Friday, August 19, 2011

Californians Have No Use for the Use Tax

In a piece of news that should surprise no one, the Sacramento Bee reports that California taxpayers are widely non-compliant with its long-standing "use tax". This tax is essentially a sales tax that Californians are supposed to pay on durable goods purchased outside the state. It's moved into the spotlight since the Legislature passed a (probably illegal) tax affecting online retailers; the so-called Amazon tax is, essentially, an attempt to force businesses to remit taxes that we're supposed to be paying. But the use tax is supposed to apply in a wide range of other circumstances. If you bought a big, ugly sculpture on a trip to Santa Fe, or you bought an ironic hipster t-shirt when you visited New York, or you bought an overpriced Red Sox hat like everyone else in the country when you went to Boston, you owe California taxes on it. (And no, they don't care that you already paid sales taxes at the time of purchase.) You can probably see the two problems with this tax: it's impossible to enforce its collection, and it can require a lot of homework to comply with it. And according to the state Board of Equalization, almost no one in the Golden State bothers with it. Of the Californians who filed a personal income tax return in 2009, only 0.42% paid any use tax. In total, the state collected only $10.4 million through this program.

Which does beg an obvious question: does the use tax generate more revenue for the state than it costs the BoE to manage it? How about it, Sacramento?

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