Just 1% of taxpayers report unpaid sales tax
Fact: Total sales by online retail giant Amazon increased by 79 percent—from $19.1 billion to $34.2 billion—between 2008 and 2010.
Fact: In that same period, sales taxes voluntarily declared and paid by Wisconsin taxpayers on online or out-of-state purchases rose 11.2 percent.
Why is that gap important?
The number of Wisconsin taxpayers who follow the law and voluntarily pay sales tax on online and out-of-state purchases when they file income taxes “is low,” state Revenue Secretary Rick Chandler conceded in a WisconsinEye interview last week.
“Low” seems like quite an understatement.
Data suggest another word—“pathetic”—might better describe taxpayers’ lack of compliance with the tax code when it comes to online or out-of-state purchases.
--When they filed 2010 income taxes, 28,878 taxpayers voluntarily acknowledged owing sales taxes on out-of-state and online purchases.
--Since there were 2.86 million tax returns filed that year, one out of every 100 taxpayers voluntarily complied with the law.
--The 28,878 taxpayers who reported owing sales taxes on those purchases paid an average of $69 each.
Chandler estimated that the low—to use his term—compliance rate costs state government about $150 million a year in uncollected sales taxes.
What would $150 million buy?
It would fix the deficit projected by mid-2013 in Medicaid, which provides health care for the poor, elderly and disabled. It would run the state Department of Corrections for seven weeks. It would pay for the Legislature for more than two years.
Chandler attributed the dismal tax-code compliance rate to both ignorance and scofflaws.
“A lot of people are unaware of it or just choose to not go to the trouble of complying,” he said.
“They are supposed to voluntarily say, ‘I made this purchase, and I’m going to be sending in this (sales) tax owed to the state.’”
For those of you gathering records needed to file your state income taxes by the April 17 deadline, here is what short-form Line 26 asks of you:
Sales and use tax due on Internet, mail order or other out-of-state purchases—If you certify that no sales or use tax is due, check here_.
Which brings us to letters the Revenue Department recently sent to about 3,000 Wisconsin taxpayers asking them to—please!—check whether they owe unpaid sales taxes on Internet, out-of-state or mail-order purchases between January 2007 and December 2010.
And, the letter continued, if taxpayers owe any additional sales tax on those purchases, they should add 18 percent interest per year and send in “any payment due.” The Revenue Department will also add “late filing fees” but “no penalties will be assessed.”
The letter was accompanied by a “tax worksheet,” which state officials want completed and returned “even if no tax is due.”
But it’s the opening sentence of the Dear Taxpayer letter that may cause the most confusion and anger because it uses the dreaded word “audit.”
Here’s that greeting: “As part of an ongoing office audit project, we are requesting that you review your records for purchases of taxable merchandise used, stored, or consumed in Wisconsin to determine if you reported and paid the correct amount of Wisconsin state, county and stadium sales and use taxes.”
No, Chandler said, taxpayers who got the letter are not having their tax returns audited.
It’s a standard letter—just like the ones that have been going out for 15 years, Chandler added. And letters like this have resulted in taxpayers paying an additional $10 million in taxes and interest in recent years.
The Revenue Department got the names of those 3,000 taxpayers from third-party groups—including the U.S. Customs agency that monitors what international travelers declare when they return to Wisconsin and some on-line retailers who do provide state-by-state information on customers.
Chandler said it’s only taxpayers who are on their honor to report unpaid sales taxes on out-of-state or online purchases. Congress has never passed a law requiring retailers to disclose whom they sell to and what those items cost, he added.
Every state is losing sales tax money in this way, Chandler noted.
“Congress clearly has the power to regulate this area,” he added. “The solution is in Congress.”
Steven Walters is a senior producer for the nonprofit public affairs channel WisconsinEye. This column reflects his personal perspective. Email stevenscwalters@gmail.com.
Feb 16, 2012 at 4:56 p.m.
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kio- I thought there was a box on schedule A to imput out of state tax paid on things.
Feb 14, 2012 at 5:38 a.m.
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Must be a slow news day for poo pie, or he ran out of pages to color with his crayons.
Feb 14, 2012 at 4:14 a.m.
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frogger:
You can only claim sales tax deduction IF you don't claim state income tax deduction when itemizing. Since we live in a 7.5% state income tax state, hardly anyone who itemizes is going to opt for writing off sales tax (you can only claim one or the other). If you live in TN, FL or a non income tax state, then you will claim all sales tax receipts on itemization.
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The final comment of this article is VERY telling of the reporters writers beliefs-philosophy.
"“Congress clearly has the power to regulate this area,” he added. “The solution is in Congress.”
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And as normal once you get all this great regulation, you'll have all the unintended consequences to go along with it. See: banking regulations, trade regulations, the prohibition era, ext.
Feb 13, 2012 at 9:22 p.m.
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donnaw must be a student in Janesville, iPad and all
Feb 13, 2012 at 2:20 p.m.
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donnaw said, "Sorry about the multiple postings..darn sensitive iPad."
Maybe it's your conscience for supporting Walker that is causing a twitch in your finger.
Feb 13, 2012 at 2:14 p.m.
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I am one of those 99% woh said "no"
I am glad I am in the majority!!
Feb 13, 2012 at 2:12 p.m.
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ezoner- If you pay a different tax in another state you can keep those receipts and get a credit or something on your itemized but who keeps these like you said.
I think I will now. Going to Il and may just keep those for an extra .05 credit on my taxes.
Feb 13, 2012 at 2:01 p.m.
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Guess you need to figure out how to get taxes paid when they BUY something on the internet huh?!?!!?
Feb 13, 2012 at 12:54 p.m.
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Gandy -- The point I was really trying to make is it is very unlikely that anyone keeps data on small purchases made over the web. Small -- being less than $500. I doubt it very much. Those that do are anal accountant types.
Feb 13, 2012 at 12:29 p.m.
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careful man, the state will hit you up for taxes on multiple postings...of course it is self reported so all you will have to do is fill out a couple of request forms, submit a DNA sample and a notarized summary of the multiple postings then is 6-8 weeks you will get the actual paperwork regarding the multi-posting tax from the DOR.....of course you could just get the form from Amazon.com but then we start this discussion all over again.
Feb 13, 2012 at 11:18 a.m.
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Sorry about the multiple postings..darn sensitive iPad.
Feb 13, 2012 at 11:17 a.m.
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Madcity...good one! I agree!
Feb 13, 2012 at 11:17 a.m.
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Madcity...good one! I agree!
Feb 13, 2012 at 11:17 a.m.
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Madcity...good one! I agree!
Feb 13, 2012 at 10:57 a.m.
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If Congress is the solution, we're all screwed.
Feb 13, 2012 at 8:40 a.m.
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OK-- Lets think logically here just for a momet.
1. How many people keep each and every reciept for everything they purchase, in and out of state? Not many.
2. When someone travles to IL they pay the IL sales tax. Therefore, the sales tax collected would/should be based upon the state in which the products are sold, not bought. So if there is no sales tax on those items in the state of transaction, then no sales tax would apply.
3. This implies that sales tax for all items, including cash or credit transactions, when traveling should be paid to BOTH states, or you must file to recieve a refund from the state of purchase, and pay into the state of residence.
The law will be nearly impossible to enforce and would be a undue burden on a business to pay sales tax collect to multiple states if you are small business. Large businesses -- such as Amazon should be able to comply, however, I would expect the tax to be paid into the state where the transaction occurs.
Feb 13, 2012 at 8:29 a.m.
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Gandalf- 100% agree with that..100%
I can't believe brick-and-mortar stores aren't screaming murder about this.
Feb 13, 2012 at 8:27 a.m.
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FOTH and Bubs,
Add 1 independent to that list.
Feb 13, 2012 at 8:01 a.m.
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Bubs: Yes, it would be interesting to see a breakdown of that 1% of filers by political philosophy. I don't recall how many times I have paid it. More than two or three times, at least. So far, that makes one liberal and one libertarian. As for conservative politicians and pundits preaching the gospel of "rendering unto Caesar", I can't recall hearing that even once but I will certainly be keeping my ears open from now on. :-)
Feb 13, 2012 at 7:11 a.m.
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To help calculate how much tax you owe from online purchases, you can download a free "Use Tax" form from Wisconsin DOR website.
http://www.revenue.wi.gov/faqs/ise/useta...
Take a look at #7 on that link above. Wisconsin makes you pay taxes on the shipping as well, not just on the price of the item.
Feb 13, 2012 at 7:01 a.m.
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The hard evidence would also suggest that conservatives- who claim moral superiority - are not living up to their legal requirement to report these purchases. Whether you like taxes or not, simply choosing not to pay them should not be an option. Considering how many conservatives trumpet their religion, I'm surprised that they aren't better about rendering unto "Cesar" and then work within our political system to change the law.
The truth is, this isn't a liberal/conservative argument. From the low reporting rate, it should be obvious that citizens of all stripes are violating the law. Personally, I think self-reporting is a ridiculous way to collect taxes, but until the law is changed, I (a liberal) will do my legal duty. There are plenty of laws that I disagree with, but I obey them and work to get them changed.
Feb 13, 2012 at 6:41 a.m.
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It looks like the overwhelming majority of "Please Tax Us More" liberals aren't preaching what they practice. I just love hard evidence.
And, speaking of "Please Tax Us More" hypocrisy, anyone bamboozled into the self-delusion that Warren Buffet is some sort of altruistic patriot should read this excellent piece of journalism:
http://reason.com/archives/2012/02/09/wa...
The General Electrics and "The 1%" will always, always find a way around taxes. It's just one more example of things that only THEY can afford.
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