Wow, I had an unpleasant letter from the Florida Department of Revenue.  Apparently they are targeting photographers who buy equipment online and forcing them to pay sales tax on any online purchase of equipment where they did not pay sales tax.  

That means purchases from B&H, Adorama, Amazon, etc.  going back 36 months.  Even if you weren't in business 3 years ago they still want to charge back sales/use tax if you are using the gear to make money.  

I called for clarification after getting the letter and asked if it was just be because I recently incorporated.  They said no - they are combing their records for anyone doing business in Florida as a photographer.  My accountant suggested that perhaps B&H or some other online photo retailer is being audited.   I guess I won't ever know for sure how I turned up in their database.

So now I have to send them all my photo gear receipts dating back as far as 2006 and they will send me a bill for 7% tax.  They are waiving the interest and penalties because I am cooperating.    Oh joy.

I never even knew I was supposed to be paying sales tax on out of state purchases  

Anyone else in Florida had this happen?  If not, you may, so here's a headsup.

1. They're supposed to go after the retailer, for not collecting sales tax. Not the customers.

2. I thought the federal government forbid this - guess I'm wrong?

3. The retailer is in another state. So "where" did the transaction take place? Another case of clueless polititicans and bureaucrats who still don't understand the internet.

4. If they're not willing or able to go after the retailer's records, they're just naming some names and asking if you bought anything from them. You could say NO, at some risk of course.

I think this crazy action shows how desperate some of the states are for money right now. I believe Florida is in particularly tough shape.

This reminds me of a scam that happened recently in Ontario,

Phone calls from 'various' government agencies stating records need to be updated etc - and they confirm your identity by asking you for your SIN number, and address etc... basically they were just phishing by telephone for personal data.

If it is a true government agency phone call they should be able to tell you your sin and provide you with the personal information.

Ask for a phone back number that is verifiable in your government directory, and employee name, and reference number for the call - and call back the government agency from the telephone book - and try to verify the caller - do not give out personal info over the phone.

This reminds me of a scam that happened recently in Ontario,

Phone calls from 'various' government agencies stating records need to be updated etc - and they confirm your identity by asking you for your SIN number, and address etc... basically they were just phishing by telephone for personal data.

If it is a true government agency phone call they should be able to tell you your sin and provide you with the personal information.

Ask for a phone back number that is verifiable in your government directory, and employee name, and reference number for the call - and call back the government agency from the telephone book - and try to verify the caller - do not give out personal info over the phone.

I wish it was a scam, but no.  It was not based on a phone call, but a letter.  The information in the letter is also available on the Dept. of Revenue website.

Sad to say, this is the real deal.k

I totally agree with the comments about the state being cash strapped and that being a likely reason for this.  Right now it appears to be photographers being targeted but I am certain they will pursue other industries too. 

They're going to get a grand or so from me and multiplying that by hundreds of thousands or even millions of small business owners it will add up to quite the windfall.

Something about this sounds so wrong.. the retailer is meant to add sales tax to the item you buy, if there is no sales tax marked on the item, you presume it is included in the overall cost.. the the retailer pays the tax back to revenue..

I don't understand how they are chasing the buyer, it is the seller they should be chasing, and how do they know the sales tax was not included in the selling price? I think you should consult with a laywer..

You may be right.  However as it stands I owe around 1k.  Based on prior experience with lawyers, I would be damned lucky to get off that lightly in lawyers fees. 

Lisa,

It is generally known as "Use Tax" and has likely been written into your state sales tax code for a long time but few knew about it, or chose to ignore it. They are likely targetiing photographers because generally purchases run into in high volume dollars and can be repetitive. I am sure that somehow computer junkies will be found out as well, again, high volume and high price tag. After that, they will likely try to round up all of the soccer moms purchasing gobs of stuff on Amazon and Overstock.

Here in NY in they have gone on the campaign the past few years. There is now a line, even on the NY state income tax short form, for Use Tax. The line cannot be left blank. It must be either Zero or an amount of dollars. They explicitly state "online and all other out of state purchases" or something to that effect.

Amazon purchases are now taxed in NY State (Amazon took it to court and lost) no matter where the vendor is. It used to be that if a camera vendor was in NY, yes I would get charged tax if the item was not purchased for customer resale under a resale tax ID. A few months ago I had purchased some kitchen items from a specialty vendor in IL, and yes it was taxed through Amazon.

Even just a few years ago, you could purchase out of state items with no tax with no problem. But now with easy ordering on the web becoming huge business, larger vendors are being sought out and are being "persuaded" to abide by NY State Sales Tax reciprocal agreements. Florida may have a similar scheme in mind.

If you browse through your Florida State Sales Tax Code, I am sure that something called Use Tax, or something similar, is already in the code and has likely been here for at least a few years. It's just never been at the forefront though until now as states start to scrounge for revenue.

I am sure the tax gathering activity ramps up, the issue will make it big in your local media headlines, as more people are being made aware of the collection process. If they are going back 3 years retroactive, my guess is that's when it was written into your tax code.

In NY Sales Tax Code, the concept of Use Tax has actually been in place for many years. It was virtually unknown to those not in business. So NY went after all of the internet buyers who had no knowledge of the code.

Sorry to hear about that Lisa but honestly you'd be a lot worse off if you lived in Europe __ although that's probably precious little comfort right now.

But I would be able to comfort myself with the >$600/month my family would save by having National Healthcare...

Death and taxes eh?

Amen Brother!  

FWIW, here's the relevant part of the law from the DOR website.  Stormchaser is right, it is a Use Tax.

Most Florida citizens are not aware that this state has a "use tax." Use tax normally applies to items purchased outside Florida, including another country, which are brought or delivered into this state and would have been taxed if purchased in Florida. The use tax rate is the same as the sales tax rate, 6%.
Examples include:

    * Purchases made through the Internet.
    * Mail-order catalog purchases.
    * Purchases made in another country.
    * Furniture purchased from dealers located in another state.
    * Computer equipment ordered from out-of- state vendors advertising in magazines.

If an out-of-state seller fails to collect sales tax, it is your responsibility to comply with Florida law. You must submit payment directly to the Florida Department of Revenue. This payment is required by section 212.06(, Florida Statutes. To file and pay use tax, complete an Out-of-State Purchase Return (Form DR-15MO). If the tax owed is less than one dollar, you do not have to file a return.

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Before everyone gets all atwitter about scams or starts with the conspiracy blather here is my experience:

I got socked with a similar tax bill in Illinois when I sold an Illinois business about several years ago. When the state sales tax department reviewed and signed off that I didn't have any sales taxes due the state that my business collected, they also checked my expenses listed on my Illinois income tax returns. The line on the return was called "Use Taxes" and on that line I should have listed (verified by my CPA) out of state purchases that the sellers were not required to charge in their state. Thus my state would benefit from sales taxes on goods flowing into the state that weren't collected by the originating states.
 
So, yes it is all quite legal. And yes I paid the $2,000+ that was due. The odd thing about this tax is that virtually nobody bothers to pay it and unless you get audited or need the state to "sign off" on a business sale to another buyer, you will get billed for taxes on the out of state purchases, plus penalties and interest. In my case, gratefully, they were only interested in going back 3 years. And only charged me interest on the amount due.

I think you can anticipate more of these collections to occur as many states are scratching around for dollars.

Given the trillions of dollars in debt the current crop of politicians seem bent on amassing, hold onto your wallet for the inevitable federal collection onslaught. What you might really want to worry about is the US VAT tax schemes that are now making the Washington rounds.

Thanks for posting that legal information Lisa, wow, I'm also in Florida, so I guess my letter is already on its way...a fathers day gift from dear Uncle Sam  
Edited: Thanks for the links stormchase.

Same thing here in Washington. We have to pay 'use tax' for state and county taxes (8.3%) for anything bought for use in the business.  I pay it quarterly.

Something about this sounds so wrong.. the retailer is meant to add sales tax to the item you buy, if there is no sales tax marked on the item, you presume it is included in the overall cost..

That isn't how things work in many states in the US. First the price quoted never includes the sales tax. Second, most states have a use tax, meaning that if you are a resident in that state and buy something out of state for use at your residence, they expect you (the purchaser) to pay the use tax to the state directly.

I used to live in New Hampshire (no sales or income tax) which borders on Massachusetts (both) and a lot of businesses set up along the border (on the NH side) to pull in buyers who were Mass residents. One furniture store had to display a big poster of a blow up of a letter they had received from the Massachusetts Dept of Revenue, saying that deliveries of furniture to Massachusetts required payment of Massachusetts Use Tax and that they'd be monitoring the parking lot for vehicles with Massachusetts tags loading up furniture.

I'm sure that Lisa's letter is legit, but it's unfortunate they can go back 3 years to get the tax.

Lisa, if it's of any consolation, you can claim it on your federal tax return. Generally either state income tax or state use tax can be claimed on federal tax return as one of the itemized deductions. For most people, at least here in California, state income tax is usually much higher. Since there is no income tax in FL, you might be able to claim all of this on your federal tax return.

Florida has other taxes you're supposed to pay, but probably don't.  I remember something about being supposed to list investments and having to pay taxes just for having them.

I'd like to know how they would know how much.  "the only thing I bought was a lens cap".

I doubt they have any way to know for sure, but I am assuming that if they are targeting a large group of photographers, as they claim, that they will get a good feel for what is average consumption.

Also, I don't know if they have access to my federal return, but if so then they know the amount of business expenses I claimed.  Obviously the bulk of that was bought in state and paid tax on, but they may have a rough % in mind and if I fall way short of that it might get them curious.  

If I were to fudge they might very well audit me and then I get to pay the interest and penalties that they are waiving for now.  Not worth the risk to save 1k.

ETA:  Thanks for the tip Goldenangel.  I will definitely be deducting it

I remember a few years ago there was a lot of fuss here in Florida about this same issue, on in regarding computers.  The Use Tax thingy has been on the books a long time but most people either don't know about it, or just simply choose not to remember.  Back then (5 or 6 years ago?) the state was requesting records from large mail order computer places for all sales made to Florida residences and then sending them bills for the tax.  I controversy then was over whether they had to right to require those records from out of state businesses.  As I remember, the State was successful in obtaining them.

So I wonder now if it is actually photographers they are going after or all major photography equipment purchases, like then did before?

I guess, Lisa, you can always think about all the interest you made off the state's money during the past 3 years, but if you're like me, who as the extra cash to let sit around collecting interest!

This happened to me as well several years ago on a couch I bought. From the pamphlet that came with the bill, it sounded like they want their share of any product that you didn't pay taxes on that resides in Florida. Or even the difference if the sales taxes you paid was less than their sales tax rate. I assume they only crackdown on large ticket items.

Only 7% sales tax? Lucky *insult removed*. In Belgium it's 21% VAT and in the Philippines 12%.

If you live in California you should have a read on this from Ken Rockwell this morning

Proposed New Internet Taxes

I'm unsure exactly what's going on, but proposed California Assembly Bill 178 (AB 178) will require out-of-state sites like Amazon (and pretty much every site) to collect sales taxes on everything sold into California.

This sounds like a bad idea to me, so I oppose this. (I bet my wife opposes it more; she shops even more than I do.)

You might want to express your opinion to your California assembly member ....

 

Ken can oppose things all he wants.    I did some reading on the Amazon suit here in NY. Here is an interesting note from Accountingweb. com from Jan 14, 2009

A New York state judge has dismissed Amazon.com's lawsuit alleging the online retail giant had no requirement to pay sales tax in the state due to a lack of physical presence.

Last July, Amazon.com Inc. filed a complaint with the Supreme Court of the State of New York saying it is unconstitutional to require e-tailers based outside of New York to collect the state's sales and uses taxes.

New York State Supreme Court Justice Eileen Bransten said that New York law requires companies to collect state and local sales taxes if the company generates $10,000 or more in revenue as a result of commissions paid to persons in New York for sales referrals, The Wall Street Journal reported. Justice Bransten wrote that, "There is no basis upon which Amazon can prevail."

Although Amazon has no physical presence in New York, the company, through its "Associates Program," pays unaffiliated Web site operators across the country a commission if they advertise Amazon on their sites. Those ads often allow consumers to click through from the advertiser's Web site to Amazon.com. Under a New York law enacted last April, that amounts to solicitation of business in the state, Reuters reports.

Amazon had argued in its lawsuit that the New York law unfairly targets Amazon, is overly broad and vague, and violates the commerce clause of the constitution because it imposes tax-collection obligations on out-of-state entities.

Amazon has been complying with the New York law and collecting sales tax on shipments to New York, but had hoped to prevail in its lawsuit. The company has the right to appeal the New York Supreme Court's decision.
 
The Affiliate Program, in which Ken is a likely participant, is in part how the courts justified the collection of tax. I don't know if Amazon has any appeal underway. Poor Ken. I feel so sorry for him. 

I, too, think that most states have a Use Tax and I have heard about it before. I don't think it was enforced, but as previously stated, now that everybody's grasping for money, I am not surprised that there will be a crackdown.

I think a lot of places are starting to charge sales tax. For instance, I just upgraded all my Adobe software to CS4 and ordered from the Adobe Store online, which lists its address as San Jose, CA. They included sales tax.

This is what scares me - I live in the US, too. My husband & I are in our early 50's. He's looking to retire when he turns 591/2 and can access what funds are still remaining in his 401K. We've both been relying on Healthcare benefit associated with his job; Medicare won't kick in until he's 67. We both have a lot of health issues, and with our "pre-existing conditions" it will be very difficult to get insurance, and if we do manage to find it, it will cost us a fortune. Lisa, are there any health issues in your family? I've heard insurance can $1000 or more per month for people with pre-existing conditions - who can afford that?  

Sorry to hear about your situation Allsa.   I really hope you find reasonable insurance.  This is a terrible dilemma for a lot of people.  

My step dad had lung cancer surgery over 15 years ago.  He has been cancer free since then but was unable to get insurance for a number of years.  Now he and my mom are covered through his job, but yeah, they pay an arm and a leg for it.  

My husband and I are in our 40's.  I have had health problems but have not had to change insurance since then, fortunately.  We did pay many thousands in copays etc. when I had surgeries, though. My husband works for the school board so they have good insurance, but it is expensive, not to mention a PITA when you need to get pre-approval for every little thing.  

ETA:  Sorry for going off topic.  Guess the ON topic point I am trying to make is it irks me to have to pay additional taxes when I don't get anything in return. 

Quote from: FlemishDreams on June 19, 2009, 23:23

Only 7% sales tax? Lucky *insult removed*. In Belgium it's 21% VAT and in the Philippines 12%.

That's only State taxes Flemish.  We also pay 25% federal income tax and 15% social security tax.

No I was mentioning VAT alone = sales tax in the US = 21%. The income taxes are a separate story. What about 50% income tax plus 20% social security tax paid largely by the employer?

States have been howling about use taxes on mail order and internet sales for decades. Sorry you got nailed in the Florida tax fishing for more revenue.You stated, they offered you with a payment option without penalty or interest. Oh how nice of them? What a heart?
Did they provide you with purchase information? Or was it a threat of audit?

 

Quote from: shutterdrop on June 21, 2009, 17:30

Did they provide you with purchase information? Or was it a threat of audit?

 

Threat of audit.  They don't appear to have any info about what I have bought.  Unless of course they already audited one of the stores I shop at, which info they did not volunteer.

Frankly even the possibility of an audit is enough of a threat for me.  I have a very low threshold for aggravation.  Would rather pay them the $ owed than fight it.   I am sure they are banking on a similar attitude from most photogs. 

Average gross income for photographers in the US is 52k.  (surely quite a bit less for average micro photog).  Who can afford to hire and lawyer and fight at that income level?

That what I thought. They are trolling for targets. I understand it cost money to fight and it is fight you may not win.

Yes, we have small claims court here.  I have never used it but I understand there are court fees to be paid.

However this is not a dispute with a neighbor.  It is the gov't enforcing a policy I don't like.  You can't take the government to small claims court to get out of paying taxes.   

However this is not a dispute with a neighbor.  It is the gov't enforcing a policy I don't like.  You can't take the government to small claims court to get out of paying taxes. 

If you are sure there is some abuse in the interpretation of the law, I believe you could.

Lisa,
I think when you filed for a corporate ID number and registered your Corp. with an address in Florida, you tripped the wire. 

I suspect you are right Roadrunner.  The timing is awfully coincidental...