Saturday, February 19, 2005

Is Amazon Next?

I haven't seen this touched on yet.
The Ohio Department of Taxation wants to collect on thousands of dollars in unpaid cigarette taxes from Internet sales and plans to mail about 1,000 letters demanding payment from Ohio residents.
Evidently, the agency has already sent out 25 letters requesting $5,000 in lost taxes. They aren't saying how much more money they expect from to get from the remaining letters, but it's safe to assume they went after the biggest offenders first.

Even assuming everyone who receives a letter pays immediately and they continue to average $200 per letter, the state will pull in a total $205,000 in lost taxes. Now do you really think they're going to pay immediately. How many follow-ups will be needed? Will a lawyer have to get involved?

It doesn't take long before we spend over $200K collecting our lost taxes.

The point is clearly not the taxes. Or at least not these taxes.

The point is to generate visibility and publicity to scare Ohioans about all of their Internet purchases. It's just easier to get the list of tobacco sellers. Plus, it's always safe to pick on the smokers.

In 2001, Ohio added a line to it's tax form where Ohioans can enter a Use Tax, for any out-of-state purchases made over the Internet or through catalogs. No one heard of it then.

In a statewide survey done for ODT, nearly 86 percent of respondents had never heard of the use tax. More than 77 percent were not aware that Ohio charges tax on purchases from out-of-state catalog and internet retailers.

Commissioner Zaino said overcoming that lack of awareness is critical for both the retail industry and state and local government, "We have a lot at stake here -- thousands of retail jobs and a vital source of revenue for both local and state government services. I believe taxpayers will understand the importance of this issue and be responsive. If we can’t slow the losses, it’s not hard to imagine a scenario where you’d have to raise other taxes to compensate."

That was in 2001. It's safe to say little has changed except that the lost revenue continues to grow. Nothing a little free press about the threat of lawsuits can't help.

It is a little ironic to see the Ohio Department of Taxation taking the same approach to a problem as the RIAA. I just don't know which one has the worst reputation to be hurt by the comparison.