State taxes on shipped goods

Old May 2nd, 2004, 07:30 AM
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State taxes on shipped goods

Yesterday we received a bill from the state of Illinois for taxes (and interest) due on an aboriginal painting shipped from Australia in 2001. Seems that the customs data base is now available to states and they're collecting state taxes, regardless of whether custom fees were due. Anything that went through customs and was recorded will be taxed. Another reason to bring items home with you...
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Old May 2nd, 2004, 07:38 AM
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You actually owe the state tax if you carry the item home with you also. (I realize most of us don't go pay, but...)
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Old May 2nd, 2004, 07:44 AM
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How does that work exactly? Do you owe the full rate sales tax for items bought outside the state? Is it adjusted for any taxes you have paid at the point of purchase?

Not to put the OP on the spot, (thanks for the info, by the way) just curious if anyone was familiar.
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Old May 2nd, 2004, 07:44 AM
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If your state has a sales tax, most likely it also has compensating use tax. The constitutionality of such taxes was upheld by the US Supreme Court way back in the 1930s. Assuming that your state's laws are somewhat like my state's, goods (that is ones that would have been taxable if sold in your state) that you buy outside your state or by mail order, under circumstances in which state or local tax was not both due and paid to another state or local jurisdiction within the US, are subject to use tax when they are delivered to an address in your state or when you take them into your state to use in your state. Most of these use tax systems depend on people to self-assess and report and pay the use tax they owe, so a lot of people don't comply. But in some situations, e.g., when records are made at customs, or when a cooperating state audits a mail order vendor that makes interstate sales, the purchaser's home state may be supplied with the relevant information and then people who didn't self-assess the use tax get caught.
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Old May 2nd, 2004, 07:56 AM
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Clifton: Generally the use tax is at the same rate as the sales tax that you'd pay if you bought from a vendor within your state. In most states in the US, you can claim a credit (subtracted from the full amount of use tax you'd otherwise owe to you state, but it cannot reduce your liability to below zero, so you can't get a refund becaue you paid more in another state) for sales or use tax that was already due and paid lawfully to the state (or local jurisdiction within a state) where you purchased and picked up the item. That way you're not double taxed.
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Old May 2nd, 2004, 08:11 AM
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So do we get to claim the VAT as a counter-balance to state sales tax? Are we not being taxed two or three times on some items?
 
Old May 2nd, 2004, 08:19 AM
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No, in my state, you cannot claim credit for tax paid to a foreign jurisdiction, and, as far as I know, it can't be done in other states either. The credit for taxes paid to other states reflects a relationship of comity among states that are all part of the US. Generally the credits are reciprocal. Individual states can't have such a relationship with a foreign country. I guess it would be different if the EU weren't just an "E"-U and if we belonged to it, but until then....
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Old May 2nd, 2004, 09:16 AM
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Thanks for the information cmt. That's very useful! Hopefully to anyone else who wonders how this might impact them personally as well.

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