Colorado passed a law to force residents to pay taxes on what they buy online! And it already went into effect! Beware!!! Amazon now says that “over our strong objections” they now must report our total purchases over a certain threshold to the State of Colorado Department of Revenue. (That threshold is rumored to be $250 per merchant). And then when we do our tax returns, we have to pay the taxes on what we bought over the year. And we have to pay the high Colorado tax rate, not the tax rate of where Amazon is.
Since I use Amazon for many things, my year-to-date expenses at Amazon are more than $___ (I don’t even recall buying anything in particular). The new law only went into effect on May 1 though, so since May 1, I’ve bought $400 worth of stuff from Amazon. Socks, cellphone battery, music, movies, shoes, a backpack, a comic book… and it is none of Colorado’s business. Literally and figuratively.
Some would say I’m overreacting.
After all, based on what I’ve spent so far this year, I’ll only owe $30 more in taxes.
But by year’s end, assuming my grand total at Amazon is a thousand bucks (and I hope it won’t be, now that I’m aware of this new law), that would be $82 more in taxes. And being hit with an unexpected $82 bill on April 15 is enough to cause stress in anyone.
We need to reexamine why local taxes exist in the first place. It isn’t simply like the Mob saying “You wanna do business in our town? You gotta give us a cut!”. There’s a rationale for state and local taxes. Wear and tear on the town from those who have businesses in the town. Sewer systems being used more by the employees who moved to the town to work. Schools for those employee’s kids. Etc. But with internet purchases, there is no wear and tear. There’s no use. Aside from some UPS trucks rumbling around, there is no great infrastructure that the presence of a business entails, for which the state or city should be compensated. (And UPS already pays taxes for the locations is keeps in state, and for the vehicles it drives around the state.)
It’s an unfair tax. A tax created to increase revenues, solely for the purpose of increasing revenues.
So, can this tax be avoided, legally?
In the case of Amazon, many of the items, although purchased through Amazon, were actually not sold by Amazon and so I could have avoided having them reported. Many retailers that sell clothes or shoes or electronics (for example) exist on Amazon as well as on their own websites. So if I’d bought shoes directly from Shoes.com rather than from Shoes.com’s presence on Amazon.com, I could have kept the total spent at Amazon below $250 for the year, and kept my private life out of Colorado’s eavesdropping. I used Amazon, as does most everyone, because Amazon’s transaction system is proven to be secure.
So you could keep your Amazon total low. However, regardless of how you spread your purchases around, there is still an obligation for you, as an upstanding citizen, to report all of your online purchases to the State of Colorado. Always has been. “The State of Colorado requires that the taxpayer file a sales/use tax return at the end of the year reporting all of the purchases that were not taxed and pay tax on those purchases.” Has anyone ever done so? Probably not. It isn’t something the H&R Block office ever asks people about. But it is there on the tax forms, and I expect that people who buy big things, like tractors or boats, are told to fill it in.
News articles say this Colorado internet tax is unprecedented and will be appealed up to the Supreme Court. We can hope it will be overturned. However, the national Democratic party (which I usually like) has started to solicit support for taxing internet purchases everywhere. The whole country could soon be facing the same situation that Colorado is experiencing now.