Illinois wants web shoppers to report, pay online sales tax

Chicago Sun-Times ^ | Mar 9, 2011 | FRANCINE KNOWLES

[Freedumb]

If you think making purchases online means you don’t have to worry about paying the state sales tax, think again.

As the state continues to grapple with a big deficit the Illinois Department of Revenue this year has begun targeting those purchases on state tax forms and is seeking to collect.

This year, for the first time, taxpayers are being asked how much they owe in so-called “use taxes” on the Illinois 1040 tax form. The law already required taxpayers to pay the “use” tax, but it wasn’t listed on the basic form.

A use tax is a form of sales tax that applies to purchases made outside Illinois, but used in the state. The tax, which is 6.25 percent of the purchase price, applies to online purchases made from businesses that don’t have brick and mortar locations in the state and that don’t charge Illinois sales taxes, according to the Illinois Department of Revenue. That includes companies like Amazon.com, but not Barnes & Noble or Macy’s, who charge sales taxes online. The “use” tax also applies to catalog and home shopping network purchases from out-of-state companies that don’t charge sales taxes.

The state expects to collect $5 million to $6 million in such taxes this year, said department spokeswoman Susan Hofer.

For taxpayers who know how much they spent, the 1040 instruction forms include a worksheet to help calculate what is owed.

If you made such purchases but are clueless on how much you spent, the forms include a guide in estimating how much you owe, based on adjusted gross income. For individuals with income between $50,001 and $75,000, the state estimates that such purchases amounted to $608, and the estimated tax owed is $38. For those with incomes between $20,001 and $30,000, purchases are estimated at $240, and the tax owed is estimated at $15.

The state expects filers to honestly report what they owe. And if the state later finds out that you owe more, you can face penalties and interest, Hofer noted.

While the amounts aren’t much, the tax still “kind of hit people between the eyes because they didn’t expect it,” said Judi Strauss, an enrolled agent and owner of Strauss Tax Service with offices in Chicago and Downers Grove.

Taxpayers can’t leave Line 22 blank on the 1040 form, but they can put in zero if they don’t owe anything, she said.

Strauss advises consumers going forward to keep track of what they actually do buy from virtual stores online. “Look to see if the store charges sales tax,” when you check out, she said. “Keep a running total all year.”

The tax law is not new nor is it unique to Illinois, said Carol Kokinis-Graves, senior writer analyst with Riverwoods-based CCH, a provider of tax and audit services.

“In most states, the use tax was enacted at the same time the sales tax was enacted,” she said. “However many people are simply unaware of their use tax obligation and don’t pay it.”

Illinois is offering an amnesty program on the tax covering purchases made from July 1, 2004, through the end of last year.

The state isn’t alone in trying to collect. “Many states are experiencing severe budget crises,” Kokinis-Graves said. “As a result, they are aggressively looking for additional methods to collect taxes they are owed.”

[lewarcher]

Only thing is, there are the rules of God and the rules of man.
And in this instance?
The ones making these rules, are the biggest sinners.

[lewarcher]

Only if you report a figure on line 22.
A zero placed there shifts the burdon of proof back to the real crooks.

Otherwise you’ve declared that you do in fact buy on line, and brother, the next assumption by the state is that you very likely owe more for the previous six years.

Remember, .006 for one year will not get you off the hook for the previous six years, only the penalties and interest. So, place a dollar figure less than the .006 against your gross for years 2004 thru 2010, and my friend, they WILL come after you.

So, your choice is this: Pay up for the relevant seven years whether you owe for those years or not, or declare zero.