to any state government, and stay in business that is.

While we are on the subject of voluntary compliance to local or state tax law, as mentioned earlier, there are six states that do not even have a general sales tax.  They are Alaska, Delaware, Hawaii, Montana, New Hampshire, and Oregon.  As states cannot constrain interstate commerce, only distance prevents you from driving over the border into a neighboring state and purchasing your big ticket items and return home if you happen live in a state that borders one of these six states.

Having personally spent many years living in Southern New Hampshire, the malls on the border with Massachusetts are so packed on Sundays that you can’t even drive down the main road without sitting in traffic for hours on end.

Now I need to be abundantly clear. The Massachusetts residents that do not pay their fair use tax in Massachusetts for the purchases made in New Hampshire are violating the laws of Massachusetts.  Do you think that the businesses in New Hampshire that benefit from these sales are going to provide Massachusetts a list of customers and purchases, not likely? Which is likely why the roads are so crowded, wouldn’t you think?  Now remember, I would never advocate breaking the law.

New Hampshire sells fireworks and Massachusetts does not.  Massachusetts State Police have been known to watch the fireworks stores selling fireworks to people with Massachusetts license plates, and then pull them over and arrest them when they cross into Massachusetts.

However, this kind of police activity is never going to happen to enforce a Use Tax law.  It is not the act of going over the border into a tax free state to make a purchase that is the crime. It is the failure of claiming that item as a Use tax item on their state/local income tax form that is the crime.

Now I personally believe that most people are honest. But that crime, assuming it takes place at all, would likely take place many days/weeks/months, after the actual out of state purchase. Not a likely candidate for a similar surveillance activity.